The ABCs of Benefit Corporations in Health Care Innovation

The development of socially conscious corporations took a big step forward when Delaware’s authorizing statute for benefit corporations became effective on Aug. 1 and Delaware joined 19 other states and the District of Columbia having such statutes. Benefit corporations can be “naturals” for health care innovation, incentivizing delivery of products and services in ways that help the nation achieve quality affordable care.

This article will discuss: 1) formation of benefit corporations; 2) the key elements distinguishing benefit corporations from traditional corporations; 3) various ways in which benefit corporations foster health care innovation; and 4) funding opportunities.

I. How to Form Benefit Corporations

To have a meaningful conversation about benefit corporations, it is important to distinguish between statutory benefit corporations and what are known as “Certified B Corporations.”

A. Statutory Benefit Corporations

As mentioned, 19 states and the District of Columbia have enacted statutes authorizing benefit corporations, and legislation is pending in eight other states.¹In addition to the District of Columbia, the states which have enacted authorizing statutes are: Arizona, Arkansas, California, Colorado, Delaware, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont, and Virginia. States in which authorizing statutes are pending are: Alabama, Connecticut, Florida, Iowa, Montana, North Carolina, Texas, and West Virginia. (Available at http://benefitcorp.net/state-by-state-legislative-status.) (This and all electronic documents last checked Aug. 2, 2013.) Delaware’s embrace of benefit corporations²Senate Bill No. 47, 147th Gen. Assembly, Delaware (2013) (available at http://www.legis.delaware.gov/LIS/LIS147.NSF/vwLegislation/SB+47?Opendocument) (“SB 47”). is significant because Delaware is home to more than 1 million business entities, as well as half of U.S. public companies and two-thirds of the Fortune 500.³State of Delaware, Division of Corporations (available at http://corp.delaware.gov). Delaware’s action likely will spur passage of authorizing statutes in other states, as well as creative applications of this new entity form in Delaware and states with authorizing statutes.

If located in a state with an authorizing statute, a business can elect benefit corporation status by identifying itself as such in its articles of incorporation or, if already incorporated, amending its articles, with its Secretary of State. Opting in or out of benefit corporation status generally requires a two-thirds shareholder vote for entities already incorporated.⁴Illinois Benefit Corporation Act, 805 ILCS 40 / § 1.10, Definitions, “Minimum status vote”; 40 / §§ 2.05 and 2.10. A benefit corporation sometimes is referred to as a “B corp.” However, there is no tax significance to the term. A benefit corporation can elect “S” or “C” corporation status for federal tax purposes. Delaware requires a 90 percent vote for opting in and two-thirds for opting out.⁵SB 47, § 363(a) and (c).

Delaware’s becoming a benefit corporation state is the culmination of efforts by a nonprofit known as “B Lab” which has created and spearheaded the benefit corporation movement in the United States and internationally. B Lab developed the statutory model for benefit corporation legislation and has lobbied for its adoption.⁶The B Lab website contains a wealth of materials regarding the benefit corporation movement, entity organization and Certification, and existing Certified B Corporations (available at http://bcorporation.net/).

B. Certified Benefit Corporations

Separate from statutory benefit corporation status obtained through and conferred by respective Secretaries of State, B Lab has developed a community of benefit corporations through its own third-party certification process among businesses wanting to do “good” in addition to “well.” To be clear, this is not the equivalent of becoming a statutory benefit corporation. Specifically, B Lab certifies corporations and limited liability companies achieving a minimum score of 80 on its B Impact Assessment, having or amending bylaws or operating agreements to require consideration of stakeholder interests, and signing a B Corp Declaration of Independence and Term Sheet to undertake social or environmental purposes as “Certified B Corporations” (with the B circled).

Two aspects of B Lab’s certification can be particularly useful to statutory benefit corporations although statutory benefit corporations need not be certified and vice-versa.⁷There currently are almost 800 Certified B Corporations (including Ben & Jerry’s, the first wholly owned subsidiary to be certified) and more than 200 statutory benefit corporations (including GreenChoice Holding Company Inc., which is the first regulated banking entity to be registered as a statutory benefit corporation) to the extent the latter can be tracked through respective Secretaries of State records. One is B Lab’s assessment, and the other is the “GIIRS” (“Global Impact Investing Rating System”) assessment overseen by B Lab which impact investors use in evaluating funding decisions. The practical application of these two tools will be discussed in Sections II-C and IV below.

II. How They Differ from For-Profit Corporations

Statutory benefit corporations have three core elements that set them apart from traditional for-profit corporations: purpose, accountability, and transparency. State authorizing statutes contain these core elements, although details of the statutes may vary from state to state. For comparison purposes, this article will discuss the authorizing statutes in Illinois, the author’s home state, and in Delaware, home to many U.S. corporations.

A. Public Purposes

Illinois’s statute, representing the model adopted for benefit corporations in many states, requires the entity have a purpose of creating a “general public benefit,” often defined as creating a material positive impact on society and the environment, assessed against a third-party standard.⁸805 ILCS 40 / § 1.10, Definition, “General public benefit”; 40 / § 3.01(a). Under this model, the benefit corporation can opt to identify one or more “specific public benefit(s),” such things as:

• providing beneficial services or products to low-income or un- or under-served people;
• promoting economic opportunity beyond ordinary job creation;
• preserving the environment;
• promoting the arts, sciences, or knowledge;
• improving human health;
• improving capital flows to entities with a public purpose; or
• accomplishing another particular benefit for society or the environment, thereby giving a benefit corporation the ability to define a very specific mission.⁹805 ILCS 40 / § 1.10, Definition, “Specific public benefit”; 40 / § 3.01(b).

Delaware’s statute differs slightly. It authorizes “public benefit corporations” and speaks in terms of “public benefit(s).” Delaware public benefit corporations must operate in a responsible and sustainable manner and intend to produce public benefit(s), meaning:

• “…[A] positive effect (or reduction of negative effects) on one or more categories of persons, entities, communities, or interests (other than stockholders acting in their capacities as stockholders), including, but not limited to, effects of an artistic, charitable, cultural, educational, environmental, literary, medical, religious, scientific or technological nature.”¹⁰SB 47, § 362(a)-(b).

Delaware public benefit corporations must identify one or more of these public benefits to be promoted.¹¹SB 47, § 362(a). Consequently, Delaware’s statute has no separate category of specific benefits.

B. Directors’ Mandate and Accountability

In general, statutes authorizing benefit corporations empower their directors to consider the interests of stakeholders in addition to shareholders. For example, directors of Illinois benefit corporations are mandated, in evaluating the best interests of the corporation, to consider the effects of any action on shareholders, employees, customers, the community, the environment, short- and long-term interests, as well as the benefit corporation’s ability to achieve its general and any specific benefit purposes, and, unless the articles of incorporation provide otherwise, the directors are free to prioritize as they see fit.¹²805 ILCS 40 / § 4.01(a)-(b).

Delaware’s statute differs slightly. It mandates public benefit corporation directors balance shareholders’ pecuniary interests, the best interests of those materially affected by the benefit corporation’s conduct, and public benefits identified in the certificate of incorporation.¹³SB 47, § 365(a).

A unique feature of benefit corporations is the legal protection afforded directors for considering this broader range of stakeholder interests. In fact, this legal protection has been a primary reason for the effort to enact state authorizing statutes.

Illinois’s statute affirms that directors do not have a duty to a beneficiary of general or specific public benefit purposes and are not personally liable for monetary damage for failure to pursue general or specific public benefit purposes.¹⁴805 ILCS 40 / § 4.01(c)-(d). Only injunctive relief is available against the entity for failures relating to the benefit corporation statute, and standing for “benefit enforcement proceedings” is limited to the entity itself, or, derivatively, to shareholders, directors, investors of certain levels, or others expressly specified in articles or bylaws.¹⁵805 ILCS 40 / § 4.20. Thus, third-party actions by those who might otherwise consider themselves beneficiaries of the public benefit purpose(s) are eliminated.

Delaware’s statute likewise relieves directors of any duty based on a person’s alleged interest in the public benefit corporation’s purposes. A Delaware director’s fiduciary duties to shareholders and the entity with respect to that state’s balancing requirement will be deemed satisfied if the decision was informed and disinterested, and “… not such that no person of ordinary, sound judgment would approve.” Delaware limits derivative suits challenging directors’ exercise of its balancing requirement to stockholders holding positions of certain levels.¹⁶SB 47, §§ 365(a)-(b) and 367.

C. Transparency Through Reporting

A benefit corporation typically is required to prepare a report in accord with independent, transparent third-party standards defining, reporting on, and assessing social and environmental performance. Typically, there is no requirement that the annual report be certified or audited by a third party or involve mandatory verification. There are various third-party standards organizations, including B Lab and the Global Reporting Initiative (“GRI”), whose assessment tools can be used. B Lab’s assessment is available after an entity has six months of business records and is offered on a sliding scale based on entity size for a relatively nominal amount.¹⁷The annual fee for assessment starts at $500 and goes up to $25,000 for businesses with annual sales ranging in categories from, respectively, $0 - $999,999 to $100 million up. (Available at https://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/make-it-official). In Illinois, the report must be distributed annually to shareholders and made available to the public on the benefit corporation’s website. Delaware requires biennial reporting to shareholders about promotion of the public benefits.¹⁸805 ILCS 40 / § 5.01; SB 347, § 366(b)-(c). A Delaware benefit corporation may require more frequent and more specific standards and public distribution.

Illinois benefit corporations must have a benefit director whose duty it is to prepare for inclusion in the report the annual opinion as to whether the entity acted in accord with its general public benefit and any specific public benefit purpose(s) in all material respects during the applicable time frame.¹⁹805 ILCS 40 / § 4.05. Illinois benefit corporations also may have a benefit officer to whom powers and duties are delegated relating to the general or special public benefit purposes and whose duty it is to prepare the benefit report.²⁰805 ILCS 40 / § 4.15. Delaware’s statute does not require either a benefit director or officer.

III. How They Can Foster Health Care Innovation

It is generally recognized that the United States spends more per person for health care than other developed countries, and most Americans have first- or second-hand experience navigating the health care system to determine what care is available and its cost to them. The average person would tend to think that a business in the health care sector should have a social purpose—or what is it doing? Benefit corporations should be “naturals” for health care.

We could leave it there and simply discuss what benefit corporations in the health care sector might look like and what advantages they might offer. Still, policy analysts believe that data can identify a core problem and define a solution, and innovators, sometimes with copies of Heilmeier’s Catechism in hand, like to identify the problem and understand the difference the solution will make.²¹A set of questions created by George Heilmeier to be answered by those proposing a research project or product development is referred to as Heilmeier’s Catechism. Among the questions are: “How is it done today, and what are the limits of the current practice? What’s new in your approach and why do you think it will be successful? and If you’re successful, what difference will it make?” So, at the risk of offending some, I want to share data to better understand improvements benefit corporations may make.

A special report, Bitter Pill: How outrageous pricing and egregious profits are destroying our health care, by Steve Brill earlier this year for Time, ²²S. Brill, Special Report: Why Medical Bills are Killing Us, Bitter Pill: How outrageous pricing and egregious profits are destroying our health care,
Time, Mar. 4, 2013, 16-55 (“Bitter Pill”). has spawned articles and conversations. For our purposes, it offers three insightful perspectives. One involves price, specifically differences between and among a) the “chargemaster” amounts hospitals charge—which vary even among hospitals but are high; b) the amounts insurers reimburse—which are discounted from the chargemaster amounts but still adequate to be profitable for hospitals; and c) the amounts Medicare pays—which approximate more closely a hospital’s cost of actually providing services. The un- or under-insured most often are the ones asked to pay the full-blown chargemaster prices, sometimes with extreme financial consequences.²³Id. at 22.

The second regards the high profitability of tax-exempt nonprofit hospitals as a result of the “chargemaster effect” even when the hospitals are paid discounted amounts.²⁴Id. at 22, 26. Contrast this with Medicare, a payer approximating the hospital’s true cost since its reimbursement formula includes direct costs and allocated expenses. In fact, the 2,900 nonprofit hospitals in this country averaged higher operating profit margins than the 1,000 for-profit hospitals after the for-profits’ income-taxes were deducted, according to a McKinsey study cited by Brill.²⁵Id. at 26. Tax-exempt nonprofit hospitals can earn profits but cannot distribute the money as there are no shareholders. Rather than using the undistributable funds to provide health care per se, funds often are used to build new infrastructure despite excess hospital beds, purchase equipment, acquire rival entities and practice groups, or pay administrators high salaries.²⁶Id.

The third involves the relatively small percentage of hospital revenue devoted to charity care. Whether one accepts Brill’s estimate of 5 percent of U.S. hospitals’ annual revenue for uncompensated care to the poor²⁷Id.;
Setting the Record Straight, Time, Mar. 11, 2013, 4. The number is based on the cost of care provided. or the 7.5 percent of operating expenses for community benefits reported recently in the New England Journal of Medicine for 2009,²⁸Young, G.; Chou, C.; Alexander, J.; Lee, S.; and Engl, E. (2013), Provision of Community Benefits by Tax-Exempt U.S.. Hospitals, New E. J. Med. 368 (16): 1519-1527 (Apr. 18, 2013). the number is small.

With that data in mind, here is a roadmap to how benefit corporations involved in creating innovative health care products or services could be structured and what advantages and synergies they might generate.

A. Signaling Innovation

Benefit corporations signal that they are different and innovative by their very nature. They are forthright about practices they will follow. They specify their intent to foster the public purposes they identify, to consider the interests of a broad range of stakeholders, to endeavor to be sustainable, and to provide periodic transparent reporting on social and environmental performances.

This provides internal guidance, but it also can help traditional businesses understand how they might interact and partner with benefit corporations. This can help grow businesses.

B. Defining Mission

Public purposes are embedded in the DNA of a benefit corporation and define mission in a way that does not occur in a traditional corporation. Consider the example of a corporation creating a health care app. As an Illinois benefit corporation, it could have a specific public benefit purpose of improving human health. In Delaware, its public benefit purpose would be to have a positive effect of a medical nature on people.

But it need not end there. Given the trend toward electronic medical records and increased use of technology in delivering medical care, a corporation also might elect a purpose relating to preserving the environment by utilizing technology. In some cases, mission also might include treating or delivering health care to an un- or under-served population on a regular or partial basis as yet another public purpose.

The benefit corporation alternatively might choose not to identify public purposes relating to the environment or charitable purposes. However, activities in these regards could have a positive impact on its periodic assessment and reporting because sustainability and environmental practices are considerations for the assessment, as are communities served.

Whatever the exact identification of purposes for a benefit corporation in the health care sector, the overall goal of improving human health care would be elevated in the benefit corporation to a level typically reserved for shareholder interests in a traditional corporation. Embedding purposes in this way focuses resources and activities on achieving the mission. Ideally, this will raise the bar for delivery of health care and lower costs as well.

C. For-Profits with Ownership Interests

Although its public purposes may remind some of a nonprofit, a benefit corporation is a for-profit and not subject to the undistributable profit phenomenon with respect to tax-exempt nonprofit hospitals mentioned above. A benefit corporation has the ability to expend resources to achieve its mission rather than in ways it does not want or which do not further its mission.

Owners and investors retain interests in the for-profit benefit corporation giving them control and potential future return on investment. Through their ability to bring benefit enforcement proceedings, they can ensure the entity stays true to its mission and purpose(s). Their ownership interests serve as a sword, if you will, to ensure mission. Again, this contrasts with nonprofits which typically are operated by a board of directors which becomes self-perpetuating once established and leaves founders with no recourse as a practical matter if the nonprofit is not fulfilling its intended mission.

D. Elevating Stakeholder Interests

A benefit corporation elevates, not just the public purposes, but also the interests of various stakeholders and the environment to the same level as shareholder pecuniary interests. This shifts directors’ focus from maximizing shareholder value to a longer-term strategy considering this expanded range of interests and pursuing high social and organizational standards. This shift may reduce short-term earnings but have a positive impact longer-term.

Likewise, a benefit corporation can tailor its finances to serve stakeholder interests and achieve its mission goals. For example, it might decide to forego extravagant infrastructure and high administrative salaries and instead lower and equalize multiples for expenditures among stakeholder constituencies.²⁹See, e.g., J. Mackey and R. Sisodia, Consc
i
ous Capitalism, 18, 93-95, 177-20 (2013). Lowering funding multiples for various aspects of a business frees up funds to treat participants in the business chain more equitably. This could have a positive impact on delivering quality affordable health care to “customers,” and simultaneously “raise the boats” of other stakeholders and the nation’s economy.

E. Convergence with Regulatory Innovation

Most of the time, innovators assume regulators are antithetical to innovation and want as little as possible to do with regulators. Sometimes, innovators are concerned with what they perceive to be the burdens and costs of regulation at a time when an entity’s resources are limited. Sometimes, innovators just have other priorities. But rarely are they pro-active vis-à-vis regulators.

As a practical matter, government agencies today are confronting budget limitations, political obstacles, and difficult rulemakings. There can be a convergence of interests between a government agency and a benefit corporation if the agency were to leverage the good practices of the socially conscious business to achieve the agency’s mission-related goals.

One can imagine, for example, that benefit corporations’ self-assessment and reporting on sustainability could mesh with certain regulatory efforts. The Environmental Protection Agency (“EPA”), for example, has instituted a “Next Generation Compliance” (“NGC”) program.³⁰EPA, Presentation: Next Generation Compliance, National Environmental Enforcement Information V-Meeting, July 26, 2012 (available at http://www.epa.gov/compliance/data/systems/icis/vmeeting/vmeeting6a-panel.pdf). One set of NGC goals focuses on building compliance into regulations. A way to do this is to include requirements for regulated entities to regularly assess compliance and take steps to avoid noncompliance—to self-monitor and self-certify, if you will. Another is to encourage e-reporting by the regulated entity, something which also can encourage public transparency and accountability. Benefit corporations are well-structured to collaborate in such a program, given their regular self-examination across various sectors against third-party standards and their periodic reporting, as well as their prudent use of technology to achieve sustainability.

A related NGC goal is to leverage benefits and market forces that promote compliance. This can be done by demonstrating the tangible benefits from compliance, such as reduced costs. It also can be achieved by making consumers aware of compliant products and businesses. Early benefit corporations are making a tangible impact in this regard as traditional businesses adopt some of their social and environmental sustainability practices and customers are willing to pay the prices for quality products.³¹Certain of the practices of Patagonia, California’s first statutory benefit corporation, have been adopted by traditional corporations like Wal-Mart and Levi Strauss. Also, Patagonia’s customers have been willing to pay the prices of quality products. Y. Chouinard and V. Stanley, The Responsible Company: What We’ve Learned from Patagonia’s First 40 Years, 8-14, 70 (2012); S. Stevenson, Patagonia’s Founder Is America’s Most Unlikely Business Guru, Wall St. J., Apr. 26, 2012, at 2.

Good business practices make economic sense regardless of entity type and encourage consumer trust. Benefit corporations go a step further, embedding positive economic factors in the entity. This can make benefit corporations forces for regulatory innovation.

IV. How to Fuel Them

Innovation opportunities abound in the health care sector, particularly as the Affordable Care Act is implemented. Many of the innovations are technology-based and lend themselves to benefit corporations.

Already, entrepreneurs are leveraging data made available by the Department of Health and Human Services (“HHS”) to create apps and other technologies to improve outcomes.³²T. Friedman, Obamacare’s Other Surprise, N.Y. Times, May 26, 2013, at BW SR 11. HHS recently held its “Health Datapalooza IV” to encourage innovators to use health data it has released to increase access to health care, improve health, and facilitate administration. In particular, HHS seeks help for consumers to make smart health insurance decisions and better manage their health and health finances.³³T. Park and B. Sivak, HHS.gov/Open:
Health Datapalooza IV Tops Off a Huge Year in Health Data Liberation & Innovation, June 6, 2013 (available at http://www.hhs.gov/open/discussion/health_datapalooza_iv.html).

The states have health care initiatives as well, telemedicine being among the most innovative. Maryland State Sen. Catherine Pugh from Baltimore is a leader on the subject, having authored legislation and addressed the American Telemedicine Association. For the senator, telemedicine is a new methodology to deliver health care in both urban and rural environments, as well as an opportunity to drive down costs. Remote patient monitoring is a related technology innovation.

As innovative as telemedicine is, Pugh is forward-thinking even about it. She views telemedicine in the broader context of paying for and delivering timely care to a population consisting of aging baby boomers and children born today who are projected to live to 104. Pugh believes it is important to ask what telemedicine will look like in the future, how widespread its use will be, how its use will be reimbursed, and what the projected savings are. She points out that early introduction of innovation can result in savings.

Potential benefit corporation entrepreneurs may be able to access funding as well as ideas for health care innovation. Benefit corporations can turn to impact investors for investments intended to create positive impact beyond investment return. This is a significant market, projected in late 2010 by J.P. Morgan and the Global Impact Investing Network, applying its methodology, to have potential total invested capital over the next 10 years at $400 billion to $1 trillion.³⁴JP Morgan and The Global Impact Investing Network, Impact Invest
ments: An emerging asset class
, 6, Nov. 29, 2010. Benefit corporations stand to attract some of this capital from impact investors who know they can rely on the social purposes embedded in these entities. Moreover, B Lab’s GIIRS assessment is a valuable tool to bring impact investors of substantial resources and entrepreneurs together.

Benefit corporations also may capitalize on an emerging trend of organizations with social missions turning to for-profit structures to advance their goals. The thinking is that certain types of for-profits work as well as, or better than, nonprofits in specific situations. As one example, the Coors family recently decided to create a private equity fund to invest in Africa, in the belief that philanthropy does not work for economic development whereas capitalism does.³⁵P. McGroarty, Coors-Led Group Brews Fund to Invest in Africa, Wall St. J., May 6, 2013, at C1, C2.

Another type of social entity, the “low-profit limited liability company” (“L3C”), is authorized in some states. The idea behind L3Cs is to capture “program-related investments” (“PRIs”). Charitable foundations make PRIs to further social activities consistent with certain defined qualifying charitable purposes of the foundation set out in the Internal Revenue Code.³⁶Internal Revenue Code section 170(c)(2)(B) defines a charitable contribution as a contribution or gift for use of a “corporation, trust, or community chest, fund, or foundation…organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.” These include scientific and charitable purposes.

There can be no significant purpose of producing income on the foundation’s behalf; this is accomplished by aligning the purposes or missions of the foundation under the Internal Revenue Code with those of the recipient. An IRS rulemaking, proposed in 2012 to encourage and streamline the PRI process, offers examples of acceptable PRIs and makes it clear that PRIs are not limited to economically disadvantaged persons and deteriorated city areas, that many forms including loans to, and equity investments in, for-profits are possible, and that a potentially high rate of return is not an automatic disqualifier.³⁷77 Fed. Reg. 23429-32 (to be codified at 26 CFR pt. 53) (proposed Apr. 19, 2012) (available at http://www.gpo.gov/fdsys/pkg/FR-2012-04-19/pdf/2012-9468.pdf); see also, The White House Office of Social Innovation and Civic Participation, Press Release: Opening the Door for Program Related Investments, May 4, 2012 (available at http://www.whitehouse.gov/blog/2012/05/04/opening-door-

program-related-investments). It does take time and money to document that funds are used for qualifying purposes.

Another option is to combine for-profit and nonprofit entities to maximize funding and achieve social purposes. Virginia Community Capital (“VCC”)—the only example of state money ($15 million) privatized in this way—is a creative and effective example. VCC is a nonprofit bank holding company and a community development financial institution. Its wholly-owned subsidiary, Community Capital Bank of Virginia (“CCB”), is a for-profit commercial bank and a Certified B Corporation. Both VCC and CCB provide loans, and both entity activities are branded as of VCC. VCC is GIIRS-certified.

VCC has two noteworthy health care initiatives. Recognizing that proper nutrition can avoid health problems, VCC recently launched a Virginia Fresh Food Loan Fund to bring locally-grown, fresh produce to corner stores in urban food deserts and to finance the growth and expansion of food hubs in rural communities. Virginia has a significant number of urban areas with low access to healthy food, and the demand for food hub financing outstrips available capital due to the innovative and complex nature of these entities.

The initiative VCC has undertaken to address these problems consists of a $10 million loan fund for fresh food financing and an additional $1 million grant deployment component to develop healthy corner stores in urban food deserts. Up to 10 food hubs will be financed and 6 corner stores will offer fresh produce over the next 14 years. It is anticipated that 70 full-time jobs and 50 part-time jobs will be created during that time period. Fresh Food Notes will be available to impact investors and PRIs to foundations.³⁸VCC, Press Release: VCC Attends Clinton Global Initiative
Am
erica meeting, Commits to Healthy Foods Programming, July 19, 2013 (available at http://admin.vacommunitycapital.org/index.php/news-item/clinton-global-initiative-healthy-foods).

VCC also provided critical financing for Pioneer Health Services of Patrick County, enabling a hospital essential to community health in rural Virginia to renovate and return to full functionality after having deteriorated to only emergency services. Joseph McNulty III, the founder and chief executive officer of Pioneer Health Services, said:

• “Virginia Community Capital is the kind of company that lives up to its mission statement. Their business decisions are truly centered on creating positive change in communities.”

Pioneer’s Chief Financial Officer Julie Geiger pointed out:

• “. . . Virginia Community Capital has given us the resources to be a better hospital because their expertise and direction makes us better financially. By recommending and obtaining an NMTC (New Markets Tax Credit) loan over an SBA or USDA loan, we are now situated to save a significant amount of money over the life of the loan. This money can now be put toward the growth and expansion of care for our patients.”

VCC’s mission enables it to meet genuine community needs and simultaneously creates a ripple effect of other improvements. It stands in contrast to the anomalies pointed out in Bitter Pill.

V. Conclusion

Benefit corporations are partners on the legal side for business makers aiming for net positive social impact. A well-designed benefit corporation can take advantage of the strengths of this new entity structure to achieve mission goals and economic success. Using a benefit corporation’s advantages in this way makes sense from a strategic and financial standpoint and has the potential to transform today’s health care challenges into opportunities and even be forward thinking in terms of promoting wellness for succeeding generations.