Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Custom Media Event: ESG Summit
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Transformation Summit
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain Revenue Cycle
    • - Hospital at Home
    • - Workplace of the Future
    • - Virtual Health
    • - Future of Healthcare Staffing
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
March 10, 2018 12:00 AM

Hospital M&A complicates fundraising

Tara Bannow
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Getty Images

    The modest seven-person development and marketing team at Burke Rehabilitation Hospital has been feverishly raising money for a new facility dedicated to supporting the friends and family members of patients recuperating from major events like severe strokes or spinal cord injuries.

    "We're trying to provide the tools a family needs to be able to navigate this process and to help them move on to the next level of rehabilitation, and hopefully the highest level of independence," Burke spokesman Richard Sgaglio said.

    So far, they've raised about 10% toward the project's roughly $1 million price tag, a relatively modest goal for the 150-bed rehabilitation hospital in White Plains, N.Y.

    But even though Burke was absorbed into New York-based Montefiore Health System in 2016, an integrated four-hospital system with revenue of more than $5 billion, Burke executives have chosen to keep its fundraising in-house.

    In doing so, Burke will harness its 102-year-old reputation among long-standing donors, many of whom are former patients and their family members, rather than dissolve its identity into the larger system. "If you have this wonderful thing, you don't want to quash it, you want to make it something that continues to be valuable," Sgaglio said. After the acquisition, Sgaglio's team reached out to donors to assure them their money would stay with Burke, which also runs seven outpatient facilities.

    In an industry experiencing an accelerated pace of mergers and acquisitions, health systems must grapple with how to structure their fundraising operations, especially as they absorb not-for-profit hospitals and systems with existing foundations. During acquisitions, leaders try to cut redundant work to make the deal worthwhile, but centralizing fundraising often comes with regulatory barriers and hospital-level pushback.

    It's an important consideration because while fundraising produces only about 3% of health systems' revenue, that's close to the size of many health system operating margins in recent years.

    And the total amount that healthcare organizations are raising is going up: from about $8 billion in 2006 to more than $10 billion in 2016, an increase of about 25%, according to the Association for Healthcare Philanthropy.

    total-funds-raised

    Yet, philanthropy—like politics—is still very much local. Case in point: Hackensack (N.J.) University Medical Center. The hospital's pediatric cancer campaign relies on New York Giants quarterback Eli Manning to try to win the hearts of fans in northern New Jersey. Despite its merger with Northern and central New Jersey-focused Meridian Health two years ago, Hackensack's foundation is still separate, but there are talks of uniting them, said Robert Wahlers, vice president of development for the Meridian Health Foundation.

    Doing so would require carefully tailored local outreach, with Hackensack's historical presence in Philadelphia Eagles country. "Especially on the heels of them winning the Super Bowl, if we're going to put something out with Eli Manning to the folks in the southern part of the state, they might not be as excited to come out and support Tackle Kids Cancer, because they're going to want to see their quarterback," Wahlers said.

    median-fundraising-by-type

    More generally, relations can get tense when an acquiring system also tries to absorb the hospital's foundation, pulling away what could feel like its last semblance of control.

    "The hospital that's being subsumed into a larger system has an interest in maintaining whatever level of control that it can now that it's giving up the keys to the larger system," said Jack Gleason, an attorney specializing in healthcare with the New York law firm Epstein Becker & Green. "That's just a natural gravitational pull."

    There's no one-size-fits-all solution, and often the model that works best depends on a system's unique circumstances. Some industry experts praised a hybrid model in which acquired hospitals maintain their own fundraising operations that are then supplemented by their parent organizations, which provide specialty expertise, standardization and some of the back-end work that donors don't see.

    "You still have at every single one of their foundations front-line people who are on the ground working with donors, doing all the work to find out what a donor's intent was, cultivating and nurturing those relationships, thanking people," said Betsy Chapin Taylor, president of consulting firm Accordant Philanthropy. "All the boots-on-the-ground work is still done at the local level, but they're just being resourced and enabled at the system level."

    That's the general setup at San Francisco-based Dignity Health, whose 31 separate foundations across the West are supported by a systemwide foundation that provides budget guidance and recruitment help. While the system benefits from having hospital-level groups, Fred Najjar, Dignity's senior vice president of philanthropy, spoke longingly of the efficiencies the system would gain if its foundations were rolled into one: a unified reporting structure with one annual Internal Revenue Service tax filing of Form 990.

    Dignity is in the process of merging with Englewood, Colo.-based Catholic Health Initiatives, which would create the nation's largest not-for-profit hospital system by revenue. CHI operates its foundations similarly to Dignity. The system had 39 foundations as of June 2016, some of which represent several of CHI's 101 hospitals, spokesman Michael Romano said. The systems have not determined how they would structure their fundraising, but Najjar said he thinks they should consider uniting them.

    "To make it one single foundation across 20-some states could be a challenge," Najjar said, "but I think we should explore it."

    Salt Lake City-based Intermountain Healthcare is a fervent advocate for the parent foundation model, which the system adopted in 2012 when it brought together 16 separate foundations. The resulting Intermountain Foundation now has close to $300 million in total assets.

    But it was an emotional undertaking for the system; many people were afraid the change would strip away local identities, said David Flood, the foundation's president and Intermountain's chief development officer. To prevent that, Intermountain has stationed members of its fundraising staff at some of its hospitals, and it operates volunteer community-development boards for each hospital.

    "Local identity is important," Flood said. "We just want to provide as a system a strong backdrop that people were afraid to bring forward, but they're realizing our donors are impressed with that."

    Northwell Health Foundation has historically operated under more of a parent structure, with a single foundation overseeing 19 hospitals. But four of its most recent acquisitions— Northern Westchester Hospital, Phelps Memorial Hospital, Peconic Bay Medical Center and Mather Hospital—have retained their existing foundations, said Brian Lally, the foundation's senior vice president and chief development officer. He said there are no plans to change that.

    The New Hyde Park, N.Y.-based foundation, which had $260 million in total assets in 2016, still supports the hospital-level foundations through branding expertise and other resources—things a six-person development staff could not afford on its own, Lally said.

    "One of the strongest aspects of Northwell as an organization is we're very much about the community," he said. "There's not this sort of top-down, 'This is what you have to do.'"

    Local donations stay local

    When hospital foundations are merged into system-level foundations, donors who want their money to stay local might fear it will be funneled elsewhere.

    "If you give to, say, Memorial Hospital in Chattanooga, Tenn., you know they're part of CHI, but if you ever thought your money was going to Denver, you would be deeply offended," Taylor said. "You gave that money to benefit local healthcare." Taylor added such a situation wouldn't happen at CHI, as the system operates individual hospital-level foundations.

    But even when there's a parent foundation in place, donors can still designate that their contributions go toward specific facilities or purposes. In fact, the majority of donors already do that. When that happens, parent foundations manage the money, but are legally obligated to ensure it's used as intended.

    "If you give a gift to a hospital and we move it to another hospital, we've broken the law," Flood said.

    A recent report by the New York-based financial advisory firm Wilmington Trust studied the fundraising models of 160 hospitals in New York state and found that 62% followed the local foundation model, while 19% used the parent model. Another 20% did not operate separate foundations and instead did their fundraising through hospital development departments, like Burke Rehabilitation Hospital.

    Initially, it might seem like the parent model is the most efficient, said Walter Dillingham Jr., the report's author and managing director of endowments, foundations and healthcare for Wilmington Trust. But once administrators drill down, they tend to see the regulatory hurdles involved and the importance of the existing hospital development teams. "Those people have the relationships," he said.

    The laws differ in every state, but by and large, when a local not-for-profit organization's assets, such as a foundation, are acquired by another organization, state attorneys general are likely to get involved. In some cases, health departments might have an interest, too.

    That's not as big of a problem for systems like Northwell and Intermountain because their coverage areas are centralized largely within New York state and Utah, respectively, Taylor said. "When you get into these big ones with really geographically dispersed foundations, they definitely would have problems bringing all that money back to central," she said.

    However systems go about it, the most important piece for any fundraising campaign is that it's a personal experience for donors, said Susan Holt, president and founder of Vision Philanthropy Group, a healthcare consulting firm.

    "Ultimately, it's absolutely imperative that deep local connections and relationships occur with those in the community and that they feel the closeness with that brand and with the delivery of care," she said.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Supporting a truly diverse C-suite
    Supporting a truly diverse C-suite
    For top healthcare execs, leadership shapes legacy
    For top healthcare execs, leadership shapes legacy
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Transformation Summit
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain Revenue Cycle
        • - Hospital at Home
        • - Workplace of the Future
        • - Virtual Health
        • - Future of Healthcare Staffing
      • Custom Media Event: ESG Summit
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing