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Hospitals and their foundations: the importance of communication

The importance of regular communication between hospitals and their foundations cannot be overstated to avoid disputes about how best to use money raised in the community, says Toronto health lawyer Kathy O’Brien.

“It’s a relationship that needs to be cultivated,” she tells AdvocateDaily.com. “It’s kind of like a marriage that needs to be nurtured and not taken for granted.”

O’Brien, a partner with DDO Health Law, says most hospitals in Ontario have a separate foundation that acts as its own corporation/charity with a board of directors, to raise money for the hospital. 

“Hospitals started creating separate foundations for fundraising in order to keep the government funding they get for running the hospital separate from the money they raise in the community,” she says.

There is a codependent relationship between hospitals and their foundations, O’Brien adds.

“The foundation really has no purpose except to raise money for the hospital so it’s dependent on the facility’s priorities — such as whether it wants to raise money for a new MRI or a new building,” she says. “A foundation’s whole purpose has to be aligned with what the hospital wants to do. 

"The hospital is, in turn, dependent on the foundation because that’s the entity that the community is giving money to and if it wants to do a new build or raise money for a certain project, it needs to have a good relationship with the foundation.”

But sometimes the two organizations butt heads, and it’s generally because of personality conflicts, O’Brien says.

“If the relationship deteriorates, it’s never good for anybody, and especially not for the community,” she says. “If the community starts hearing about squabbles between the hospital and the foundation, there is going to be less confidence in donating your money there.”

Problems can begin when there is a change in leadership at the foundation or hospital, O’Brien says.

“Sometimes there can be different visions of what the foundation should be doing,” she says. 

O”Brien points to a case about 15 years ago where a hospital took its own foundation to court after it refused to fund a hospital-requested project.

“The Ontario Superior Court articulated the duty a foundation owes to the hospital when it asks for funds,” she says. “The court said the foundation can’t just say no. The foundation has to give a “demonstrable, disinterested, thorough and sympathetic consideration” to any request for funding by the hospital.”

What should have come out of that decision, O’Brien says, is a direction to hospitals and foundations to sit down before there’s a problem and map out, in an agreement, how they’re going to deal with each other when a hospital wants to request money from the foundation.

“Just because a hospital and its foundation have a good relationship now doesn’t mean it will always be,” she says. 

“The agreement should set out the foundation’s expectations when it comes to fundraising requests from the hospital. Does the foundation want to see a business case? Does the foundation want to see how it aligns with the hospital’s plans?”

O’Brien says sometimes the objectives of the foundation and the hospital don’t align.

“Often, the foundation wants the money it raises to go into something long-term and meaningful such as a building or a major piece of equipment — something they can show the community that’s where their money has gone,” she says. 

“They don’t want the money to go to day-to-day operations. The foundation often thinks that’s what government funding is there for, and the money from the community is for something above and beyond that.”

And so, it can be helpful to set out, in an agreement between the hospital and the foundation, the circumstances under which the foundation will and won’t grant money to the hospital, O’Brien says. 

“It’s also a good idea to set out a regular communications plan,” she says. “The two boards should get together at least once each year, or, at a minimum, the two chairs of the boards should get together to talk about what’s coming in the next 12 months to set expectations and to create a collaborative, collegial relationship.”

Some cross-appointment on the boards is also a good idea, O’Brien suggests.

“Making sure that the chair of the hospital board is on the foundation board so they are hearing at every meeting from people on the ground who are in tune with the hospital’s financial needs,” she says. 

When everybody is getting along, these things may not seem necessary because the lines of communication are open, but it’s particularly necessary when there are changes in the leadership, O’Brien says. 

“That’s when it’s good to have this kind of reset for everyone to get together to pull out the agreement to remind themselves of the rules and to make sure they’ve got a meeting scheduled on a communication plan so that nothing goes off the tracks,” she says.

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