The Role of Hospital Foundations in Health Care Philanthropy and Finance II
By: Susan Raymond, Ph.D., 12/09/05

This is the second in a two-part series describing the results of a 159-hospital survey conducted by Changing Our World to explore the size and distribution of hospital foundations across the country.


To determine how hospital foundations are distributed around the country and the role they play in health finance, Changing Our World examined 159 hospitals with affiliated foundations.  Data reflected calendar year 2003.  The sample was distributed by geographic region, by hospital bed size, and between large and small urban areas.  Part I of this analysis  (/tren_comm/tc2005-10-14a.html) found that foundation revenue could be as much as 7% the size of the sponsoring hospital’s revenue, and transferred grants to hospitals from foundations can represent a significant contribution to the margin of the hospital.  This is particularly so in Western states.

But geography is not all that matters.  Urbanization matters more.  The sample was equally divided between large and small cities, rural areas rarely having hospitals with significant foundations.  Foundation revenue in large cities was $353 million; in small cities it was about a third as large, $116 million.  Foundation assets in small cities were less than 20% those in large cities.

Furthermore, foundations were more critical financial players in hospital finance in large cities.  Half of the foundations in small cities had revenues of less than 1% of hospital revenue; in large cities, only 2 of 75 were of such small significance.

Interestingly, however, although it pays to be in a city, it does not necessarily pay to be a big hospital.  Hospitals with less than 250 beds had nearly $11,000 in foundation revenue per bed, compared to $8,200 for hospitals with 250-500 beds and $8,000 for hospitals with over 500 beds.  Foundation assets in smaller hospitals were 30% greater on a per bed basis than in larger hospitals.

So, being fairly small in a big city seems to be the best profile from a fundraising point of view.  This may be because such facilities engender greater community loyalty and support, and are seen as more important to the health and viability of people in the neighborhoods in which they concentrate their services.

But the real problem underscored by the data is the relatively poor showing of foundations affiliated with hospitals in small cities.  Hospital finance in small town and rural areas is particularly vulnerable.  Hospital margins in these locales have declined by nearly 10% in the last five years.  Falling Medicare payments will only intensify that trend. 

If the philanthropic robustness of hospital foundations is limited to large cities, then the financial options of small cities and rural areas will be limited.  This maps reality. Large cities dominate the headquarters patterns of private and corporate foundations, and the nation’s wealth patterns.  The key question for philanthropy is whether this reality can be altered.  Are there strategies to be developed which will make the philanthropic arms of these hospitals more muscular?  And, if so, from what quarter will the investment come to help hospitals in small towns and rural areas develop that muscle?

This is the philanthropic opportunity for private and corporate foundations interested in health care in America.  Develop a portfolio of grants that will build the capacity of America’s small town and rural hospitals to develop and grow foundations that will contribute to their financial viability.  To this author’s knowledge, there is no such focus in any of the nation’s leading health care philanthropies.  Studies about access, about management, about efficiency abound.  But no one is investing in long-term sustainability using philanthropic strategies.  It is about time someone did.  And time is wasting.

Sources

All hospital foundation data analysis is original to Changing Our World, Inc.

Other sources

J Stensland, I Moscovice, J Christianson. “Future Financial Viability of Rural Hospitals. Health Care Financing Review, 23:4, Summer 2002, 175-188.

Trends and Indicators in the Changing Health Care Marketplace, Kaiser Family Foundation, Publication 7031, April 1, 2004.

Special thanks for research assistance for this two part series to Daniel Kopf, CW Research Intern, and to CW Senior Managing Director Wayne Steffey for guidance in sampling structure.