Healthcare Endowment Management: 3 Questions to Consider

January 10, 2017 |
2 minute read
|

Mounting cost pressures are forcing small and mid-sized nonprofit healthcare organizations to consider adopting endowment management practices similar to those used elsewhere in the nonprofit sector.

The healthcare business model is changing. In the face of declining reimbursement from insurance companies and governmental payers, nonprofit healthcare organizations are confronted with an unprecedented series of challenges, all while striving to maintain positive operating margins.

Having played a major role in their communities for decades, medical practice models are also being challenged. As a result, many doctors have closed their independent practices to become hospital employees. And in hospitals and clinics, the old-style model of brick and-mortar buildings located in major urban centers is being challenged by new delivery systems such as suburban mall-style “big box” shell structures with flexible wards that can easily be changed in response to the advent of new equipment and practices, free from the strictures of plaster walls and concrete slabs.

Although these challenges are being accelerated and intensified by the regulatory and payment changes mandated by the Patient Protection and Affordable Care Act (ACA), they are not new and, we believe, will continue despite any repeal or replacement of the ACA.

Healthcare organizations have worked for years to cut costs and maximize operating efficiencies. Larger organizations and networks, with substantial endowments to support their operations, have been better prepared financially to adapt to the more stringent demands of the coming environment and have been more successful in reducing costs and tightening their organizational structure.  Small and mid-sized healthcare providers, however, lack the economies of scale necessary to achieve meaningful cost reduction.

For these, the way forward increasingly includes merging or affiliating with other organizations to form more competitive networks. With or without these operational steps, it will be essential that small and mid-sized healthcare organizations strengthen their resource base by improving their endowment management skills and strengthening their ability to attract gifts and donations.

Should healthcare organizations consider adopting the endowment management model that has been developed over the last three decades by educational institutions and increasingly adopted by other types of nonprofits?

If your organization is contemplating this change in direction, you should consider the fact that it may take several years for your organization to implement these changes and begin to see the benefits  – a fact which makes this task all the more urgent.

Leaders of healthcare organizations will need to consider the following questions:

  • What is the role of the endowment in our healthcare organization?

  • How do actual and potential donors evaluate our skill in managing our present endowment?

  • How can we make the case for larger endowments – and contributions – at a time of fiscal uncertainty?

In this changing landscape, it will be essential that small and mid-sized healthcare organizations strengthen their resource base by improving their endowment management skills and strengthening their ability to attract gifts and donations.

Learn more about the state of healthcare and how your healthcare organization is affected.

Download the Commonfund Whitepaper

Stay connected with the Insights Blog

Popular Blog Posts


Governance And Policy | Insights Blog

What is an OCIO?

Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing...
Governance And Policy | Insights Blog

Should We Issue an Investment Manager RFP? 7 Key Considerations

Best practice for nonprofits is to issue a Request for Proposal (“RFP”) for an investment management partner every market cycle. Typically, that is at least every 7 to 10 years, or as it is...
Governance And Policy | Insights Blog

Observations on Diverse Manager Selection Across Asset Classes

At Commonfund, we believe diverse managers offer clients access to investment talent and valuable investment opportunities and therefore should be explored and invested in. Overlooking the merits of...

Disclaimer

Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.