Instead, as the Journal recounts:
In a series of court-approved transactions, hospital administrators repeatedly tapped the fund to serve as collateral for loans and to cover malpractice and other costs, according to court records. The transfers were permissible to keep the hospital going, the court ruled, saying that is what the Othmers would have wanted.
Now, amid protests by workers and residents, the money-losing hospital's owners have been given permission to close it down and almost all of the Othmers' gift is gone.
(Read more: Warren Buffett's online lessons for giving away billions)
Alerted by a Brooklyn resident, Buffett tells the Journal, "This came as a huge surprise to me." He wishes he had known sooner.
The Othmers "did not spend huge sums on themselves but instead wanted the money to go back to society. And at least one institution couldn't wait to change the terms under which it received the money."
You can read the entire story by Anupreeta Das here. It is not behind the Journal's paywall, so you don't need a subscription to see it.
Update: While the article wasn't behind the paywall when it was first posted, it is now (July 24, 2013), so a subscription is required.