A year ago I began a project with a small non-profit health care provider in a remote rural county here in North Carolina. They had many problems that needed to be addressed. Over the course of four months a long range plan was adopted which included a restructuring of the board, a revitalization of their by-laws, and the development of a marketing plan that would grow their image and support in the region.
Before the plan could be fully implemented, it became obvious that they were running out of money, and that if nothing was done, they would be out of business by the end of the year. So, we went back to work to modify their long range plan to incorporate into it a partnership that could provide them additional revenue.
After some research, three options emerged. The first a merger with a competitor from a neighboring county never got beyond an initial conversation. The second a possible acquisition by a local provider of different health care services than the non-profit's. The third was to sell to a for-profit health care provider in the same business.
As we approached this decision, we had two basic criteria that we applied to our decision making process. It was essential that whatever happened, it would be in the best interest of the people of their community. After all as a not-for-profit organization, their stakeholders were the people they served. Our prior planning process had revealed a lack of confidence by the community in the organization. Our plan was to rebuild the foundation of trust and confidence by the community. The mission of this healthcare organization was one that potentially could touch every person and family in the county. So, the failure to be a financially sustainable organization was not just a business one, but also a failure to fulfill its mission to serve their fellow citizens. It was, therefore, essential that any solution would lead to greater opportunities to serve the people of their county. No small task.
The second criteria for finding a partner was that they could bring financial resources to the agreement. For their problems were not really a management or service/operations problem, but a financial resources one. To build the numbers of client/patients to financially sustainable levels would not happen over night.
The clock was ticking, time was running out, and urgency was the name of the game. After initial discussions, the first two options were put aside because there were no prospects for financial resources coming from either.
So, conversations began with a for-profit health care provider from out-of-state that already had another business enterprise operating successfully in the community. The thought occurred to all of us, "How does a for-profit business partner with a non-profit organization?" There are all sorts of legal issues that must be addressed. So, we pulled in a couple of lawyers to advise us on these factors.
Over the course of three months, discussions and meetings were held that led to a purchase by the for-profit of particular assets of the non-profit. The arrangement that they created is a story of how through persistence, creativity and attention to one's mission, even in the most dire circumstances, solutions can be found. Here's the result of our work.
The for-profit is purchasing the non-profit's Certificate of Need and License to operate in five contiguous counties in North Carolina. That is all they are purchasing. While they apply to the state for approval of the transfer of license, they will operate the non-profit organization under a management agreement. This agreement begins December 1.
The non-profit retains the rest of its assets, including outstanding accounts receivable, their building and furnishings, and remaining funds in reserve. The non-profit will begin a new life as a philanthropic organization with funds that it can use to raise awareness of their mission of service to their community, and for indigent patients in their community. Along with a foundation entity owned by the for-profit, payment for services by those in the community who "fall between the cracks" of the health care system can be met.
The resulting agreement, announced yesterday to staff and community, is a win-win-win one. It is a win for the non-profit who met the criteria for continuing their mission and for the financial resources to do it in their transfer of operations to the for-profit organization. The for-profit organization wins because they have the opportunity to build up services that had not reached its capacity to benefit the community, and provides them a base for expanding services in areas not provided by the non-profit. It is a win for the community because the specific health care services provided by the non-profit will continue.
The response from former board members was positive and hopeful. From the staff, a sense of excitement about a stronger organization that will provide them greater job security, opportunities for better compensation and benefits that the non-profit could not afford to provide. By the board, a sense of hope, optimism and relief.
What are the lessons to be learned from this story?
Just how important trust and confidence matter. I cannot speak to what would have happened if a merger or acquisition by one of the other two options had occurred. The circumstances were not right at the moment they were presented. So, we'll never know.
However, as the non-profit board and the leadership/ownership of the for-profit got to know one another, it became increasingly apparent that there was a growing level of compatibility between the two organizations. This made the deal the best it could possibly be.
Two things can be said about the leadership of the for-profit. It was apparent that there was no narrow, only one way, our way deal to be made. Instead, I've rarely encountered the level of openness to options by leadership that has been in place as long as they have. My assessment is that they are absolutely clear that their mission is to serve people and to do so in a business-wise viable manner.
That openness to let the deal become what it needed to be built trust and confidence in them. This was not a for-profit predatory organization looking to take the assets of a failing organization and slip off into the night. I've seen that before. No, their commitment to the mission of service to the people of this rural county was paramount and enabled the board to see that not only were they a group to be trusted with the mission, but also they could have confidence that this group would succeed in ways that the current organization had not able to achieve.
In my role as facilitator, intermediary and consultant, I came to understand the importance of two things - communication and resilient optimism.
In a negotiation between two businesses, rumors begin to surface. People talk, and often the talk is inaccurate. In this case, all the rumors were wrong and apocalyptic in tone. At the appropriate time, the board of the non-profit instructed me to tell the staff about what was taking place. We talked about a range of issues, like their continued employment, and one of them asked if they could tell others. Here's the nature of real communication. I said,"I believe it is not time for you to talk about this outside of this room. However, my assumption is that once this meeting is over, that the news will be all over town." They asked "Who will that come from?" I said, "My assumption is that one of you will be the source of the news getting out." And, I was correct. For this reason, it is important to be absolutely clear about what is told in these situations. It can't be a hype. It has to be a straight-forward depiction of what is happening, to the degree that it can be said.
Finally, when an organization sees their money running out, it produces many different emotions. Fear, panic, remorse, anger, guilt, and denial to name a few. What this project did was reinforce my experience that resourceful, resilient optimism is required to thrive in hard times. We have to believe that there is an answer and through persistence and hard work, we will find it. In my dealings with the board of the non-profit, I never allowed them entertain the option of closing down. I was confident that if they stayed open to new ideas and options, one would surface that would work. And it did, and will beyond anything they could have imagined a year ago when we started this project.
Yes, in a time of diminishing expectations for the future, great things can still happen. We just have to remain open to the opportunities that are emerging, and learn to embrace them with energy and commitment.
And the story doesn't end here. Next month, once the management contract begins, the non-profit board will begin to plan for its next life as a philantrophy still committed to providing services to their fellow community members. I look forward to the opportunities that will come for them.