Contributed By William C. McGinly
SPENDING ON HOSPITAL CONSTRUCTION in the U.S. is expected to grow to $20 billion annually by 2010 to replace aging infrastructure and accommodate new technologies. Also driving this trend are shifting population centers, an aging population, and Americans’ rising sense of entitlement to the highest quality care.
Sources of funds to finance this building boom, besides earned revenues and government funding, include loans from private and public sources, and philanthropy – grants and donations from individuals, foundations and corporations.
According to the Association for Healthcare Philanthropy, whose more than 4,500 members manage philanthropic programs in 2,200 of North America’s not-for-profit healthcare providers, healthcare executives today recognize that philanthropy is vital for dealing with financial challenges. For them, philanthropy’s utility is maximized by ensuring its reliability, and that when a healthcare institution must borrow for major projects, its ability to consistently raise funds through philanthropy also affects its ability to secure favorable terms for loans.
Not-for-profit hospitals and affiliated foundations are increasing their fund-raising efforts in response to the rising costs of patient care, technology and construction that far outstrip payments received from individuals and from public and private insurers.
Not-for-profit hospitals, clinics, nursing homes, hospices and similar facilities raised $7.1 billion from donors in 2005, the latest year for which AHP data on giving have been published. Of this amount, 16.6 percent was contributed to capital campaigns, defined as concentrated efforts to raise a specific sum within a limited time period. An additional 17.8 percent consisted of “major gifts” of $10,000 or more.
Professional fund-raisers place capital campaigns and major gifts on a “pyramid of giving,” midway between a base of annual giving activities and an apex of estate or planned giving. Often associated with building and renovation projects, major gifts and donations to capital campaigns are most successfully accomplished by cultivating the pool of individual and corporate donors to annual campaigns who have developed a sense of connection to the organization. This requires personal solicitation and the involvement of the CEO, board members and prominent physicians. Gimmicks that promise quick results never produce more than a few one-time gifts at best, AHP experience has found.
Research and planning before a capital campaign may involve a year or more of work in advance of the active stage of the campaign. The follow-up period after the campaign often lasts one or more years as well, to collect pledges and acknowledge donations. Crucial to this undertaking are the roles of the development officer and staff, who are often part of the institutionally related foundation or in a development department of the healthcare organization. Generally, board members and executives of the foundation provide leadership and identify prospects, recruit and train volunteer solicitors, prepare solicitation materials and coordinate the overall resource development effort.
These professionals face a number of important challenges, especially regarding capital campaigns aimed at funding new or expanded facilities – how to integrate the healthcare organization’s philanthropic efforts with its strategic planning; how to demonstrate return on investment for these efforts; and, underlying both, how to effectively communicate with the board, CFO and CEO who must present their organization’s case to lenders and potential donors.
Towards this end, the AHP now offers member organizations a performance benchmarking service, a unique, integrated database of business practices and performance metrics developed exclusively for philanthropic fundraising. Using data collected from participating AHP member institutions, users can generate comparison reports for improved financial and human resource evaluation and planning. The service enables organizations to develop a roadmap for improved philanthropic performance and creates a plan using the financial modeling and planning metrics that board members, CEOs and CFOs can relate to and understand.
The AHP benchmarking program enables participating hospitals and healthcare systems to compare their fundraising efforts with those of other facilities in the program across the country. They can efficiently exchange and adopt the best ideas to encourage philanthropy and avoid pitfalls others have experienced. To foster transparency and eliminate problems that arise from comparing organizations’ efforts, the program systematizes data-gather techniques, utilizing standardized definitions derived from the experience of member organizations.
So far, 40 hospitals and healthcare systems in 18 states and two Canadian provinces are participating in the benchmarking service. Current users say the program facilitates their ability to reach fund-raising goals, and it integrates resources from grateful patients and donors into strategic healthcare plans.
The extent to which the utility of this system becomes more widespread depends on the ability to increase participation by AHP member organizations, thus increasing the reliability and validity of data and resulting conclusions about best practices.
As pressures exerted on hospitals by the current building boom make the need to adopt more business-oriented approaches to philanthropic fund-raising all the more obvious, this benchmarking service can play a role in making the most of philanthropic resources.
William C. McGinly, Ph.D., CAE, is president and CEO of the Association for Healthcare Philanthropy.