the thoughtful rant

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  • Peter F.

Should we really be donating to hospitals?

The hospital has been the focal point of our collective global health system for generations. When you ask someone what they picture when they think of healthcare, chances are it is a hospital.

As the jack-of-all-trades solution for all our health problems (unfortunately), hospitals are integral to the health system. They are also expensive. Like ridiculously expensive.

They are expensive to build; expensive to staff; expensive to maintain; and expensive to progressively digitize.

To help foot this steep bill, many hospitals have foundations with the singular purpose of fundraising for the hospital. And some hospitals are pretty damn good at it.

For example, the Hospital for Sick Children (SickKids) in Toronto — a tertiary paediatric hospital with close to $1 billion in annual revenue — recently launched a campaign to raise $1.3 billion by 2022 to assist with a full hospital rebuild.

The media efforts supporting this campaign are as inspiring and powerful as they come, and with SickKids being a hospital that consistently raises well over $100 million per year — or around 10% of their operating budget — even without a clear goal like a new building, they have a real shot at reaching this target.

But the bigger question is not if SickKids will reach their target, but should we be donating such massive sums of money to hospitals in the first place?

To explore this question, let’s start by briefly looking under the hood of a hospital donation — from its history to its impact on direct client care.

The earliest hospitals across both Canada and the United States were, in fact, largely charitable organizations — serving poorer people and operating primarily on donations from benevolent organizations and affluent citizens. However, as client populations expanded, diseases became more prevalent, and more advanced treatments were developed, it became apparent that donations alone would no longer be enough; this is when Canada and the United States decided to go their separate ways when it comes to how to finance hospitals, but these charitable roots are still evident across the continent.

In Canada, 7–10% of all donations to non-religious organizations have historically gone to hospitals which equates to anywhere between $530 million and $750 million per year.

It is a bit tougher to find neat data in the US as the categorization is slightly different (health is its own category, but so is foundations which would likely include a lot of hospital donations), but assuming the same 7–10% of non-religious donations as Canada, Americans would still be donating between $19–27 billion to hospitals each year ($390.05 billion was contributed to US charities in 2016). That’s more than the total GDP of Jamaica and Mongolia combined.

At this point you may be asking, “So what? Hospitals need our money.”

This is very true.

And there is no doubt that hospitals are being put under increasingly unprecedented fiscal pressures.

But to me, there are two issues with this practice of blindly donating to hospitals which are further explained below:

  1. The money often doesn’t go where you’d ideally want it to; and

  2. It doesn’t encourage operational improvement — a cultural shift that most hospitals desperately need.

Not all charities are created equal

There are many charities that do great work and stretch every dollar they receive to the fullest extent. On the flip side, there are many charities that operate more like for-profit businesses, only putting a small amount of every dollar received towards their core cause. Unfortunately, hospital charities and foundations generally operate more like the latter.

Every year, the Canadian publication MoneySense grades charities across the country across a number of dimensions:

  • Charity Efficiency: How much of the raised money goes towards the cause;

  • Fundraising Efficiency: How much a charity has to spend to raise $100;

  • Reserve: How much cash the charity has on hand; and

  • Governance: How well the charity/foundation is run based on responses to a detailed questionnaire.

Of the 22 hospital foundations that were graded in MoneySense’s 2018 preview, only 4 received a grade higher than a ‘B’ in charity efficiency.Even worse, 8 received a ‘D’ in the same category, meaning that less than 60% of the funds at these foundations went towards their cause.

So basically, half of every dollar donated to these places goes to something other than the programs and initiatives that directly or indirectly aim to improve client care.

Considering United Way operates between 80–90% charity efficiency (depending on where you are), food banks at over 90%, and the American Red Cross at 89% — although how they spend this 89% is often a topic of controversy — being below 60% is abysmal.

People will argue that 50 cents for every dollar is better than not donating at all and I’m not going to debate that as I’ve seen first-hand the financial and operational troubles plaguing many hospitals, but because I’ve seen these issues first-hand, I also know that this money is often used to treat organizational symptoms, not underlying conditions.

Beware of ankle braces

I understand that every year can be a struggle for hospital administrators to keep the lights on let alone deliver high-quality care.

And I understand that donations are often a major mechanism by which hospitals finance big capital projects that otherwise would never be possible (like the SickKids rebuild), but we need to start focusing more on improving day-to-day operations instead of financing the sexy new building.

Apologies in advance for the digression — and I’ll do my best to be quick — but I would like to relate hospital donations to a time when I got injured playing basketball.

Back in high school, I sprained my ankle pretty badly and decided to start wearing a brace in hopes of preventing future injuries. I went on to sprain that same ankle a handful of times over the next few years — while wearing a brace — and with each injury, my frustration grew further. I finally told myself that I was going to ditch the brace and properly build up the mobility and strength to play carefree again.

Long story short, I haven’t hurt my ankle since.

I tell you this story because I feel to a certain extent, donations are the ankle brace-equivalent for our hospitals; they are the false sense of security that hospitals need to progressively ditch if they want to run properly.

Whenever hospital executives are told about a new potential capital project, their first instinct is typically to go to the foundation. Instead of pouring more money into marketing efforts to spark more philanthropic donations, focus on uncovering savings within your own four walls before looking elsewhere.

Build a culture of continuous improvement and efficiency.
Become a lean organization.
Optimize your workflows.

What good is a shiny new building or a fancy new EMR if the same inefficiencies that crippled your organization before are going to persist?

Why repeatedly remove water from a sinking boat as opposed to fixing the original hole?

As cash-strapped as hospitals may be, donations are not helping the underlying issue: that hospitals need to reinvent themselves and become more efficient.

They should be minimizing their reliance on philanthropy, not expanding it.

I’m not saying that you should stop donating to hospitals, but we can’t continue to let these organizations increasingly rely upon an unreliable source of money for the indefinite future.

Maybe consider taking some of what you would normally donate to your local hospital and putting it towards other health or social causes that can help alleviate some of the debilitating stress that hospitals are constantly under.

Maybe then they’ll feel comfortable to start playing without a brace.

#philanthropy #hospitals #healthcare

Copyright © 2020

Peter Forte

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