The phenomenon of nonprofit to for-profit conversion in the health industry represents the largest redeployment of charitable assets in history. Because the converting nonprofit health organization is presumed to have provided public benefit before the conversion and because the nonprofit assets have been built by and on behalf of the public, state laws typically require that converting organizations preserve their charitable assets in order to maintain the level of public benefit provided before the conversion. Often these assets are used to endow a new foundation. These foundations -- commonly called conversion foundations -- are the subject of this paper. Over the past two decades, billions of dollars in charitable assets have transferred from the health care industry into organized philanthropy, and billions more will no doubt do so.
The trend of health conversions is a very recent but quickly accelerating one: The first conversion foundation was created in 1973, and over the next ten years, only four were created; most were established in the mid-1980s or mid- to late 1990s. Most are fewer than ten years old: 59% were formed between 1994 and 1999, and an additional 11% since 1999.