December 28, 2011
The Cook County Health and Hospitals System appointed Lester Crown and Dr. Quentin Young to be directors of its newly created not-for-profit corporation, the Cook County Health Foundation.
On May 26, 2011 the Health System’s Board of Directors approved the creation of the new foundation to seek charitable contributions for the public health system. The Cook County ordinance (Cook County Code of Ordinances, Chapter 38, Article V, Sec. 38-80(n)) that established the Health System in 2008 specifically authorized the Health System Board to encourage the formation of a philanthropic arm.
The Foundation is designed to operate independently from the Health System. The Foundation’s board will have nine members, including seven voting members. The Health System’s Chief Executive Officer and Chief Financial Officer will serve as non-voting, ex-officio members.
The Health System’s Board on November 18, 2011 named Mr. Crown and Dr. Young as the first voting directors of the Foundation’s board. A business and civic leader in Chicago, Mr. Crown has been a long-time supporter of the Cook County public health system. Mr. Crown spearheaded the Chicago business community’s initiative to replace the old Cook County Hospital with the John H. Stroger Jr. Hospital, which opened in 2002. Dr. Young, a former Chairman of the Department of Medicine at Cook County Hospital, is the founder and Chairman of the Health and Medicine Policy Research Group, which advocates for improved health care for the poor in Illinois.
The Health System is currently recruiting the Foundation’s additional five directors and preparing to submit an application for tax-exempt status as a charitable organization under Section 501(c)(3) of the Internal Revenue Code. Such charitable organizations are exempt from federal income taxes and are generally eligible to receive tax-deductible contributions.
Warren Batts, Chairman of the Health System’s Board, said at the October 27, 2011 Board meeting that he is in discussions with a donor who has pledged to make a significant financial contribution to the System’s network of clinics. Mr. Batts did not identify the potential donor.
Many public health systems across the nation have established foundations to seek charitable contributions. For example, the New York City Health and Hospitals Corporation (HHC) created the HHC Foundation in 2001 to raise funds for New York’s public health system. Dr. Ram Raju, who became the Cook County Health System’s CEO in October 2011, was formerly Executive Vice President of the New York system. The Cook County Health System’s Ruth M. Rothstein CORE Center, a clinic for the prevention, care and research of HIV/AIDS and other infectious diseases, has a 501(c)(3) arm called the CORE Foundation.
Creating a separate, not-for-profit foundation helps overcome the perception among some potential donors that contributions might be used to replace public funding, according to the National Association of Public Hospitals and Health Systems (NAPH). Because donations to a separate foundation are not included in a health system’s budget, they do not offset government appropriations. In addition to contributions, foundations provide organizational benefits to health systems by creating the structure and staffing needed to meet long-term fundraising goals, according to the NAPH.
The Cook County Health System’s creation of a philanthropic organization comes at a time when it faces significant budgetary challenges, as discussed here. To meet its budget for FY2012, which began on December 1, 2011, the Health System will have to increase revenues from patient fees by approximately 80%, or more than $160 million, from FY2011. While most of the Health System’s patients lack insurance of any kind and do not pay for medical services, most of the System’s operating revenues come from the Medicaid program.