Venture philanthropist for health care
Public-private partnership helps improve state’s safety net

by Doug Childers
for Virginia Business
May 2007

The patient’s complaint seemed straightforward. He had a toothache, and because he didn’t have health insurance, he visited Richmond’s CrossOver Health Center, which offers free medical care to the uninsured. A physician’s assistant gave the man a primary-care examination, during which she found a life-threatening dental infection penetrating into the man’s mouth and entering the soft tissues of his neck and chest.

“The physician’s assistant alerted me, and we sent him to the hospital, where he had emergency surgery,” says Dr. Dan Jannuzzi, CrossOver’s medical director. The man recovered, Jannuzzi says, thanks to the care he got from the physician’s assistant.

The clinic has a physician’s assistant because of help from the Virginia Health Care Foundation (VHCF), a unique public/private partnership that strives to improve the state health-care safety net.

The General Assembly created VHCF in 1992. “There was a national awareness of the uninsured at the time,” says Deborah D. Oswalt, the foundation’s executive director. “A number of experiments were percolating because there was a realization that when you have uninsured people, we all pay the costs in a lot of ways.”

In 1992, the United States had 38.6 million people without health insurance. Today, the number has climbed to 46.5 million. Virginia currently has more than 1 million uninsured. “There’s really a need for a primary-care safety net to provide a home for the uninsured,” Oswalt says. “[The national increase in the uninsured] is discouraging, but it underscores the need for the work that we do.”

Tom Snead, chairman of the foundation’s board of trustees, calls the burden that the uninsured place on the insured “a hidden tax.” He is the retired president of Wellpoint Southeast Region, whose subsidiary, Anthem Blue Cross and Blue Shield, is the state’s largest health insurer. “It’s a problem all of us pay for but yet few of us know about,” he says. “Fifteen percent of our population doesn’t have health coverage, but they get care — typically, through the emergency room. Doctors and hospitals have to get paid, so they shift the cost of all that free work to the paying patients and the insurance companies. The paying patients are paying for the ones who don’t pay.”

Health-care premiums for Virginia families who have private employer coverage were $734 higher in 2005 because of the cost of unpaid care for the uninsured, according to a 2005 study published by Families USA. The increased cost for individual coverage was $277.

In 1992, Oswalt, who then was Virginia’s deputy secretary of Health and Human Resources, worked with businessman and future Gov. Mark Warner to set up the VHCF. Warner served as the foundation’s founding chairman. Working with the foundation’s board, they created a public/private partnership focused on venture philanthropy. “We decided to approach our grant process as if we were investors,” Oswalt says. “We wanted a solid business plan, solid financials and evidence of the community’s support. We fund ducks in a row, not a gleam in the eye. We thought that if we took the approach that our grants were ivestments, they would have a stronger likelihood of succeeding.”

In the past 15 years, the VHCF has invested $16.5 million in Virginia’s health-care safety net. It has issued the bulk of the money as three-year grants to free clinics and community health centers. These organizations have used the money to provide the state’s uninsured with medical and dental care, mental-health services and pharmacy services. “The drugs are free,” Oswalt says. “A small number of organizations we work with do charge a small fee to help with some of their supply costs.”

To encourage these organizations to become self-sufficient, each year’s payment is dependent on the success of the previous year. In addition, the VCHF reduces each year’s funding by 25 percent. “We’ve found that the nonprofit world is often a bit different from the business world,” Oswalt says. “The boards and the people who lead the organizations are often driven by a mission, but they lack the knowledge of how to operate something as a business.” The VHCF tries to combine what Oswalt calls “the best of both worlds — compassion plus good management practices.” The goal is simple: to grow and strengthen Virginia’s health-care safety net for the long term. “To achieve that, the health safety net providers need management and financial skills.”

To help its grant recipients achieve self-sufficiency, the VHCF runs management workshops and offers scholarships for nonprofit management courses. It also gives grant recipients funds for strategic planning.

In its first year, the General Assembly gave the foundation $2.2 million to attract private investment.  For fiscal year 2007, it received $3.6 million from the General Assembly.  For fiscal year 2008, the figure increases to $3.85 million. The percentage of the foundation’s funds that come from public sources varies from year to year. Its total budget for fiscal year 2007 is $6.4 million.

The foundation’s record speaks to the success of the model: 89 percent of its grant recipients are operating at the same level or higher three years after graduating from the foundation’s funding. And the number of Virginia’s free clinic and community health center sites has grown from 30 to 150 since the foundation’s creation. The sites are unable to determine how many patients they see in any given year.

The foundation’s level-headed business approach is paying off. “In the past 11 years, we’ve leveraged an average of over $11 in cash, health services and other in-kind contributions for every dollar spent,” Oswalt says. “That’s the value of a public/private partnership.”