Bad Government 11: “New Foundation” Is Objectively Worse In Every Measurable Way

On December 12, 2016, each of the seven members of City Council nominated one person to the “new wellness” Foundation Planning Task Force. City Council plans to nominate 2 additional task force members and Mayor Summers is to nominate 8 members-- so there will be a total of 17 members of the task force. The stated goals of the Foundation Planning Task Force are to: “recommend a process for the creation…discuss and reach preliminary conclusions about the nature, scope, mission and governance of the new foundation”provided for in the Master Agreement passed on December 21, 2015. So it has taken a year to create a task force even though the hospital has been closed since February, 2016 and people are in need of help.

 1. Council President Trails Mayor’s Lead in Favoring the Cleveland Clinic Influence.

Council President Sam O’Leary nominated Dr. Charles Garven to the task force. Dr. Garven was a Cleveland Clinic family practice doctor until recently when he joined North Coast Health Ministry as Director of Medicine as part of plans related with the Master Agreement. While Dr. Garven is a fine doctor, Mr. O’Leary’s nomination amounts to giving away a Lakewood “choice” to the Clinic. The Master Agreement guaranteed that the Clinic will have at least two representatives on the board of the “New Foundation,” and the City of Lakewood is not guaranteed any representation. The “New Foundation” was first planned back in 2013 in Mayor Summers’ secret “Select Committee” formed within the Lakewood Hospital Association—Summers chose a majority of Clinic trustees as the members of his “Select Committee."

 2. Delay in Foundation Funding Is Measurably Worse Than the 2015 Letter of Intent.

Elected official gave the Cleveland Clinic complete control over $50 million of Lakewood’s charitable investment portfolio which otherwise would have come directly to the City when the hospital closed. Only after the Clinic’s new specialty referral center (also known as a family health center) is opened in Lakewood in mid-2018, will the Clinic be required to begin funding the “New Foundation.” 

The Master Agreement foundation funding plan is objectively worse in every measurable way for Lakewood than was the original Letter of Intent (LOI) made public on January 15, 2015. The LOI provided for foundation funding of $12.2 million upon signing (December, 2015) and $12.2 million by 2018.

The following chart shows how the Clinic will benefit for the coming 11 years the differences between the agreements:

Year                New Foundation Funding       Clinic’s Returns On Portfolio (Estimated)

                        Master             LOI

2015                $0.2M             $12.2M                                              

2016                -0-                                                                   $5M

2017                -0-                                                                   $5M

2018                $7.6M             $12.2M                                       $5M

2019                $4.3M                                                              $5M

2020                -0-                                                                   $5M

2021                -0-                                                                   $5M

2022                $4.1M                                                              $5M

2023                -0-                                                                   $5M

2024                $4.1M                                                              $5M

2025                -0-                                                                   $5M

2026                $4.1M                                                               $5M

Total                $24.4M                                                           $55M

Net benefit to the Clinic by 2026:

 $50M portfolio gifted to Clinic in 2015

 +$55M returns on portfolio

- ($24.4) foundation funding

 $80.6M Net to Clinic by 2026

Despite these facts, President O’Leary claimed in the October 25, 2016 Lakewood Observer that “Lakewood deserved a better deal than what was put forward in January of 2015, and after a year of study, negotiation, and public input, Lakewood City Council was able to affect a deal that was objectively better in every measurable way.”

Another problem with Mr. O’Leary’s claim is that there was no public discussion, deliberation or explanation as to why the Master Agreement funding was worse than the original LOI.

The City’s Master Agreement closed Lakewood Hospital in February, 2016 and ended 100 years of charity services which averaged over $7 million per year for the last 20 years.

Christmas 2016 will be the first Christmas in over 100 years that Lakewood’s residents will be without the charitable services of Lakewood Hospital or any other charity to take care of health needs of the underserved. At the pace our elected officials are proceeding with the “New Foundation,” it is likely that there will be many more future Christmases in which the needs of Lakewood’s most vulnerable citizens will go unmet.

That’s bad government.