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Philanthropy As A Resource Solution In A Community Hospital Setting: An Overview
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By James N. Raffel, Senior Consultant

Nationally, more community hospitals and systems are turning to philanthropy to provide the margin of excellence demanded by patients and raise the standard of care in a very competitive marketplace. These added financial resources provide community hospitals with the ability to offer patients the latest technology, renovate and develop new facilities, and participate in important clinic research through national protocols.

Growth Design has found that these philanthropic resources make it possible for hospitals to operate a number of non-revenue-producing programs, such as free immunizations, clinics for the under or uninsured, community wellness and prevention programs, health screenings, pastoral care, parish nurse programs, and many more, all of which traditionally have to be funded by earned revenue to exist.

However, as reimbursement patterns continue to change and margins on particular services shrink - translating into less earned revenue for the hospital in general - those non-revenue producing but critical human service programs are the first to be eliminated. Hospitals that serve entire communities are counted on by that community to provide these programs and are respected and admired for doing so.

Hospitals can also no longer pass along overhead costs to the public by simply raising fees. Negotiated rates for procedures require hospitals to seek ways to operate more efficiently so they can provide the same level of care at reduced costs. The shrinking margins of today's healthcare environment means less surplus revenue at the end of a year to reinvest in people and technology. The growing shortage of healthcare professionals (nurses, technicians) translates into salaries that are increasing at an accelerated rate.

The patient desires the very best, and the cost to provide the very best is far outpacing inflationary increases. Philanthropy is rapidly becoming an important resource solution.

Benefits of Healthcare Philanthropy

Philanthropy at hospitals has made a difference in several ways:

  • It allows patients and their families an opportunity to express gratitude for the care the patient received. Many people have a need to give and philanthropy in a hospital setting provides fulfillment of that need.
  • The acceptance of unrestricted gifts provides the administration with financial support for areas/programs of the hospital that may not be fully funded through earned revenue and/or interest income.
  • Restricted gifts/grants provide support for specific programs and services of importance to the hospital and community - the advancement of the cardiac and radiation oncology services for example - and allows the administration to commit current income to other pressing needs stretching the resources of the hospital in very real ways.
  • Charitable support can also provide for the addition of amenities that are not considered essential to the delivery of service but enhance the patient and employee experience, such as the redesign of a lobby or waiting area, added comforts to rooms, enhancements to the cafeteria, and others.

Growth in Healthcare Philanthropy

Giving USA 2002, the annual report on philanthropy conducted by The Center on Philanthropy at Indiana University, noted that gifts to healthcare totaled $18.43 billion in 2001 or 8.7 percent of all philanthropic gifts that year. Interesting statistics from the report are as follows:

  • 75.8 percent of all gifts come from individuals, followed by 12.2 percent from foundations, 7.7 percent from bequests, and 4.3 percent from corporations.
  • Over the past 30 years (1971-2000) health giving grew by an average annual rate of 7.7 percent (3.6 percent adjusted for inflation).
  • Independent Sector surveys on household giving in 2000 revealed that an estimated 43 percent of households gave to health. Only household giving to religious institutions is higher at 68.6 percent.
  • Among those households who reported giving to health, the average (mean) amount given in 2000 was $224.
  • The last study that tracked direct contributions related to a health organization's total revenue found in the 1998 Nonprofit Almanac evidenced that direct philanthropic contributions accounted for approximately 3 percent of all healthcare revenues.

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