Philanthropy Leadership Council The Value of Philanthropy Highlighting

Philanthropy Leadership Council The Value of Philanthropy Highlighting the Opportunity for Hospital CXOs

2 Increasing focus on philanthropy as critical lever “Most of what I’m talking about are unfunded mandates. We’re in a world that’s not about volume generation; we’re in a world of changing reimbursement formulas. I can’t offer a new program in the hospital and grow it and get margin from it to pay for these types of things. We are counting more and more on philanthropy. ” Hospital President and System Senior Vice President Health System in the Mid-Atlantic “When I first started, my CEO challenged me to build funding priorities based on his strategic vision and plans around population health and primary care. ” Foundation President Community Hospital in the Midwest © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Leadership Council interviews and analysis.

3 Becoming partners in care transformation Frontier institutions garnering community support through philanthropy Examples from the research $40 M Legacy Health’s fundraising goal for a system-wide behavioral health program designed to direct patients to best care setting $2 B $31 M Campaign goal at Cleveland Clinic to lead shift from “sick care” to “well care” Campaign goal for access, innovation, discovery, and sustaining excellence at Children’s Specialized $15 M $150 M $54. 7 M Recent challenge gift to invest in care transformation research at Stanford Medicine Fundraising goal to complement $150 M operational investment in pediatric community health at Cincinnati Children’s Funds raised at GBMC Health. Care for anniversary campaign focused on primary care and population health © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Leadership Council interviews and analysis.

4 What’s the most efficient route to $1 M? Comparative paths to funding growth © 2016 The Advisory Board Company • advisory. com Source: Baptist Health Foundation, Birmingham, AL; Philanthropy Leadership Council interviews and analysis.

5 Philanthropy generates robust returns Median returns more than 3 X investment Overall return on investment (FY 2018) n=74 11, 8 7, 8 1, 5 10 th 2, 4 20 th 2, 9 30 th 3, 6 40 th [VALUE] 50 th 5, 1 60 th 5, 7 70 th 80 th 90 th Percentiles © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Performance Benchmarking initiative; Philanthropy Leadership Council analysis.

6 Impact on overall finances is tough to ignore Significant margin boost from philanthropy Philanthropy’s impact on hospital/system margin (FY 2018)1 In percentage points of operating margin 3, 3% n=71 0, 0% 10 th 0, 2% 0, 3% 0, 4% 20 th 30 th 40 th 0, 6% 50 th 0, 8% 60 th 1, 1% 70 th 1, 5% 80 th 90 th Percentiles 3. 8% Median hospital/system operating margin in Philanthropy Performance Benchmarking Survey 2 1) Philanthropy’s margin impact = hospital operating margin with philanthropic production and expenses included – hospital operating margin without philanthropy included. 2) n=69 © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Performance Benchmarking initiative; Philanthropy Leadership Council analysis.

7 Major Gifts Dominate Largest Contributions Nearly Half the Value of Largest Gifts Comes from Individuals Percentage of value of top 5 gifts by revenue source (FY 2018) n=73 Other Corporate 7% 5% Planned 44% 23% Major gifts 22% Grants © 2016 The Advisory Board Company • advisory. com Source: 2018 Philanthropy Performance Benchmarking initiative; Philanthropy Leadership Council analysis.

8 How CXOs are advancing major gift opportunities 1 Identifying strategic priorities 2 Engaging with prospects and donors 3 Enfranchising peers and direct reports © 2016 The Advisory Board Company • advisory. com CXOs have unique perspective, insight, and data into individual initiatives and across health system. CXOs have significant credibility with donors and prospects as representatives of the hospital/health system. CXOs are influential models for engagement with philanthropy across the organization. Source: Philanthropy Leadership Council interviews and analysis.

9 Identifying strategic priorities Facilitating the intersection of priorities Philanthropy’s role in health care organizations Four ways CXOs can help Hospital and health system priorities Donor interests Foundation/Development office purview © 2016 The Advisory Board Company • advisory. com 1. Include development in planning discussions/meeting 2. Help translate and prioritize strategic needs for donor audiences 3. Facilitate access to internal stakeholders and data to identify impact opportunities and track them 4. Make the call and deliver message to stakeholders on what is funded by philanthropy Source: Philanthropy Leadership Council interviews and analysis.

10 Provide institutional perspective for donors CXOs help test balance of institutional need and philanthropic potential Hickory Medical Center Foundation Checklist 1 1. Vision leading to improved health 2. Strong science linked to clinical presence Institutional insight required How does this priority align with institutional vision and need? 3. Strong departmental leader Who can provide even more insight or champion this priority? 4. Current donor base and advocate interest Philanthropy insight required 5. Potential lead gift donor for 40% to 80% of goal 6. Philanthropic excitement and potential Known donors, including enthusiastic high-capacity donor Sufficient interest to appeal to new prospects in the absence of known donors 1) Pseudonym. © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Leadership Council interviews and analysis.

11 Engaging with prospects and donors Executive interaction with top donors essential CXOs can play significant role in donor’s decision Person with greatest influence on top donors’ attachment to hospital Individuals present at solicitation of hospitals’ top gifts n=147 n=96 Other Board Member / Donor / Volunteer 53% 10% 9% CEO 30% 24% 25% Development Professional 13% 8% 26% Physician © 2016 The Advisory Board Company • advisory. com 20% CEO Board Other CXO Physician member / who did not Donor / provided provide Volunteer care Source: Philanthropy Leadership Council Survey of Hospitals’ Largest Gifts.

12 How CXOs advance relationships Meaningful interactions deepen engagement Four common venues to leverage executive credibility and influence Individual meetings Executive briefings • Personal interaction with high- • Breakfast meeting hosted by CXOs capacity prospect • Discussion of specific funding opportunities and their strategic importance for select prospects • Discussion of hospital priorities, strategies, and special events Hospital tours Panel discussion • Volunteers and prospects • Donors and prospects attend tour hospital • Tour new technologies, renovations; witness live procedures © 2016 The Advisory Board Company • advisory. com panel discussion • CXOs and physicians present on new programs or research Source: Philanthropy Leadership Council interviews and analysis.

13 Enfranchising peers and direct reports Engagement scales and cascades impact C-Level surrogates can act as both agents and models for philanthropy Multiplier effect on internal philanthropy engagement CEO CXO CXO VP VP VP VP Clinicians © 2016 The Advisory Board Company • advisory. com Faculty Staff Source: Philanthropy Leadership Council interviews and analysis.

14 The power of referrals Donor relationships with volunteer or physician result in larger gifts Time to major gift and average gift size at Virginia Mason Medical Center 60%1 Board referrals 6. 9 months $242 K Patient prospects 4. 2 months Physician referrals 2. 9 months 1) n=217 © 2016 The Advisory Board Company • advisory. com Of surveyed physicians say that “not being asked” is the top barrier to their participation in the philanthropy process $49 K 80% $455 K Percentage of donors with a relationship with a physician at Med. Star Health Source: Virginia Mason Medical Center, Seattle, WA; 2018 Philanthropy Leadership Council survey of physicians, Philanthropy Leadership Council interviews and analysis.

15 Promote a culture of philanthropy Make philanthropy participation an organizational priority Impact on philanthropy performance Executives’ opportunities to elevate philanthropy across organization Set philanthropy goals for executives/teams Incorporate metrics for engagement with philanthropy in performance review Add standing Dedicate recurring meeting philanthropy line item time for philanthropy-related to executive agenda concerns and opportunities Create space for CDO to address system leaders Provide opportunity for development leaders to address questions about fundraising from health system management and physician leaders Degree of executive engagement with philanthropy © 2016 The Advisory Board Company • advisory. com Source: Philanthropy Leadership Council interviews and analysis.