There are just 12 days left until Christmas. Yes, the season of giving is upon us, unfortunately this year, hospital philanthropic foundations didn't feel too much of that giving spirit—donations for hospitals are lower than last year and the forecast is a slow, if any, increase, for next year. However, there are strategies CFOs can employ at their facilities to see some changes in their fundraising divisions.
Presently, philanthropic efforts nationwide aren't booming. So, it's not surprising that healthcare philanthropy has also had difficult year. The Association for Healthcare Philanthropy (AHP) reports that its members nationwide have seen donations fall off considerably since mid-2008, and it's not clear when they will pick back up again.
"It's overwhelming if all of a sudden your funds dry up," says AHP President William C. McGinly, PhD. "When you're faced with it, you've got to get creative with your funding."
Philanthropy, especially at nonprofit hospitals, has long been a strategy for supplementing capital budget needs. However in recent years, some finance executives are finding ways to make fundraising an integral part of their financial planning efforts—recognizing that an operating budget funded in part by philanthropy can strengthen the overall bottom line.
However, not all facilities have set up strategic philanthropic divisions, and that amounts to financial loss that few can afford these days. The AHP reports that nearly three-out-of-four hospitals' philanthropy efforts have been squeezed by the recession, and the "giving forecast" at most hospitals is projected as lower than in years past.
William S. Littlejohn, Pacific regional director for AHP and CEO and senior vice president for Sharp HealthCare Foundation, knows that "squeeze" only too well. The Sharp HealthCare Foundation raises money for seven acute-care and specialty hospitals in San Diego County. Three of the foundations within the health system have raised a combined average of approximately $20 million per year over the past five years. Sharp philanthropies have raised about $100 million in the past five years and turned over about $92 million in cash over the past seven years.
However, Littlejohn says while Sharp's foundation managed good results through the end of 2008, by 2009 they felt "a contraction of about 20%, especially in large gifts." Philanthropic donations fund about 10% of the capital plan for Sharp Healthcare, so while the fundraising drop isn't positive, it hasn't stopped projects at Sharp Healthcare.
"Sharp is always rolling forward with the long-term plan. We had four good years and then one contraction, so we aren't taking a huge hit," he says.
Other philanthropic divisions aren't faring nearly as well as Sharp during the economic recession. The AHP reported earlier this year that nearly one-third of negatively affected hospitals are postponing the purchase of new equipment funded by philanthropy. Moreover, 20% of survey respondents said they were scaling back on areas, such as events and capital campaign programs.
Eight Strategies for CFOs Philanthropic Divisions
Though scaling back has become a fact of the recession, CFOs who take a different tack with their philanthropic divisions may find a strong strategic partner waiting to improve their bottom line.
1. Decide if it's fundraising or development. Fundraising is designed to focus on the next cause, says John B. Donovan, executive director at Dubuque Mercy Health Foundation in Dubuque, IA, part of the Trinity Health Network. The foundation, which was created in February 2008, gathers charitable contributions for the 288-bed, Catholic nonprofit Mercy Medical Center. Getting the foundation off to a swift start was difficult in the down economy, though Donovan says that realigning the focus to look at the larger picture for the facility is the key to long-term success.
"You may not develop long-term donors if your primary goal is to raise money for the latest project," Donovon says. Instead, he advocates for development, in which a regular team is used to cultivate donors and looks at the broader scope of capital projects for the entire facility and works toward larger goals. It's a tactic Sharp Healthcare Foundation has employed successfully for nearly eight years.
2. Use performance measures. You measure every other aspect of your finances, if you aren't tracking performance measures for your philanthropy division in the organization's monthly "dashboard" reports, then start. McGinly says when evaluated on net return philanthropy is sometimes the hospital's most valuable revenue producer.
Sharp HealthCare uses these measures, and Littlejohn says they take a strategic approach by reviewing the hospitals five-year capital plan and the five-year cash projection, then they determine how the foundations efforts will fit into the larger plan for the facility.
"Our approach is a bit of a departure from other organizations who may look at philanthropy [donations] as a 'nice thing' to have," says Donovan. "We want to know what role our team will play in funding the long-term projects, so we can articulate this to our donors."
3. Get the right tools in place. CFOs can be instrumental in helping the fundraising team evaluate information systems to track their financials. The information that is gathered can go a long way toward helping you set up performance measures and establish five-year projections.