September 22, 2015

Alzheimer's Association Plan to Consolidate Angers Chapters

BRAD DOHERTY/The Brownsville Herald/AP Images

Talk to the board members and chapter executives at the Alzheimer’s Association, and one quickly learns that their cause is a personal one: Just like millions of other Americans, many of the association’s leaders have watched a friend or relative gradually unravel and succumb to the disease. Those emotions are coming to the fore as the national association pushes a controversial plan to consolidate more than 50 independent chapters into a single charity.

The national board thinks a more coordinated, top-down approach is needed as the number of people affected by Alzheimer’s, currently about 5-million in the United States, is expected to more than triple by mid-century. But some local chapters oppose the consolidation plan, fearing that it will lead to an all-out emphasis on fundraising and cuts to local programs that provide support for Alzheimer’s victims and their caregivers.

Some critics of the plan also argue that the national organization’s own performance has been weak — with executive salaries soaring over the past decade even as direct spending on research has dropped. The national association and several chapter executives say those statistics are misleading and don’t capture the association’s successful lobbying for more federal research spending.

Two votes in October will determine whether the controversial consolidation plan moves forward. On October 3, the 54 independent chapters will weigh in on the plan. While that vote will be closely watched, it is only advisory. Two weeks later, the national board will hold a final vote on whether to fold the chapters into a single organization.

"The fact that people are digging in is great," says Lee White, board chairman of the association’s Georgia chapter, whose mother died of Alzheimer’s after battling the disease for 15 years. "It says that the disease has impacted them, and they care enough to have a strong opinion."

The Georgia chapter supports the consolidation, but at least 14 chapters have written letters to the national board opposing the plan, including large chapters in Los Angeles, New York, Philadelphia, and San Diego. (Some critics say they have seen letters opposing consolidation from as many as 25 chapters.) Many of the letters say the national board hasn’t made a strong enough business case for why a single organization would be more effective than the current chapter structure.

"At no time did they give us any indication about how this transition would take place or any indication of a plan to effect that consolidation," says Greg Tigani, board chairman at the association’s Delaware Valley chapter, in Philadelphia. "In the absence of any kind of plan, we felt that we couldn’t support it."

Cost of Care

Through its Walk to End Alzheimer’s and other fundraising, the Alzheimer’s Association takes in about $131 million a year, up from $81 million in 2009. But the costs of caring for Alzheimer’s and other dementias are exponentially larger, some $226 billion in the United State alone, and are growing just as quickly.

A report issued by the association in February projects costs of $1 trillion by 2050.

In spring 2014, a committee led by Stewart Putnam, a national board member who is now also the board’s chairman, began exploring changes that would allow the association to make better progress against the disease. Streamlining the organization’s structure quickly gained favor. The board considered an option that would maintain independent chapters working in a more coordinated fashion, but a report from the Bridgespan Group, a consulting firm, held up the idea of a single charity as the more effective alternative.

Mr. Putnam and others say the current system leads to too much inconsistency in programs, services, and fundraising.

"The national board feels strongly that working in a more highly aligned fashion and providing the right tools and resources and support consistently and effectively across the organization will enable us to perform better and faster against all aspects of our strategic plan," Mr. Putnam says.

Fundraising vs. Services

Consolidation is in vogue among charities that raise money for health causes. The American Cancer Society is one recent example; in 2013, it combined 13 divisions into a single organization to enable quicker decision making.

Some health charities that have merged chapters have also narrowed their focus more tightly on fundraising and cut back on local services. Critics of the Alzheimer’s Association’s plans fear it will use a similar playbook.

"The national organization would like everything to be done by phone," says one chapter executive who asked not be named. "They don’t say that, but we all know that’s what’s coming."

National-association officials say "care and support" will remain an important part of the group’s strategy.

The Oklahoma chapter illustrates the association’s current approach to education and support. Staff members hold educational events, where people can learn about the early signs of Alzheimer’s and what to watch out for. About 80 support groups throughout the state meet regularly, usually once a month, at sessions led by chapter volunteers. People with questions about Alzheimer’s can call a help line 24 hours a day. And staff members at the Oklahoma chapter also sit down for highly personalized "care consultations" with individual families, which can last for an hour or more.

Mark Fried, CEO of the Oklahoma chapter, served earlier this year on a committee of chapter executives evaluating the association's future direction. He says the time-intensive individual consultations are one area that the association is considering handing off to other groups.

But Mr. Fried, who supports the consolidation plan, says the national association won’t walk away from its programs that support victims and caregivers, because they are, for now, the only "effective treatments" for the disease.

"If I’m diagnosed with cancer, my first call is with an oncologist about how to treat it," he says. "If I’m diagnosed with Alzheimer’s, doctors can’t do much for me, so I need someone who can help me and my family."

Past Mergers

The Alzheimer’s Association has already been conducting a piecemeal consolidation for years. After its founding in 1980, the association grew to 221 chapters by 1993, but local mergers over the subsequent two decades brought that number down to just 83 by 2009. Since then, 27 formerly independent chapters, some of which were struggling financially, have become "national chapters." Mr. Putnam says the national chapters are now outperforming their independent peers in fundraising and providing care and support.

The San Antonio and South Texas chapter became a national chapter in 2011. Since then it has expanded its budget from $900,000 to $1.4-million, increased its staff from six employees to nine, and opened a second office in Corpus Christi. Employees are more productive since the national association now handles back-office duties like bookkeeping and human resources, says Meg Barron, the chapter’s executive director. And the 23-member local board, which no longer has fiduciary responsibilities, has more time to make local connections related to the association’s core mission.

"It’s power in a different way, but my board definitely has power," Ms. Barron says. "They have more of a face in the community."

The Philadelphia chapter is one of several that have indicated they may break away if the national board votes to move forward with the consolidation plan. A slew of defections could leave less revenue for the national organization. Under a "shared fundraising" model that went into effect in 2009, each independent chapter turns over 30 percent of the money it collects in donations to the national organization and another 10 percent to a "mission fund" that the chapters and national board jointly administer.

Mr. Putnam says the national board has considered the risks of disaffiliation. In the past nine years, four independent chapters have left the network — some due to opposition to the shared fundraising model — but the association has installed new chapters in those areas and all are performing well, he says.

Some chapter executives who oppose consolidation argue that the national association has a mediocre record, although these critics speak off the record, citing a fear of retribution. One of the independent chapters assembled a document, using the national association’s tax returns, that shows the organization’s payroll and some other expenses, including legal and travel, have more than doubled, since the 2006 fiscal year, the period during which the current CEO, Harry Johns, has led the organization. Over the same period — stretching from 2006 to 2014, the latest year for which tax data is available — the annual amount that the association spent on grants, primarily for Alzheimer’s research, declined 31 percent, to $15.6-million.

Mr. Putnam says the national association’s budget and employee head count rose primarily due to the absorption of the 27 formerly independent chapters, which added 232 employees to a staff that now numbers 578.

The national association’s spending on research declined due to a drop in donations during the recession but also due to a shift in strategy, Mr. Putnam says. The association started the Alzheimer’s Impact Movement to lobby Congress for greater federal spending on Alzheimer’s research. That advocacy group helped pass a federal law that calls for preventing and effectively treating Alzheimer’s by 2025, a goal that is leading to significant increases in research spending. Appropriations committees in both the House and Senate have approved spending increases of at least $300 million for Alzheimer’s research during the 2016 fiscal year.

Although the budget is not yet final, those proposed increases could lead to total federal spending on Alzheimer’s research of $900 million, twice as much as in 2012. At its peak, in the 2008 fiscal year, the Alzheimer’s Association made grants totaling only about $28 million.

"Our investments in public policy have turned out to be a real smart thing to have done," Mr. Putnam says.

Criticism of Salary

Critics of the national association have also targeted Mr. Johns’s compensation. He made $2.8 million in 2012, thanks in part to the vesting of retirement benefits, and $1.05-million in 2013, a more typical year. His 2013 compensation is higher than that of the CEOs of the American Kidney Fund, the Leukemia & Lymphoma Fund, and JDRF (formerly known as the Juvenile Diabetes Research Foundation), even though those three organizations raise significantly more money than the Alzheimer’s Association.

Dave Goltermann, a national board member who leads its compensation committee, says Mr. Johns’s compensation is reviewed for "reasonableness" by Aon Hewitt, a compensation consulting firm. Mr. Goltermann says Mr. Johns is paid competitively because the board is keen on retaining him.

"We feel strongly that the performance of our CEO is one of the reasons that the Alzheimer’s cause has become such a national initiative," Mr. Goltermann says.

Even some of the chapters that have been critical of the consolidation plan say they’re impressed by Mr. Johns’s leadership. Bill Fisher, CEO of the Northern California and Northern Nevada chapter, says that after a "period of chaos" during the early 2000s, Mr. Johns has assembled a leadership team that is the strongest Mr. Fisher has seen in his 28 years with the Alzheimer’s Association.

The Northern California chapter, which raises more money for research than any other chapter in the federation, was an early opponent of the consolidation plan. In May, its board chair wrote to Mr. Putnam that "the need for major change at this time is especially difficult to comprehend."

Mr. Fisher says his board has since "moved" in its understanding of what the national association is trying to achieve, but he says it’s not yet clear how the chapter will vote on the national consolidation plan.

"I’ve got 22 board members, and they don’t all think alike," he says. "It’s probably 50/50 at this point."

Correction: An earlier version of this article said that Mark Fried serves on a national committee evaluating the association’s care and support activities. The committee is a group of chapter executives who evaluate the association's future direction, and he stepped down earlier this year.