AHP Connect Articles

10 Things Your Board Should Know About Philanthropy

In an AHP Huddle post, AHP President and Chief Executive Officer Alice Ayres asked a question: What are the top 10 things those of us engaged in health care philanthropy wish our boards knew? I have been working to answer that — and share with our boards — for the past 20 years. It is especially challenging in health care, as we are institutions in a very complex industry with equally complex organizational structures. So, as a champion of “institution-based strategic philanthropy,” here is my list of top 10 things your board should know about philanthropy:

1. Philanthropy creates the greatest legacy in our society, and hospitals and health care are no exception. Communities and religious groups financed the building of much of the American health care system, often through a combination of philanthropy, institutional sources such as debt, and federal funds. (The Hill-Burton Free and Reduced-Cost Health Care Act after World War II provided financing for many community hospitals.) It was community volunteers and boards who led those initiatives. The boards of today need to know and understand it is their responsibility to preserve and enhance that legacy.

2. All health care boards should view philanthropy as an investment strategy for hospitals and health care — not just a fundraising function that fills a need. There are just three ways to generate funding in health care: Earn it, borrow it or ask for it. Philanthropy is a powerful lever for the other sources — and vice versa. Donors and the community receive a great return on investment when their gifts are leveraged with other sources of funding.

3. Boards should consider philanthropy as an institutional priority — and not just the “nice to have” fundraising function that is just the responsibility of the foundation or development department. Such an institutional priority should be vision-based and not solely need-based. Boards are the decision makers for institutional priorities and are vital in helping to articulate the vision and financial investments (including philanthropy) required to achieve the vision.

4. A strong fundraising program can positively impact bond ratings. It has now been more than a decade since the "watershed" special comment when Moody's Investors Service (and now other rating agencies) included high-performing and sustained philanthropy in debt ratings for hospitals. 

“We believe a strong fundraising program, as a complimentary strategy to a hospital’s patient care operation, is an important consideration in our credit assessment and can positively impact bond ratings…the consistency and depth of their long-established programs have resulted in these organizations achieving financial success and solid bond ratings.” — Moody’s Investors Service, Special Comment 2006

5. In organizations with multiple boards, governing board members have a responsibility to both elevate and engage in philanthropy. I believe the governing board should have philanthropy representation (such as the chair of the foundation) and view it as element of the financial plan and health of the institution, for which they are the fiduciaries. Unfortunately, when you have a foundation with a board, the governing board often believes they can delegate philanthropy engagement to others.

6. The philanthropy function is usually one of the most "profitable" components of the health care enterprise. With return on investment of $3:1, $4:1 or $5:1 or more, philanthropy is a profitable function that also should be invested in (funded) by the boards. As philanthropy professionals, we can say to a board: "If you give me a dollar, and I give you $4 back, when do you stop giving me dollars?" The return on investment dynamic is more powerful to a board than cost to raise a dollar.

7. Board directors (along with executives and physicians) provide the greatest influence on major gift philanthropy. As such, their involvement in the major gift process is imperative. Major donors require the trust of both executive leadership and the governing bodies.

8. Expectations for philanthropy engagement should be aligned. If an institution has an orientation to philanthropy, all board directors (no matter the board on which they serve) should have similar expectations for philanthropy engagement: giving, participating in the philanthropy process, engaging donors and prospects, stewardship and being a champion for philanthropy.

9. Philanthropy demonstrates the value of the institution as a community asset worthy of investment. A health care organization is most often the largest not-for-profit corporation in a community. Many people may have incorrect perceptions of the health care organization being for-profit – along with a lack of understanding of health care finances. The embracing and elevating of philanthropy can offset those perceptions and misunderstandings.

10. Philanthropy can touch every aspect of a health care enterprise: capital, technology, scholarships, clinical program support, innovation and research. As such, it should be aligned with the institutional strategic plan and objectives.