Guest Blog: The Inner Working Relationship Between a Hospital Foundation and its Parent During a Sale

This is the second in a series that explores the inner working relationship between a hospital foundation and its parent during a sale. The author, John Gilchrist, FAHP, CFRE, has lived through one nonprofit sale and is experiencing a second sale. His insights into this process can prove to be excellent counsel to an organization going through a merger or acquisition.

The system had prepared the announcement communications (i.e. media releases, notices to physicians, associates, volunteer leaders – including those on the Foundation board) for a 10 a.m. distribution. My role was to call the board members of the Saint Louise Foundation with the news; as the O’Connor Foundation board met at noon on announcement day, I would contact those who were not in attendance. With each call, the deeper the news impacted me – my world had just been fundamentally shifted. During each call, the Foundation board member wanted to know how and when the decision was made. Why did the system only announce its intent to sell and not wait until a buyer had signed an agreement? That actually turned into a positive as it allowed me to discuss the values of the sponsoring order and the importance they placed on respect and transparency, to name but two. Several times I was asked what impact this would have on me personally, as I had started only five months ago and had not yet moved my family. I appreciated and thanked those persons for the concern for my personal welfare; I politely answered that matter would resolve itself over time. Our primary tasks are to disseminate information about the sale to our donors and other stakeholders and to find avenues for continued fundraising, if possible.

Frankly, I received some pushback on future fundraising. Some board members felt it best to cease the existing events already in the pipeline. Always listen to their concerns – they do set strategy and have deep connections into the community. Some felt they would not be as successful as in the past – and they made a valid point. Fortunately, the board chair, who in his profession provided advice and counsel on many mergers and acquisitions, joined me and advised everyone to take a pause, not make any hasty decisions, and to focus on where the enterprise was positively engaged in outreach activities the Foundation could support.

Every development officer has that list of activities ready to describe to a prospect – make sure you have your list ready and updated. Fortunately, our Foundation had supported a pediatric clinic that traditionally saw patients with no resources, were undocumented, or for any number of reasons, had no medical home.
While most board members could understand the economics and the rationale for the sale, the understanding did not mitigate the emotional effects brought on by the announcement. In some ways, board members took it almost as the announcement that a loved one just received a terminal diagnosis. The Daughters of Charity had served San Jose for 125 years. Some of these volunteers had served this faith-based mission of the hospital for over 10 years – I observed some of these board members viewed the Sisters v almost as family members. They were understandably concerned, perhaps even worried, for their future. The Sisters responded with the dignity, class, and grace they had shown every member of the San Jose community. They relied on God for their daily sustenance, and were not about to change their thinking with one announcement!

Their attitude of acceptance of the decision to sell, prayerful discernment for a new owner who would share their passion for service to the less fortunate, and commitment to all associates was evident throughout this initial board meeting. Our CEO excelled in casting the perspective toward the future. Our situation was unfortunate, yet he painted the picture of the San Jose hospitals’ work toward sustainability that had been accomplished to date – a new owner could provide significant resources the Daughters just did not have.

One lesson for the Foundation executive is to always present the positives for the organization: a new owner saves the enterprise, preserves thousands of jobs, recapitalizes the facility, brings economies of scale for purchasing, etc. As the Foundation executive, you cannot show any negative feelings or impressions about your professional future. Take the high road, always. I found 40-50 minutes on an elliptical rider at the gym every day, or every other day, would literally “work the negatives out”. So you have another reason to exercise.

In the next installment, I will discuss the donor communication and the possible futures for the Foundation…and as always, your feedback, questions, and comments are welcomed.
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