Nonprofit Hospital Donations Up 8% in FY2010

The nation's nonprofit hospitals collected $8.26 billion in philanthropic donations in fiscal year 2010, not as high as pre-recession levels, but trending strongly in the right direction, according to a report from the Association for Healthcare Philanthropy.

AHP President/CEO William C. McGinly told HealthLeaders Media the 8% increase in donations in 2010 doesn't make up for the declines that hospitals endured in fiscal 2009. Still, he was surprised and encouraged by the report's findings. "In 2009 we dropped 11%, which was nearly $1 billion," he said. "I was hoping we would recover half of that loss this year in 2010, and we are ahead of that. So it's a little better than we thought. We are excited about that. This gives us a sense that we are slowly moving back in the right direction."

The AHP's annual survey showed that donations and grants to healthcare institutions in the not-for-profit sector totaled $8.2 billion in fiscal 2010, up $620 million over the $7.6 billion raised in fiscal year 2009. While last year's total was still short of the $8.6 billion raised in FY 2008 and the FY 2007 level of $8.3 billion, the 8% growth was the healthiest rate of advance since FY 2006.

A further breakdown in the report shows that individual donors contributed almost 60% of total giving. "We are seeing what I call 'the family' stay steady," McGinly says. "Over half the donations are coming from the employees, the boards, and foundations of the hospitals, the physicians, and grateful patients. That family group is still holding strong through all of this. They are the people in the know. They know better what the hospital is providing than the public they are serving in their community."

Annual giving was the largest fundraising source in fiscal 2010 and accounted for 20% of all funds raised, followed by major gifts (17%), capital campaigns (15%) and special events (15%). Planned giving, such as bequests, charitable gift annuities, charitable remainder trusts, and similar long-term philanthropic arrangements, accounted for 9.5 % of donations last year, similar to pre-recession levels.

In fiscal 2010, as in previous years, healthcare organizations used most of their donated dollars – 22% -- to fund construction and renovation, down from 27% in fiscal 2009. New and upgraded equipment purchases were the second-largest category, at 21%, followed by general operations at 18% -- both up slightly from FY 2009.

McGinly says hospitals are using more donations to pay for operational costs, especially with anticipated reimbursement reductions from Medicare and Medicaid. "Somehow hospitals are going to have to make that up and that is where more and more of the philanthropic dollars will be going," he said. "Ten years ago, 7% or 8% of philanthropy was going towards operations. That need is growing as hospitals struggle with the bottom line because of the cuts to reimbursements."

While philanthropy still provides a good return on investment, McGinly says the cost of raising money continues to go up. At 33 cents in fiscal 2010, the cost-to-raise-a-dollar through philanthropy remained stubbornly above 30 cents for the third year in a row. Return-on-investment declined, on average, more than 4% to just $3.05 raised for every dollar spent on fundraising.

The bottom line: Fundraising has become more challenging and, therefore, more expensive. Additional resources are needed to raise the same amount of funds during difficult economic times, the report said.

Higher than average success raising money donations was seen by fundraising programs that help to sustain hospitals associated with academic institutions and children's hospitals, by programs that have been in existence for 15 or more years, and by programs with at least four professional fundraisers on staff. McGinly says healthcare organizations with strong philanthropic arms will be best positioned to collect donations if the economic recovery – however uneven – continues.  

"We are going to see a big upswing in this coming year unless something goes wrong with the economy," McGinly says. "The economy is improving and what we are finding is of our high performing group, those who didn't have to lose staff or make cutbacks, they weathered the storms through parts of 09 and 10 and you are going to see those major donors coming back in a big way."

Ultimately, healthcare donations are tied to the economy, McGinly says. "The economy undergirds an awful lot of what donors are feeling and how generous they feel they can be," he says. "If they don't feel as wealthy as they used to because of the economy, while they are still going to be connected, they may not be as generous.

A copy of the AHP Report on Giving Fact Sheet is available here.