Healthcare Lessons from Philanthropic Investing

Posted on July 1, 2011


It is no secret the state of Florida and the Governor are dishing out tough love for its hospitals, in the ‘sink-or-swim’ vein.  More on that in a minute.

Over the past five to ten years, a major paradigm shift for non-healthcare, non-profits has been the concept of philanthropic investing. Philanthropic investing is a way for a new breed of benefactors to imbue organizations with money that is put to work.  Gone are the days of blank checks unallocated and given out of sheer generosity.

Philanthropic funds are still gifts, but gifts with strings attached—gifts that must become self-sustaining. Many non-profit organizations are required to take these donations and create programs consistent with their missions that generate income for the non-profit, and fund themselves year after year. For instance, a Jacksonville non-profit, The Clara White Mission, feeds the hungry; yet it also runs Clara’s at the Cathedral, which teaches life skills to individuals. Instead of simply taking donations and converting them into food to provide a meal once or twice to people, it is teaching a skill that will allow a person to cook, eat better, and even get a job. In addition, the “training cafe” charges a fee, so it is an entrepreneurial venture as well.

Philanthropic investing has upped the ante on ‘free money’ and created entrepreneurial non-profits, and no that is not an oxymoron. It makes non-profits govern themselves with an honesty and rigor more akin to for-profit business.

In effect, this is what is happening with healthcare. Slowly, government and the healthcare service consumer are demanding more of the healthcare system. They want transparency, and a system that is accountable for its costs. 

In Florida, Governor Scott is challenging the very existence of hospital districts, which are municipal jurisdictions that pay special taxes each year to support local hospitals.

On the federal level, the government is slowly weaning hospitals off the ‘philanthropy’ of Medicare and Medicaid. Yes, hospitals provide services for those reimbursibles, but many hospitals rely too heavily on those payments to make ends meet.  Those payments are similar to the ‘philanthropy’ non-profits were accustomed to receiving. When that revenue stream dries up, where do funds come from? The federal healthcare legislation is reducing reimbursibles, which will indirectly and sneakily reduce the reliance on those funds by forcing hospitals to look harder at how hospitals operate.

Severe cases will be hospitals who cannot identify exact costs associated with various procedures, and hospitals with the majority of their income from Medicare and Medicaid. These are the hospitals, similar to the non-profits, that will need significant structural overhauls to survive in the future.

And this is where hospitals can learn from the entrepreneurial non-profits, to reverse-engineer how services are provided to ensure they are executed as leanly and possible, and how to deliver the company mission while also making money.

The federal goverment is tightening the flow on the tap. For some it will be a slow death, others see it as a wake up call to find a new, sustainable source of water.