For generations, children with clubbed feet, severe burns and other debilitating injuries have been treated for free at Shriners hospitals. That care could be in jeopardy in the future.
As the charity's endowment shrivels, the fraternal group known for wearing red fezzes and driving miniature cars in parades faces a serious decision: whether to close six of its hospitals.
About 1,300 Shriners International members who sit on the hospital system's governing body are meeting in San Antonio this week. They are considering permanently closing a quarter of the hospital system's facilities, among other changes.
In initial votes, the Shriners agreed to keep all 22 of their hospitals open and to begin accepting insurance money for some services. They also voted to replace Ralph Semb, the CEO of Shriners Hospitals for Children, said Rod Brown, chairman of the Greenville, South Carolina, hospital. None of the decisions, however, is binding until the convention ends Thursday.
"People think you can just keep going, but you can't," Semb said earlier this week. "If nothing changes, in seven years, we go through the endowment fund."
He didn't immediately return a call Wednesday seeking comment on his reported ouster, though Brown said the group frequently changes leadership at its annual meeting.
Using an annual $2 member assessment, the Shriners Hospitals system opened in 1922 with a facility in Shreveport, Louisiana, that specialized in treating polio. The modest start has grown into a network of hospitals in the United States, Canada and Mexico that operates on $856 million a year in donations and investment proceeds.
Patients are treated free of charge, and the hospitals don't take insurance, Semb said.
The Florida-based fraternal organization was hit in 2007 with accusations it used money intended for the hospitals to throw parties and that lax accounting mingled hospital donations and club funds in some locations. The Shriners disputed the claims.
Only a fraction of the donations raised by members are used to fund the hospitals. Most of the operating fund comes from an endowment that has shrunk to $5 billion from $8 billion in less than a year because of the sputtering economy.
Word of the proposed closures upset many patients and caregivers at the hospitals, where numerous treatments for childhood burns and disfiguring conditions have been pioneered over the last 87 years.
"I've gotten to know these doctors like they're my best friends," said Andrew Willard, 15.
Born with clubbed feet so severe that similar cases have required amputation, Willard has had countless surgeries to reconstruct his feet and ankles since infancy, including one last week, at the facility in Greenville.
The Shriners hospitals funding crisis has been building for years, Semb said. Dividends and interest from the group's endowment began withering even before the recent recession hammered them with investment losses. Donations leveled off a decade ago, and membership has declined to less than half of what it was 30 years ago.
The hospital system has been running at a loss since 2001, and the endowment is now hemorrhaging cash at $1 million a day, meaning the entire system could collapse in a matter of years if something isn't done, Semb said.
The board of trustees proposed closing hospitals in Shreveport; Greenville; Erie, Pa.; Spokane, Wash.; Springfield, Mass.; and Galveston, Texas, eliminating a total of 225 beds. The hospitals were chosen mainly because of too many vacant beds, Semb said. The Galveston facility has been closed since Hurricane Ike last year.
Semb said he would like to see a compromise, perhaps giving the six facilities several months to find partnerships or other financial arrangements.
He said the Shriners are also considering allowing their hospitals to accept medical insurance payments and bill insurance providers for whatever treatment would normally be covered if a child's family agrees, but any additional treatments prescribed by Shriners doctors would still be done for free.
A group of staffers and patients from the Galveston hospital handed out pamphlets at the Shriners meeting, arguing that Semb and the trustees used Hurricane Ike as an excuse to keep the facility closed.
"I know the wonders they can do for kids," said Gordon Pranger, 35, who was treated at the hospital after suffering third-degree burns over his entire body at age 14. "For me, it's all family and home. It's personal."