Health Care and Nonprofits

Changes impact Alliance for Health

October 3, 2014
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A Grand Rapids-based organization has long depended on charitable giving and grants over the years as it advocates low health care costs while maintaining high-quality care. A recent decision, however, could position the coalition to pursue insurance-based strategies or services.

A 501(c)(3) nonprofit organization, Alliance for Health has long been committed to improving health and the health care system in the region, but during a closed meeting held Sept. 29, a quorum of board members voted to rethink the organization’s strategy to include service aspects of an “insurance-based agency.”

Due to last week’s meeting and resulting decision for a new strategic focus, some board members and officers have turned in their resignations, several of which are no longer listed on the Alliance for Health website. Members resigning include: Dr. Marsha Rappley, dean of Michigan State University’s College of Human Medicine; Jim Green, executive director of HR at Lacks Enterprises; Joe Gavan, president at Potomac Ventures; Paul Keep, editor of The Grand Rapids Press; and Judge Dennis Leiber.

In a written statement, Rappley said the MSU College of Human Medicine has been engaged with the Alliance for Health as a result of its focus on health issues in the community.

“I’m grateful for the opportunity to have represented Michigan State University College of Human Medicine for nearly four years as a member of the Alliance for Health board,” said Rappley. “The recent decision by the board of directors to change the focus of the Alliance for Health’s mission to become actively engaged in the health care marketplace through the creation of a health exchange precludes my further participation on their board and MSU’s sponsorship of their future.”

Alliance for Health is also defined by the Internal Revenue Service as a 170(b)(1)(A)(vi) entity, which receives a substantial part, or 33.3 percent, of its support from governmental units or from direct or indirect public contributions. Through the Tax Reform Act of 1969, an organization described as a 170(b)(1)(A)(vi) is excluded from private foundation status and certain excise tax liabilities associated with it.

With this classification, the community coalition receives funding in large part from charitable gifts, donations, grants, and its annual Once in a Blue Moon fundraising event. As of 2011, the Alliance received roughly $4.2 million in financial gifts, grants, contributions and membership fees since 2007, which results in public support of 54 percent, according to the Form 990 Schedule A filed in 2012 by Lody Zwarensteyn, the Alliance’s former president.

Contributions and grants for 2011 reached $753,626 with only $42,065 of the amount attributed to fundraising events; the total revenue for the year was $862,263, according to the Form 990.

For the 2013 fiscal year, Alliance for Health reported total revenue of $1.12 million, which is a 4.8 percent increase from 2012, with approximately $1.15 million in total revenue. Expenses for 2013 decreased roughly 5 percent, from $1.19 million in 2012 to $1.14 million in 2013. During the annual meeting in May 2014, Brian LaFrenier, treasurer for the nonprofit, said it added approximately $70,000 to the annual fund balance.

One of its grant sources is the Robert Wood Johnson Foundation for an initiative originally launched in 2007 known as Aligning Forces for Quality: The Regional Market Project, and received renewal on the grant in 2011 and 2013. With the recent $1.04 million grant renewal in May 2013, the grant is considered active through April 30, 2015, according to the RWJF website.

Several aspects of the project include: reducing racial and ethnic disparities in care; providing models for national reform; and leveraging measurement tools, public reporting, quality improvement, consumer engagement and payment reform to stimulate change.

Some former board members have alleged the organization may have run out of local funds, leaving the remaining financial support to consist of grant resources. The New Jersey-based foundation does not support ongoing general operating expenses or existing deficits, endowment or capital costs, or lobbying of any kind, according to the RWJF website.

Beth Toner, senior communications officer at RWJF, said the funds are typically distributed in installments over the course of grant period and with the current period ending in 2015, has no reason to withdraw funding at this point.

“Throughout the grant period, we work hand-in-hand with the grantee and our national program office to ensure funds are being used as stipulated in the original grant proposal,” said Toner in a written statement. “We hold each of our grantees to the highest standards and do not waver on those standards. The West Michigan Alliance has, of course, received a good portion of their grant funds, and we are satisfied they have used their funds appropriately for the project we funded them to do. Of course, we will, as always, continue to do our due diligence when it comes to the use of our grant funding.”

Originally established as a community coalition working to reduce health care costs in the region, Alliance for Health has significantly affected policies and procedures in Kent County leading to lower medical care costs. Throughout the United States, health costs have risen over the years to reach 17.9 percent of the total GDP of country as of 2012, up from 13.6 percent in 2000, according to The World Bank.

Since 1948, the organization has strived to reduce duplications of health care services and, in 1972, began conducting local certificate of need reviews under the state of Michigan’s authority in an effort to keep costs low while maintaining quality of care, according to the Commonwealth Fund’s case study in April 2014.

Combined with a conservative medical practice style, regional planning and accountability for efficient resource use, the study noted Greater Grand Rapids ranks in the top quartile out of 306 regions across the United States as of 2012.

In 2012, Alliance for Health evaluated more than 30 projects seeking CON approval with a total expense of roughly $224 million, according to the organization’s annual report.

With approximately 12 years of involvement with the organization, Gavan said he is disappointed with the current leadership and has resigned from the organization.

“I’m incredibly disappointed with its current leadership chaired and run by two people who have no appreciation for the Alliance’s history, benefit or potential impact,” said Gavan. “As a result, the Alliance will now morph into an insurance agency using its nonprofit status to compete against for-profit organizations, and effectively ignoring its once noble mission of reducing the cost of health care to individuals and businesses. I, like so many others who have served this organization, have now resigned from it.”

When contacted about the significance of the board’s decision and the organization’s continued involved with CON evaluations, the Alliance’s current president and CEO, Paul Brand, stated in an email there has been a great deal of strategic rethinking occurring at the Alliance and is in no way ready to discuss the results in any public forum, including its role in CON proceedings.

The organization is working with Wondergem Consulting to launch a public roll-out of its new initiatives.

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