Lauren LeRoy and Malcolm V. Williams, Grantmakers In Health: The New Health Philanthropy Landscape

July 12, 2001
Lauren LeRoy and Malcolm V. Williams, Grantmakers In Health: The New Health Philanthropy Landscape

"New health," or "conversion," foundations became a prominent feature of the philanthropic landscape in the 1990s, sparking interest throughout the field of health philanthropy and among policymakers, consumer advocates, community-based organizations, and others in the health sector. As part of its broader interest in tracking the field, Grantmakers In Health (GIH), a nonprofit, educational organization dedicated to increasing the knowledge, skills, and effectiveness of individual grantmakers and the grantmaking community, recently published A Profile of New Health Foundations, which updates earlier GIH surveys of this important group of health funders.

In June, Philanthropy News Digest sat down with Lauren LeRoy, president and CEO of Grantmakers In Health, and Malcolm V. Williams, a senior program associate at GIH, to learn more about new health foundations, the broader field of health philanthropy, and the role of GIH within the field.

Before joining GIH, Dr. LeRoy was executive director of the Medicare Payment Advisory Commission (MedPAC), a nonpartisan congressional advisory body charged with providing policy advice and technical assistance on Medicare and broader health system issues. Prior to MedPAC, Dr. LeRoy served as executive director of the Physician Payment Review Commission (PPRC) — one of two congressional advisory commissions merged to create MedPAC in October 1997 — which she joined at its inception in 1986, serving first as deputy director before assuming the responsibilities of executive director in 1995.

Dr. LeRoy's research interests have focused on Medicare reform, the health workforce, health care for the elderly, reproductive health, and health philanthropy. She is the author of numerous articles and analytic reports on these topics as well as two books on physician training and practice, and is a member of the National Academy of Social Insurance and a fellow of the Academy for Health Services Research and Health Policy. In 2000, she chaired the Institute of Medicine's Committee on Medicare Payment Methodology for Clinical Laboratory Services, which produced the report, Medicare Laboratory Payment Policy: Now and in the Future. Dr. LeRoy received a doctorate in social policy planning from the University of California, Berkeley.

Malcolm V. Williams manages GIH's activities in the program areas of access to care, oral health, and racial and ethnic disparities in health. He has also been responsible for conducting analyses on foundation-funded outreach and enrollment for uninsured children and the development and operations of new health foundations.

Prior to joining GIH, Mr. Williams was the director of the national resource center of the National Fatherhood Initiative, a national nonprofit educational organization dedicated to improving the wellbeing of children by increasing the number of children growing up with loving, committed, and responsible fathers. In his capacity as director of the national resource center, Williams was responsible for providing technical support to organizations working with fathers, as well as producing and cataloging educational materials for fathers, social service providers, and policymakers.

Mr. Williams received his bachelor's degree in psychology and history from Bucknell University and his master's degree in public policy from Georgetown University.

Philanthropy News Digest: Lauren, Malcolm, thank you for speaking to us today. To start, why don't you tell us a bit about Grantmakers In Health, its mission, and some of its activities.

Lauren LeRoy: The mission of Grantmakers In Health is to help grantmakers improve the nation's health. We try to do that in a number of ways. First, by providing grantmakers with information that will help them be better informed when they're making decisions about the priorities they set and the particular programs they undertake. We also provide a forum where grantmakers can come together and exchange information and learn from experts in different program and operational areas, as well as experts in health philanthropy. We try to build bridges between philanthropy and government. We encourage and try to facilitate collaborations among grantmakers and between grantmakers and government agencies or other entities.

All the activities we undertake are designed to enhance the effectiveness of the health grantmaking community. That gives us a lot of room and flexibility. We do hold two major meetings during the year — an annual meeting at the end of February that looks at a broad array of issues related to a particular theme. This past February the theme was collaboration, building partnerships that work. And this coming year, because it's our 20th anniversary, we are going to focus on the future of health and health philanthropy.

The second meeting is in November, in Washington, and it's more focused on trying to help grantmakers gain a better appreciation of the intersection between policy and philanthropy and the relevance of policy to the work of every type of grantmaker, not just those who happen to fund policy work.

Then we have a series of programs we call "issue dialogues" that bring together small groups of grantmakers for a day to talk about an issue and to try to find out what the opportunities are and where the niches are for philanthropy. We have held several of these recently on topics such as oral health, patient safety, and early childhood development. For each meeting, we prepare a background paper in advance and then a synthesis of the discussion at the meeting, which is published in a report and circulated widely within health philanthropy and the policy and nonprofit communities.

Our Support Center for Health Foundations was created to help new health foundations deal with the operational issues they face in getting off the ground. Over time, however, we began to realize that with the growth in health philanthropy, many new people were joining staffs of established foundations as well. So we decided to broaden the mission of the center to serve the entire field of health philanthropy, with particular emphasis on new health foundations and people new to philanthropy. The Support Center is the focal point for providing information and advice on such operational issues as grantmaking, governance, communications, socially responsible investing, and evaluation.

An exciting development in the last year was our launching of a pilot program on foundation peer assessment in which a foundation steps forward seeking feedback from peers in the field on how it is approaching its work. We put together the team and manage the process and report that the team provides to the foundation. We are hoping, after several more test cases and our own assessment and fine tuning of the process, to turn peer assessment into another service that we can offer in a year or so.

Malcolm Williams: That's a good summary of our activities and how they relate to our overall mission. Lauren mentioned our work on the intersection of policy and grant-making. Throughout the year, we try to enhance our work on foundation operations and programming by making those connections, identifying where and how grantmakers can have the greatest impact on policy, and clarifying the spectrum of roles for those grantmakers who do have an interest in policy.

PND: Let's talk about health philanthropy in the U.S. The number of grantmaking foundations in the U.S. has nearly doubled since 1985, while their assets and giving have doubled in just the last five years alone. Are the interests of new health funders different from those of more established health funders?

LL: I'll let Malcolm speak about the data he's collected. But I will say that because health philanthropy is so diverse, in some ways it's a difficult question to answer. I'm not even sure it's helpful to distinguish new funders from the established funders in health philanthropy — although many people do. I would say, though, that there's considerable interest among a number of the new foundations in the broader determinants of health — in public health, health promotion, and disease prevention. That's not to say that established foundations don't contribute a great deal in those areas. In fact, some have made major commitments.

In addition, many of the newer foundations, because they are local, are very concerned about access. They're concerned about the organization, financing, and delivery of services and making a contribution there as well. And because they're usually located right in the community and see the needs of the community in a way that a foundation outside the community might not, they approach their work with a sense of urgency.

MW: That's absolutely right. I think the major difference for the new foundations is that they're in the community by design. And so they have to dedicate their assets and their work in health to the community — whether that's a neighborhood or city, a state, or even a region of states. But the influence of those health dollars on the community is, I think, something that can be pulled out and looked at more closely as one of the important contributions of the new health foundations.

And Lauren is right. The focus on broader health issues — in particular, access to care — is another trend among the new foundations. In some cases, this might mean funding the direct delivery of health services.

Sometimes it's more — in many other cases, new foundations are working to improve the delivery system so that it effectively addresses the health needs of the local population. I think it's really important to highlight the fact that so many new foundations have as a component of their mission to improve access and that they are doing so in a way that makes the most sense from their community's perspective.

LL: And to focus not just on the delivery of services but on systemic change, which eventually leads some of them to the policy arena, or to support appropriate types of grassroots advocacy activities that give a voice to groups that are disenfranchised. And so there are a number of new funders that have gone from looking at the problem and thinking they should address it by providing services to concluding that they will not make any real headway unless they step back and look at broader changes.

PND: As you suggest, over the last decade foundations have been in the forefront of several emerging trends in the health field. Treating gun violence as a health issue, stressing the need for improved palliative care, the problems of the uninsured, to name a few. Can you look into your crystal ball and tell us what you see as the next set of issues for health funders?

"...But access to information is a double-edged sword. While it offers tremendous opportunity on the one hand, it also has a lot of potential risks...."

LL: e-Health certainly comes to mind. The term is often used as shorthand to encompass many things, such as changes in technology, access to information, privacy issues related to that information, consumer protection, consumer education, monitoring the quality of the information, and the tremendous potential of these new advances and technologies for empowering and giving information to consumers who currently don't have access to that information in the same way that the rest of society does.

But access to information is a double-edged sword. Because, while it offers tremendous opportunity on the one hand, it also has a lot of potential risks. And it's such a dynamic situation right now that it's hard to stay on top of it. In addition, there's a level of excitement that can cause people to be less critical than they might be. I'm not talking only about people in philanthropy but the society in general. For all these reasons, we've seen some organizations — both new health foundations and established foundations — take a very significant interest in these issues.

The human genome is another area that is going to present all sorts of new challenges for us. We are planning a session to explore its many dimensions at our annual meeting on the future of health and philanthropy next February. There are many important issues to discuss. What are the issues and challenges that will emerge because of the advances that are being made? What are the implications for society, and what might that mean for philanthropy? Is there a role for philanthropy in this area?

Then there are the issues that are not going to go away. Issues around access and the financing and delivery of health care. We will continue to grapple with such questions as how much the country will be able to afford and what that means for the kinds of choices we make as a society. We would be remiss if we didn't continue to keep those issues on the agenda.

Concerns about access to health care will also continue to be accompanied by efforts to ensure that the care people do receive is of high quality. In particular, in the past year we have seen the beginning of what we expect will be increased involvement by funders in supporting efforts to reduce medical errors and improve patient safety.

Another set of issues that comes to mind is health and aging, which, because of changing demographics, is only going to become more urgent. In my view, there isn't enough being done in this area, within the public sector, the private sector, or philanthropy. The good news is that there are some very exciting programs being funded, and I see more foundations beginning to make this a priority. But time marches on. It is also important to keep in mind that issues related to health and aging do not just affect the elderly. They include what happens to families that are helping to care for elderly family members and the resources that can enable them to play that role effectively without neglecting other family responsibilities. How we address these issues is a key question — not just for individuals and individual families, but for society as a whole.

The changing composition of our population is another issue that gains in importance every day. Our society is becoming increasingly diverse in terms of both race and ethnicity. Disparities in health status and access are well documented. We have a growing immigrant population as well, increasing the challenge for our health system to be equipped to provide access to culturally and linguistically appropriate services.

There are so many more issues, but the last one I would mention is global health. Putting the work that goes on in this country and the issues we face in a broader global context will be an increasing challenge for our society in general and philanthropy in particular. Again, it's one of those areas that GIH has begun to develop and will be focusing on more in future programs.

MW: I would add to that list the way public health has changed over the last hundred years. Where once the leading causes of death were infectious diseases such as tuberculosis, smallpox, and measles, today, by contrast, cardiovascular disease, cancer, and diabetes are among the leading killers and require different public health prevention efforts.

But at the same time we're also seeing a rise in antibiotic resistance, meaning that many of the diseases once thought to be all but eradicated may come back. Figuring out how to address this problem is going to be a challenge.

LL: The capacity of the public health system to anticipate and respond to these problems and others, ranging from implementing data systems to monitor population health indicators to environmental health problems, has also made strengthening the public health infrastructure a priority for some funders.

PND: According to Foundation Center data from 1999, foundations in the West provided a much larger share of giving to health, compared to other regions. Given that new health foundations, in the West and particularly in California, account for a substantial share of this giving, do you see that region and that state becoming an incubator for innovative thinking on health issues?

"...The diversity of California's population makes it a microcosm of what we can expect to see happening across the country...."

LL: Definitely. It's very exciting to see what's happened in California. It's a big change for health philanthropy because, while there are obviously health foundations all over the country, you had a large representation of foundations in the Northeast. And now we see a new balance, with the activities of the California foundations and other funders in the West.

Many of the California foundations were created through conversions and are focused on California or communities within the state. They aren't nationally focused foundations, and yet the work that some of them are doing, particularly the larger new foundations, has national implications. And they're clearly aware of that.

And because of the diversity of California's population, it's a microcosm of what we can expect to see happening across the country. Take the California Healthcare Foundation and the work it has been doing around privacy and the quality of health information on the Internet. You can understand, because of the concentration of information technology activity in California, why a California foundation might be one of the first to take it on.

MW: All the issues Lauren talked about vis-a-vis the future of health grantmaking are being addressed by California foundations — aging, access to health care, and violence prevention — are all pressing issues in California, and the foundations in the state are reacting to that.

PND: What exactly is a "conversion" or "new health" foundation?

MW: New health foundations are foundations that are created when a nonprofit health-care organization is sold, merges with, or enters into a joint venture with a for-profit or, sometimes, nonprofit organization. Because these transactions often result in the loss of nonprofit resources to for-profit use, the trend in law and regulation is to require that converted assets be used in a manner consistent with the original nonprofit's mission. In most cases, regulators satisfy this requirement by creating a health foundation.

PND: What is the role of a state's attorney general in the conversion process?

MW: Well, it varies from state to state. Sometimes it's not even the attorney general. Sometimes the regulator might be the insurance commissioner or a state legislature. It depends on how the state government is structured to address those kinds of transactions. But in general there are three major roles for regulators of conversions: first, to evaluate whether the conversion should take place; second, to evaluate the assets of the entity that is being converted.

LL: To ensure that they are properly valued.

MW: That's right. And third, to develop a process for using the assets after the transaction is complete. If they decide to create a foundation, the regulators must decide whether to create a brand new foundation or to place the assets with an existing foundation to make grants in health and health care.

Because in most cases the process leads to the creation of a new foundation, the next step for the regulator is to make sure that the foundation is structured in a way that allows it to assume a sense of a public ownership over those assets — that they are in constant consultation with the public, with consumers, to ensure that the immediate and long-term health needs of the community are being addressed with the money.

LL: I think that over time the attorneys general and other regulatory parties have gotten more involved. It would be surprising now, I think, to see one of these transactions taking place without the state authorities showing fairly significant interest in the way things were structured and in the outcome of the conversion process.

PND: Of the hundred and twenty-nine new health foundations that responded to your most recent survey, almost three-quarters were formed between 1994 and 2000. Was there a single catalyst behind the fairly rapid creation of new health foundations in that period?

MW: That's a great question. I wouldn't say there was a single catalyst. There were probably several. The health-care system in this country has undergone a variety of changes over the last several years. Some of which resulted in the large-scale consolidation of health-care organizations during the 1990s.

Today, more and more health plans — including Blue Cross and Blue Shield plans — are going through conversions. In part, because they feel their niche in the marketplace is being threatened by the rise of for-profit health insurers. So in order to compete, I think they feel they, too, have to become for-profit insurers.

LL: There are probably a number of reasons why any given hospital or health plan makes the decision to go through a conversion process. But I think what Malcolm said accurately describes the background for a lot of this activity. As the market has become more competitive, more confusing, more chaotic, there has been a sense on the part of nonprofit providers that they are not in a position to compete in the marketplace. And they have come to the conclusion, in some cases enthusiastically, in many cases reluctantly, that they needed to make this kind of a change.

PND: Do new health foundations view themselves as different from independent foundations?

LL: That depends on whom you talk to. For the most part, there are some clear differences between new and established foundations in terms of their needs related to the stage of development they find themselves in; and it can take up to five years for most of those things to shake out. But after that, these foundations tend to function quite similarly to others in the field. You cannot say that any two foundations operate in exactly the same way, because each foundation prides itself on being unique and functions in a different context. In fact, some of these newer foundations like to think of themselves as being different, as being part of a group of foundations that are in the vanguard, that are young, energetic, creative, innovative. And there are others that very much view themselves as part of the broader field of health philanthropy and don't see being grouped in a distinct category vis-a-vis their colleagues as a benefit or appropriate.

We see considerable interest in collaboration at these new foundations as well as at established foundations. And yet, there's a real question about whether collaboration is facilitated by creating these distinctions among foundations with different origins, or whether in fact it can be inhibited by such distinctions.

Obviously, there's a lot of interest, both within and outside of health philanthropy, in these new foundations, the decisions they make, the way they're structured, and the priorities they set. And I think they've had an impact on the field in a number of ways, in part because of the spotlight that has been shined on them as a result of the conversions themselves. Many of the conversions that led to the creation of a foundation have had their controversial elements. And when you have the state attorney general and others stepping in, it tends to focus attention on the entire field of health philanthropy. That attention has stimulated much more thought and creativity around communications issues on the part of foundations and about defining their role, priorities, how do they do business.

As a result, I think there is more discussion, and increasingly action, around issues of performance and organizational effectiveness: focusing on outcomes and being able to measure outcomes. These aren't just issues for health philanthropy. When you look at a group like the Communications Network [a membership association of foundation communications officers], you'll see that a number of people in leadership positions have come from the field of health philanthropy. I think that's very interesting. And I think some of the energy around these kinds of issues stems from the fact that all of these new organizations have entered the field.

PND: Have you noted any differences in the interest, grantmaking levels, or practices of new health foundations established as public charities compared to those established as private foundations?

MW: We haven't looked at that systematically. But we do know that there are significant differences between what foundations can do based on their tax status. Foundations that are public charities have greater leeway in funding advocacy than private foundations. Particularly when it comes to lobbying. Private foundations can't lobby, while public charities can lobby to a degree.

PND: Do differences in tax status affect the geographic restrictions that a new health foundation might have on its giving?

MW: Well, there are geographic restrictions on giving that stem from the conversion agreement. New health foundations generally dedicate their assets to the same geographic regions as was served by the original nonprofit health-care organization.

PND: Regardless of tax status.

MW: Right.

LL: And in some cases the new health foundations are the largest source of funds for the kinds of programs we've been talking about in that community. And at some of those foundations, the staff and leadership have spent considerable time thinking through both the opportunities and the responsibility that comes with that. Communication becomes very important: making sure that people really understand what the foundation is able to do, how it may be constrained in terms of its ability to fund different types of programs or organizations.

MW: It's also important to recognize that the field of health philanthropy includes a diverse group of organizations, which makes it difficult to draw conclusions about their behavior based on origin and tax status. Each individual foundation is unique and responds to a number of demands beyond these factors.

LL: What we also find is that many of these new foundations start out as public charities. But they often have a difficult time maintaining that status, because since they're already such a large source of funds in the community, it becomes difficult for them to raise additional funds from the community to meet the public support requirement for public charities. Over time, some of those that are committed to remaining a public charity have a very hard time meeting that requirement and end up as private foundations.

MW: Absolutely right. By virtue of failing the public support test their tax status simply reverts to that of a private foundation. What I mean is that one major difference between public charities and private foundations is that public charities must maintain a sufficient amount of public involvement to warrant the beneficial tax structure. One way that public charities do this is by passing a public support test. In general, public charities must show that over the proceeding four-year period support from the public — such as contributions from individuals, support from government agencies, or membership fees — equals or exceeds one-third of total support.

PND: Do you see continued growth, over the next five years, in the creation of new health foundations?

LL: We pull out our crystal ball every day and try to figure out what's happening — both so that we can speak with some authority about the field and also anticipate what the needs of the field will be. I think if you had asked that question a year ago, we would have answered that it looks like the rate of formation is leveling off. But this year we have been inundated with calls for assistance from all sorts of different organizations that are either considering converting, on the verge of converting, in the middle of a conversion process, or have just converted — the whole spectrum.

That's one of the changes, actually, that's taken place in our organization. We used to focus on working with foundations after they were created and the entire conversion process was over. But because we've become more knowledgeable, we have been discovered by those involved in earlier stages of the conversion process. Malcolm has spent time talking with state attorneys general, for example, and being invited to meetings of some of the stakeholders before the foundation is actually formed to talk through the different issues of the conversion process itself and the kinds of decisions that, if they can be made and made well, will prevent problems later.

From our experience this year so far, I'm assuming there are going to be more conversions.

We also discovered another interesting thing after we did an analysis of the kinds of technical assistance questions that have been asked of the Support Center over the last four years. Because there has been so much more conversion activity and there are more of these foundations around, those involved in the operation of newer foundations seem to get up to speed — at least in terms of being able to ask better questions — much earlier in the process than what we were seeing four years ago.

PND: There have been seventeen conversions in California and seventeen conversions in Ohio. How come there haven't been any in New York State?

MW: It's still against the law for a conversion to occur in New York. There is, however, legislation pending in the New York legislature to allow for the conversion of Empire Blue Cross.

LL: There is definitely interest on the part of a number of New York organizations in the possibility of converting. But because of the legal framework, they just haven't been able to do it.

PND: In terms of the larger field of health philanthropy, what do you think the impact of giving by the Gates and Packard foundations will be over the next three to five years?

LL: Everybody will watch with great interest. But I'm not sure, for philanthropy in general, what the implications might be. Both those foundations make very strategic decisions about how they spend or invest their money, and they have resources that many other foundations don't have. They have collaborated with foundations whose work complements and furthers their shared agenda. While they may provide models or examples, or raise the visibility of very important issues, many foundations simply won't be in a position to follow suit, at least in some ways. It's exciting that they're able to bring those kinds of resources into the field, but I'm not sure what their impact on the specific activities of the field as a whole will be. Their impact on philanthropic giving in health, however, will obviously be substantial.

"...I think everybody would agree that collaboration is labor intensive. It takes a lot of time, patience, trust, and openness to develop successful collaborative activities...."

PND: Do you expect to see more collaboration between health funders and government, funders and other funders, and funders and their grantees over the next three to five years?

LL: I would say there is tremendous interest in that. There's so much interest, in fact, that we devoted our entire annual meeting last February to the theme of collaboration. There are a number of excellent examples to draw on. But whether funders have been involved in a success story or a collaboration that has been troubled, I think everybody would agree that collaboration is very labor intensive. It takes a lot of time, patience, trust, and openness to develop successful collaborative activities.

Having said that, there seems to be an increasing appreciation of the importance of collaboration. That's one of the things that has impressed me over the last three years about the foundations I've worked with, both national and more locally focused foundations. The kinds of issues they are trying to address, in many cases, are issues that can only be tackled through collaborative efforts — not just among different foundations or between foundations and government, but involving a broad array of stakeholders from different sectors of society.

PND: Can you point to specific examples of collaboration that we should be paying attention to?

LL: Since 1994, the Commonwealth Fund has partnered with more than seventy other foundations to fund and implement an early childhood development program, called Healthy Steps, in pediatric and family practices throughout the country. The Kaiser Family Foundation has a major initiative called loveLife that is designed to protect South African teenagers from contracting HIV/AIDS. The foundation has been collaborating with the Gates Foundation, with USAID, and with a number of organizations in South Africa.

The Gates and Rockefeller foundations also are actively engaged together in pursuing a number of different global health issues, with AIDS as one particular focus.

MW: The California Endowment and the Sierra Health Foundation developed a collaborative program called brightSmiles that funds a number of different oral health activities in California. Closer to home, there's the Healthcare Working Group of the Washington Regional Association of Grantmakers, which is working with local foundations to focus and collaborate on health concerns that affect the greater Washington, D.C., area. That group has been able to work with District health and government officials as well as nonprofit organizations to figure out what the role of local foundations might be.

LL: The Robert Wood Johnson Foundation has a program called the Local Initiatives Funding Partners Program that encourages local foundations to approach the foundation with proposals for different kinds of programs or projects that they want to initiate in their communities. That's a very successful program, and an exciting example of a national foundation linking with local foundations.

Over the last three years we've been working with various agencies of the Department of Health and Human Services on initiatives designed to reduce racial and ethnic disparities in access to health care. GIH and HHS co-sponsored a national conference that served as a call to action for government, philanthropy, and other key sectors of society to work together to eliminate racial and ethnic disparities in health. Later, the California Endowment, in partnership with the Centers for Disease Control and Prevention and the CDC Foundation funded three additional community sites for the federal Racial and Ethnic Approaches to Community Health — or REACH 2010 — demonstration project.

PND: You've mentioned a number of things that you're involved in or have planned. What else can we look forward to from GIH in the next year or two?

LL: That's a good question. Three years ago we set an ambitious agenda to become a source of expertise on key program and operational issues facing health foundations and to make the organization more inclusive by creating new ways for grantmakers to become involved in or supported by our activities. Our last annual meeting, for example, marked the inauguration of grantmaker-designed sessions. We are trying different approaches that will result in grantmakers feeling that this is their professional home and that they can play a critical role in shaping the activities we undertake.

We'll continue to keep our eyes on emerging trends and issues so that we're not only here to respond when health funders request assistance, but can actually present new information to them and act as a catalyst for focusing their attention on new issues.

We've learned a tremendous amount from the different types of activities we've undertaken in the last three years to build the organization. We want to continue those activities that have been well received. But we also feel that there are so many opportunities for an organization like ours to add value to the work of health funders — together, encouraging collaboration, generating information that will make health funders more effective.

PND: Well, Lauren and Malcolm, thank you very much for speaking to us this afternoon, and best of luck with your future endeavors.

Mitch Nauffts, PND's editorial director, spoke with LeRoy and Williams at the GIH office in Washington, D.C. For more information on the Newsmakers series, contact Mitch at mfn@foundationcenter.org.