The Distinction Between Lakewood's Hospital Charities
In the hospital debate, it is important to distinguish between the Lakewood Hospital Association (LHA) and the Lakewood Hospital Foundation (LHF). Both are charitable organizations under 501(c)(3) of the Internal Revenue Service. However, LHA is also a "public" charity under 509(a) of the Internal Revenue Code while LHF is a "private" charity.
The assets of LHA are essentially the City of Lakewood’s assets, i.e. public assets to be used for the general public. These assets are owned by the City of Lakewood and leased to LHA. By the terms of the 1996 Lease, when the lease ends in 2026 or earlier, the assets must be returned to the City of Lakewood. The Letter of Intent seeks to liberate some of LHA public assets and divert them to a new foundation. To do so would require City Council approval, because it is essentially the City’s money. Exactly how trustees of the new foundation will be chosen and how they will be accountable to the City and its citizens remains to be seen, but it is clear from the LOI, that the Cleveland Clinic wants some representation and control over the assets of the new foundation.
A significant part of LHF’s assets are “restricted” funds as to Lakewood Hospital--this means that the donors required that LHF use or apply these funds for the benefit of Lakewood Hospital. According to Kristin Broadbent, LHA’s executive director, if Lakewood Hospital no longer exists, LHF will need to obtain the Ohio Attorney General’s approval to use the “restricted” funds for a new purpose other than Lakewood Hospital. Since the City owns the hospital that benefits from those restricted funds, the City might have some say with LHF or the Attorney General as to how that portion of LHF’s money might be used.