Brenda Goins, Executive Director, Salem Health and Wellness Foundation
The Salem Health and Wellness Foundation was created with the proceeds from the sale of the nonprofit Memorial Hospital of Salem County when it was converted from nonprofit to for-profit status in 2002. As the only foundation focusing exclusively on health disparities in our county—a small rural community with approximately 64,000 residents living within a 338 square mile radius with nearly one half of the land actively farmed—the foundation has supported its nonprofit partners serving our residents with more than $17.8 million in grant funds.
In 2013, we launched a highly focused strategic plan to address the most pressing health issues of our county’s children and young people, childhood obesity and sexual transmission of diseases. To enhance the capacity of our nonprofit partners, we instituted the Rebound to Resiliency capacity building program. Organizations participating in this program began by completing the Core Capacity Assessment Tool (TCC Group), to identify areas for improved effectiveness. We created a learning curriculum for our grantees and their boards which culminated in a funding opportunity for grants to support their individual capacity building needs. More than $750,000 has been awarded to support these organizations seeking to build their effectiveness and capacity.
However, the foundation never lost sight of the importance of using its assets to help the Memorial Hospital of Salem County remain viable. In 2013, when rumblings of diminished services and loss of physician practices in the hospital were followed closely by rumors of closure, the foundation sought out potential buyers who might partner with the foundation to bring the hospital back to nonprofit status.
Facing Challenges Head-On
When the foundation’s board of trustees made the commitment to finding a potential buyer, the challenges were admittedly great. We needed to find a partner that would be committed: to bringing needed health care services to our residents, to being a partner with the community, and to being a partner with the foundation to promote and participate in joint health improvement goals. We were not only a catalyst in this effort—without our funding this project would not come to fruition.
In late 2017, the foundation met with Community Healthcare Associates, an interested buyer, to assess their vision for the hospital campus. These conversations were the beginning of merging CHA’s vision with the foundation’s vision to ensure a long-term presence and stability of a premier health care facility proximate to residents and to address the specialized needs of its large at-risk populations in behavioral health, opioid treatment, obesity, and long-term care.
Twenty-nine million dollars would be needed to bring a hospital back to the community, this time with state-of-the-art technology in a completely renovated facility. The foundation had been exploring ways to use program related investments (PRIs) as an instrument of impact to further our mission in addition to its grantmaking. The investment in the hospital was a goal core to the mission while continuing the flow of funds for grantmaking initiatives. The timing of this investment also coincided with our conversion to private foundation status in January 2019.
The deal that was ultimately structured was a grant/loan (PRI) investment—$14.5 million in the form of a grant and $14.5 million in a PRI, representing the largest single investment in the foundation’s history, as well as the first PRI for the foundation. From the perspective of the IRS, this investment more then met the test—by “significantly furthering the accomplishment of the foundation’s exempt activities” and “the investment would not have been made but for its relationship to the foundation’s exempt activities.” (Treas. Reg. §53.4944-3(a)(2)(i)).
Together, the $29 million investment represents an increase of 170 percent of the foundation’s cumulative grants since 2002. The grant agreement allows for the foundation to appoint three board members to the new hospital board, so that we can have a stake in its success. It also states that if the hospital is sold in the future to a for-profit entity, the $14.5 grant would be paid back to the foundation. This agreement allows the foundation to support the hospital and remain a substantial resource for service providers in the county.
This unique partnership has transformed our rural community in many ways, and there were six important take-aways from our experience that might be useful to other foundations our size:
- Be willing and determined to take the lead in a potentially risky endeavor.
- Mitigate risks while making significant impact on mission by using alternate financial instruments.
- Consider using PRIs, which are a powerful tool that—with skilled advisors—can be relatively easy to employ.
- Understand that large investments in risky projects require a long-term relationship with the investee, and perhaps continued investment until they can get on their feet.
- Remain committed to preserving foundation assets so as to continue grantmaking in perpetuity.
- Remain transparent with the community in all endeavors.
Salem Medical Center celebrated its first anniversary on February 1, 2020. New, cutting-edge services— as well as the re-establishment of prior services—are now available to our residents and each quarter shows growth in patient care. Increasing access to health care services for our residents has been the priority of the foundation and we are pleased with what this partnership has brought to our county.