What is the role of philanthropy in healthcare?

Hospitals need funds in order to maintain operations and provide healthcare. In 2015, $3.2 trillion was spent on healthcare. This was divided between Medicare (20%), Medicaid (17%), private insurance (33%) and out of pocket (11%). Medicare, the single-payer, national social insurance program that provides provides health insurance for Americans aged 65 and older who have worked and paid into the system through the payroll tax, pays a flat fee per case which often do not cover the cost of care. Medicaid, the social health care program for families and individuals with limited resources, pays for service in three different ways, a flat fee, a daily allowance or fee for service payments. In most states Medicaid does not cover the costs of care. Privately insured patients is where hospitals attempt to make their money back by charging these patients, generally, more than the costs of care. The fees are set by hospitals which leads to much negotiation with patients and insurers. This is a part of why the United States experiences uniquely high administrative costs.Hospitals are finding it hard to keep up with growing costs.

*Refer to my previous post Why do Americans pay more for healthcare than the English? for more information on why the US experiences high healthcare costs.

According to the American Hospital Association, there 5,564 registered hospitals in the US. Of those, 4862 are community hospitals, meaning besides Medicare, Medicaid, private insurance, and some local tax revenue, these hospitals do not receive any other income. They receive no federal funds. About 1,000 are owned by state and local governments and another 1,000 are owned by for-profit companies. This leaves 3,000 hospitals searching for funds to maintain operations. Additionally, with continuing cuts to Medicare and Medicaid and an emphasis on value-based care over volume, the role of philanthropy has seen much growth.

Philanthropy in healthcare can take the form of a foundation or an internal board that focuses on philanthropic efforts. But the Association for Healthcare Philanthropy reports that it costs hospital foundations 31 cents to raise a dollar, while Moody’s Investors Service officials say it costs hospitals themselves 97 cents to raise a dollar. The cost to raise a dollar has seen a steady decline since 2010 when it cost $.33, to 2015 when it cost $.23. The volume of giving has steadily grown as 2010 saw $8.264 billion in donations, which grew to $9.651 billion in 2015, according to the Association for Healthcare Philanthropy Report on Giving.

Philanthropic initiatives in healthcare have seen changes as the need for transformation has grown. Efforts are being made to focus on preventative medicine and medical research rather than structural changes. Hospital donations are commonly used to enhance operations as the philanthropy slice of the hospital income pie gets larger. With hospital profitability decreasing and margins getting thinner, healthcare philanthropy will continue to play a vital role in hospital success.      

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