Healthcare Philanthropy as Strategic Revenue: Why More Hospitals Are Rethinking Financial Growth

As financial and operational pressures bear down on health systems of all sizes, boards and C-suite executives are rethinking where philanthropy fits into their financial strategy.

Sinking reimbursement and rising labor costs have made long-term planning increasingly difficult—and philanthropy increasingly hard to ignore.

The pressure is coming from several directions at once:

• Shrinking margins: The median hospital operating margin was just 1.3% in 2025.
• Rising labor costs: Workforce costs increased 5.6% in 2025.
• Low reimbursement: In 2024, Medicare paid just 83 cents for every dollar spent in patient care.
• Payer denials: Hospitals spent $43 billion trying to collect payments insurers owed them for care already delivered.
• Aging infrastructure: More than half of U.S. hospital facilities are at least 50 years old, with an estimated $390 billion in deferred maintenance nationwide.

These pressures have exposed structural limits in how health systems fund care, pushing philanthropy from the margins of budget planning into executive-level strategy, where it’s increasingly treated as a reliable source of funding.

Philanthropy Moves into Strategic Planning

For years, philanthropy sat outside the core financial plan. Health systems used it to support projects already approved—equipment, facilities, program expansions—rather than to shape which priorities moved forward.

Reliability was the central concern. Philanthropy was often seen as difficult to forecast and therefore risky to include in a strategic plan. That view has shifted as fundraising teams adopt technologies that enable more rigorous tracking and modeling.

This allows healthcare systems to consider philanthropic support earlier in their budgeting process. Projects that would be difficult to fund within operating margins can move forward when donor interest is identified in advance, according to Alice Ayres, president and CEO of the Association for Healthcare Philanthropy (AHP).

On the American Hospital Association’s “Advancing Health” podcast, Ayres said health systems seeking to increase the role of philanthropy in their strategic plan should integrate their foundation or fundraising leader into their executive leadership team.

“It has to start with there being a deep partnership between the chief philanthropy officer and the other C-suite members,” she said. “Without that, the rest of it doesn’t happen.

And while most health systems have limited room to expand market share or launch new services quickly, many still have significant philanthropic capacity.

The prime example is the grateful patient program. About 88% of large gifts come from grateful patients or their family members, according to The Advisory Board.

When hospitals lean into philanthropy as a strategic initiative, research indicates a healthy return on investment. According to AHP’s “2025 Report on Giving,” hospital foundations return about $0.77 for every dollar raised. A health system operating at a 1.3% margin would need to generate nearly $77 million in patient revenue just to match $1 million in net philanthropic revenue. 

The Financial Case for Healthcare Philanthropy

At UnityPoint Health in central Iowa, leaders were confronting a familiar problem with no easy solution. Demand for behavioral health services was increasing but reimbursement from Medicare, Medicaid, and commercial insurers didn’t fully cover the cost of care.

To expand services, leaders developed a five-year campaign, called “One Place for Care,” designed to bring behavioral health services together under one roof and provide better access across the region, said David Stark, philanthropy officer and chief of government affairs.

“We’re very proud of the fact that we’ve been able to expand, to treat patients from over 22 different counties and around our surrounding area,” Stark said on the “Advancing Health” podcast.

While the organization had a plan to fund the facility, the larger challenge was sustaining the services that would be delivered inside it.

UnityPoint turned to philanthropy as a central component of the strategy, framing its financial model around three primary sources of funding: patient revenue, debt, and philanthropy.

Leaders focused donor conversations on the gap between what behavioral health services cost and what reimbursement would support. That shift in framing led to a $1 million endowment gift—the organization’s largest and first endowed gift in 55 years—which helped generate additional gifts and build momentum for the broader campaign.

The effort was reinforced by strong governance. Stark pointed to consistent board support for investing in mental health and a shared understanding of philanthropy’s vital role in advancing the organization’s mission. That alignment translated into full participation, with every board member contributing financially to the campaign.

“We’ve made a concerted effort, starting with our board of directors, to talk about philanthropy, not as a nice-to-have, but as a must-have… to fund those things that are not funded by Medicare, Medicaid or commercial insurance,” he said.

Operational Readiness for Healthcare Campaign Success

With the headwinds facing healthcare funding and philanthropy’s increasing impact, leaders are exploring what it takes to launch transformative capital campaigns at scale, in a way that truly moves the needle for their organizations.

The most successful health systems approach philanthropy with the same dedication and strategic discipline as any other key revenue source. They prepare thoroughly, maintain operational excellence, and uphold transparency to earn and keep trust from donors and stakeholders alike.

Drawing from the experiences shared throughout this article, the path forward for healthcare organizations is clear: philanthropy is not just an optional supplement, but a vital force for expanding access, bridging financial gaps, and sustaining mission-driven care. As health systems confront complex needs and shifting landscapes, success lies in uniting operational readiness with visionary leadership, ensuring that every campaign’s success is measured by both dollars and by the wellbeing of the communities served.