|
GrantWatch: REPORTUnleashing The Untapped Potential Of Hospital Philanthropy
Across the country, hospitals face the challenge of finding new strategies to address capital needs in an era of shrinking operating margins. Particularly for nonprofit community hospitals, the solution is being found in philanthropy. Philanthropy was once simply "nice to have," but discussions regarding its role and strategic imperative can now be heard regularly at hospitals. More institutions are incorporating explicit expectations of fundraising into their financial planning and now consider fundraising a "must" for survival. This paper explores why philanthropy is needed, the challenges hospitals face, and what institutions must do to build an internal culture supporting this new imperative.
FROM CITY TO CITY across the country, hospitals find that their operating margins are shrinking and must search for new solutions to their capital needs. For a growing number of hospitals, particularly nonprofit community hospitals, the answer to their conundrum is being found in philanthropy. Philanthropy was once considered simply "nice to have," but discussions regarding the role and strategic imperative of philanthropy can now be heard regularly at both the management and board levels. As a result, the industry is seeing a shift in its thinking—more hospitals are incorporating explicit expectations of fundraising into their financial planning and consider it a "need to have" if they are to survive for generations to come.
This change in thinking has been brought about by the ever-increasing financial demands being placed upon hospitals and their leadership. With so many U.S. hospitals having been built through Hill-Burton grants after World War II (and many long before that), aging facilities with outdated infrastructure are in great need of updating if they are to keep up with both increased demand (from an aging population) and the accelerated pace of innovation in clinical and information technology.1 But physical-plant improvement is only part of the challenge. One can add to that shrinking operating margins, unfavorable reimbursement from government sources (such as Medicare and Medicaid), tighter contracts with health plans, increasing workforce shortages, and threats from entrepreneurial competitors that siphon off the most profitable and desirable market share (for example, surgery centers or outpatient diagnostic centers). And then there is the growth in uncompensated care. During 2001–2004 the number of uninsured Americans increased 11.2 percent, and the cost of medical care during that same time increased nearly 14 percent.2 It is in this environment that hospitals have turned their attention to the untapped potential of philanthropy. A minor funding source for nonprofit community hospitals in recent decades, philanthropy is now gaining traction as a viable and available alternative source of much-needed capital. In fact, in 2004 philanthropy moved from number six to number four when hospitals’ chief financial officers (CFOs) were asked to rank their dependency on current and future capital sources. A full 45 percent of CFOs questioned in a Healthcare Financial Management Association survey said that they expect to be more dependent on philanthropy for future spending.3 In a similar survey, six out of ten hospital chief executive officers (CEOs) said in 2003 that they plan on spending more time with fundraising than they did three years before, while only 1 percent expected their time in this arena to decline.4 These hospital leaders recognize that every dollar raised through philanthropy goes directly to the bottom line, making the philanthropic health care dollar a dear dollar indeed. This is a welcome trend for chief development officers, who often identify CEO support as a top driver of philanthropy performance. For years, these chief development officers have wrestled with just how to engage their CEOs in development activities, and every senior-level development officer has a story to share about watching a major gift opportunity—often one that was long in the making—evaporate because the CEO was unwilling to become engaged in the fundraising process. Most frustrating is the fact that the time request being made of the CEO is often as small as the duration of a dinner or a visit to the donor’s home.5 But times are changing, and CEOs increasingly recognize that they can no longer "leave money on the table." They realize that often their participation can help secure the largest gifts and that donors will take the request for funds more seriously when the CEO becomes personally involved.
CEOs can do many things beyond meeting with donors to help foster philanthropy at their institutions. One is simply to provide the information and necessary budget for creating and executing an intelligent philanthropy strategy. The CEO should meet regularly with the chief development officer to discuss hospital strategy, upcoming capital needs, and fund-raising potential. The CEO should also make the chief development officer part of the hospital’s executive team and governing board. He or she should also approve the budget dollars necessary to pay for staff, systems, and non-labor expenses necessary to meet fundraising targets. The CEO can also help mobilize the leadership and staff in a way that builds an internal culture of philanthropy. By definition, the CEO sets priorities, establishes a tone, leads by example, and directs the energies of employees and volunteers. In doing so, the CEO has the inherent power to deliver or discourage participation in and support of philanthropy on a broad scale.6 Sending the right message can be done either directly, such as including philanthropy among hospital goals, or indirectly, such as setting a personal example as a philanthropist and fundraiser. There are many things that the hospital’s leadership team can do to foster such a culture. Team members can include fundraising performance on the institution’s "dashboard measurements," much the same way that daily census or patient satisfaction scores are tracked. They can advocate fundraising participation to employees, medical staff, and board members. They can also make it a point to mention philanthropy—and the vital role it plays in helping the hospital continue to fulfill its mission–—in all appropriate internal employee meetings and public appearances. As an adjunct to this, CEOs can write articles in employee/community/medical staff newsletters, or op-ed pieces for the local newspaper, that discuss why philanthropy is so vital to the future of health care in the community and help build a compelling case for community financial support. Working with the hospital’s public relations or development office is often the best way to identify these opportunities and develop appropriate "scripting" to convey this important message. Engaging hospital leadership in philanthropy is but one of the many challenges that chief development officers face. According to an Association for Healthcare Philanthropy press release, Gary Hubbell, senior strategist at Growth Design Corporation, says that "the growing commercialization of nonprofit hospitals, continuing evidence of civic disengagement, and generational characteristics are the leading forces of change that will intersect in unprecedented ways" in his 2004 book, Forces of Change: The Coming Challenges in Hospital Philanthropy.7 "These trends and others could lead to diminished returns on hospital fundraising." Hubbell’s central conclusion is that "converging trends may lead to a decline in hospital philanthropy—especially for community hospitals—in the second decade of this new millennium." The AHP release continues, "There are incredibly competitive forces at work, demanding that hospital CEOs lead sound, efficient business operations that are clearly attuned to gaining and maintaining market share." The AHP explains, "Yet the same forces that propel today’s nonprofit hospitals to operational excellence will also foster comparisons to big business, with all the negative connotations that comparison brings for personal giving." As such, "hospital leaders should embrace these change forces" and "adopt a new stance, raise a new vision and collaborate with new partners in order to be seen and accepted by donors as being part of the health care solution for society." In doing so, "hospitals will regain the opportunity to engage philanthropy as innovation capital and likewise capture the idealism, the advocacy and the resources of donors in the future."
As has been demonstrated in education, the arts, and local foundations, donors are motivated by many factors, and each person has his or her own reason for becoming engaged with a certain organization. People also have differing capacities to give. One of the most important things that a hospital can do is to create a variety of portals through which the community—individuals and businesses—can become engaged at the level of their choosing. For example, there is a prevalent belief that charitable bequests come only from people of wealth. Nothing is further from the truth. Through carefully planned wills, people can provide a measure of support that they could not possibly duplicate with outright gifts. Hospitals should also be open to specific gifts in kind, such as works of art, antique furniture, rare coins, and the like. As with all non-cash gifts, the fair market value of such items must be objectively determined, and the donor must be assured that the proceeds from these items will go to support the specific hospital-based programs or be invested in the specific hospital fund or community health initiative that he or she designates. Hospitals can also benefit from life insurance policies that are no longer needed for family protection (these can be used by making the hospital the irrevocable beneficiary). People may also perpetuate the memory of a loved one or a cherished friend with memorial gifts to the hospital. Tribute giving provides the donor with an opportunity to recognize such special occasions as birthdays or anniversaries, to honor living or deceased relatives or friends for some personal achievement, or simply to send best wishes to those who are hospitalized or housebound. Hospitals can also receive gifts of real estate, securities, and stock and should make donors aware that there are a wide variety of trusts (including charitable remainder, revocable, and testamentary) that may enable the donor to realize his or her own objectives now and to help answer the hospital’s needs at a later date. In total, hospitals should be prepared to work with donors and their financial advisers in developing a plan tailored to donors’ special requirements and desires. Another source of philanthropic funding for hospitals is foundation grants. Many funders around the country offer grants to hospitals and other health care facilities for research, program development, general operating support, and community education programs. Some grants are focused in specific areas such as children’s health, teen pregnancy prevention, geriatric health management, or assistance for people with disabilities. Others are more global in nature. The Robert Wood Johnson Foundation (RWJF) is an example of a private foundation that supports hospitals and health networks, among many other health-related organizations. Grant support over the years has included "health services research and projects that address the needs and realities of health care workers in hospitals and the millions of patients they serve: a hospital where patient safety is assured, quality of care is paramount, efficiencies are maximized, and staff are satisfied with and actively supported in their jobs," according to an RWJF spokesperson.8 Also, a number of local and regional foundations provide charitable dollars to hospitals. These grants, for example, help hospitals to fund innovative programs and fulfill their community mission. The Duke Endowment is one such funder. On 12 December 2005 the endowment announced that in its most recent grant cycle, it had awarded more than $20 million "for not-for-profit hospitals and other health care organizations" in North and South Carolina. Grants included one for $222,250 to Allendale Community Hospital, in South Carolina, for establishment of a Bachelor of Science in Nursing education program.9
More than simply funding necessary improvements and operating expenses, dollars raised through philanthropy are an ideal way to fund innovation. That is because such money is not viewed as "patient care dollars" received for inpatient or outpatient services rendered. Instead, these dollars are generously given to the hospital to allow the institution to continue to provide community good. In addition, although some funds raised are earmarked for specific hospital initiatives—such as campus expansion or renovation—many dollars are relatively unencumbered and therefore can be used to fuel innovative programs or new business opportunities for the institution. As futurist Leland Kaiser aptly explains, innovation "involves high-risk projects," and that makes it difficult, especially in tough economic times, "to justify taking money from the operations budget" for such innovation.10 But such innovative projects "are easier to justify on the philanthropy side of the ledger. "Using philanthropic moneys for innovation is the way to assure necessary independence of the innovation culture," says Kaiser. "Raising philanthropic moneys for exciting new ideas brings additional money into the institution that would not be available if innovation was simply paid for out of the operations budget. It is also important to recognize that philanthropy constitutes a safe political harbor for innovative ideas that might be at variance with established political interests on the operations side of the hospital." Through philanthropy, hospitals are free to innovate both within and outside their walls. Innovation within the institution might include new ways to treat asthma among children, the creation of a falls prevention program for the elderly, or new services to support people with Parkinson’s disease. Externally, hospital-sponsored innovation could take the form of outreach efforts to underserved communities or new education and disease management programs conducted with local employers directly at the worksite. As Kaiser points out, "Innovative community projects, funded by philanthropy, create a new hospital constituency for future hospital fund raising projects. Philanthropists are tired of funding ‘ho-hum, more of the same-stuff’ hospital projects. They are interested in funding something exciting and new. This is the role of innovation. Innovative community projects are also a great way to develop new community partnerships with other agencies that will pay off in multiple ways."
Today’s hospitals face immediate financial pressures caused by a growing number of external and internal challenges. As a result, hospital leaders are looking for bottom-line solutions that will help them respond to urgent needs while building the necessary reserves to help assure a sustainable future. Although they understand this reality, those charged with philanthropy live in a world in which there is often an extended lag time between investment and return. It takes time to identify potential donors, cultivate their knowledge of and interest in the hospital, build a compelling story of why their support is essential, and motivate the donor to take action. For a hospital to build a successful culture of philanthropy, this chasm must be bridged. Philanthropy appears to be rising on the executive agenda at hospitals; however, it still must compete for dollars and attention with other hospital priorities, many of which appear more pressing and more patient-focused at the moment. But consider the potential, given that 13.5 percent of all higher education revenue in 2003 came from philanthropy, compared with only 1.5 percent of hospitals’ revenue.11 Yet it is hospitals that are saving lives every day, performing modern miracles, and fulfilling important community missions. It is, therefore, hospitals that have a rightful claim to community support, but they can only receive that support if the leaders of these institutions become more fully engaged.
Jane Haderlein (jane.haderlein{at}huntingtonhospital.com) is vice president of philanthropy at Huntington Hospital in Pasadena, California. The author thanks Ross Goldberg for his editorial contributions to the development of this paper.
| ||||||||||||||||||||||||||||||||||
Top
Changing Times And Challenges
Engaging Hospital Leadership
