CEO Corner: Show Your Board the Power of Philanthropy
Alice Ayres, MBA
Published: 04/07/2022
Recently I wrote an article for AHA Trustee Insights, a publication geared toward healthcare Board members, about why they should pay attention to philanthropy as a revenue stream—always, but especially now when many hospitals are facing razor-thin margins after two years of pandemic operations. One of the things I love about AHP is our members' willingness to share their work for the good of the entire membership, so I want to do the same with my own. Please beg, borrow, and steal ideas from the excerpt of the article printed below to make the (worthy) case to your own Board(s) about the importance of the work of the foundation to the financial health of the entire organization.
The following is an excerpt from the article "Why and How Trustees Should Pay Attention to Philanthropy," published in the April edition of AHA Trustee Insights. ©Used with permission of American Hospital Association.
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One of the most critical mandates for all hospital CEOs and their leadership teams is achieving profitability, ideally through diverse revenue streams. The difficult reality is that the US reimbursement model, double-digit growth in pharmaceutical costs, competition for staff, and the need to invest in research and physical plant make financial stability elusive for many hospitals. Before the pandemic, the average hospital operating margin was between one and three percent. AHA now estimates the pandemic created losses of over $350 billion in net income across the sector, a gap that is far larger than the roughly $285 billion allocated through the CARES Act. As a result, Moody’s now reports that the average hospital operating margin dropped to 0.5% in 2020.
Because the cost of patient care is so high, while the foundation team returns $4 in charitable giving for every $1 invested in their work, many progressive hospitals are investing in philanthropy and the work of their hospital foundation to strengthen their financial position. As Marc Harrison, MD, CEO Intermountain Healthcare said in a recent interview with AHP, “The easiest explanation of the value of philanthropy is the financial explanation….We raise a lot of money and in order to generate the income that the foundation generates we would have to add $3 billion worth of gross patient revenue.”
As a trustee, you are uniquely positioned to increase charitable giving to your hospital in three important ways:
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Give Yourself: The first and most important secret to success is 100% giving participation by the Board and the hospital leadership. A study done by the Non-Profit Research Coalition shows that organizations with boards who give are more likely to achieve their fundraising goals. When everyone gives, it signals to internal and external constituencies that the leadership believes in the strategic direction of the organization and has confidence in its future. As foundation team members work with donors who may want to make multi-million-dollar investments, their asks will be taken more seriously when they can say they that 100% of the leadership—employed and volunteer—participate.
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Analyze Your Network: Think about the people in your network, and ask yourself: who could be potential donors? Who cares about the projects and efforts the hospital plans on undertaking in the next three to five years? Who has had experiences with the hospital? Many trustees quite literally go through their contact list and identify people for the foundation team to engage in the work of the hospital. A warm introduction from you is always best, but if that is not comfortable for you, the foundation can use events and education sessions to invite people into the hospital community.
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Be Ready with a Story: With Covid cases declining, social interactions are on the rise. You will likely go to more events, bump into more people at the grocery store, and spend more time with friends and colleagues. When you are prepared, these interactions are an opportunity to talk about the work of your hospital. Ask the fundraising leadership for one or two stories you can tell about the amazing people at your hospital and the incredible things that charitable donations enable for your community. Practice telling the stories so that you are comfortable in the moment when you are asked what you have been doing lately. This is one of the best ways to introduce your network to the work of the hospital and to invite people to consider becoming involved.
Most hospitals would need to generate $75 to $100 in gross patient revenue to have the same net income impact as just $1 of charitable giving. If you can help the foundation raise even $100,000, you will be contributing the same amount as if the hospital was able to find an additional $7.5 million to $10 million in gross patient revenue—an achievement with quite an impact in these incredibly difficult financial times.