The Dollars Aren't Coming
11/12/2009
John Commins
Healthcare philanthropy has been hit hard by the recession, right at a time when it's needed more than ever.
The Association for Healthcare Philanthropy says its members across the nation report that donations have fallen off considerably since the middle of 2008, and it's not clear when they will pick back up again.
"In fact, there is a lot less happening financially. The dollars aren't coming," says AHP President and CEO William McGinly. "People are delaying their gifts or they are still giving but they're giving half or two-thirds of what they used to give. We are seeing somebody who was worth $100 million who is now worth $50 million. Most of them are still going to give, but they are cutting back and we don't know the impact of that yet."
The drop in giving comes at the same time hospitals are having a difficult time accessing capital markets, and they're sweating out narrowing operating margins as investments have suffered.
Greg Pope, chief development officer at St. Thomas Health Services, a four-hospital system in Nashville affiliated with Ascension Health, and the new board chair of the AHP, concedes that hospitals and health systems might not be able to raise as much money during a recession. However, he says they should still be out in the community, working existing donors and identifying potential donors.
Pope says his foundation has spent the recession "getting the right people in the right places from a volunteer perspective to be ready to move quickly when the economy turns. We've done that and believe that will pay some dividends going forward.
"The most important thing for us is for our long-time donors, the people who are being cultivated and who we've spoken to long enough so they would consider making a major gift, in the last year they have been hurting financially," Pope says. "We've been saying we must maintain the contact and spend a good deal of time being empathetic and understanding because the times will turn for them, too. What they will remember is that we were with them and we were empathetic and understanding."
Pope says he took to heart the advice of Tom Lilly, his colleague at St. Mary's Foundation in Evansville, IN, who said he was going to use the economic downturn to increase his "no quotient,"—which is the number of people who say "I can't help now."
"If we increase that quotient, that means we are talking to more people and there are going to be people who can help at this time," Pope says. "Tom was right. It's been a productive time for development staffs because we have had to focus and work harder and smarter and see more people and tell the story more."
William S. Littlejohn, CEO and senior vice president for Sharp HealthCare Foundation, which raises money for seven acute-care and specialty hospitals in San Diego County, says the three foundations within the health system have raised a combined average of about $20 million a year over the past five years, but have seen about a 20% decline in the number of larger gifts this year. "We have seen a contraction. We'll have less this year than last year," says Littlejohn, who is also the Pacific regional director for AHP. "We have some nervousness about the future. However, we feel confident that the size of our base and the market that Sharp has will allow us to get through the difficult times without completely falling apart."
Littlejohn says he's hearing the same thing from colleagues in other health systems across the nation, some of whom are reporting contractions of up to 40%.
Unlike colleges and universities, which have huge endowments from their decades of fundraising efforts, Littlejohn says Sharp and most other hospital systems don't have the luxury of establishing large investment portfolios. Sharp philanthropies have raised about $100 million in the past five years and turned over about $92 million in cash over the past seven years. As an upside, they didn't lose a lot of money in their investment portfolios when the stock market tanked. "Hospitals are incredibly capital-intense organizations. We spend this money as fast as we raise it," he says.
Littlejohn says Sharp's efforts over the past six or seven years to focus on small donors have helped to soften the drop-off in giving during the recession. Almost every discharged patient is a potential donor. "The bulk of our funds come from grateful patients and their families. We have thousands of relationships. Many express their gratitude through giving," he says. "It's sort of an untapped marketplace. It's not just the wealthy people in town. It's the people you already have relations with. Grateful patients equal people who might be willing to give."
Rather than a pure pitch for cash, Littlejohn says Sharp's donor requests use the successful patient experiences as an example of the vital services that the hospital is providing for the community. "We ask them not so much to give, but if they would like to invest in the institution that helps take care of them, that they are partners in this," Littlejohn says. "The idea is that rather than just a fundraising organization, Sharp is a great community asset that people value and therefore they are willing to invest in it as much as they would in any important community endeavor.
"That has changed the attitude, and it is how we get through the rough times," he says. "Sure, we are going to see a few of the bigger gifts go away for a while. But we are going to continue to build our base of support because we have so many relationships that already exist in the hospital."
Sharp's emphasis on the patient experience has given rise to creative and effective gift-giving strategies. The health system's Guardian Angel program allows people to make gifts for any amount to recognize specific caregivers. The health system has raised more than $1 million over the past four years through Guardian Angels, with the bulk of the more than 10,000 gifts averaging about $100. "We begin the journey by tapping into their patient experience and gratitude. It's been incredible. We've had gifts from $10 to $300,000. We've had three physicians who've been recognized more than 100 times as Guardian Angels," Littlejohn says.
For the past five years, Sharp has offered potential donors a deferred gifts program called the Life Estate Gift Annuity, which allows some people to donate their homes to the health system and live in them for the rest of their lives. Sharp takes ownership of the home when the donors die and sells the property. "It's like a charitable reverse mortgage," Littlejohn says. "Here are people who have considerable wealth in their homes and they can use that as a gift strategy."
The annuity program is tightly drawn. Most of the candidates are more than 70 years old and have to either own their home outright, or close to it. Sharp pays the donors an annuity based on the value of the house. An older person with a house valued at $500,000, for example, might get an annual gift of up to $40,000 depending upon their circumstances. Even with the recent decline in home prices, Littlejohn says the annuity has consistently shown a good return. "The numbers have to work. It's not one of those gifts you can do with a 45-year-old person. We are not dealing with people with subprime mortgages," he says.
McGinly says hospital foundations can't simply hoist the white flag in tough economic times, nor be afraid of failure. "A lot of folks are delaying capital campaigns. The leadership and trustees out there are saying it's not a good time. Well, it's never a good time. There are always reasons for why not," McGinly says.
"You may have to modify your expectations, but you're still out there in the community. Let's say 18 months ago you could raise $50 million. That same community is not going to be able to raise that much now. But there is nothing wrong with pursing a capital campaign that is realistic. That keeps your presence in the community. So people feel as if, 'Here is our goal and if we don't make it we fail.' Well, if you walk away with $40 million instead of $50 million, have you failed?"