The health care industry is complex, and fundraisers new to the industry will need to learn its ins and outs in order to effectively engage with donors, executives, and board members.

In recent interviews with Philanthropy Leadership Council, development leaders who made the transition from higher education to health care highlighted three operational and business differences between the two industries.

1. Executive involvement in philanthropy is not an explicit expectation in health care.
2. Complex hospital finances affect how organizations value philanthropy.
3. Health care donors are also health care consumers.

These realities affect the daily interactions that fundraisers have with internal allies and donors.

1. Executive involvement in philanthropy is not an explicit expectation

Hospital executives are key philanthropy allies. But unlike deans and higher education administrators, many CEOs and hospital executives do not have defined philanthropic responsibilities.

In the past, a fee-for-service model was able to generate enough revenue for hospitals to reinvest in their operations, so they were less reliant on philanthropic dollars. As a consequence, many health care providers do not have much institutional experience with fundraising.

Today, pervasive financial pressures demand that executives look for new ways to generate revenue, like philanthropy. That doesn’t mean that executives have well-defined fundraising roles. A Chief Development Officer at a large health system in the southeast recalled that as a development leader in higher education, she was often part of the recruitment and hiring process for deans and presidents. “Fundraising is integral to these leaders’ positions. In healthcare, it isn’t that there’s opposition amongst health care executives, rather a lack of formal expectation.”

2. Complex hospital finances affect how organizations value philanthropy

The key component of hospital finances that fundraisers should understand is margin. Margins in health care are extremely narrow—or in some cases nonexistent. Philanthropy can have significant impact on margins, improving the overall financial health of the system.

According to the 2018 Philanthropy Performance Benchmarking Initiative, philanthropy provided 0.6 percentage points of the median hospital’s/system’s margin. Compared to a median hospital/system margin of 3.3% among surveyed organizations, the median philanthropy margin contribution would account for about 17% of total margin. At least half of the organizations in this sample provided an even bigger boost—with organizations at the 90th percentile adding a robust 1.8 percentage points to overall margin through philanthropy.

A general knowledge of how hospitals manage revenue margins and variable costs is important. Knowing how philanthropy fits into the equation can help fundraisers manage the expectations and perceptions of donors by showing the extensive impact of their gifts.

3. Health care donors are also health care consumers

The complexity of health care costs directly impacts how consumers—who can also be donors—interact with health care systems. Jeff Comanici, Director of Philanthropy at Crouse Hospital said, “In higher education you can raise tuition and people will generally pay it, but that acceptance doesn’t translate to rising health care costs.”

The factors that affect health care costs tend to be opaque, creating an additional challenge for fundraisers when working with donors. Hospitals are primarily paid by third parties, and prices are negotiated based on factors including patient need, location of service, type of service, and payer type. Advisory Board research has found that 89% of patients want to know their medical costs in advance of receiving care, which many providers struggle to generate accurately.

On top of cost complexity, there is an emotional component to consumers’ health care experiences. Patients in a hospital often have limited ability to make financial choices in the moment.

This is important for fundraisers to remember when engaging with prospects and donors following a care experience. Often, fundraisers will find themselves discussing a patient’s entire care experience—including not only the outcome of that care, but also its cost.

Get up to speed on the business of health care

To understand the differences between health care and higher education, fundraisers need to understand one additional factor:

What defines the culture of philanthropy at their specific institution?

This discussion will follow in a subsequent resources (Part 3) on transitioning from higher education to health care philanthropy.