It’s not every day that a foundation decides to change its tax status. In July 2018, Forefront Member The Michael Reese Health Trust in Chicago officially became a public foundation after nearly thirty years as a private entity. This evolution brings both dramatic change to their organization and new, vital opportunities that will further their mission and legacy. They’ve also rebranded themselves as Michael Reese and will be launching a new website: wearemichaelreese.org. Forefront sat down with Gayla Brockman, President & CEO, and Harvey Barnett, Chair of the Board to learn more about this incredible transformation, our shared commitment to cultivating partnerships around the sector, and what comes next for Michael Reese.
Can you tell us a bit about the history of the Michael Reese Health Trust?
Harvey Barnett: Michael Reese was one of the great teaching hospitals of all time. It started in the late 1800s. Michael Reese was a Jewish man who made a bunch of money. When he died, his descendants decided they wanted to do something important with the inheritance. At the time, Jewish doctors in Chicago had trouble being admitted to hospitals. So, they created Michael Reese hospital and funded it with the money. Their credo was: “We might have been discriminated against, but we’re going to treat everyone, no matter what race, color or creed.”
The hospital became the first in many different things. It was the first hospital to have a real training program for nurses back in the 1920s. It was a leader in medical research. As neighborhoods changed, doctors started to move away, and the hospital eventually folded. When the hospital closed in 1990, a deal was struck between the Jewish Federation and the Hospital Trustees where the money they had from the sale of the land and a health plan (around $35 million) would be placed into the Michael Reese Health Trust, to be managed by a combination of the Jewish Federation, the former Trustees, and community members. That fund has now grown to around $150 million and we’re planning on increasing that through fundraising.
From this history you then decided to take on transitioning to a public foundation. Can you walk us through the process and internal decision making?
Gayla Brockman: Michael Reese built its reputation as a convener and a knowledgeable funder that supported administrative advocacy. We were a traditional funder, where applicants would meet with program officers, apply for grants, proposals were reviewed, the team would make recommendations to the board, and the board would make decisions.
At the same time, since our founding we had inherited a group of funds that threw off income, but no one sat down and looked at the numbers. To be a public charity, you must generate revenue: not just your investment revenue, but you also must generate public support. And we were doing that without anybody realizing it.
As a private foundation, there are two rules you must adhere to: you must give out 5% of your corpus, which we were doing through our grantmaking program, and the second is you must pay excise tax. In addition, you must not support legislative advocacy. As for paying the excise tax, it is a complicated formula, but suffice to say that we were paying taxes when we almost didn’t need to. As a public charity, you don’t pay taxes, you don’t have to give out 5% of your corpus, and you can fund, up to a certain amount, legislative advocacy. When I got here three years ago, I sat down and realized we were getting these checks in and they were sizable. With the support of the board and our strategic planning committee we agreed to take a closer look at this.
We sat down with our accountant and laid out this massive spreadsheet and did the numbers together, and saw we were generating about 8% of public support. The minimum that you must generate to be public is 10%. When we realized all we needed to do was raise 2% to transition, the board got excited.
Harvey: It was more than just the economics. With Gayla’s vision, we saw all the other things we could do as a public charity: fundraise, grow our corpus, and be involved in advocacy. It created a whole new panoply of options for us which stimulated our board to move ahead on these different fronts.
Gayla: When Michael Reese was a hospital, we were a public charity. I felt this obligation to be a public charity. Even though we no longer had the walls, we still had this obligation to fulfill this legacy. I felt like we had to do this, and we were close enough, and the board got behind the idea.
Were there any serious roadblocks in the transition to a public foundation?
Harvey: We were sort of a sleepy foundation that did unbelievable work. In terms of transition, not everyone was on the same page, because things had been done a certain way for so long. In some respects, the transition was very cathartic and a healing process which brought everyone on the board much closer together. Now everyone is much more engaged. They feel the passion, and the sense of what we will really be able to accomplish as a public charity.
One of the distinctive features of Michael Reese is the unbelievably close relationship between us and our grantees. Our program officers, including Gayla, meet with them and listen to their concerns. Our board members make site visits as well. They know us personally. It’s not “Submit a grant, here’s $20,000.” It’s very strategic, and there’s a wonderful relationship. You feel like you’re doing the Lord’s work. We’re changing people’s lives.
Gayla: We shifted so much during this time, as Harvey mentioned. We changed the way the board saw each other. Everybody came to a shared understanding of history, strategy, how we saw ourselves, how we made decisions together, succession planning, how we build our board, how we create committees, and what our committees look like.
This move to a public foundation was just once piece of it. We changed our bylaws. We changed our term limits. We changed our committee structure. We changed the number of meetings the board has in the course of a year. The board didn’t have much of a role before I came, from what I understand. They weren’t as engaged in the every day. I would say we see board members every week. They’re very involved.
The other thing we did with Jill Baldwin’s [a nonprofit consultant and now member of the Michael Reese team] help is that we asked the board to come up with core values, so they knew who they were and why they were doing this work. They weren’t just any other foundation, they were Michael Reese. That’s why we talk a lot about history. Michael Reese the hospital had a specific purpose. It was known for its dedication to serving immigrants, for serving those who no one else cared about, for having its doors open to all. These are important things that we need to carry with us and never forget.
Harvey: That’s our legacy. That’s how the board feels. People go on this board and understand they are carrying on a legacy. Our goal is to make a difference.
Gayla: It’s what keeps us solid as a board and how we educate new members. They feel part of a family, and that we’re doing this work together. It creates a whole different feeling than sitting alone as one person out there.
Going from private to public is a different way of looking at yourself, and there is some change. We do have to raise money. Some people are less excited about that than others. Every board member, though, has helped. We ask that board members make a gift. We don’t require an amount, but we do ask. Staff also is invited, not required, but some of them do give. We like to. We’re happy to. We think it’s important that we say to our donors as well: “Look, our board is supporting this.”
In what I have researched and done, I find that this board is so unusual in what change they’ve tolerated in such a short period of time. Going from private to public is a huge change. We’ve made it sound seamless, and it was, for the most part. It shouldn’t be easy. All I can say is this is an unusual group of people who were ready for it, open to it, extremely flexible and open minded, and believe in potential. I think that carries from the culture of Michael Reese the hospital: it was open to innovation and change, willingness to try new things, willingness to fail.
What’s your future impact now that you’ve made this transition?
Gayla: As a public foundation there’s a couple of things that we can get into that we really couldn’t before. One is we can develop our own advocacy voice in addition to funding legislative action that can have larger impact.
The other part is scaling or incubating initiatives that we think have the best chance for greatest impact. For example, we have been in the violence interruption business for a very long time. Specifically, we have been funding Acclivus, a community led organization, whose credible messengers with relevant lived experience and community relationships build trust and support individuals affected by community violence – be it the victim, their family and community, or their healthcare team. We believe these credible messengers are the best possible chance for those affected by violence to avoid getting shot or hurt again. The studies show that if these credible messengers are fully funded, they’ll reduce violent reinjury by 50%. In addition, all Acclivus staff have an education plan so they too can have a path to a healthier alternative.
As a public foundation we might learn of an initiative that would support one of our funding areas that’s a best practice in another community and bring it here in partnership with other stakeholders in the city and work with those stakeholders to elevate and incubate those initiatives. We would bring it in house, hire staff, raise the funders, then hand it back, perhaps, to the agency that we worked with to start the initiative. We don’t necessarily want to be an operating foundation, but we would consider incubating something with the proper start. Not one year, two years, three years, but give it a serious, six-year start, be the venture partner, and bring other partners to the table – funders, decision makers. And if it needs an advocacy platform, we can help build that platform. And now, because we’re public, we can advocate for a policy change that would give this venture a pathway to sustainability.
Do you have advice for organizations considering a similar transition?
Gayla: Be willing to make mistakes, because that’s where the real learning happens. Be willing to try this, to step out in the scary. Being public is scary. We don’t know if we’re going to make it. We have five years to make it. That’s what the IRS says – we have a provisional status. And the board is willing to take that risk. I’m scared! But they believe we can do it. (Turns to Harvey) You’re not scared.
Harvey: My advice for other foundations is to be bold, take some risk, and think about Michael Reese when it comes to healthcare. Join us. Work with us. We’re thought leaders. We are great conveners. We welcome everyone to the table.
Michael Reese is a role model for how foundations can spur internal innovation to transform and expand their external impact. Their commitment to partnership is exemplary of the community Forefront aims to foster and sustain in our Membership, where innovation is cultivated and shared so that everyone can maximize the impact of their work. As part of Michael Reese’s commitment to partnership, Gayla welcomes you to continue the conversation. You can reach her at firstname.lastname@example.org.
You can also connect with, and learn from, your peers through Forefront’s Member Networks, which convene foundations, nonprofits, and advisors around issue areas important to their work in order to ensure collective action, spark innovation, and create working relationships among colleagues. To find out which Member Networks might be right for you, and what other opportunities, resources, and connections Forefront Membership provides, email our Chief Operating Officer, Dawn Melchiorre, at email@example.com.