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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.
Health Services Research
|December 1, 1995
Summary
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.