In the good ol’ days, hospitals had three ways to re-invest in their facilities and equipment – EARN, BORROW or ASK
I believe the days of earning and borrowing are coming to an end and the path to optimal success for non-profit health care systems in America is strategic philanthropy. Here’s why:
According to a recent study by the Healthcare Management Association: Financing the Future Report 6: How are Hospitals Financing the Future? CEO’s and CFO’s that were polled responded:
1. 50% said they were not keeping up with capital needs;
2. 72% expect capital spending to increase in the next 5 years by an average of 14%;
3. 85% believe it will be more difficult to fund capital projects in the future.
In addition, many hospitals no longer have the EARNing margins to support facility improvements, which in turn affects their ability to BORROW. And, the full impact of Health Care Reform has yet to be really felt or even understood by most, if not all, hospitals.
What’s left? The answer is to ASK!
Less than half of the non-profit hospitals in America have an annual operating surplus and of those, 25% only had a surplus because of earnings from their endowments or transfers from their Foundations. Why don’t more hospitals invest in growing their Foundations and their capacity to attract philanthropic investors?
1. One of the challenges is that many of the 3000 non-profit hospitals in America are addicted to the traditional short-term win of campaigns, producing a feast and famine flow of revenue transfer to hospitals;
2. By and large, hospital philanthropy has yet to reach the maturity of the type of fund raising done at colleges and universities. This is the result of a culture and focus on major gift fund raising yet to be widely established in American hospitals and healthcare systems. This has produced a less than optimal approach to raising funds for investment in healthcare.
What’s the Alternative?
Creating and building a culture that engages all constituencies in an investment strategy of strategic philanthropy. When philanthropy is integrated with the strategic plan and entire organization, the result is a predictable, sustained revenue stream. This is also critical for two reasons:
- Institutional investors are focusing on philanthropy as a consideration in their ratings of a hospital’s total financial health;
- Philanthropic investors (major donors) want others to join them in investing in healthcare for the future of their communities.
Changing Measures of Success
1. Return on Investment (ROI) is playing a crucial role relative to effectiveness;
2. The traditional measurement of cost-to-raise-a-dollar indicates efficiency, not effectiveness;
3. Healthcare philanthropy must adopt better productivity tools & models;
4. Healthcare philanthropic professionals must constantly evaluate and modify resources in response to fundraising cycles.
Conclusion - How to Maximize Healthcare Philanthropy in the 21st Century
First and foremost, hospitals and healthcare systems must ensure that the mission of their organizations is grounded in charitable purpose. Then, by effecting bold strategies, seeking out sensible partnering, recruiting and retaining strong leadership, “back-to-basics” in fund raising practices, they will start to realize more strategic contributions. In addition, what gets measured gets improved, so benchmarking results using ROI is a must.