Health Care Foundation is hoping for a windfall

Small state entity would gain assets of a for-profit CareFirst

March 09, 2001|By M. William Salganik | By M. William Salganik,SUN STAFF

Maybe it's not exactly right to say that Marilyn Maultsby wants to be a billionaire, but she thinks she - and her foundation - would be ready if they got the chance.

Maultsby is executive director of the Maryland Health Care Foundation, created by the legislature in 1997 to receive the proceeds if nonprofit health plans or hospitals convert to for-profit status.

So far, the foundation has received $500,000 in start-up funds from the state, $1.9 million from the conversion of a small mental-health plan and $1.5 million from the state's tobacco settlement. It has raised a few hundred thousand dollars in corporate and individual contributions. It has four employees, housed in a nondescript Columbia office park.

However, if CareFirst BlueCross BlueShield converts to for-profit status - it has told state officials it is seriously considering such a move - the Health Care Foundation could be receiving hundreds of millions of dollars.

Maultsby said the fledgling foundation doesn't yet have a plan in place for sudden riches, but "it's on our screen, and our board will be going through those exercises very soon."

If it happens, the relatively small and quiet Maryland Health Care Foundation would be vaulted into the first rank of "conversion foundations." Since a nonprofit hospital or health insurer belongs, in effect, to the public, when one switches to for-profit operation, or is acquired by a for-profit company, assets are generally turned over to a foundation.

There are 135 conversion foundations with more than $16.3 billion in assets, according to an annual survey by the Washington-based Grantmakers in Health. The smallest is smaller than the Maryland Health Care Foundation. The largest is The California Endowment, one of two foundations created by the conversion of Blue Cross of California, with $3.7 billion in assets.

In Maryland, there is one conversion foundation, but it wasn't created by a for-profit conversion. The Horizon Foundation grew from the 1998 acquisition of Howard County General Hospital by Johns Hopkins Medicine. The foundation has $70 million in assets. It awards grants in health in Howard County, but interprets health very broadly, said Richard M. Kreig, the foundation's president. For example, it supports arts programs to reach isolated seniors.

For the Maryland Health Care Foundation, there are many uncertainties before it would get its hundreds of millions. If CareFirst does decide to convert, the state's insurance commissioner would commission a study and hold hearings to decide whether a conversion is in the public interest and to determine the value of CareFirst, potentially $1 billion or more. The value would have to be shared with foundations in the District of Columbia and Delaware, where CareFirst also operates.

And although the Maryland legislature created the foundation a few years ago to receive proceeds from any conversion, it is now considering whether it would want to use the CareFirst money for something else, particularly for a fund to cover the uninsured.

While Maultsby has testified against two bills that would freeze or divert CareFirst money, she said the discussion of how to use the money is "a healthy policy debate we ought to have."

Even without a major endowment, the Maryland Health Care Foundation is unusual in the conversion foundation world because of its close ties to government. The governor appoints the board, which includes representatives of business, labor, health care providers, insurers (CareFirst's chief executive, William L. Jews, is a member) and the public. It also includes the following or someone they designate: speaker of the House, Senate president, secretaries of health and human resources, and insurance commissioner.

"The idea is that you have the major policy-makers sitting at the table," Maultsby said. In making grants, "We're looking for systemic change, for some sense of how things fit into the big picture," she said. "We want to go back to the policy-makers and say, `based on what we've learned, here's an opportunity for legislative change.'"

For example, the foundation provided a $173,000 grant to launch MEDBANK of Maryland, which collects free medicines from manufacturers and distributes them to the uninsured. Senate President Thomas V. Mike Miller has introduced legislation that would expand the program using state money.

"We are positioned as a lab, if you will," Maultsby said.

While conversion foundations almost all focus on health, they take different approaches. Ann Monroe, director of the quality initiative for the California Healthcare Foundation, one of the two created by the Blue Cross conversion there, said her foundation has "a focus on changes to the health care system." For example, she said, since states and local health officials have difficulty signing up uninsured children for a new program, her foundation paid for software development for an on-line application "to shrink enrollment time from six days to six minutes."

Kreig said an emphasis for Horizon Foundation has been "capacity building, helping to improve the management" of community organizations, with major grants to help a free health clinic and an organization which helps the foreign-born in a variety of ways, including access to health services.

Whether or not there's an influx of money, Maultsby said, the Maryland Health Care Foundation will continue to devote its efforts to programs to help the uninsured and medically underserved - priorities set out in the legislation that created it.

Maultsby has been involved with health, one way or another "since I started as a candy-striper at Provident Hospital at 13." She has worked at several health insurers and was director of health planning for the state.

She became the foundation's first employee in 1998, and she has found the experience "like building a small business." It could be a much bigger business soon.

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