The State of the Healthcare Subsector
Published August 2020
Foreword
Ignited by the coronavirus pandemic, healthcare has skyrocketed into the forefronts of public consciousness. Rapidly altering fundraising strategies, events, and day-to-day operations, the pandemic has strained even the strongest healthcare organizations.
From sourcing high-demand items like personal protective equipment (PPE) to creating additional treatment sites and racing toward a vaccine, healthcare and medical research organizations have been pushed to their limits. Though currently entrenched in this fight, many organizations were already struggling to keep their doors open. On top of the razor-thin margins that most not-for-profit healthcare systems operate within, hospitals have been forced to cancel elective surgeries and routine care visits. Disruption to normal business models have impacted cash flow and reduced revenue, all at a time when demand is higher than ever.
In crises, we can turn to the past for help navigating uncertainties. In this report, we will examine the factors that have affected giving to healthcare organizations over the long-term and recent past. Time and again, key best practices in fundraising and engagement have supported organizations as they weather change.
At this moment, supporters, funders, patients, and donors aspire to actively help find a solution to these challenges. From individuals sewing masks at home to corporate donations of PPE and emergency grant allocations, many have stepped up to invest in community health. Expressing gratitude to front-line healthcare providers in a time of dire need, our organizations must be prepared to leverage this support and look to the past for perspective and advice in navigating a shifting landscape.
Introduction
Across the span of a few months, the events, goals, and benchmarks we set for 2020 were quickly uprooted. Facing a year like no other, we have altered the day-to-day operations of our organizations. For some, this has revealed existing cracks in the foundations of our practices.
With 2019 in what seems to be the distant past, how can we better understand which trends reflect the state of our sector now? What types of information can we provide organizations, stakeholders, and constituents to help navigate a path forward? And when challenges feel stark, how do we remind ourselves that they offer the opportunity to reimagine our futures?
Confronted by these changing times, it is more crucial than ever that we seek greater perspective.
In this report, we will examine today’s environment against the backdrop of long-term trends and the core practices that have enabled organizations to weather dynamic economic, environmental, political, and social challenges.
Understanding the long-term trends that have shaped the healthcare subsector is a key component of your response to today’s landscape. We hope that these perspectives will help you to identify and invest in the right strategies to move your mission forward in the long run.
The Long View
With recent economic woes brought on by the coronavirus pandemic, many in the social sector have been affected or worry that they soon could be. While it is difficult to determine the future course of the pandemic and the extent of its economic impacts, there are valuable insights to be gleaned from looking at historic trends in giving. While the overall amount of dollars continues to grow, research increasingly shows that the number of individuals donating money is shrinking (Vital Signs Part 1, 2017). One thing is clear:
Social good organizations have long contended with the ripple effects of various challenges. Smart organizations look to effective practices in the face of extreme events.
Economic Influences
Taking a longitudinal view allows us to see how charitable giving has weathered similar events, learn from these changes, grow, and move organizations forward with data-informed strategies. Adjusted for inflation, giving has increased nearly $300 billion between the years 1979 and 2019 (Giving USA, 2020). Total charitable giving has increased or stayed flat in current dollars every year since 1979, except for three years that experienced significant economic declines: 1987, 2008, and 2009.
While these declines coincided with severe economic downturns, overall charitable giving rebounded alongside the economy’s recovery. Giving USA Foundation research indicates that, in the past, it has taken an average of three to four years for inflation-adjusted charitable giving to rise back up to pre-recession levels. Between 2008 and 2019, giving increased $77 billion, from nearly $350 billion given in 2008 to $427 billion in 2019. The recent Great Recession ended in 2009 and yet, for the most recent decade from 2010 to 2019, the total growth in inflation-adjusted giving is 33%. Giving in 2019 reached nearly $450 billion.
In 2019, the healthcare subsector received 9% of all charitable giving, totaling $41.46 billion.
These contributions totaled the highest inflation-adjusted value ever recorded in the healthcare subsector. During the 2008 recession, with the heightened need to access social services, healthcare, and scholarships, donors rose to the occasion by funding that access. Though the effects of the coronavirus pandemic are not yet known, a focus on health may encourage giving to healthcare organizations, as many respond to the immediate needs it has created.
In addition to trends in total giving, gross domestic product (GDP) is one of the most helpful indicators for tracking and explaining changes in revenue across the nonprofit industry. Research shows that giving revenue growth rises during periods of strong economic growth, when the GDP is growing, and slows or even falls during periods of relative economic weakness (Target Analytics, 2015). Charitable giving in the United States has been about 2% of total GDP for more than 40 years. In boom times, it has reached as high as 2.3%, and in recessions, it has dipped as low as 1.7%. This means that in a slow economy, not only does giving slow down, but it also declines as a proportion of the average American’s spending dollar.
In recent years, however, this figure has remained steady while overall giving has grown and while philanthropy has opened its doors to additional channels like crowdfunding and donor-advised funds (DAFs). When larger circumstances (like financial capacity and inclination to give) influence those factors, fundraising often feels the effects. However, philanthropy tends to lag behind stock market volatility, following the general up- and downward trends across time. As markets fluctuate and as philanthropy continues to shape its response to today’s current events, it remains too early for recent market volatilities to be seen felt across overall giving.
Health Subsector Trends in
Total Giving, 1979-2019
Shifting Priorities
Just as the percentage of GDP has remained steady, the percentage of disposable income has also hovered around 2% for the past 40 years (Giving USA, 2020). Despite this continuity, major events and social movements have the power to temporarily attract attention towards specific causes. Natural disasters, for example, have consistently prompted a noteworthy charitable response in their immediate wake. Additionally, in 2017, an extraordinary multitude of circumstances motivated Americans to engage socially and politically (Vital Signs Part 2, 2018). Beginning in late 2016 and gaining massive energy in 2017, civic involvement was charged by the presidential election. In tandem with those influences, 2017 tax reforms further shifted giving dynamics by motivating the use of DAFs and foundations.
In the immediate aftermath, organizations saw significant rises in households making new gifts. While organizations did not retain all those new donors, the spotlights shone on their causes provided a renewed interest in giving.
Year-to-Year Change in Households Making New Donations
So far, 2020 has felt an unforeseeable convergence of similar influences. From economic shutdowns due to the pandemic to the advocacy and protests generated by the Black Lives Matter movement, we should anticipate 2020’s giving climate to be affected by these events.
History—specifically the 1970s and 80s—shows us that while these kinds of social and political movements do not directly benefit all charitable subsectors, expanding the population of donors inevitably benefits all types of organizations. It stands to reason that advocacy organizations and those most directly affected by social and political movements receive the lion’s share of increased support most.
We can better see this by assessing the long-term change in allocation of charitable dollars across subsectors. For instance, while overall giving to religion continues to receive the majority of giving year over year, it has declined as a share of giving to all organizations since the early 1980s (Giving USA, 2020). Moving from 54.8% of all giving in 1979 to 31.4% in 2019, this reallocation has allowed additional subsectors to flourish, furthering their growth. Throughout the last four decades, the health subsector has comprised between 8 and 10% of total giving.
Giving by Type of Recipient: Percentage of the
Total in Five-Year Spans, 1979–2019
Additionally, the breakdown of charitable dollars given by individuals, foundations, bequests, and corporations has fluctuated. Over the last 40 years, giving by individuals has begun to decline as a percentage of total giving. And for the most recent two years in a row, individual giving has totaled less than 70% of all giving. This is in sharp contrast to the five-year period beginning in 1980, when individuals gave 82% of all charitable dollars. The increasing concentration of wealth throughout the U.S. has played an outsized role in creating foundations. This trend, coupled with rising income inequality and the emerging influence of DAFs, continues to increase the share of giving by foundations, and decrease the percentage of giving from individuals.
Though 2020 will be marked as a time of widespread change, the overarching trends in philanthropy are positive: Individuals, companies, and groups continue to invest in the causes they care about.
Giving by individuals remains the largest contributor to overall giving year over year. More than ever, this reminds us that while much is in flux, the core values of donors remain the same. It is up to our organizations to remain committed to cultivating these relationships. Staying attuned to the long-range trends, as well as the continued influences of innovations like DAFs and crowdfunding, will support your mission area as you approach your strategy for 2020 and beyond.
Current Trends
In addition to long-term trend data, current trends may provide a glimpse into the impact of the coronavirus pandemic. While we may begin to see significant contrasts against recent years throughout the first half of 2020 across overall and online giving, it may be too early to decipher long-term effects.
2019 In Review
In 2019, charitable giving in the United States grew 1.0% based on analysis of $36.3 billion in donations by the Blackbaud Institute (Charitable Giving Report, 2019). Online giving grew by 6.8% compared to 2018 after analysis of $2.7 billion in online donations.
In the healthcare subsector, overall giving increased by 0.6% and online giving increased by 7.1%.
Traditionally, most transformational and major gifts are not yet made online, so on average, online gifts are lower than offline gifts. In 2019, the average donation amount was $617, while the average online donation was $148. In the healthcare subsector, the average donation amount was $417 and the average online donation amount was $336. Healthcare organizations should continue to watch these trends closely, as the shift to virtual fundraising and engagement events may impact donors’ reliance on online giving.
2019 also saw a continuation of multi-year trends in monthly giving patterns. While December remains the largest month as a percentage of giving, June continues to drive giving due to end of fiscal year fundraising campaigns. While this year has proven to be a mixed bag of unexpected spikes in need and attention, healthcare organizations should continue to anticipate growth at the end of the year as they execute giving day and end-of-year campaigns. According to the Blackbaud Institute Charitable Giving Report, one-fifth of all donations are given in December alone. Know which months yield the highest giving for your subsector to ensure that you are prepared to maximize your opportunities.
Snapshot in Time
As 2020 trends emerge, we can identify how subsectors have begun to navigate the current environment.
Year over Year change in overall giving, June 2019 - June 2020
Pertaining to year-over-year trends, data from the Blackbaud Institute Index shows that overall giving declined in the immediate wake of the pandemic. The general donor population froze with the rest of the social good sector, as businesses shut their doors and individuals stayed home to quarantine. The cancellation of major events, conferences, and galas created a decrease in giving for March and May, but showed slight increases in April and June compared to the same months ending in June 2019.
Heading into April, overall giving spiked as philanthropy responded to the pandemic. Wide-scale giving days such as #GivingTuesdayNow in May shone a spotlight on charitable giving at a time when many were receiving economic impact payments, assisting in its execution.
Healthcare Subsector
Year over Year change in giving, June 2019 - June 2020
Data from the Blackbaud Institute Index, which captures giving to healthcare organizations, shows that this subsector received significant support throughout the last several months in both in-kind and monetary gifts compared to the previous year’s cumulative 12-months. As you can see from the chart above, healthcare organizations experienced a 12-month cumulative increase in March 2020 that continued into April and May. Giving to this subsector remained strong in June compared to the previous 12-months ending in June 2019. Additionally, medical research organizations, who were flat year over year as they headed into March, experienced a 6.9% decrease through the end of June.
Beyond the healthcare subsector, other mission areas, such as food banks, received significant support throughout the last several months. Across many charitable subsectors, increased demand for services due to economic shutdowns, job losses, and healthcare needs have been supported by increased contributions. Organizations found their stride in late spring with overall giving in June leveling off at an increase of 1.2% for the last 12-months ending in June compared to the same months ending in June 2019.
While the percentage of online donations has leveled off for the last two years, we may see an uptick in 2020 as in-person stewardship and programming give way to online-only engagement. These effects will be telling if seen throughout major giving, where gifts have traditionally been made in-person. Across all subsectors, there has been a 36% increase in online giving year-over-year from the three months ending in June 2020 compared to June 2019. Healthcare organizations saw a 10.5% increase of online giving in the three months ending in June 2020 compared to June 2019. Significant jumps during the month of May show an increasing reliance on online platforms, as many organizations rushed to leverage momentum from #GivingTuesdayNow.
In addition to these emerging trends, several other factors may continue to shape the year in charitable giving. Throughout the remainder of 2020, we may anticipate heightened civic and political giving following a summer of activity that saw the growth of the Black Lives Matter movement, as well as increased advocacy for safety, health, and healthcare workers’ rights amidst the pandemic. In the fall, the potential effects of hurricane season may also draw increased support to disaster relief causes in the aftermath of any events.
In tandem with this engagement, the upcoming presidential election presents an opportunity for organizations to broadcast their causes and how they relate to issues on candidates’ agendas. This election will coincide with the start of many organizations’ end of year campaigns, which could further fuel charitable activity. Underpinning each these factors, the CARES Act of 2020 reinstated a $300 charitable deduction for one year. This may entice an uptick in low- and mid-level donations by a comparable amount, as many individuals race to give to the causes of their choice. These effects may amplify pending further changes in unemployment and federal relief.
Looking Ahead
From recessions and significant natural disasters to political campaigns and social upheavals, looking back allows us to track how philanthropy follows and often aligns with major events. In examining these trends, we can identify the core practices that enable organizations to weather challenges, allowing you to forge a path forward through an ever-changing 2020. While much remains uncertain, we can expect the events of 2020 to shake up charitable behavior across the sector.
To brace for these and bolster your organization, you can examine several core practice areas.
Diversify Your Revenue Mix
Healthcare organizations should not overlook revenue mix as a component of ongoing strategic planning. Examining data from the Urban Institute’s Nonprofit Almanac show that across subsectors, social good organizations follow a multitude of revenue models. While different organizations may thrive through various combinations of revenue sources, organizations should avoid an over-reliance on certain sources.
Percentages of Revenue by Sources of Reporting
Healthcare Charities, 2013
As the coronavirus pandemic has shown, lost income due to the cancellation of in-person events, fundraisers, canvassing, galas, and more has left many organizations in weakened positions. Although crises like the pandemic are unpredictable, organizations should be aware of revenue sources that could exert an outsized influence on their budgets. For instance, the cancellation of elective surgeries or routine care procedures due to the surge in COVID-19 patients had left many hospitals without their largest sources of earned revenue. In tandem with this, the cancellation of in-person galas and large-scale fundraisers affected many healthcare organizations and hospitals, which already rely on razor-thin margins in operational budgets. Several key metrics can support you in uncovering hidden variables throughout your budget.
- For instance, the dependency quotient is a metric that quantifies the risk associated with a lack of revenue diversification. It assesses the percentage of an operating budget that would be left unfunded if an organization were to lose their top five donors. To calculate your dependency quotient, divide the total contributions of your top five supporters by your organizational expenditures. While some organizations may cease to exist if they lost their top five donors, others may experience minimal distress. This metric allows you to take a more nuanced approach to your fundraising strategy in order to steward your top donors, while also staying focused on your other revenue sources. See The Right Mix to learn more.
- In addition to their dependency quotient, organizations should regularly calculate their cost to raise a dollar. This metric shows the investment your organization requires to fundraise. To calculate this, add staff and fundraising expenses together, then divide that by the net fundraising total. Most development staff understand that investment is often required to achieve long-term fundraising success. Regularly tracking this metric across your campaigns, grants, events, and more will help you to assess your most affordable or unaffordable actions and better steer your budgeting process in the long run.
Now more than ever, there is heightened awareness of the need for equity in healthcare. Organizations should remain nimble and consider new avenues for their case statements and funding opportunities. Foundations and corporations are eager to step up to the plate at this time, and continual investment in these relationships could support an existing goal of revenue diversification.
While revenue mixes in the healthcare subsector are unique, these metrics can illuminate the weak spots that may be hiding in your budget. By putting the costs of your fundraising into perspective, you can strive toward financial sustainability by prioritizing a revenue mix that can weather downturns and position you for long-term success.
Inspire Your Major Giving Strategy
Data from the Vital Signs series has found that while the overall amount of dollars donated continues to grow, the number of individuals donating money since the last recession has been shrinking. However, donors who are still giving are giving more than ever before. Research from How America Gives also demonstrates how the influence of major donors masks the distribution of giving across income levels. A decrease in the number of lower- and mid-level donor households shows that major donors persist as a critical component of any organization’s fundraising performance.
For example, between the five-year period from 2010 to 2015, nonprofits in the health subsector and hospitals had a 1% decline in the number of households contributing to new nonprofits, and a 62% increase in new donations (Vital Signs Part 1, 2018). These figures should help to underscore the care that organizations take in staying informed on the changing landscape of donors in their subsector.
To shore up your major giving strategy, ensure that you are familiar with the donors in your file who are already giving as well as the prospects who have the capacity to make a major gift. Continually review your file to evaluate your major giving program and track the success of your stewardship and moves management. There are key resources that you can leverage throughout this process, as well as key wealth indicators that could help you assess the capacity to make a major gift.
While some prospects may be concerned by the current market’s performance, it’s critical to double down on your prospecting and cultivation efforts. Many donors, patients, and community members have a stake in their community’s health and are eager to help respond to this crisis. Focus on these efforts by updating your case for support so that it reflects how your organization has been affected by the pandemic and responded to its related effects.
Although traditional access to patients has been limited as healthcare centers enact preventative measures to control the spread of the coronavirus, increased traffic in systems, coupled with a heightened awareness of community health, provide an opportunity to make your case for support. Many are supporting our healthcare providers by highlighting their heroism and work on the front lines of the response. Think through how you can inspire and expand your grateful patient programming by showcasing the immediate impact of gifts. Translate your gifts into terms that will resonate with supporters now – will you be able to secure additional PPE for your nurses and physicians, or help purchase meals and groceries for providers quarantining outside of their homes between shifts? Showcasing the direct value of your supporters and their impact in the community is a crucial step in ensuring that your mission resonates.
Focus on Retention
With all the factors affecting philanthropy, fundraisers play a more important role than ever in guiding their organizations and causes through turbulent waters. Donor retention reflects how you keep in contact with your donors and build a pathway for their continued support. It is a direct, quantifiable reflection of how you are engaging your donors and communicating your mission.
You should annually calculate your overall donor retention rate to assess who is choosing to stay in your donor circle every year. While organizations with a high retention rate keep or renew many donors from year to year, those with a low rate must acquire new donors to keep their bottom lines above water. This reinforces the significance of calculating retention to benchmark your internal progress annually and over time.
Donor Retention in the Healthcare Subsector, 2010-2015
While first-year donor retention continues to be a challenge, multi-year retention rates remain strong. New donors disproportionately come from the pool of supporters who are already donating to other organizations. Not only do they give to twice as many nonprofits, but they also give twice as much per year when compared to donors who did not make a new gift.
While the value of your retained donors should be clear, their continued stewardship should remain a core priority across your organization. Recall that your marketing and fundraising strategies must be aligned to best frame and communicate the societal values embraced by an organization’s mission and programs. This results in stronger donor engagement and retention.
Invest in Sustained Giving Programs
Sustainer giving is a long-term strategy in which donors commit to regularly giving a set donation amount. Allowing donors to give an amount of their choosing, sustainer programs automatically support your retention while ensuring a dispersed revenue source.
Data from Sustainers in Focus examined multiple donor files and compared the retained revenue of new donors—those who first gave a sustainer gift and those who later converted to sustainer giving—against those who never gave a sustained gift. Overwhelmingly, this showed that revenue per donor increased in the two years following a donor’s commitment to a sustainer program. Giving increased from 50% to 300%, with even the low end far exceeding the typical return for non-sustaining donors. There is substantial value to be found in strategic sustainer fundraising.
Double Down on Acquisition
To expand, organizations need to focus on strategies that address the changing macroeconomic environment in which we find ourselves. Though many of us are focused on retention and sustained giving at this time, they cannot happen without acquiring new donors. Organizations should not take their foot off the gas of acquisition. To provide the most long-term growth for your team, you’ll want to continually add to your donor pool and enhance your acquisition strategy as a sustainable practice.
You should continually consult your donor acquisition cost. This metric is calculated by adding all expenses that go into recruiting a new donor, then dividing by the number of new donors acquired over a given period. By calculating the donor acquisition cost at your organization, you can better pinpoint the tactics that merit further investment while zeroing in on the channels, preferences, and behaviors that will expand your supporter base.
10-Year Overall DonorCentrics Index Revenue & Donor Trends, 2007 - 2017
As highlighted above, major social and political advocacy throughout 2016 and 2017 resulted in a spike of new donors throughout 2017. In 2020, spotlights on widespread political change, civil rights, and social movements have garnered similar attention. Organizations aligned with these causes are in advantageous positions to welcome new donors into the fold. Andin tandem with these influences, the 2020 CARES Act reinstated a $300 charitable deduction for one year. Together, this could potentially inspire an increase in low- or mid-level donors, leaving it up to our organizations to complete the additional due diligence required to initiate and maintain relationships with new donors.
Some of these effects may well play out in the healthcare subsector. With an added focus on healthcare at this time, many have been inspired to donate towards coronavirus-related relief efforts and health.
While physicians and fundraisers may feel uncertain about engaging with prospects, focuses on grateful patient fundraising will continue to be significant.
Encourage your team to continue identifying and investing in the community members that have expressed gratitude for your cause area. When your cultivation centers around gratitude, you can better celebrate the momentous work being done by front-line providers right now, as well as the patients, community members, institutions, and individuals that keep the system in motion.
Navigate Your Digital Transformation
From reducing your manual processes through workflow automation to thriving in remote working environments and embracing new telemedicine platforms, organizations must adhere to a new focus on delivering strong digital experiences to their stakeholders. While a focus on retention and stewardship will advance your cause, you will also want to be sure that you are speaking to your stakeholders through the channels and platforms that they are embracing.
As consumer behavior begins to show itself across the social sphere, it is becoming clear that individuals are more eager to sit in the driver’s seat of their engagement. The acceleration of avenues like crowdfunding, do-it-yourself, and peer-to-peer fundraising will continue to be cohesive components of overall fundraising strategies. Speaking to individuals on a one-to-one versus a one-to-many level, these campaigns continue to gain traction, connecting people to the causes they care about through the channels they regularly use.
An organization’s success in these arenas lies in leading their staff and stakeholders. Whether you are guiding your organization through shifts in day-to-day operations, managing a strained supply chain for resources like PPE, or towards a full digital transformation, you must be prepared to support the donors, followers, patients, clinicians, and networks who advocate best. Although our minds may try to steer us a different way, we need to be even more communicative and collaborative during crises. Communicating needs and understanding the realities your community and staff are working within will help you find tech tools that match their access and skill options. Just as the challenges of the organization may have changed, so too have the challenges being presented to your staff and community.
While digital transformation covers a broad spectrum, remember that the key is to use these tools to strengthen your relationships and build loyal supporters for life. In a changing digital environment, these platforms will be more crucial than ever before, offering you the ability to make more informed decisions about how to identify your supporters and nurture relationships with them.
Conclusion
In these trying times, the way your organization adapts to challenges will determine both your current and long-term organizational health. By looking back, we can provide a sense of stability in knowing that Americans are, and continue to be philanthropic. They respond in great numbers to disaster relief efforts; they volunteer at local events; they participate in walk-a-thons and bike-a-thons.
Though we are still watching 2020 unfold in real time, we can expect a further confluence of influences to alter the year ahead. As the Black Lives Matter movement grows across the U.S. and as we head towards a presidential election, we may anticipate heightened civic activity resembling the waves felt throughout 2016 and 2017. The potential for an active hurricane season coupled with continued coronavirus relief may also usher in similar activities. While much may feel uncertain, we can better prepare for these events by grounding ourselves in the long-term perspectives that have helped philanthropy to adapt over time.
When challenges expose the areas in our organizations that require additional support or change, we can use these moments to emerge stronger. Reflecting on how we can adapt and innovate will help us tap into the practices that work in the long run. Our healthcare organizations play an invaluable role in this fight—both as providers on the front lines of the response delivering access to care and as a critical conduit connecting supporters to this cause. As we grapple with the pandemic in myriad ways, the intentions that we set in our processes, relationships and cultivation will support our organizations’ responses to these challenges—and any others that lie ahead.
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