Our Take

How generational change will upend donor strategy

15 Minute Read

Baby boomers occupy a central place in hospital fundraising strategy, but younger generations are bringing new opportunities and threats. An estimated $68 trillion wealth transfer, new care utilization patterns, and shifting societal views will disrupt health care philanthropy in the coming years. The time has come for philanthropy leaders to prepare more aggressively for this inevitable generational change.

 

What is generational change?

We define generational change as the continuous evolution of societal attitudes, behaviors, and wealth characteristics caused by the aging of the adult population.

To learn more about each generation’s wealth accumulation, care utilization, and giving preferences as they relate to health care, visit the cheat sheets linked below:

 

The conventional wisdom

Health system development leaders acknowledge that they are more effective at engaging baby boomer donors than younger generations. Advisory Board asked a group of leaders to provide a numerical assessment of their performance:

DATA SPOTLIGHT

This is no surprise, given that the conventional wisdom among development leaders is that baby boomers are the most well suited for a valuable philanthropic partnership. For example, 73% of health care fundraisers identify baby boomer patients as the most likely to become donors out of all adult generations.

To their credit, philanthropy professionals recognize a generational shift is underway. While a majority of development leaders identify baby boomers as the most important to their success in 2020, they predict Generation X will be the most important in 2025, and millennials will be the most important in 2030.

Even though most philanthropy leaders understand the importance of eventually developing a strategy to engage younger generations, they continue to rely on a playbook that exposes them to vulnerabilities later. They also misjudge the urgency around making changes today. Not only has the Covid-19 pandemic accelerated the need to craft a more diverse engagement toolkit, but many “next generation” donor opportunities are already hiding in plain sight.

 

Our take

As the population ages, generational differences are going to transform the health care industry. They will disrupt the way modern health systems structure and operate themselves, and they will disrupt the way health systems raise philanthropy. Many fundraising programs are ill-prepared for those disruptions over the long term, which will lead to significant weaknesses in the donor pipeline. What’s more, most development professionals don’t appreciate the opportunities to engage younger donors that are already available today.

For example, Advisory Board’s Patient Gratitude survey found that Generation X and millennials exhibit the most philanthropic affinity following a care experience, double the rate of baby boomers. We also know that young people today are intricately woven into the philanthropic behaviors of their elders, and vice versa. Consider the children who make care decisions on behalf of their parents. We know from data that children of patients are much more likely to develop philanthropic affinity than patients themselves. And that doesn’t even account for the multi-generational estate planning and family giving that are occurring now.

Hospitals and health systems are missing near-term opportunities to engage younger supporters, but those losses are largely masked by successes with older generations. Across the coming years, that may no longer be the case. Shifting wealth, health care utilization patterns, and societal views will affect the charitable preferences and behaviors of younger generations as they enter into their prime giving years. Without a better plan to anticipate these changes and their impacts, development teams will see damage to their pipelines.

While baby boomers will continue to hold the most wealth this decade, the significant wealth accumulation by Generation X and millennials cannot be ignored. It is estimated that $68 trillion in wealth will be transferred among generations across the next 25 years. Generation X alone will gain $32 trillion of that share. In fact, by 2030, Deloitte predicts that Generation X will double their current share of total wealth in the United States. Cerulli Associates consulting firm estimates that Generation X will overcome baby boomers in wealth by 2041.

Estimated generational share of net household wealth

Beyond the wealth transfer, younger generations will also fundamentally change the health care industry’s product portfolio by demanding health care outside of traditional care settings. Generation X and millennials prefer fast and convenient care, a significant driver of ongoing site-of-care shifts (outpatient revenue was already at 95% of inpatient revenue in 2019). A telehealth revolution that was slow to proceed before the Covid-19 pandemic has gone into full swing. Likely more than 1 billion telehealth visits will occur in the U.S. in 2020 alone.

Shifts in societal views are also promising further disruption in health policy. Younger generations tend to favor more government involvement in health care. One public opinion poll by Morning Consult and Politico found that 63% of millennials support a Medicare-for-all health care system, compared to just 44% of baby boomers.

Covid-19 has made well-understood societal shifts even more apparent, and more urgent. Care patterns shifted almost overnight. The pandemic has accelerated better understanding of intractable issues related to social determinants of health, health equity, and more. The moment to respond to emerging generational preferences no longer exists in an abstract future; it is upon us now.

Unfortunately, hospital and health system development teams remain nearsighted in their focus on engaging baby boomers. The tactics they continue to use—while successful so far—leave them vulnerable as generational change takes hold.

 

Three key vulnerabilities

The effects of generational change illuminate areas where philanthropy leaders need to revamp current strategies. Below are three key vulnerabilities in health care development strategy that leaders must address.

  • Vulnerability

    Prospect identification strategies aren’t looking for young people

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  • Vulnerability

    Funding priorities are slow to encompass causes important to younger generations

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  • Vulnerability

    Engagement strategies aren’t meeting the mandate to be fast, impactful, and digital

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Parting thoughts

Philanthropy leaders must begin to tackle the challenges created by generational change now, even while existing strategies focused on older donors seem sufficient. Covid-19 has accelerated several inevitable trends, and your future pipeline depends on a proactive engagement strategy. Every hospital and health system will need to reconcile the philanthropic consequences of generational change with their own market dynamics, and our team is here to help.

To create a sustainable and effective fundraising strategy for the long haul—one that anticipates and responds to generational differences—pursue the following:

  • Analyze current and projected generational utilization patterns at your organization. Use patterns to predict where and when you need to invest in baby boomer, Generation X, or millennial prospects. Coordinate with your marketing team to better understand existing market intelligence.

  • Investigate which priorities resonate with each generation in your community. Collaborate with your clinical allies and population health team to develop funding priorities that resonate with various donor cohorts.

  • Identify your engagement strategies that exclude cohorts of prospects from current fundraising activities. Instead, adopt a segmented strategy for each generation, or aspire toward an all-inclusive strategy that responds to the variety of preferences and behaviors that span all age groups.

We captured a few examples of these insights within this brief. For additional support, please access our additional generational giving resources listed on page 16, or contact philanthropy@advisory.com with questions.

 

More takes on this topic

 

GENERATIONAL INTERDEPENDENCIES

Demographic and health care trends are not happening in a vacuum, and generations do not make choices in isolation. Each generation influences those before and after through economic choices, health choices, value systems, and giving behaviors.

This is embodied by parental influence on their children’s values and preferences. A survey from the Johnson Center for Philanthropy found that 89% of Generation X or millennial donors say they are influenced by their parents’ philanthropic giving. Consider how to engage younger generations within families of long-standing donors or community members.

AGE INSTEAD OF GENERATION

In 2020, a 50-year-old is from Generation X. In 2030, a 50-year-old will be a millennial. Answering the question of “Which characteristic—age or generation—presents a more effective basis for engaging that individual?” is a difficult exercise.

The argument in favor of age over generation goes like this: In general, life takes a predictable arc in terms of family dynamics, wealth accumulation, and health care utilization. Age offers a consistent input for finding donors who are most inclined, and able, to provide support based on where they are in their life arc.

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