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Hospital sale

August 24, 2008

Past hospital sales still helping other areas

Sales of non-profit hospitals in Berwick, Wilson help to benefit community organizations.

By Andrew M. Seder aseder@timesleader.com
Times Leader Staff Writer
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The sale of non-profit hospitals in Berwick and Wilson to the same for-profit corporation that’s negotiating to purchase the Wyoming Valley Health Care System has had positive effects, say officials in the two communities.

An offshoot of the deals was the creation of non-profit foundations, using proceeds from the sales. The foundations in Berwick and Wilson have allocated millions of dollars in grants to community health care organizations, schools, municipalities and other non-profit human service agencies since their inception less than a decade ago.

The value of the WVHCS sale, which includes Wilkes-Barre General Hospital, First Hospital and other affiliates, has not been made public. After outstanding debt is paid and ongoing litigation, workman’s compensation and other claims are settled, the remaining revenue – what would be the profit in a traditional business deal – will become the seed money for a foundation.

Wyoming Valley Health Care Board Chairman Charles “Rusty” Flack said Wednesday the foundation here would start with “tens of millions,” but he declined to be specific because the final figure could change during negotiations. He said an agreement should be reached within 90 days.

In 1999, after Berwick Hospital in Columbia County was sold to Community Health Systems, Inc. of Franklin, Tenn., the Berwick Health and Wellness Foundation started with about $28 million. In 2001, Community Health Services purchased Easton Hospital in Wilson, Northampton County. A foundation there was launched with about $20 million. After paying off about $4.5 in pension costs, which Community Health Systems did not assume in the deal, and other commitments, including a $3 million malpractice insurance policy, the Two Rivers Health & Wellness Foundation was left with about $11 million.

The presidents of both those foundations called their evolutions “successes” and said if Wilkes-Barre’s foundation is run properly, organizations in Luzerne County will benefit for years to come.

“You’re still getting what will probably be a great hospital and now you’ve also got a health foundation that serves the community,” said Eric DeWald, president of the Central Susquehanna Community Foundation, which the Berwick Health and Wellness Foundation has merged into.

Paul E. Brunswick, president of Two Rivers Health & Wellness Foundation, said he found it helpful to contact the Berwick organization for guidance. He said he’s already fielded questions from Flack and other WVHCS board members during a roundtable discussion in Easton on the proposed sale.

“When you’re doing this, there’s no book that tells you what you’re supposed to do,” Brunswick said. “If they (the foundation that could be created in Wilkes-Barre) called us, we’d be glad to help and share our experiences.”

DeWald said those overseeing the start-up foundation, legally known as a “conversion foundation,” should first form a board of directors and register it as a non-profit corporation. The next step is to hire staff people, including a professional that has experience dealing with philanthropic foundations. Once the staff is on board, a firm should be hired to conduct a needs assessment for the community, to help determine funding priorities. The resulting focus can be widespread or it can be directed to specific health care priorities. In Easton and Berwick, four areas were chosen.

The foundation in Berwick chose to support oral health, mental health, cardiovascular health and school readiness. Easton’s foundation targets elder care, maternal and child care, oral health and behavioral health. Among the recipients of grants from the groups have been Meals on Wheels, Easter Seals, Big Brothers and Big Sisters, Boys and Girls Club, Berwick Public Library and the “Jump Start” preschool program at Northwest Area School District.

Qualifying for grants requires being located in the hospital’s service area, being non-profit and falling within one of the chosen health care priority groups.

The Berwick foundation has allocated about $1 million annually. Two Rivers has given out a total of $1.68 million since 2003, averaging $13,000 for each of the 61 allocations, according to Brunswick.

Both foundations now have more money in their portfolios than they did when incorporated; Berwick holds $30 million, and Two Rivers has $11.5 million. That’s because they invest the money and have earned returns between 4 percent and 7 percent annually. Berwick annually allocates about 4.5 percent of its assets, based on the previous 16-quarter average. Since that’s lower than the investment gains, it can pay grants while building up additional money to reinvest.

The same holds true for Two Rivers, which gives away between $400,000 and $500,000 a year. The smallest individual grant it’s ever given away was $1,000 and the most, $62,215.

“Instead of giving away large grants, we try to issue smaller grants to a greater number of agencies,” Brunswick said.

He said the community has embraced the foundation and has come to count on it as a key contributor to many smaller non-profit organizations that serve portions of the community in the greatest need.

“We feel we’ve made an impact. We’re not big enough that we’re going to have a huge impact, but we do what we can,” Brunswick said.

Berwick’s fund serves a much smaller geographic area and population, but, with a larger pot, it has been able to make major allocations. It has given $600,000 to the Berwick Public Library’s capital campaign and $600,000 toward the Berwick YMCA capital campaign. It also has allocated $250,000 to Luzerne County Community College for its planned Public Safety Training Institute. Over a four-year span, it has granted the Jump Start program at Northwest Area $88,000.

“It’s pretty amazing for a community this size,” DeWald said, noting that $1.3 million was dispersed this year alone among organizations and agencies in the hospital’s 23-municipality service area. Fourteen of those municipalities are in western Luzerne County, including Shickshinny, Nescopeck and Salem Township.

The Nescopeck Youth Center, which also houses the borough council meeting room, has applied for and received thousands of dollars in the past. Borough Secretary/Treasurer Stacie Kachurka on Friday was finalizing grant applications for nearly $55,000 worth of projects for the building, including repairing the handicap ramp, furnace, water heater and making the two bathrooms compliant with the Americans with Disabilities Act. The borough police department has also received funding to purchase an AED battery.

Kachurka said the foundation has been a godsend and has made it easy for small organizations to get much needed funding.

“We wouldn’t have any place else to go, really,” she said.

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