When Health System Mergers Birth a Foundation

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Did you know that frequently when hospitals or health systems merge, a foundation is born? Hospital mergers often create foundations as a means to address various objectives and challenges associated with the merger process. These foundations are typically established as separate entities from the merged hospitals and serve specific purposes. Government regulations often require the establishment of foundations in hospital mergers to ensure transparency, accountability, and the protection of community interests. The regulations aim to address potential concerns and challenges associated with the consolidation of healthcare providers, particularly when a not-for-profit system is acquired by a for-profit system. This type of foundation is usually required, under the same regulations that mandate its creation, to make substantial investments in the community it serves.  

Here are some reasons why government regulations require the creation of foundations in hospital mergers:

Community Benefit

Government regulations often require hospitals to demonstrate their commitment to serving the needs of the community. By establishing foundations, hospitals can enhance their community benefit activities and fulfill their charitable missions. These foundations are expected to invest in community health initiatives, support underserved populations, and address the healthcare needs of the region.

Asset Protection and Divestiture 

In some cases, government regulations require the establishment of foundations to protect the assets of a community hospital during a merger with a larger healthcare system. The foundation acts as a custodian of the hospital's assets, ensuring they are used for the benefit of the community and not diverted for other purposes.

Ensuring Access to Care

Government regulations may require foundations to be established to ensure continued access to healthcare services, particularly in rural or underserved areas. The foundation can be mandated to provide financial support for essential healthcare services, maintain existing facilities, or invest in new infrastructure to expand access to care.

Regulatory Oversight

Foundations created through hospital mergers are often subject to regulatory oversight by government agencies. This oversight ensures that the foundation's activities align with the defined community benefit goals and that the funds are utilized appropriately. Regulatory oversight helps maintain transparency, prevent misuse of funds, and protect the interests of the community.

Balancing Power and Control

Hospital mergers have the potential to create large healthcare systems with significant market power. Government regulations may require the creation of foundations to balance this power dynamic and prevent monopolistic practices. By establishing foundations, the government can ensure that the interests of the community are represented and protected in decision-making processes related to healthcare services, resource allocation, and community health initiatives.

It's important to note that the specific regulations governing the establishment and operation of foundations in hospital mergers can vary across jurisdictions. The purpose and requirements of these foundations are often outlined in healthcare laws, regulations, or specific merger approval processes implemented by government agencies responsible for overseeing healthcare systems.

We have had a great deal of success in securing funding from these types of foundations to support a wide range of projects. Typically, the awards are substantial and since the funds are not governmental, we have often leveraged these awards as matching funds for other federal or state awards. If you are in an area receiving this kind of investment, it should definitely be a part of your grant strategy. Have questions or need help making it work? Contact us. 

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