Tell it to Interfaith Medical Center (NY), Long Island College Hospital (NY), St. Vincents Medical Center (NY), Long Beach Memorial Medical Center(NY), Essex County Hospital (NJ), Bayley Seton Hospital, Vidant Pungo Hospital (NC), Williamson Memorial Hospital (WV), Florala Memorial Hospital (AL), Lee Regional Medical Center (VA), Corcoran District Hospital (CA), Cozby-Germany Hospital (TX), Charlton Memorial Hospital (GA), Shelby Regional Medical Center (TX), Sacred Heart Hospital (IL), W.O.Moss Regional Medical Center (LA), Earl K. Long Medical Center (LA), Anaheim General Hospital (CA), Bellflower Medical Center (CA), Los Angeles Metropolitan Medical Center (and its Hawthorne campus) (CA), Newport Specialty Hospital (CA), Steward-Webster Hospital (GA), Renaissance Hospital Terrell (TX), and Calhoun Memorial Hospital (GA), all of which recently closed.
I can tell you many of those hospitals the problem wasn't indigent care, but crappy management. Heck Long Island College Hospital had a great endownment and they pissed it away. Check out this article from the Wall St Journal on them:
A Buffett Fortune Fades in Brooklyn
Case of Othmer Gift to Ailing Hospital Is Cautionary Tale for Wealthy Donors
By
Anupreeta Das
July 19, 2013 4:39 p.m. ET
As early investors with Warren Buffett, Donald and Mildred Othmer quietly amassed a fortune that they believed would sustain their favorite charities for generations.
Among those organizations: Long Island College Hospital in Brooklyn, N.Y., for which the Othmers created a $135 million endowment in the 1990s, "to be held in perpetuity," according to their wills.
ENLARGE
Less than 20 years later, much of their gift is gone. And the hospital's owners have been cleared by state regulators to close the money-losing nonprofit, which has sparked protests because the 155-year-old facility was one of Brooklyn's largest private employers.
In a series of court-approved transactions, hospital administrators repeatedly tapped the fund to serve as collateral for loans and to cover malpractice and other costs, according to court records. The transfers were permissible to keep the hospital going, the court ruled, saying that is what the Othmers would have wanted.
Doctors, nurses and community activists say the treatment of the Othmer gift illustrates a pattern of financial mismanagement on the hospital's part.
Mr. Buffett has even expressed concern. "This came as a huge surprise to me," said the billionaire investor, who learned of the situation earlier this year in an email from a Brooklyn resident. "I would think if [the Othmers] were alive they would feel betrayed."
A spokesman for the State University of New York Downstate Medical Center, the hospital's owner since 2011, declined to comment.
A spokesman for Continuum Health Partners Inc., the previous owner, said, "we did everything possible to keep [Long Island College Hospital] financially solvent so that the hospital could continue its mission to meet the healthcare needs of all who turned to us for help."
New York's Department of Health on Friday approved Downstate's plan of closure for the hospital beginning July 22.
The Othmer case, experts say, shows how even the best-laid philanthropy plans can go awry—and provides a cautionary tale for wealthy individuals who hope their gifts will make a long-term impact.
Natives of Omaha, Neb., the Othmers married in New York in 1950. An accomplished chemical engineer and inventor, Mr. Othmer taught at Brooklyn's Polytechnic Institute, now a part of New York University. Mrs. Othmer taught English in the 1930s.
The couple had no children and lived modestly. They traveled to far-flung places like Burma and Japan and signed their letters "Midon," a combination of their nicknames, Mid and Don, according to a 1999 book about them.
ENLARGE
Nurses and staff protest the closure of Long Island College Hospital. Peter Foley for The Wall Street Journal
In 1961, they each invested $25,000 in a partnership run by Mr. Buffett, who knew Mrs. Othmer's mother. When Mr. Buffett dissolved the partnership in 1969, the Othmers ended up with roughly 14,500 shares of
Berkshire Hathaway Inc. stock valued at $42 a share, which they never sold.
"They just stuck with me," Mr. Buffett said, recalling lunches of ham sandwiches at the Othmers' Brooklyn home.
When the Othmers died, their Berkshire shares were valued at more than $780 million. At today's prices, they would have been worth $2.5 billion.
Between Mr. Othmer's death in 1995 at age 91 and Mrs. Othmer's death in 1998 at age 90, at least 12 institutions benefited from their generosity. The University of Nebraska at Lincoln, which the Othmers attended, and Polytechnic received more than $135 million apiece.
Long Island College Hospital was the other charity to receive a nine-figure gift. The hospital is roughly half a mile from the five-story townhouse where the Othmers lived. Mr. Othmer served on the hospital's board for 22 years. His wife was a member of the hospital's Women's Guild.
Theodore Wagner, a New York-based lawyer at Carter Ledyard & Milburn LLP and executor of Mr. Othmer's will, said Mr. Othmer was a meticulous man. Mr. Othmer's 30-page will dictated such things as who should get his collection of 12 elephants, each carved of a different Burmese wood.
Mostly, their goal was to create permanent funds for the institutions they had loved, to ensure "they would survive and grow," Mr. Wagner said.
Such endowment funds are commonly used by universities, hospitals and other nonprofit organizations to hold donations. Only the income generated by investing the principal amount is meant to be used.
In the case of the hospital, the wills stipulated that most of the Othmer endowment was "to be held in perpetuity and the income only to be used for general purposes."
By the late 1990s, the hospital was in financial trouble, according to court records. In 1998, soon after Mrs. Othmer died, it handed over operations to Continuum, a private hospital operator which this week approved a plan to merge with New York's Mount Sinai Medical Center, in a bid to improve performance.
In 2000, the hospital sought court permission to use the principal from the Othmer endowment. It invoked the legal doctrine of "cy pres," which gives a court power to revise a will to save a charitable organization from failing if certain conditions are met.
In its petition, and subsequently, the hospital argued that the Othmers would have wanted to protect its existence.
The Kings County Surrogate's Court initially allowed the hospital to use about $89 million as collateral for loans and spend an additional $15 million to buy and renovate a building that was later sold off to developers.
Although cy pres, which means "as near as possible," is a standard part of the law governing charities, it is used infrequently because the process is stringent, lawyers say.
Starting in 2000, the hospital on at least three occasions requested—and received—permission from the court to borrow against the Othmer funds, use it as collateral or allocate it to short-term expenses. A portion of the money at one point was repaid to the fund but most wasn't, the records show.
In 2011, the hospital sought the release of the remaining money to pay off malpractice and other claims, citing a condition in its proposed merger with Downstate, a deal it pitched as essential to its survival.
The court allowed the hospital to take the last $26.8 million of "unencumbered" money as well as $63 million of Othmer money pledged as collateral since 2000. Also that year, $85.7 million of the endowment was put into a trust to pay medical-malpractice claims, according to public records.
The court also transferred control of the funds to Downstate and said it would be liable to repay all the Othmer money. In a January letter to state Comptroller Thomas DiNapoli, Downstate President John Williams wrote that the university would "replenish the Trust only when and if it is able to."
Barbara Gartner, a 73-year-old Brooklyn Heights resident, first heard about the Othmer funds at a citizens' forum in February. "People kept saying, 'nobody knows what happened to the Othmer funds,'" Ms. Gartner said. At first she was curious, then outraged.
Ms. Gartner pieced together the history from public records. She emailed Mr. Buffett, who said he wishes he had known sooner.
The Othmers "did not spend huge sums on themselves but instead wanted the money to go back to society," Mr. Buffett said. "And at least one institution couldn't wait to change the terms under which it received the money."
Write to Anupreeta Das at
[email protected]
