Frontiers 24.4_Sample:20.

4 11/22/11 1:10 PM Page 11

Reprinted from Frontiers of Health Services Management, Volume 24, Number 4

(Health Administration Press 2008)

The Maturing Role of Philanthropy in

Healthcare

B Y W ILLIAM C. M C G INLY, P H D, CAE

Summ a ry • Hospital and healthcare system executives today face myriad

issues that revolve around finances. Aging infrastructure must be replaced and
staffing shortages addressed while pursuing costly advances in treatments and
technology. Higher operating expenses, especially those resulting from care of
under- and uninsured patients, continue unabated, while the adequacy of reim-
bursement from private and third-party sources, including Medicare and Med-
icaid, continues to lag. Complicating matters are concerns—and their
associated costs—about patient privacy, changing relationships with physi-
cians, and the need to provide and demonstrate community benefit (Costa
2005). Philanthropic giving is emerging as a significant means by which health
systems can enhance financial resources when those in leadership positions
foster a culture of philanthropy.

F E A T U R E

William C. McGinly, PhD, CAE, is president and chief executive officer of the
Association for Healthcare Philanthropy, Falls Church, Virginia.

William C. McGinly • 11
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Factors Driving the
Importance of Philanthropy:
Two Case Studies
Nyack Hospital and Good Samaritan Hos-
pital, located about a dozen miles from
each other in New York, worried when
locally based Union State Bank was sold
to Key Bank in 2007. The two hospitals,
which each have approximately 370 beds,
were faced with the loss of a longtime
benefactor, U.S.B. Foundation, Inc., the
charity arm of Union State Bank.
Over the years, Nyack, a member of
the New York–Presbyterian Healthcare
System, and Good Samari-
“This is the community tan, part of the Bon Secours
Charity Health System, had
we live in and the
received generous dona-
community we make our tions from the foundation.
money in. We always felt it While Key Bank, based in
made good business sense Cleveland, Ohio, also oper-
ates a foundation for phil-
to invest in the anthropic purposes and has
community.” provided support for hospi-
tals and other health-related
causes, its primary focus is on grants that
foster workforce development and finan-
cial education programs (Key Bank 2007).
The experiences of Nyack and Good
Samaritan serve to illustrate several fac-
tors that are driving the importance of
philanthropy for nonprofit hospitals and
healthcare systems, as well as the efficacy
of building a culture of philanthropy
within an institution and its surrounding
community.
The first factor is the high cost associ-
ated with upgrading hospital infrastructure,
including expensive new technologies. A
Westchester Journal News report pub-
lished several weeks prior to the comple-
tion of Union State Bank’s sale to Key
Bank noted that the U.S.B. Foundation
had recently given $500,000 to Good
12 • frontier s of h ea lth s e rv i c e s m a n a ge m e n t 2 4: 4
Samaritan to support a new cardiac
surgery center and $100,000 to Nyack
Hospital to purchase digital mammogra-
phy equipment. The newspaper quoted
Union State Bank’s vice president for
municipal affairs as saying, “This is the
community we live in and the commu-
nity we make our money in. We always
felt it made good business sense to
invest in the community”(Lerner 2007).
Would Key Bank, with branches
throughout the Hudson Valley, be willing
to maintain these relationships? Would its
foundation be as generous to healthcare
institutions?
Good Samaritan’s director assured the
Journal News medical writer that he had
already been in contact with Key Bank
officials and was “looking forward to
enhancing that relationship.” An AHP
official, interviewed by the same reporter,
made the glass-half-full observation that
“(i)f the new corporation is bigger, there
could be more dollars available for philan-
thropy,” while cautioning that “the deci-
sion-making process isn’t totally local
anymore”(Lerner 2007).
Meanwhile the hospital, seeking to
upgrade its emergency department, was
also promoting an offer by a wealthy area
resident to match major donations of at
least $10,000 in appreciation for the out-
standing performance of Good Samaritan
emergency room staff in saving his wife
after she suffered a brain aneurysm
(Lerner 2007). Clearly, Good Samaritan
was not about to “put all its eggs in one
basket.”
Rising expectations among the public
that they and their family members deserve
and will receive healthcare services of the
highest quality constitutes a second factor
that tends to heighten interest in philan-
thropic giving, because of the pressures
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placed on health systems to invest heavily
and continually in upgrading their facili-
ties, equipment, and procedures to keep
their healthcare programs as up-to-date
and as appealing as possible (Cauchon
2006).
Nyack Hospital, for example, provides
a wide range of services to patients,
including addiction/recovery programs, a
breast center, cardiology, a cancer center,
the Edythe Kurz Center for Sleep Medi-
cine, the Herbert and Edythe Kurz Pedi-
atric Emergency Room and other
emergency services, home care, a joint
replacement center, maternity, a medical
library, pain management, pediatrics,
radiology services, respiratory care, a
stroke center, support groups, therapy and
rehabilitation, and a wound care center
(Nyack Hospital 2007). Good Samaritan’s
offerings are similarly comprehensive,
including a birthing center; the Bobbi
Lewis Cancer Program; the Frank and
Fannie Weiss Renal Dialysis Center, a
regional kidney center in nearby Harri-
man, New York; and a women’s health
center, to name just a few (Bon Secours
Charity Health System 2006).
As evidence of Union State Bank’s
prior largess, both Nyack Hospital’s can-
cer center and Good Samaritan’s birthing
center are named after the bank. The hos-
pitals may miss Union State Bank’s reli-
able generosity as they pursue the
resources to improve or expand facilities.
Good Samaritan, for example, is in the
midst of an $8.5 million campaign aimed
at expanding emergency and cardiac ser-
vices, Phase 2 of which has a goal of rais-
ing an additional $2.5 million to fund an
electrophysiology study lab (Bon Secours
Charity Health System 2006). At Nyack
Hospital, donations in the spring of 2007
were being sought to purchase two digital
mammography units, endoscopic ultra-
sound equipment, laparoscopic instru-
mentation sets, and renovations to the
oncology inpatient unit (Kaliff 2007).
A third reason behind increased interest
in developing philanthropic sources of income
for nonprofit hospitals is the financial burden
placed upon hospitals by uncompensated
costs and inadequate reimbursements by
Medicare and Medicaid, which account for
more than half of all care provided by hos-
pitals. For a great many hospitals, reim-
bursements from all sources are
insufficient to meet the costs of providing
care, let alone support capital projects and
community benefit programs, cover
uncompensated care, or fund teaching
and research obligations. The American
Hospital Association reports that its
annual survey indicates that “(i)n 2006,
64 percent of hospitals received Medicare
payment less than cost, while 76 percent
of hospitals received Medicaid payments
less than cost,” and “(c)ombined
(Medicare and Medicaid) underpayments
rose from $4.0 billion in 2000 to nearly
F E A T U R E
$30 billion in 2006.” During that same
period, uncompensated costs rose from
$21.6 billion to $31.2 billion (American
Hospital Association 2007a).
Fewer than two-fifths of hospitals in
the United States responding to a 2005
survey reported a positive bottom line
greater than 4 percent, a level that enables
them to reinvest profits in their enter-
prise. The rest made too little to reinvest:
29 percent eked out positive bottom lines
of 3 percent or less; 14 percent of hospitals
reported just breaking even; and 19 per-
cent operated in the red (Deloitte &
Touche 2006). It also is important to
point out that hospitals that lose a reliable
bottom-line source of philanthropic
income also run the risk of having to pay
(continued on page 15)
William C. McGinly • 13
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AHP Survey Shows Fundraising represented 49.4 percent of the U.S. total
Growth Slowing and 71.2 percent of the Canadian total in
fiscal 2006. In both countries, the next
For 23 years, the Association for Healthcare
largest source of philanthropic revenue
Philanthropy (AHP) has tracked funds
was interest on investments (21.9 per-
raised and fundraising expenditures in the
cent in the United States and 17.0 per-
dynamic healthcare environment. Estab-
cent in Canada). Other important
lished in 1967, AHP is a not-for-profit orga-
sources were endowments (5.0 percent
nization whose more than 4,600 members
in the United States, 7.6 percent in
direct philanthropic programs in 2,200 of
Canada), and grants (4.2 percent and 1.6
North America’s not-for-profit hospitals
percent). A miscellaneous “other” cate-
and healthcare systems.
gory accounted for 19.6 percent of rev-
AHP’s most recently published Annual
enue from giving in the United States,
Report on Giving is for the 2006 fiscal year
but only 2.6 percent in Canada.
and was based on a survey of the 1,199
U.S. institutions and 182 in Canada
• The vast majority of donors were individ-
(responses were received from 291 U.S.
uals, rather than corporations or founda-
and 44 Canadian hospitals). The results of
tions, and collectively they gave the most
the survey exemplify key roles philanthropy
as well. In the United States, 85.8 percent
is capable of playing as a means of coping
of donors were individuals, approxi-
with financial challenges facing nonprofit
mately half of whom were hospital board
healthcare systems.
members, physicians, staff, or patients.
Individuals’ generosity accounted for 59.5
What the data say
percent of total funds raised. A similar
Total funds raised through philanthropy by
pattern was evident in Canada, where
healthcare institutions in the United States
87.1 percent of donors were individuals,
increased 11.5 percent over fiscal year 2005
raising 52.2 percent of total donations.
levels, totaling $5.897 billion in cash and
However, only about one-fifth of individ-
another $2 billion in pledges. This was a
ual Canadian donors were patients,
significant decline in the rate of growth of
physicians, staff, or board members. The
giving when compared to the 16 percent
proportion of total giving that originated
growth rate reached in fiscal year 2005, a
from individual donors was about the
trend that is likely to be of considerable
same in 2006 and 2005 in the United
concern to fundraisers if the U.S. economy
States; however in Canada, it went down
continues a slowdown that began last year
9 percentage points in 2006 from the
(Abelson 2007). Cash and pledges raised
2005 level of 61 percent.
by Canadian healthcare institutions in FY
2006 totaled $1.227 billion, just 3.3 percent
• About one-fifth of philanthropic funds to
higher than the previous fiscal year, when
nonprofit hospitals and healthcare sys-
donations increased 11 percent.
tems in the United States were con-
tributed by business, including corporate
• Cash contributions were the largest sin-
foundations, increasing to 20.4 percent
gle source of philanthropic revenue. Cash
in 2006, up from 18.2 percent in 2005.

14 • frontier s of he a lt h s e rv i c e s m a n a ge m e n t 2 4: 4
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Non-corporate foundations provided 12
percent of funds raised in 2006, down
less than a percentage point from the
earlier year. Other giving sources in the
United States, such as hospital auxil-
iaries, public agencies, and civic groups,
were responsible for 8.1 percent of the
2006 total, down almost 2 percentage
points from 2005.
• In Canada, the Report of Giving indicated
that businesses and their foundations
supplied more than one-quarter (25.4
percent) of the 2006 total, about the
same as in 2005, while non-corporate
foundations contributed 9.7 percent in
2006, up from 3.5 percent in 2005. The
“other sources” category of givers in
Canada accounted for approximately 13
percent of the 2006 total. It was about 10
percent of the total in 2005.
• Fundraising endeavors may be classified
into the general categories of annual giv-
ing, major (or capital) giving, and planned
giving (AHP 2006). In 2006, capital cam-
paigns, annual giving, major giving, and
special events, which are considered a
subset of annual giving, topped the list as
the activities that returned the largest
donations in the United States and
Canada (AHP 2007). In both countries,
capital campaigns were the largest single
source of donations, with 21 percent of
higher interest rates for borrowing,
should they decide to turn to lending
institutions to help fund capital projects
or cover operating expenses.
Of necessity, then, hospital managers
are coming to the realization that philan-
thropy must be regarded as an important
funds raised in the United States and 31.8
percent in Canada. In terms of return on
investment, at least in the short run,
annual giving and special events tended
to be more expensive to run than the cul-
tivation of major gifts or capital cam-
paigns. However, annual giving and
special events also serve important ancil-
lary purposes, such as the acquisition of
new donors and volunteers and new
business contacts, increasing public
exposure, and improving community
relations (AHP 2006).
• In 2006, philanthropic funds in the United
States were primarily allocated to pay for
construction and renovation costs (31.8
percent), new equipment (21.8 percent),
and community benefit programs (11.7 per-
cent) (AHP 2007). In Canada, the top three
allocation categories were the same; how-
ever, construction and renovation received
just 22.5 percent of the philanthropic funds.
Community benefit programs received 7.7
percent, and new equipment purchases
F E A T U R E
accounted for fully 55.1 percent (AHP
2007). The portion of funds allocated to
general hospital operations in the United
States (10.4 percent) was more than twice
that in Canada (4.4 percent), but Canadian
research and teaching programs received a
somewhat larger share of philanthropic
resources than those in the United States
(6.3 percent vs. 4.8 percent).
source of income for not-for-profit hospitals
and healthcare systems (Hall 2005). Dona-
tions and grants from grateful patients and
their families; from members of the com-
munity, businesses, corporate and non-cor-
porate foundations; as well as federal, state,
and local government agencies help close
William C. McGinly • 15
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the budget gap and help today’s healthcare
organizations deal with the financial chal-
lenges confronting them (Association for
Healthcare Philanthropy 2006).
Return on investment (ROI) from a
well-run philanthropic foundation pro-
gram is often much higher
Return on investment
than that which can be
from a well-run achieved by a hospital’s
philanthropic foundation standard services. Operat-
program is often much ing margin percentages for
a hospital foundation can
higher than that which be several orders of magni-
can be achieved by a tude higher than those of
hospital’s standard services. the hospital itself (Costa
2005, 17–19). A dollar
raised through philanthropy contributes
just as much to the total organization’s
bottom line as a dollar generated by pro-
viding the range of medical, surgical,
diagnostic, rehabilitative, and related
healthcare services that constitute its core
mission (Greenfield 2005, 83–84).
The Pyramid of Philanthropy
All methods of seeking donations, how-
ever, are not created equal. Research by
the Association for Healthcare Philan-
thropy and the experience of generations
of fundraisers for a wide range of not-
for-profit organizations and causes indi-
cate conclusively that productivity varies
widely among the activities employed to
raise money through philanthropy (Sey-
mour 1966).
Seen through the prism of ROI,
which measures the effectiveness of a
fundraising endeavor, or cost-to-raise-a-
dollar, a measure of efficiency, such tradi-
tional but expensive-to-run special events
as golf tournaments, benefits, charity
balls, and telethons, often quickly reach a
point of diminishing returns compared
to efforts put into obtaining major gifts
16 • frontier s of h ea lt h s e rv i c e s m a n a g e me n t 2 4 : 4
and planned giving (Association for
Healthcare Philanthropy 2007c).
Capital campaigns, mainstays of
fundraising for specific, usually long-
term projects, require extensive plan-
ning and can involve high
implementation and follow-up costs.
Health services managers, who are
increasingly being drawn into the fore-
front of philanthropic fundraising
endeavors, need to be aware of these
facts.
Veteran fundraiser James M. Green-
field postulated a three-part “pyramid of
giving.” In this pyramid, annual giving
—including such activities as special
events, direct mail, and membership
associations—is at the base, serving as a
foundation for higher levels of philan-
thropy. In the pyramid’s mid-section is
major giving from individuals, corpora-
tions, and foundations, as well as endow-
ments, capital campaigns, and special
campaigns. At the apex is estate or
planned giving, including bequests and
planned gifts (Greenfield 1991).
Besides the advancing dollar size of
the average gift progressing through each
of the pyramid’s sectors, the three stages
also represent developmental phases in a
nonprofit’s relationships with its donors.
The smallest, although most numerous,
gifts are those obtained via annual giving
appeals from individuals responding to
door-to-door, direct mail, Internet, or
telethon efforts; paying to attend a bene-
fit; joining a membership association; or
giving through a volunteer/auxiliary activ-
ity. While relatively expensive to carry out,
these activities raise funds and can yield
vital initial contacts for the organizations
or causes they support.
Participation at the annual giving level
is a general indication that contributors are
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aware of and informed about the institu-
tion or cause to which they are donating
and have identified it as deserving of sup-
port. Further, when regular and faithful,
their participation demonstrates that the
organization has earned community sup-
port, which is an important consideration
for developing the confidence of major
donors that their donations will serve a
worthwhile purpose (Association for
Healthcare Philanthropy 2006).
By far, however, major gifts of
$10,000 or more and planned giving yield
the most productive returns for fundrais-
ing efforts (Association for Healthcare
Philanthropy 2007d). At these levels,
Greenfield (1991) postulates, donors’
interest and involvement have developed
sufficiently to motivate significant gen-
erosity toward the cause or organization
they are supporting. This includes captur-
ing the attention and support of busi-
nesses, foundations, and funding
agencies of various levels of government.
At the highest level of his pyramid,
Greenfield characterizes willingness to
make a planned giving commitment as
the “investment” level of philanthropy
(Greenfield 1991). The relatively high dol-
lar amounts produced through major gifts
and planned giving tend to boost the cal-
culation of ROI and reduce their cost-to-
raise-a-dollar score. However, these
measures, if focused solely on annual per-
formance, may not fully take into account
the longer cycle in terms of expenditures
of fundraising time and resources usually
needed to achieve these higher levels of
giving (McGinly 2007).
A ‘Culture’ of Philanthropy
Organizational frameworks through
which nonprofit hospitals and healthcare
systems administer their giving programs
range from single-person shops (many
including public relations functions) to
associated foundations with development
offices, specialized staff members, and
leadership provided by a chief develop-
ment officer. In a large healthcare system,
each affiliated hospital or facility may have
its own fundraising staff with varying
degrees of autonomy in relation to a cen-
tral office with overall responsibilities for
coordinating philanthropic activities. The
chief development officer (CDO) may
answer to the chair of a foundation’s
board of directors, to the chair of the hos-
pital’s board development committee, or
directly to the organization’s CEO (Associ-
ation for Healthcare Philanthropy 2006).
There are a number of variations on
these themes, but the basic goal of develop-
ment efforts is to achieve effective and effi-
cient philanthropic fundraising by
climbing the pyramid of philanthropy so as
to positively and significantly sustain a hos-
pital’s or healthcare system’s ability to fulfill
its mission to the community it serves.
Success at this endeavor calls for the cre-
F E A T U R E
ation and maintenance of a culture of phil-
anthropy (Hubbell and Reinders 2007;
Hall 2005; Hook and Mapp 2005), a term
that has been aptly described by philan-
thropy expert Simone P. Joyaux as follows:
“This means that everyone in the organi-
zation…from the janitor to the president
of the board…understands that philan-
thropy and fund development are critical
to the organizational health AND that
each individual (both the janitor and the
board president) has a role in the process”
(Joyaux 2007).
Indeed, in their analysis of the
lessons that hospital fundraisers can dis-
cern by applying benchmarking tech-
niques to their endeavors, Hubbell and
Reinders (2007, 17) conclude, “regardless
William C. McGinly • 17
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of performance in other areas, there was
no greater predictor of success (in
fundraising) than the presence of a sys-
tem-wide culture that actively promoted
philanthropy.”
CEOs have the ability to set the tone
for the overall organization through their
oversight, influence, and contacts with
board members, physicians, staff, patients,
individual donors and donor institutions,
and the community at large. It is upon
their shoulders that responsibility primar-
ily falls to foster and maintain the philan-
thropic culture (Hall 2005). (Note, for
example, the proactive steps taken by Good
Samaritan Hospital’s director to establish a
working relationship with Key Bank’s foun-
dation even before the sale of Union State
Bank was finalized.) If the CEO is success-
ful in promoting such top-to-bottom and
bottom-to-top engagement, a strong foun-
dation can be set not only for the develop-
ment office’s day-to-day operations but also
for the acceptance by internal stakeholders
and the external community of the proposi-
tion “that the hospital is a
CEOs, boards of directors, charitable enterprise worthy
and physicians are of philanthropic support”
recognizing the need to (Hall 2005).
The CEO, however,
involve their philanthropic needs the backing of a
foundation and board of directors that is
development office at the equally aware of its respon-
sibilities to foster a success-
earliest stages of the ful fundraising program.
organization’s core strate- Board members are often
gic planning process. donors themselves, and
they should be willing
spokespersons to and vital contact points
with the donor community.
So, too, physicians and other health-
care providers affiliated with the hospital
must be convinced and educated about
their obligations toward the task of fur-
18 • frontier s of he a lt h s e rv i c e s m a n a ge m e n t 2 4: 4
thering philanthropic giving. In a system
where a culture of philanthropy prevails,
they understand they must be willing to
work with development staff to cultivate
donors while protecting the physi-
cian–patient relationship (Hook and
Mapp 2005).
Hospital administrators and physicians
must take into account patient privacy con-
cerns and regulatory requirements under
the federal Health Insurance Portability
and Accountability Act (HIPAA) without
imposing unnecessarily restrictive limits
on interaction with grateful patients and
their families who may become sources of
philanthropic giving. The Office for Civil
Rights of the U.S. Department of Health
and Human Services has assured the Asso-
ciation for Healthcare Philanthropy that it
has received an infinitesimal number of
complaints under HIPAA “in the context
of fundraising efforts” (Association for
Healthcare Philanthropy 2007e).
Beyond the Hospital
The concept of building a culture of phil-
anthropy extends beyond the hospital’s
walls into the larger community. Exter-
nal partnerships constitute an important
element in achieving high fundraising
performance (Hubbell and Reinders
2007). Outreach and community benefit
programs serve a philanthropic purpose
as they sustain and reinforce relation-
ships with people and organizations
devoted to providing access to health-
care, meeting the needs of low-income
persons, and improving overall commu-
nity health conditions. Buy-in and sup-
port by hospital professional staff,
support staff, and physicians are vital to
the success of such efforts, and so they,
too, require the time and attention of the
institution’s executive leadership to
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ensure effective collaboration with com-
munity partners (Catholic Health Associ-
ation 2006).
Philanthropy at the Core
Fundraising has thus become essential to
the well-being of the nonprofit healthcare
establishment. Decision makers can ill
afford to relegate it to the periphery of
their concerns. To an increasing extent,
CEOs, boards of directors, and physicians
are recognizing the need to involve their
philanthropic foundation and develop-
ment office at the earliest stages of the
organization’s core strategic planning
process, and to provide foundation
boards, development staffs, and chief
development officers a more active voice
in setting priorities for developmental
projects that will be pursued and deciding
how resources will be allocated and what
fundraising techniques will be used
(McGinly 2007).
The days of the development office
being limited to charity balls or an annual
direct mail appeal are fast receding, as
CEOs and boards gain sophistication and
understanding about the importance of
major gifts, planned giving, and the plan-
ning and execution of capital campaigns.
Indeed, selecting a CDO with the “right
stuff” to get the development job done for
a particular hospital or healthcare system
has become a major personnel issue
involving consideration of skills, important
relationships that must be cultivated, and
compensation, as well as the definition of
responsibilities, opportunities, and chal-
lenges facing candidates (Freeman 2005).
Such organizational evolution with
respect to furthering philanthropy means
that fundraising programs must be held to
high standards of accountability and trans-
parency if they are to earn their seats in the
board room as equal partners with the
medical, operational, and financial leader-
ship. It places responsibility on the CDO
and the development staff to adapt to the
expectations of business-oriented financial
officials and board members to adopt
accepted accounting practices and embrace
evaluative techniques that will make the
case for and deliver greater return on
investment (Greenfield 2005; Smith 2005).
For example, the Financial Accounting
Standards Board requires that not-for-profit
organizations classify gifts as unrestricted,
as having a temporary restriction, or as
having a permanent restriction. Unre-
stricted gifts may be used by the hospital or
healthcare system as it sees fit. This is
often the case with money raised through
annual fund drives. A temporary restric-
tion limits use of funds to a specific project
or purpose designated by the donor. A per-
manent restriction, or endowment, pre-
vents spending the contribution itself, but
its income may be used, either on a
restricted or unrestricted basis, depending
on the donor’s wishes. Integration of
F E A T U R E
fundraising projections into a healthcare
system’s budgeting process must take heed
of these types of restrictions. They will
affect the nature and range of fundraising
activities to be pursued to meet the institu-
tion’s long-term and short-term needs.
(Costa 2005).
Benchmarking
Some 50 member institutions of the Asso-
ciation for Healthcare Philanthropy take
part in the AHP Performance Benchmark-
ing Service, contributing information into
an integrated database of business prac-
tices and performance metrics whose pur-
pose is to improve the performance of
philanthropic healthcare fundraising.
Participating nonprofit hospitals and
William C. McGinly • 19
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healthcare systems gain the ability to ana-
lyze and compare their fundraising efforts
with those of other facilities or in the
aggregate, enabling them to exchange and
adopt best practices to encourage effective
and efficient philanthropic techniques.
The benchmarking service is based
upon meticulously developed, systematic
data-gathering techniques and standard
definitions of terms designed to alleviate
the difficulties of gauging one system’s
practices against another’s. It consistently
measures results of philanthropic pro-
grams in terms of net fundraising
Treat your institution’s returns: the difference
between gross returns and
fundraising foundation as fundraising expenses,
a profit center worthy of including human resources
appropriate resources that and operation expenses
directly related to fundrais-
yield high net returns and ing activity. Analyses based
balanced efficiency. on such benchmarking data
enable CDOs to discern
best practices, recognize approaching
points of diminishing returns, and pre-
sent a more coherent and compelling case
to financial staff and directors when seek-
ing budgetary resources for the fundrais-
ing enterprise (Association for Healthcare
Philanthropy 2007c).
Challenges
An array of external challenges now con-
fronts healthcare philanthropy. Several
arise from basic misunderstandings
among political leaders, advocacy groups,
and the general public about differences
between nonprofit and for-profit health-
care delivery systems. Uncertainty over
the bases for billing practices, criteria for
the provision of charity care, and the defi-
nition of community benefit contributes
to a questioning of the tax-exempt status
of nonprofit hospitals. Proposals have
20 • frontier s of h ea lt h s e rv i c e s m a n a g e me n t 2 4 : 4
been made to eliminate the deductibility
of donations made to nonprofit hospitals
unless they meet required minimum
numbers of uncompensated charity cases
or percentages of expenses attributable to
charity care (Kane 2006).
Exacerbating the problem is a percep-
tion that at least some nonprofit hospitals
use overly aggressive practices to collect
payments from low-income patients
(American Hospital Association 2007;
Chern 2005; Wunder 2007). The result is a
diminishing of the ability of nonprofit hos-
pitals and healthcare systems to maintain
the public trust and confidence necessary
to cultivate individual donors, businesses,
and foundations to provide support
through philanthropy (Greenfield 2005).
Adding to these challenges are
longer term trends that “bode poorly for
hospital philanthropy” (Hubbell 2005).
These include generational differences
in attitudes and expectations toward
philanthropy in general and giving in
support of healthcare institutions in par-
ticular, as well as observed declines in
volunteerism and weakening civic
engagement.
These challenges, however, also pre-
sent opportunities for executives of hospi-
tals and healthcare systems who have
grasped their central role in promoting
philanthropic fundraising by working
closely with the CDOs to encourage their
leadership in organizational planning and
by providing the resources needed to ade-
quately support fundraising activities and
increase dollars raised. Those who wish to
succeed in this effort should keep the fol-
lowing in mind:
It takes money to make money. Treat your
institution’s fundraising foundation as a
profit center worthy of appropriate
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resources that yield high net returns and
balanced efficiency.
Be patient, plan, and execute. Concentrate
on major gifts from individuals, corpora-
tions, foundations, and public sources.
These yield the best production, especially
when campaigns provide stimuli for
major giving.
Be prepared to invest in operational and
human resources for fundraising. Total
resources directly dedicated to the
fundraising operation—including
fundraising expenditures, direct staff size,
and compensation levels—show the
strongest association with bottom-line
returns and fundraising effectiveness.
Keep staff members focused, efficient,
and effective. Compensate them well,
give them responsibility to direct giving
programs, and expect high performance
from them.
Maintain focus on the ROI and the dol-
lars raised. Avoid concern about environ-
mental factors that cannot be changed,
such as geographic location, demograph-
ics of the service population, or size and
structure of the healthcare facility. They
do not have as strong an impact on phil-
anthropic fundraising as sound manage-
ment strategies and a balanced focus on
the full scope of fundraising programs.
Be creative. Wise fundraising investments
pay off, and well-rounded fundraising pro-
grams that reach a broad base of donors
are more successful.
Capture the imagination of donors. Focus
on the “impossible” and be amazed at the
“real” and very possible.
The author would like to thank Al Bel-
sky, public affairs consultant, and Kathy
Renzetti, vice president, membership, com-
munications, and government relations at
the Association for Healthcare Philanthropy
for their contributions to this article.
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