Last year, Advisory Board conducted its annual survey of strategic planners to understand their priorities heading into 2024 and where they intend to focus their investments. In a January webinar, research leaders Vidal Seegobin and Erin Lanahan shared their perspective on these priorities — and the effect they'll have on fundraising.

Overall, how well an organization is recovering financially will have a significant impact on future development priorities and projects. In the current margin environment, many healthcare executives may be reluctant to commit to large-scale projects. Leadership changes can also affect which projects are prioritized, including visionary projects that could attract transformational giving.

In 2022, hospitals and health systems faced unprecedented operating losses due to high labor costs, supply inflation, volume depression, and more. Since then, operating margins have begun to improve, with the year-to-date median margin reaching a little over 2% in December 2023. Organizations will need to keep up this momentum to ensure that their margins are sustainable going forward.

However, there is a wide divergence when it comes to recovery. In general, larger health systems are performing better than small hospitals. In Advisory Board's survey of strategic planners, 78% of respondents from large health systems said they saw positive changes to their operating margins in 2023 compared to 40% small health systems and 25% of community hospitals. 

Large health systems were also more likely say that they had positive changes in total margin compared to small health systems (75% vs. 30%). They are also more likely to report positive changes to their capital spending and FTE counts compared to both small health systems and community hospitals.

Although organizations are still pursuing different channels of revenue generation, revenue diversification efforts have been slow overall. In the strategic planner survey, 80% of participants said they are investing in site-of-care shifts. This migration to non-hospital sites of care could have a significant impact on grateful patient fundraising, which typically drives the lion's share of hospitals' philanthropic revenues.

There has also been a decline in formal innovation centers, with 39% of survey respondents saying they operated one in 2023 compared to 50% in 2022. This move away from innovation could also affect the ability of development leaders to attract transformational gifts.

Understanding what strategic planners are prioritizing for 2024 can help development leaders better evaluate whether a nascent idea from a donor, volunteer, or clinical leader will ultimately gain organizational approval.

The top priority for strategic planners in 2024 is improving clinical operational efficiency, especially as it relates to the management of complex care. Unlike disruptors and other out-of-market entrants, hospitals have an opportunity to become experts in this space. In general, while this area is critically important for hospitals, projects that focus on clinical efficiency are less likely to appeal to donors.

The second most important priority is addressing social determinants of health (SDOH) and health disparities, suggesting that organizations have an expressed preference for SDOH efforts even in a capital-constrained environment. Webinar participants also indicated ongoing interest in this area, with 58% saying they've raised funds for a SDOH-related project.

"In our current campaign research, we're hearing many hospital leaders turning to development to support initiatives that address social risk factors," said Erin Lanahan, Advisory Board's Interim Managing Director of philanthropy research. "In other words: philanthropy will be essential to maintaining momentum on addressing healthcare disparities."

Although not specifically highlighted as a priority for strategic planners, interest in artificial intelligence (AI) is also growing significantly, even if not everyone is currently investing in the technology. During the webinar, almost 40% of participants said they've fielded questions about AI from a board member — making this a potential area of opportunity for the future.

Among strategic planners, 60% said they had either already implemented or planned to implement AI for clinical data analytics and predictions. Other common uses for AI include clinician documentation and messaging (57%), business analytics (54%), and computer-assisted coding (52%).

Between 2022 and 2023, interest in acquiring physician practices declined significantly, falling from eighth to 13th in priority for strategic planners. This decline is likely something development leaders will need to keep an eye on since acquiring new physician practices can lead to new fundraising opportunities. At the same time, current development priorities can be destabilized if development leaders are expected to support new clinicians.

There is also less interest in adopting risk-based models (both upside/downside risk), even if there seems to be general optimism about moving toward value-based care. Developments in this area will likely be tied to financial performance since organizations may be unwilling to add financial or operational risks at the moment.

Although this change may not seem to have a direct connection to philanthropy, chief philanthropy officers must understand how their organizations are moving from volume to value. At baseline, this may affect the budget available for funding major projects that appeal to donors, as well as resources for development itself.

Ultimately, development leaders will need to consider what low capital growth will mean to organizations and their philanthropy goals. It will also be important to have conversations between development and strategy early on to more effectively find opportunities for sources of capital and understand which organizational priorities can be brought to donors.