Our Take

How Covid-19 Will Impact Health System Philanthropy

10 Minute Read

In just the first few weeks following the spread of the novel coronavirus in the United States, billions of charitable dollars were poured into solving the problem. From grassroots efforts on crowdfunding platforms to multimillion-dollar commitments from large foundations, the rapid philanthropic mobilization around Covid-19 has been impressive and perhaps unprecedented.

The data shows that hospitals and health systems are benefitting now from this surge in support, but it’s not certain to last. Here’s our assessment of what comes next, and why the hard work ahead is ultimately worth it.

 

The pre-Covid-19 reality

For years, hospitals and health systems have been raising larger amounts of philanthropy in support of capital and programmatic investments. Private donations have played an indisputably valuable role in cushioning hospitals against poor margin performance and supporting the launch of new initiatives.

But, hospitals have been earning a decreasing share of philanthropy relative to the broader nonprofit health sector. For context, charitable giving to all health-related nonprofits in the U.S. grew by 23% between 2014 and 2018. Over the same period, giving to hospitals and health systems grew by only 12%.

There are many potential causes, such as frustration around rising individual health care costs, perceived corporatization of local hospitals, and media scrutiny around surprise billing. But all we can prove with the data is that hospitals have been struggling to attract health-focused donors.

The question now is whether this trend will reverse in light of health systems’ critical role on the front lines of the Covid-19 crisis and their significant need for financial assistance.

 

Our take

Historical evidence is clear about what happens to philanthropy during times of economic crisis: it goes down. All U.S. donations dropped by 7.2% in 2008 and then another 8% in 2009. However, these precedents may not be helpful when an economic recession coincides with a global pandemic.

As of early June, $7 billion in grants had already been issued by U.S. donors in response to Covid-19, and a Fidelity Charitable survey from late March found that nearly 80% of individual donors plan to donate at least as much in 2020 as they did in 2019.

Will hospitals and health system benefit from this spike in generosity? Yes. One recent survey found that public health clinics and hospitals are the not-for-profits most likely to gain new supporters during this time. But that support must not be taken for granted.

Where donors give—before and after Covid-19

The lasting impact of Covid-19 on hospital philanthropy is far from certain. We know from past crises that emergency donors are especially difficult to re engage once the urgency subsides. We also know that near term gains in hospital support could be offset by the combined impacts of further economic decline and delayed or cancelled fundraising activities. It’s even possible that hospitals may find themselves further out of favor with donors once the final public narrative settles in. Negative reviews of hospital performance, the ongoing affordability crisis, problems with billing related to Covid-19, and concerns over unfair allocation of government relief funds could all weigh down donors’ interest in future giving.

Nevertheless, health systems will have sizable financial wounds, due in large part to the cancellation of scheduled procedures. Philanthropy’s high return on investment (nearing 5 to 1 at the median organization and surpassing 10 to 1 at high performers) cannot be overlooked by organizational leaders. But those same leaders will be sorely disappointed if they expect donors to translate on their own a case for crisis relief into a case for long term financial restoration.

The typical health system can expect 5% to 20% of their fundraising revenue to be unrestricted in a given year. While those numbers may be higher in 2020 due to the urgency of your Covid-19 relief appeal, it is unlikely that donors will change their fundamental desire to restrict their gifts for specific purposes. Organizational leaders must offer restricted funding opportunities that cleanly align with the financial needs of the health system. And development professionals must approach loyal donors about re allocating their commitments from less urgent priorities, like capital, toward more immediate needs.

Donors will be looking to be part of the solution to the problems exposed by Covid-19, but they will need to be convinced that health systems are worthy recipients of assistance. That work was worth doing before this crisis hit, and it is now more important than ever.

 

Four key implications

The swift and dramatic response by the philanthropic community to Covid-19 has several implications for hospitals and health systems. Below are four that will matter greatly.

  • Implication

    Covid-19 will draw many first-time donors, but it won’t guarantee their ongoing support

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  • Implication

    Shifting public perception of hospitals and government will influence donor preferences

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  • Implication

    Health systems need to articulate bold, creative roles for future donors

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  • Implication

    Fundraising will require a new toolkit, even after the crisis

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Parting thoughts

The Covid-19 crisis is creating a philanthropic opportunity for providers—but capturing it depends on the actions they take.

Questions for hospitals and health systems:

  1. Reflect on the highs and lows of your organization’s preparedness in dealing with the current crisis–its assets and its liabilities. Where among the highs and lows do you see the best opportunities for philanthropy to help the system become stronger in the future?
  2. Your donors are in the process of developing perceptions of your organizational response to the crisis. How can your philanthropy team and other institutional leaders help to shape those donor perceptions? What story do you want to make sure you’re telling the market as it continues to unfold?
  3. What are the top modifications your development strategy needs to make in this era, such as virtual donor engagement and crowdfunding? Of those changes, which are opportunities to create lasting innovations that will deliver benefits beyond the crisis?
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