Reaping big donations.

Not-for-profit hospitals held their own as the beneficiaries of philanthropic dollars in 2004 at a time when healthcare interests as a whole, including patient-advocacy organizations and research foundations, suffered from diminishing charitable dollars.

"We got more of a shrinking pie," said Bill McGinly, president and chief executive officer of the Association for Healthcare Philanthropy, which last week released its 2004 Report on Giving.

AHP member institutions in the U.S. raised an estimated $6.1 billion, a 3.4% increase from the estimated $5.9 billion raised in 2003, according to the survey. Meanwhile, $18 billion, or 7.2%, of the nearly $250 billion in philanthropic dollars generated in 2004 went to overall healthcare interests, but that marked a decline of nearly $2 billion, or about 10%, according to McGinly. The 2004 report was based on 291 responses to a survey of 1,110 of the association's U.S. members, the majority of which are hospitals or medical centers.

Cash contributions to not-for-profit healthcare institutions in the U.S. totaled $4.1 billion, or 67% of the total funds raised. Pledges, planned gifts and other assets accounted for $1.6 billion, or 26.5%, of the total. From 2003 to 2004, the number of donors grew by 2.7% and the number of gifts received grew by 5%, according to the survey.

McGinly said the biggest trend noted in the past year was a greater emphasis on major-gift fundraising. Hospital fundraisers are increasingly spending their time and effort on cultivating big-ticket donors, he said. Development officers also are formulating "planned giving opportunities" that offer alternative ways to give charitable gifts other than through cash donations. "People don't give to (a hospital) because they can get a tax donation, but if there is a tax incentive to give, they will give more," McGinly said.

In 2005, individual donors provided 60% of the funds raised while businesses, including corporate foundations, came in at a distant second, supplying 19.4% of the charitable dollars. Board members accounted for 52.6% of the individual donors, while patients made up 7.1% of the pool. Employees represented 15% of individual donors, and 5.9% of them were physicians.

The profile of major gift givers almost perfectly fits Raymond and Ruth Perelman, who last week announced a $25 million pledge to name Penn Medicine's Center for Advanced Medicine in Philadelphia. Raymond Perelman is a Penn Medicine trustee and a 1940 graduate of the University of Pennsylvania's Wharton School of Business. With a price tag of about $232 million, Penn officials boast that the Raymond and Ruth Perelman Center for Advanced Medicine marks the largest capital project undertaken in the history of Penn Medicine, which includes the University of Pennsylvania School of Medicine and the University of Pennsylvania Health System.

Though fundraisers are going where the bigger dollars are, as Penn did with the Perelmans, there is still a place for annual-giving campaigns as the donor pool needs to be continually replenished, McGinly said. Colleges' big donors typically stay loyal for about 25 years, but hospitals generally can keep such people interested for only seven to 10 years, he said.

That has indeed been the experience at 465-bed St. Elizabeth Medical Center in Covington, Ky. Barbara Cunningham, the three-hospital system's vice president of development, said the hospital foundation's 150-member board drives its 15-year-old program. The foundation to date has raised between $1 million and $4 million per year, but by focusing on major gifts, it is having great success with a $6.3 million campaign to fully fund a free-standing hospice by the time it opens in December 2006, she said.

Most hospitals do not raise enough money through philanthropy to bolster their credit ratings, but there are exceptions, said Emily Wong, director of the healthcare group for Fitch Ratings. When analyzing a hospital's finances, fundraising ability is "definitely something we look at ... but I think typically philanthropy plays a small role in the overall credit rating unless it is funding a big portion of capital projects," she said.

One exception is Memorial Sloan-Kettering Cancer Center in New York. In 2004, the research hospital raised $206.5 million, up 22% from $169.2 million in 2003, said Richard Naum, its vice president of development. Last week, ratings agency Moody's Investors Service affirmed a high-grade Aa2 rating on $1.1 billion of outstanding debt and revised its outlook to stable from negative.

The outlook was revised because of the hospital's "ability to overcome what we believed would be the potentially negative impact of the Sept. 11 attacks on operations, fundraising and investments," Moody's said.

New Orleans hospitals are now facing the challenge of what Moody's describes as a "Sept. 11-type event." Charles Heim, vice president and director of the philanthropy division at the Ochsner Clinic Foundation, said among other things, Hurricane Katrina disrupted two bonanza years of fundraising. The disaster put on hold a major $10 million capital campaign, but Ochsner has been on the receiving end of an outpouring of gifts, especially from corporations, he said.

Already more than $2 million has been raised just for hurricane relief.

"It's a mixed bag. When I think about the hurricane relief fund doing as well as it is doing, that's been very gratifying," Heim said. "But when we go to knock on doors in New Orleans and ask people to consider a gift, there will be a lot of things on their checklist before philanthropy right now."

PHOTO (COLOR): The Perelmans fit the profile of major gift givers.

PHOTO (COLOR): The Perelmans' $25 million donation will put their names on the Center for Advanced Medicine in Philadelphia.

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By Cinda Becker