Related Experiment Videos
Philanthropy and hospital financing
D G Smith1, J P Clement, J R Wheeler
1Department of Health Services Management and Policy, School of Public Health, University of Michigan, Ann Arbor 48104, USA.
Insights
Nonprofit hospitals see a positive link between donations and returns, but fundraising efforts don't significantly boost donations. Hospitals may trade off returns for donations, but donors don't respond equally to both strategies.
Area of Science:
- Health Services Management
- Nonprofit Management
- Health Economics
Background:
- Not-for-profit hospitals rely on donations and financial returns for sustainability.
- Understanding the interplay between donations, hospital financial performance, and fundraising is crucial for strategic planning.
- Previous research debated the supply price of donations and its relationship with hospital financial behavior.
Purpose of the Study:
- To explore the relationships among donations, financial returns, and fundraising activities in not-for-profit hospitals.
- To test a model of hospital behavior concerning financial strategies.
- To address the debate on the supply price of charitable donations.
Main Methods:
- Utilized financial disclosure reports from the California Office of Statewide Health Planning for 160 hospitals (1980/1981-1986/1987).
- Employed a fixed-effects, pooled cross-section, time-series least squares regression to estimate three structural equations: donations, returns, and fundraising.
- Analyzed the system of equations to understand interdependencies between these financial variables.
Main Results:
- A positive relationship was found between donations and hospital returns.
- The impact of hospital returns on donations was statistically insignificant.
- Fundraising activities showed no significant positive effect on donations; however, donations negatively impacted fundraising.
- Fundraising and hospital returns were negatively associated.
Conclusions:
- Empirical findings support a positive donations-returns relationship, consistent with a positive supply price for donations.
- Hospitals may perceive a trade-off between generating financial returns and soliciting donations.
- Donors do not respond uniformly to hospital returns and fundraising efforts.
- Increasing free cash flow through community returns or fundraising may not be a highly successful short-term financing strategy for many hospitals.
Objective:
This study explores the relationships among donations to not-for-profit hospitals, the returns provided by these hospitals, and fund-raising efforts. It tests a model of hospital behavior and addresses an earlier debate regarding the supply price of donations.
Data Sources:
The main data source is the California Office of Statewide Health Planning data tapes of hospital financial disclosure reports for fiscal years 1980/1981 through 1986/1987. Complete data were available for 160 hospitals.
Study Design:
Three structural equations (donations, returns, and fund-raising) are estimated as a system using a fixed-effects, pooled cross-section, time-series least squares regression.
Principal Findings:
Estimation results reveal the expected positive relation between donations and returns. The reverse relation between returns and donations is insignificant. The estimated effect of fund-raising on donations is insignificantly different from zero, and the effect of donations on fund-raising is negative. Fund-raising and returns are negatively associated with one another.
Conclusion:
The empirical results presented here suggest a positive donations-returns relations and are consistent with a positive supply price for donations. Hospitals appear to view a trade-off between providing returns and soliciting donations, but donors do not respond equally to these two activities. Attempts to increase free cash flow through expansion of community returns or fund-raising activity, at least in the short run, are not likely to be highly successful financing strategies for many hospitals.