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The Bigger, the Better

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The meek may inherit the earth, but they should probably stay away from a career in hospital philanthropy. As gift-giving becomes a more critical financial component for nonprofit healthcare providers, hospitals are realizing they must shed the cap-in-hand approach and think big.

Hospitals should not only aggressively court donors, but they should present potential benefactors with visionary, life-changing projects, capture their imagination, and then ask them to pay for it, advises William C. McGinly, president and chief executive officer of The Association for Healthcare Philanthropy.

“This is one of the things we fall down on,” says McGinly. “We need to have a big, hairy, audacious program that we want to achieve for our community, but often we fall short of inspiring donors because we are approaching them with something that is not inspiring, or it’s too small or doesn’t seem to have the impact they’d like.”

“I’ve read we’ve got something like 370 billionaires in this country, and they want to make a difference in the world,” he says. “The kinds of things you are trying to achieve have to capture their imagination.”

Dreaming big

Sanford Health got the memo. In February, the Sioux Falls, SD-based healthcare system, which until then was known as Sioux Valley Health System, received a $400 million gift from businessman and entrepreneur T. Denny Sanford—No. 117 on the Forbes 400 ranking of America’s wealthiest citizens with an estimated fortune of $2.5 billion.

The gift will be funded in $50 million increments over the next eight years, says Brian Mortenson, president of the Sanford Health Foundation. It will finance several initiatives, including a permanent endowment—the proceeds from which will help identify, promote and fund pediatric medical research—and the construction of five new pediatric primary-care clinics over the next decade across North America.

“It’s one thing to give to your local hospital because you believe in the cause,” Mortenson says. “It’s a whole other thing to provide this kind of landmark gift to provide permanent support for some grand visions far beyond the basic mission of the organization.”

Of course, when trying to raise $400 million, it helps to have a billionaire native son with a keen interest in children’s health in your backyard. In addition to being one of the nation’s richest men, 71-year-old Denny Sanford is also one its most generous. Once stating that he hopes to “die broke,” Sanford has given $70.5 million to other charitable causes, and in 2005 he was ranked 14th on the Chronicle of Philanthropy’s list of America’s top donors.

Mortenson says Denny Sanford’s $400 million gift wasn’t just dumb luck but the end product of a long and personal relationship cultivated by Sanford CEO Kelby Krabbenhoft. Over the years, Denny Sanford had donated “smaller” gifts totaling about $50 million for then-Sioux Valley Health System and its affiliated programs.

“From that, we worked very hard to steward the relationship with Mr. Sanford to ensure that he was always kept apprised of the things he was interested in,” Mortenson says. “The relationship developed to the point where Kelby went to Mr. Sanford to share the whole vision of what could happen in this organization with such a magnificent gift. Kelby asked for a gift of $400 million to accomplish all of this.”

And how, exactly, does one ask for $400 million?

“In our business, it’s essentially called ‘making the case,’” Mortenson says. “How do you justify what you are asking for? Whether you are asking for $50 to provide infant formula or $400 million, it’s exactly the same. What will this be used for? What will it accomplish, and how will we manage it?”

Johnny-come-lately

The Association for Healthcare Philanthropy reports that charitable giving to its hospitals and medical centers in the United States reached $7.01 billion in 2005, a record increase of 16 percent over the $6.1 billion raised in 2004. On average, the AHP reports, healthcare facilities raised $3.58 for every dollar they spent on fundraising. Facilities affiliated with academic institutions fared much better, raising $10.95 for every dollar spent.

“Hospitals have been Johnny-come-lately to all of this,” McGinly says. “Our society’s philosophical view of colleges and universities is very strong. There is an identifiable body to go after—the alumni. With hospitals, the whole perception in the mind of the public is very different. There is an entitlement feeling with healthcare.”

Hospital leadership plays a critical role in the success of any fundraising effort. McGinly says an AHP survey shows about 35 percent of hospital CEOs recognize that improving charitable giving is part of their job, especially as many hospitals struggle to keep the lights on and the doors open.

McGinly notes that many hospitals are starting to recognize that in operations there is “no money,” and in investments “very little,” he says. “But philanthropy is an area that is growing and could make a difference for them. They need to get organized and invest in it just like anything else to build the kind of support that pays dividends.”

While university-affiliated medical centers and blue-chip healthcare providers like St. Jude’s Children’s Hospital and the Mayo Clinic serve as fundraising role models, they also enjoy significant advantages over most hospitals that don’t offer cutting-edge research, specialty pediatric care and well-oiled philanthropic efforts.

“We do hear more health systems talking more about philanthropy as a strategy, but they are still at the infant stages,” says Lisa Martin, a senior vice president at Moody’s Investors Service and the coauthor of a recent study on health-related charitable giving. “They aren’t banging out several hundred million dollar campaigns overnight. It’s a real uphill battle because there is so much press and publicity over healthcare costs, and part of the battle is explaining to the average donor what that means.”

Fundraising can be even more problematic for smaller hospitals that generally don’t have a supply of wealthy individuals, Martin says. “That is just a practical matter in some of these small communities. It’s not that the rural hospital doesn’t have a mission. Many have tremendous needs. There just isn’t the wealth.”

But even if there isn’t a billionaire on the block, Mortenson says hospitals should bolster their fundraising staffs, create their missions, and go out and find donors.

“You go where the fields are ripe for the harvest. If we spend our time trying to persuade people who aren’t inclined to give or support this cause, then we are spinning our wheels,” he says. “We worked pretty hard to develop a system where we can really identify who those folks are who are likely to have interest, capacity and connectivity to the program.”

Mortenson says Sanford won’t ease up on its fundraising efforts now that it has $400 million in the bank. “Even though his gift just propels us into an entirely new league, it also propels us into a new era of fundraising potential,” he says “Significant gifts inspire significant gifts.”

John Commins is editor of HealthLeaders Florida Healthflash. He may be reached at jcommins@healthleadersmedia.com.