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These nonprofits are mid-merge but struggling to finish the job

So close. March 22, 2016 Category: FeaturedFundingMedium
When PA Health Care Quality Alliance (PAHCQA) and Health Care Improvement Foundation (HCIF) made the decision to merge in January of 2015, the two nonprofits knew it would cost some serious coin.

What they didn’t know was that groundwork was simultaneously being laid out for a major nonprofit funding initiative that could have cushioned that blow: The then-unannounced Nonprofit Repositioning Fund was just nine months away from launch.

Both organizations have the same mission: establish quality standards in the state health care system. PAHCQA, a coalition of medical institutions and providers, does that through measuring and analyzing public health data. HCIF is on the ground, implementing quality standards in hospitals and health care systems across the state.

In other words, PAHCQA sets the standards and HCIF puts them to practice. They’re the Lucy and Ethel of health care quality work. Think of them as educators and hospitals as students, said PAHCQA Managing Director Erik Muther.

“By identifying who were the students getting Cs and Ds, [PAHCQA] could identify who needs extra help with their homework,” he said. “HCFI, being the tutors, could work with those students to improve their grades.”

A merger would give both entities the option to bring on more capabilities -- something funders were starting to keep an eye out for.

The perfect partnership, and one Muther said requires very little compromise — because their missions are so closely aligned, neither organization would be required to make substantial changes to their work. Rather, a merger would give both entities the option to bring on more capabilities — something funders were starting to keep an eye out for.

“Large endowments and grantmaking organizations were beginning to look for organizations that had the capability to take a multi-faceted approach to different programs and projects. They weren’t as interested in having programs be done with just one team,” Muther said. “We realized [a merger] would increase our attractiveness.”

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In the heat of the moment, it seemed like perfect timing. It was not.

“Mergers are not free. You have to spend money,” Muther said. “A little unfortunately for us, [local foundations] started the Repositioning Fund right after we’d done this.”

The merger — still underway — will take anywhere from $20,000 to $60,000 to see through completion, according to Muther. They have to consolidate their resources — both physical and digital (PHCQA has statewide brand recognition, while HCIF is contained to Southeastern Pennsylvania). And they’ve yet to come up with a name.

That’s the complicated (a.k.a. expensive) part. PAHCQA has contracts with health insurers in the state. The organization receives about 40 percent of its funding from insurance companies like Independence Blue Cross, which then use PAHCQA’s metrics as monetary incentive for health care providers. If providers meet PAHCQA’s health care standards, they receive a little extra cash from insurers. PAHCQA’s website was written into those agreements.

“Because those contracts existed, we couldn’t really change the name of the website or shut it down,” Muther said.

Changing their name and integrating their services will require a branding strategy, he said. So, PAHCQA and HCIF approached the newly formed Repositioning Fund.

As it stands, the Fund only financially supports organizations in the exploratory and implementation stages of the merging process.

“While they’re very supportive and sympathetic to what we’re doing, and certainly we’re a good example of why they’re funding what they’re funding … it’s probably not likely we’ll receive any funding from them,” Muther said.

Why? Simply put, this particular merger is just too mature. As it stands, the Fund only financially supports organizations in the exploratory and implementation stages of the merging process. There is no allowance for organizations in the post-transaction phase.

“If we had existed a year ago, I have no doubt we would have worked with them,” said Nadya Shmavonian, executive director of the Fund.

Instead, Muther said, the organizations will seek smaller grants for specific components of the merger like website consolidation, or try to figure out a way for one of their existing supporting organizations to help see the merger through to completion.

Nonprofit mergers are a rare occurrence, and the world is watching as the Repositioning Fund explores uncharted waters in Philadelphia. Unfortunately for both the Fund and PAHCQA/HCFI, the timing just wasn’t right.

Generocity Editor Julie Zeglen contributed reporting to this story.

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