Endowment income for the post-reform era

• Published in: Healthcare financial management Vol. 65; no. 5; pp. 132 - 133
• Main Author: Jarvis, William F
• Format: Journal Article
• Language: English
• Published: United States Healthcare Financial Management Association 01.05.2011
• Subjects: Asset allocation; Capital Financing - organization & administration; Costs; Deficits; Endowment; Expenditures; Gift Giving; Government spending; Health administration; Health care policy; Health Care Reform; Hospitals; Hospitals, Voluntary - economics; Hospitals, Voluntary - organization & administration; Medicare; Nonprofit hospitals; Nonprofit organizations; Profits; Regulatory reform; United States; United States; United States > US
• ISSN: 0735-0732

Not-for-profit organizations could be said to be in the "deficit reduction business." The rationale for this view is that as soon as a not-for-profit opens its doors, it is faced with the task of finding the financial resources to defray current expenditures and provide for the future. Not-for-profit hospitals and health systems rely primarily on earned revenue to fill this deficit. Over the past 20 years, Medicare spending has grown at an annual rate of 8%. The Affordable Care Act of 2010 aims to reduce that rate of growth to 6% per year, largely by reducing Medicare payment -- a step that will have a profound effect on the revenue line, and the operating margins, of many hospitals. Endowment assets thus become more important than ever for the long-term support of the not-for-profit healthcare sector. For smaller hospitals and health systems with few endowment assets, active development efforts to increase gifts and donations will he critical.