One of Benjamin Franklin's greatest pleasures was raising money to start the first colonial hospital. He strong-armed prominent Philadelphia citizens to open their wallets and persuaded
the legislative assembly to match private donations.
Franklin recounted the 1751 founding of Pennsylvania Hospital, which still operates, in his autobiography: "A convenient and handsome building was soon erected; the institution has by constant experience been found useful, and flourishes to this day."
Flash forward 250 years:
* Anne Arundel Medical Center in Annapolis, Md., recently exceeded a $20 million fund-raising goal for a replacement hospital, scheduled to open in fall 2001. It expects to fund one-third of the project's total cost with gifts.
* University of California Los Angeles Medical Center anticipates charitable giving to fund the majority of $1.2 billion in current capital projects, which include two replacement hospitals and two research buildings.
* After raising $50 million for a new $580 million campus in 1999, Northwestern Memorial Hospital in Chicago is planning another capital campaign for a $150 million women's center, scheduled to open in 2005.
America's rich tradition of healthcare philanthropy, which waned with the advent of health insurance, is undergoing a revitalization. While philanthropy constitutes a tiny portion of healthcare revenue, some institutions increasingly rely on donations to fund capital projects, research, education and outreach programs.
With operating profits evaporating, philanthropy is becoming a vital funding source and a major concern of hospital chief executives.
"For many years when hospitals were running 5% margins and sometimes 10% margins, philanthropic income was icing on the cake and nobody paid much attention to it," says James DeLauro, vice president of fund development at San Francisco-based Catholic Healthcare West. "But now you've got hospitals struggling to make 1% margins, which is not enough to rebuild and keep up with technology."
A noble cause. Though stingy health plans and soaring costs have tarnished the image of healthcare as a charitable enterprise, some hospital leaders are working to reinforce the image of local healthcare as a noble cause.
Max Poll, president and chief executive officer of Scottsdale (Ariz.) Healthcare, spends 20% to 25% of his time on fund-raising efforts, such as meeting with potential donors over lunch or giving facility tours. Some weeks, he says, it's as much as half of his time.
Poll says his philanthropic efforts have increased in the past six years as the gap between patient-care revenue and patient-service expectations has widened.
"We are increasingly asking donors to step forward to provide funds for improved services and equipment," Poll says.
The two-hospital system, with revenue of $350 million, typically raises $6 million to $7 million per year. The money has gone to an array of activities, including cancer care and research, a neighborhood outreach bus, capital projects such as a new women's and children's facility, bone density scanners and nursing scholarships.
Still, hospitals generally are struggling to capture their share of the nation's increasing philanthropic wealth. Healthcare fund raising hasn't kept pace with giving in other sectors during the past decade. Giving to all charities has increased nearly 44% to a total of nearly $191 billion since 1990, but the health sector saw an inflation-adjusted increase of 35%, to less than $18 billion.
Healthcare giving suffered in the mid- to late 1990s as a result of for-profit hospital conversions and the creation of regional systems, which alienated contributors, according to the Association for Healthcare Philanthropy, a group that represents fund-raising professionals. Often, the structuring of new foundations was an afterthought in the creation of new systems, says AHP President and CEO William McGinly.
In some cases, he says, key donors and foundation board members "probably went to other places in the community where they felt they could make a difference."
Hospitals appear to be having more success of late, as the pace of mergers has slowed and the fraud lawsuits against the for-profit giant formerly known as Columbia/HCA Healthcare Corp. have disappeared from headlines.
Simultaneously, healthcare has been enhanced by a huge redeployment of assets resulting from the conversions of not-for-profit health plans and hospitals to for-profit status.
The New York-based Foundation Center tracks foundations that have been established by healthcare conversions. In 1998, according to the not-for-profit research organization, eight large healthcare foundations awarded grants totaling $126.8 million, 13% of which went to hospitals and other medical-care providers.
McGinly estimates that funds raised by AHP's member institutions were up about 5% in 1999 to $6 billion, after a 9% increase the previous year.
The AHP's membership has increased 26% in the past 10 years. It represents 2,957 fund-raising professionals at 1,700 provider organizations, mainly hospitals, hospices and nursing homes.
Compared with patient care and even investment income, philanthropy is a lucrative enterprise. Hospitals with mature philanthropy programs typically raise
$1 for every 20 cents they spend on fund raising, according to the AHP, based in Falls Church, Va.
Guarding their share. Hospitals and healthcare systems are fighting to maintain their share of the charity pie by guarding their fund-raising advantages. Earlier this year, the AHP loudly objected to proposed HHS standards that would restrict access to health information.
The association said the government's plan to restrict the use of patient data would prevent hospital fund raisers from using patient lists to solicit donations. Because patients and their families are the most likely donors, hospitals consider patient names and addresses critical leads.
"All those kinds of things which help us to define our quality would be threatened in the absence of philanthropy in today's reimbursement environment," says David Lawrence, who became president of the Northwestern Memorial Foundation in May. He previously served as chief development officer at the Mayo Clinic in Rochester, Minn.
Hospital fund raisers argue that removing their access to patient names and addresses is the equivalent of barring universities from contacting their alumni.
HHS is expected to release a final version of the rule later this year. Meanwhile, the AHP is laying the groundwork in Congress to pass legislation that would restore the use of patient data for hospital fund raising, if that becomes necessary, McGinly says.
Philanthropy often makes the difference between a so-so capital project and a real stunner. At Anne Arundel, philanthropy is funding a $500,000 healing garden for patients and private showers in every patient room.
The hospital attracted 43 six-figure gifts, eight from first-time contributors, says Lisa Hillman, the hospital's vice president of development and community affairs.
"When you talk about raising money for a new hospital, that's something that captures the imagination, because a hospital touches nearly everyone in a community," Hillman says.
Charity fuel. Aside from funding capital projects, charitable contributions help hospitals to carry out their charitable missions through outreach programs in underserved areas, educational services and research. In California, Catholic Healthcare West uses charitable donations to fund programs for migrant populations, says DeLauro. Usually, hospitals attempt to match donors' interests to specific programs.
"In general people have gotten less interested in building infrastructure and more interested in providing direct service to people," DeLauro says.
The Bill & Melinda Gates Foundation, for example, has given $1.85 billion to health, but the contributions have gone primarily for global vaccination programs and AIDS, not building projects.
There's a risk that philanthropy will diminish in a recession, particularly at children's and specialty facilities, which rely the most on charitable giving.
Jordan Melick, an analyst at Fitch, a New York-based bond-rating agency, says risk can be mitigated by a long history of philanthropic support for a hospital, but in general, "contributions are definitely out of a hospital's control."
Projects can be delayed or even canceled if funding doesn't materialize. "That's a little scary because you're factoring the participation of benefactors into your fundamental programming," says Lawrence of Northwestern Memorial Foundation. "When we talk about introducing new programs that will not be self-sustaining from patient-care dollars, such as research initiatives, the decision is predicated on the presence of philanthropy."
Name game. Sometimes, charitable contributions come with strings. UCLA Medical Center drew criticism when it announced that it would name its new flagship facility after former President Ronald Reagan, at the request of a group of donors who pledged $150 million. Protesters said Reagan was no friend of public education while he was the state's governor.
Anne Dunsmore, UCLA's director of medical sciences development, says there is no doubt that Reagan's name has attracted wealthy contributors who wanted to honor the president and otherwise would not have given to UCLA.
She estimates that 30% of those pledging in the $150 million capital campaign are first-time contributors to the medical center.
UCLA jumped on the opportunity, Dunsmore says. "This is a unique situation where people came together on their own and wanted the naming (for Reagan)," she says.
UCLA's new facilities will be chock-full of other naming opportunities, which could number in the thousands. The 500 patient rooms at the flagship facility will go for about $250 apiece, for example, says Dunsmore.
Curiously, hospitals themselves are promoting naming opportunities in order to remind constituents of the importance of philanthropy. According to fund raisers, a smaller percentage of givers are looking for recognition than in the past.
Anne Arundel has been known to coax donors into public recognition. Hillman says the hospital staff managed to persuade one elderly donor to agree to have her name inscribed on a plaque in the women's and children's facility of the hospital, both to make her feel good and to remind future generations of patients of where the money came from to build the facility.
Says DeLauro: "Being a millionaire is not as exclusive a deal as it used to be. There are a lot of people who don't necessarily want the notoriety that goes along with having their name on a lot of stuff."
But not every contributor is so humble. Anne Arundel rejected a $250,000 donation when the would-be giver demanded a seat on the board of trustees. Says Hillman: "We didn't think he would make a good trustee."