Philanthropy flounders: Has the single biggest ROI driver lost momentum at your hospital?

Hospital and health system executives are leaving no stone unturned in the hunt for revenue streams. At the same time, one of the most promising and foolproof strategies — philanthropy — is losing steam in many organizations.

The magnitude of demands placed upon hospitals today make it easy for leaders to move matters like philanthropy from the "need-to-have" category to the "nice-to-have" category. Philanthropic relationships by nature require an investment of time and money that might not yield a return for years to come. In a volatile healthcare landscape, betting a significant amount on an investment of that nature is disconcerting, and leaders focused on operations leadership can mistake fundraising as a side-show.

But for a revenue stream that often offers the single biggest return on investment for a provider organization, can nonprofit executives afford to let philanthropy efforts take a backseat?

Driving innovation and change with philanthropy

Aside from simply funding hospital operating expenses and necessary improvements, capital raised through philanthropy is an ideal way to back the innovation that will propel hospitals to the cutting edge of care, according to Jane Haderlein, vice president of philanthropy and public affairs for Huntington Memorial Hospital in Pasadena, Calif.

"That is because such money is not viewed as 'patient care dollars' received for inpatient or outpatient services rendered," Ms. Haderlein wrote in an article for HealthAffairs. "Instead, these dollars are generously given to the hospital to allow the institution to continue to provide community good."

Funding generated through philanthropy can be earmarked for specific initiatives, but is often unencumbered and lets hospitals drive the innovation that creates new business opportunities. As vice president and CDO of Intermountain Healthcare in Salt Lake City, David Flood has seen philanthropy evolve from what was once a value-add to a must-have for hospitals over the course his 20 years as a healthcare executive. While philanthropy is most often given the backing it deserves in more forward-thinking institutions, philanthropic opportunities are overlooked by many, he says.

"The fact remains that empowered and accountable hospital fundraising often provides the highest return on investment business line in health systems today, with high-performing hospitals representing double-digit percentages of their entire bottom line," says Mr. Flood. "But, reality check, philanthropy is a cultural pillar in any nonprofit organization."

Philanthropy begins with leadership at the top, Mr. Flood says, and should permeate the whole organization. This includes recruiting staff at all levels to build the meaningful relationships that nurture fundraising success.

"I would defend the idea that giving to a hospital is a unique opportunity for one's finite philanthropic dollar to go furthest, as a hospital is perhaps the only charitable entity in a community or region that touches every point along the socio-economic spectrum," Mr. Flood says.

In her 2012 study guide, Betsy Chapin Taylor, president and principal consultant at Accordant Philanthropy, wrote that CEO engagement in an organization's philanthropy work is no longer optional and cannot be overstated: CEOs make or break their hospital or system's ability to fundraise effectively.

The CEO is the embodiment of the organization's goals and the face of the organization, Ms. Taylor wrote. They are uniquely positioned to instill confidence in donors about their organization's strength, vision and ability to follow through with its promises. When CEOs make donors feel personally respected and connected to the good their donations can bring, they lay the foundation for meaningful relationships over long periods of time.

An art and a science

So why do leaders sometimes experience a disconnect in dedicating time and energy to such a valuable opportunity for their hospital?

James Lyddy, PhD, former chairman of the department of development for the Mayo Clinic, said a number of factors drive the disconnect. These include the length of time it takes — sometimes between 3 to 5 years — to secure a significant investment in fundraising. Additionally, it's easy to underinvest in fundraising programs. Oftentimes leaders devote limited resources to informal fundraising initiatives, rather than high-quality recognition events. The latter requires extensive planning and expenses, but goes a long way to show gratitude to patient and community donors.

"The fundraising profession has evolved over the past 25 years to such an extent that the 'art' of fundraising is no longer adequate, and is now joined by the 'science' of fundraising," Dr. Lyddy says. "The introduction of this combination requires intelligent investment in fundraising at a hospital or within a healthcare system, particularly if a truly attractive ROI is to be achieved."

The mindset and practice of fundraising at this level doesn't come naturally to caregivers, nor to CEOs and institutional leaders, Dr. Lyddy says. Although a long-term perspective on philanthropy and fundraising relationships might require some buy-in from governing boards and administrators, it is a requirement for meaningful returns.

Meaningful investments bring meaningful returns

Devoting precious time and funds to donor relations and outreach events can seem counterintuitive — spending money without a guarantee of making any back? But the numbers suggest that even a modest dedication of resources to nurturing relationships with individual donors pay off: In 2015 alone, the top 19 healthcare donations from individuals totaled $566 million. More often than not, informal or half-hearted philanthropy efforts fall flat.

Many strategies can foster relationships that will pay future dividends for a system. These include expediting donor access to care when needed; identifying their true passions and developing initiatives that reflect them; expressing institutional "needs" rather than "wants"; supplementing a small amount of high-quality events with creative outreach programs; and demonstrating exactly how a donation will make a difference in medical research, education or delivery of state-of-the-art care.

Also, relationships still win the day. "One important rule of thumb that has emerged across the board is that a nonprofit's best future donor is someone who has given previously [to] that institution or organization," says Dr. Lyddy. "This means development professionals are being asked by their leadership to get to know their donors on a personal basis, if possible."

While development officers should be mindful of these strategies and more, the single most important "first step" and sustained principle for successful fundraising is systemwide engagement.

CEOs and other leaders are responsible for engaging workers at every level in building sustaining relationships with patients, donors and the community. An organization's reliance on a solitary 'golden goose' development executive is wishful thinking, according to Mr. Flood. In reality, that person is often not the 'celebrity' the community wants to know and support. Other hospitals leaders, such as CEOs, have the vision for how investments will ultimately give back. Those are the ones that grant credibility and security to fundraising enterprise.

"Beyond margin, when done well, a hospital foundation's impact goes well beyond the dollars," Mr. Flood says. "The fundraising enterprise can be a key resource in gathering and stewarding influential members throughout the community who demonstrate their commitment through their dollars. They will work loyally on the hospital's behalf to protect their investment. As a result, philanthropy attracts an arsenal of social and political strength to assist the hospital in countless ways."

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