foundation: story & boxes/21 inches/1stjc/mark2nd

BEN SULLIVAN Staff Reporter

In the world of California philanthropy, $3 billion to spend on discretionary health care projects would usually be considered a bundle.

But Mark Smith and Steven Uranga McKane, the respective CEOs of the California HealthCare Foundation and the California Endowment, argue that it's barely a drop in the bucket.

The two new non-profits are inheritors to the assets of Woodland Hills managed care giant Blue Cross of California, which converted to for-profit status in the middle of 1996.

By law, such conversions require the new company to establish one or more philanthropic entities equal in value to the old non-profit.

Though their endowments place them in the upper echelons of California charities the Foundation is the third largest in the state, the Endowment the seventh the groups' CEOs say they are guarding their money like misers.

"Everyone and their uncle" has already come to the foundations for grants, Uranga McKane said, "and in nearly all instances there are expectations that are unrealistic."

Uranga McKane's Endowment, located in Woodland Hills, received an initial $900 million from the Blue Cross conversion. Since it began doling out funds in September, it has dispersed $32 million through 147 grants.

Over the next three years it must spend at least another $150 million to meet requirements outlined by the California Attorney General's Office.

The Foundation in Oakland, which has a $2.1 billion kernel, is still developing its grants program, Smith said, and will begin disbursing money this spring.

But even then, he cautioned, the state shouldn't expect a flood of funding.

"Health care in California is a $100 billion a year industry. We could spend all of our assets in one year and still be just 3 percent of the action," Smith said.

In particular, he said, both organizations must guard against being seen as alternative funding sources for public projects.

"It's magical thinking (to believe) that it's okay to cut government spending because the private sector or charity will make up the difference," he said. "That's sophistry at worst and ignorance at best."

Smith's attitude has resonated to a point with others in the health care community. But, they also point out, $3 billion is still $3 billion.

"I don't think the foundation can just give money to the (L.A. County) Department of Health Services," said Vincent Gualdieri, immediate past president of the Los Angeles County Medical Association. "But they certainly have the resources to help find out why people are not being covered adequately" by existing infrastructure.

Clyde Oden, president and CEO of the Watts Health Foundation, sees even greater potential for two. From public health to domestic violence, "they both have an awesome responsibility of stepping in the gap" between what's now funded and what is needed, Oden said. "It's unprecedented in terms of the opportunity presented. We've had very few organizations with the kind of largesse that they have."

So far, the California Endowment has given money to a spectrum of causes, from home care for elderly Asians in Oakland, to AIDS prevention programs targeting L.A. teens, to voicemail services for the homeless in Santa Cruz.

"But I doubt those'll be really representative of what we'll be doing in the future," Uranga McKane said. As the Endowment and its board members grow into their roles, the organization will find its true voice, he said.

The California Healthcare Foundation, meanwhile, will tackle fewer individual problems, but throw greater resources behind those it does take on, Smith and others say.

"We're looking at long-term, higher risk, higher reward programs," said Enrique Hernandez, CEO of Inter-Con Security Systems Inc. in Los Angeles, and a member of the Foundation's board of directors. "We may be looking at (medical) research, while the Endowment could fund flu shots, clinics and things like that," he said.

By virtue of their clout, the foundations will inevitably play a role in helping set the state's health care agenda, observers say. But because they are barred from political lobbying, the groups' strength will be indirect, according to Marvin Kanter, a regional medical director for Long Beach-based MedPartners and a Foundation board member.

"We can serve as a convenor of others," Kanter said. "We certainly have the ability and the dollars to do that."

box:

California HealthCare Foundation

Headquarters: Oakland

Top executive: Mark Smith, president and CEO

Nine-member board of directors

Initial endowment: $2.1 billion

Ranked third among California foundations, 10th nationally

California Endowment

Headquarters: Woodland Hills

Top executive: Steven Urunga McKane, president and CEO

18-member board of directors

Initial endowment: $900 million

Ranked seventh among California foundations, 28th nationally

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