The Financial Rationale for Health Philanthropy in 2024
Charitable giving presents a significant mission opportunity. Charitable giving in the United States measured $499.33 billion in 2022.¹ While giving at this level indicates extraordinary generosity to charitable causes, this represents a 3.4% decrease in current dollars and a 10.5% decrease in inflation-adjusted dollars over the prior year; a reality largely attributed to challenging economic conditions including historic inflation, stock market volatility and decreased consumer discretionary income.² However, dollars given to health causes—including not only hospitals and health systems but also health research and advocacy organizations—enjoyed a year-over-year increase of 5.1% which equates to 10% of total U.S. giving or $51.8 billion.³ Health organizations also have a rising opportunity to secure a larger piece of the giving pie as they increasingly reach beyond hospital walls to address social drivers of health and health equity, which creates opportunities to tap into dollars given to human services ($71.98 billion) and public-society benefit ($46.86 billion).⁴
Charitable giving presents a significant mission opportunity. Charitable giving in the United States measured $499.33 billion in 2022.¹
In considering the potential of philanthropy, specifically for hospitals and health systems, the Association for Healthcare Philanthropy Report on Giving shows FY2022 annual, median, production revenue (including recorded revenue and “certain documented” pledges) across all health care organization types increased to $11.3 million.⁵ However, significant performance variations exist based upon hospital type with standalone community hospitals raising a median of $3.3 million while health systems ($20.0 million), children’s hospitals ($40.2 million) and academic medical centers ($73.0 million) raise significantly more.⁶ Health philanthropy also delivers an exceptional Return on Investment (ROI). In FY2022, health philanthropy organizations produced $4.96 in median production revenue for each dollar invested in fund development.⁷ Ultimately, this means a health philanthropy organization performing at the median must raise only $1.2 million in contributions to generate $1.0 million for reinvestment in the organization’s mission while a hospital achieving a 1.1% net median hospital operating margin must earn $90.9 million to put the same $1 million to work for the organization. This means philanthropy delivers revenue at rate of return that far exceeds what is possible from any clinical service line, so health organizations must focus attention on leveraging this strategic asset.
Not-for-profit health care organizations across the United States continue to navigate an extended and historic period of financial fragility. Credit rating agencies also forecast hospital margins will remain tight for the foreseeable future. All this throttles the ability of hospitals to pursue strategic and sustainable reinvestment in traditional priorities such as capital and clinical services as well as growing priorities such as addressing social drivers of health—such as housing, food access and more—as well as health equity and access. Therefore, progressive organizations continue to seek access to alternative revenue sources, and many identify philanthropy—voluntary, charitable giving from individuals, corporations and foundations—as a key opportunity.
Beyond enabling investment, philanthropy has also been validated as a core financial strategy by bond rating agencies that consider the financial strength and stability of hospitals to determine creditworthiness. Multiple agencies—including S&P Global Ratings, Moody’s Investors Service and Fitch Ratings—indicate the strength of philanthropy as a complementary revenue-generating strategy is a consideration in their credit assessment. All this ups the ante for hospitals to proactively pursue philanthropy as a low risk, high-ROI, alternative revenue resource.
…it would be remiss for a health system in today’s complex financial environment not to place a keen focus on leveraging the potential of philanthropy.
Creating a smart, integrated and aligned approach to philanthropy as part of the health organization’s overall approach to financial management not only provides access to critical revenue for strategic and sustainable reinvestment in the mission but also boosts bond ratings to enable hospitals to access debt to drive future progress. With all this on the table, it would be remiss for a health system in today’s complex financial environment not to place a keen focus on leveraging the potential of philanthropy.
¹ Giving USA 2023: The Annual Report on Philanthropy for the Year 2022 (2023). Chicago: Giving USA Foundation, p.22.
² Giving USA 2023: The Annual Report on Philanthropy for the Year 2022 (2023). Chicago: Giving USA Foundation, p.22.
³ Giving USA 2023: The Annual Report on Philanthropy for the Year 2022 (2023). Chicago: Giving USA Foundation, p.32.
⁴ Giving USA 2023: The Annual Report on Philanthropy for the Year 2022 (2023). Chicago: Giving USA Foundation, p.32.
About the Author: Betsy Chapin Taylor, FAHP, is CEO of Accordant. She can be reached at Betsy@AccordantHealth.com or through LinkedIn.
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