This article written by CRI President Larry G. Raff, MPH originally appeared in the May 2, 2012 electronic edition of Becker’s Hospital Review.
The more things change in healthcare, the more we should revisit what had worked in the past.
About 60 percent of hospitals and healthcare systems across the United States have non-profit status, and can link their genesis to philanthropy, “the love of humanity.” These healthcare organizations were launched on the shoulders of a religious order or a magnificent bequest or contribution from a benefactor. Others emerged from the need for a place where doctors could practice without discrimination.
The intersection of philanthropy and hospital vitality needs to be revisited in this environment when the average hospital operating margin is a razor thin 2 percent — or in some cases, even worse. Increasingly, savvy hospital CEOs are turning to their advancement office or foundation to bring fundraising to the next level. Philanthropy can enable a hospital to address capital, physician recruitment or other operating expenses. And it is increasingly common for operating margins to be eclipsed by net fundraising revenues. According to a recent Financing the Future survey by the Healthcare Financial Management Association, 45 percent of hospital CFOs said they will rely on philanthropy to support future capital projects for their organizations.
Today, the basics to make this happen seem to be in place. More than 80 percent of non-profit hospitals in the United States have a foundation that raises funds in support of their parent hospital or system. In 2010, this model raised $8.2 billion — an 8 percent increase over 2009. And here is an interesting trend to consider: Hospitals and systems that place a high value on philanthropy are also beginning to factor fundraising success into executive compensation packages for their entire executive team; and some are adding grateful patient fundraising functions to the job descriptions of employed physicians. Fundraising is a team (contact) sport, so the whole team needs to be on the playing field to win the game.
It is the rare hospital CEO who truly understands the art and science of fundraising and in turn appreciates its complexities and nuances. Overall, industry standards suggest that CEOs need to devote 3-5 percent of their time to fundraising — anything less suggests that their program may be underperforming. One core challenge many CEOs face with regard to development is understanding scope and performance: Is my fundraising operation functioning at the level it should be, based on our resources, reach, community standing, and other factors? This brings up important issues, such as:
- My organization is raising $X million annually, but could it be raising $2X million with less expense?
- What is the best methodology to set an ambitious but realistic fundraising goal for our foundation?
- How much and where do I need to invest in advancement to make this all happen?
Online resources are a good place to start answering some of these basic questions. The Association of Healthcare Philanthropy publishes annually updated fundraising benchmarks that measure the cost to raise a dollar for community hospitals, academic medical centers, integrated systems and urban hospitals. These must be used simply as guidelines, as they do not take into account important variables including the maturity of a program, historical investment in fundraising and local marketplace realities. Guidestar, at www.guidestar.com, provides the federal 990 filing for all non-profit organizations and is a great reference for gathering financial details on peer institutions — or competitors — in order to help scale expectations and fundraising goals.
Having an idea of an appropriate fundraising goal is one thing — but it is only half of the equation. Equally — or perhaps even more — important, is knowing how to invest in the growth of the operation. The most informed approach is to bring in outside counsel with specific depth and experience in comparable healthcare and hospital systems. Give them the assignment of conducting an assessment that is part of an overall strategic operating planning process. Their analysis and recommendations should plot objectives, expenses and revenues for the next five years, as well as spotlight growth opportunities and the liabilities that need to first be addressed before progress can be made. Recommendations should also include an appropriate staffing structure to meet your objectives, which puts the right talent in the right positions and introduces protocols and policies that will enable efficient and predictable philanthropic growth.
Economic and market uncertainty complicates long range planning, but does not eliminate the need for it. The troubling reality is that hospitals have a tough road ahead. Here are three certainties to use when considering the role of philanthropy for your hospital today and moving forward:
- We can be sure that reimbursements will not increase while expenses will.
- We can be sure that philanthropists will continue to be generous as they have throughout historical thick and thin, and that the wealthy will continue to be wealthy.
- We can be sure that smart investment in a fundraising operation is the closest thing to a sure bet in terms of return on investment.
Even mediocre fundraising programs return $2.25 for each dollar spent, and strong programs will return $4 – $5. There are few hospital departments or initiatives that can even approach that value.
For more information about Copley Raff and its spectrum of not for profit consulting services, please see www.copleyraff.com.