The hospital activity with a 65% margin

Can you name an inpatient or outpatient department in your hospital that returns a margin of 65 percent? If you had such a department, would you invest in it or marginalize it?

According to the Association of Healthcare Philanthropy, the average cost to raise $1 for nonprofit hospital fundraising departments is $0.35. So to generate $1 million from your fundraising operation, you need to invest $350,000. On the clinical side, with average hospital margins at 2 percent, generating $1 million from operations would require your institution to spend $980,000.

On its face its makes sense for nonprofit hospitals to invest in their fundraising department and to ensure there is a good plan and talent in place to ensure success.

The icing on the cake for hospitals and systems with robust fundraising operations is that the facilities, equipment, education and community-based programs those dollars support are often budget offsetting to the hospital, reducing financing and operating costs. And, the volunteers and donors who actively help the hospital raise money and fulfill its mission are typically community and business leaders who often become hospital board members and advocates.

But wait...there's more. I have written several times in Becker's about the role of philanthropy in helping create accountable care organizations and fund community wellness programs (see "Philanthropy's Important Role in the Transition to Accountable Care Organizations," "Include Your Advancement Director in ACO Planning" and "ACO Coalitions Key to Population Wellness"). Community assessments and wellness programs must be done by ACOs to elevate population health, which leads to attaining positive financial returns through shared savings and other ACO models. Reimbursement for community-based programming, however, is not typically available and must be financed through operating revenues.

Philanthropy can also begin to address these "new" Patient Protection and Affordable Care Act expenses in a way that generates positive public perceptions of the ACO/hospital. You can begin to attract community leaders and philanthropists who have not previously been interested in supporting the hospital and elevate your engagement with current supporters. With their leadership, you can help create new community-based coalitions that will help to burnish the ACO brand and to unify ACO patient participation. In total, this effort will use already "efficient" money to secure even more funds for programs that will help the hospital generate better operating margins.

Hospital fundraisers and administrators are beginning to understand how to use philanthropy to support the objectives of ACOs. There is little expertise in this space, however, even though the need is apparent. So while dollars are at a premium, it is wise to invest in your fundraising department and to train your staff and executives to raise funds for ACO expenses and community health programming.

Larry G. Raff, MPH, is president and principal of Copley Raff, Inc., a leading philanthropy consulting firm based near Boston. He brings three decades of leadership and experience to healthcare organizations seeking advancement results. His clients include four of New England's largest multi-hospital systems, the largest multi-hospital systems in the Midwest and South Florida, numerous academic medical centers and community health centers. He also provides counsel on ACO fundraising strategies to national scope organizations including the American Optometric Association, National Consumer Law Center, National Association of County and City Health Officials and the Massachusetts Medical Society.

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