Children's Hospitals Marketing

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Children's Hospitals Marketing Budget

While information on the marketing budgets of children's hospitals was largely unavailable, an estimate can be made when considering the data that is publicly accessible. Children's Hospitals in the United States spend an estimated $10.24 million on marketing. This estimated figure is based on data on the average marketing budgets for the healthcare industry and the average revenues of the top 25 children's hospitals. Below you'll find calculation details and other useful information.

OVERVIEW

A 2017 survey conducted by Duke University and the American Marketing Association reported that the healthcare industry dedicates 6.2% of their revenue on average to marketing. Boston Children's Hospital, as of 2014, had an annual marketing budget for a few years of about $5 million. It is unclear whether this amount matches the hospitals current marketing figures. Typically, a Wonder request relies on data from within a 2-year time frame. However, due to the lack of direct information on this subject, this useful figure was included in order to provide data on one of the nation's top children's hospitals.

Becker's Hospital Review listed the revenues of 25 of the top children's hospitals in the country. These hospitals represent each region of the country and have a total revenue of $41.32 billion and an average revenue of $1.65 billion.

The report notes that these figures are "not exhaustive, as some health systems and/or children's hospitals do not have individual listings on" the American Hospital Directory. This fact should be taken into account when considering this estimate. Below is the complete list of the hospital revenue figures that were used to reach our conclusion along with calculation details.


1. University Hospitals Rainbow Babies & Children's Hospital (Cleveland) — $3.60 billion
2. Lucile Packard Children's Hospital at Stanford (Palo Alto, Calif.) — $2.86 billion
3. Texas Children's Hospital (Houston) — $2.35 billion
4. Children's Medical Center Dallas — $2.27 billion
5. Cincinnati Children's Hospital Medical Center — $2.15 billion
6. Saint Christopher's Hospital for Children (Philadelphia) — $1.91 billion
7. Nationwide Children's Hospital (Columbus, Ohio) — $1.65 billion
8. Miami Children's Hospital — $1.61 billion
9. Phoenix Children's Hospital — $1.55 billion
10. Rady Children's Hospital (San Diego) — $1.51 billion
11. Seattle Children's Hospital & Regional Medical Center — $1.50 billion
12. Boston Children's Hospital — $1.49 billion
13. Children's National Medical Center (Washington, D.C.) — $1.47 billion
14. Children's Mercy Hospital (Kansas City, Mo.) — $1.44 billion
15. Children's Hospital of Pittsburgh of University of Pittsburgh Medical Center — $1.42 billion
16. Children's Hospital Colorado (Aurora) — $1.41 billion
17. Children's Hospital Los Angeles — $1.37 billion
18. Children's Hospital of Orange County (Orange, Calif.) — $1.36 billion
19. Cook Children's Medical Center (Fort Worth, Texas) — $1.34 billion
20. Ann & Robert H. Lurie Children's Hospital of Chicago — $1.31 billion
21. Alfred I. DuPont Hospital for Children & Nemours Children's Clinic (Wilmington, Dela.) — $1.29 billion
22. Children's Hospital Central California (Madera) — $1.14 billion
23. Children's Hospitals and Clinics of Minnesota - Minneapolis — $1.12 billion
24. Children's Hospital (Birmingham, Ala.) — $1.12 billion
25. All Children's Hospital (Saint Petersburg, Fla.) — $1.08 billion

CALCULATIONS

The Total Revenue of the Top 25 Children's Hospitals / The Number of Top Children's Hospitals = Average Revenue of Children's Hospitals

$41.32 billion / 25 = $1.65 billion is the average revenue of children's hospitals.


Average Revenue of Children's Hospitals x Average Percentage of Revenue Spent on Marketing in the Healthcare Industry = Average Marketing Budget.

$1.65 billion x 6.2% = $10.24 million average marketing budget.

TV BUDGETS

Precise details on marketing channels were largely unavailable. This is likely due to the fact that marketing breakdowns are not regularly released to the public. Details that are available tend to present information related to hospitals or healthcare as a whole as opposed to strictly focusing on children's hospitals. This information is also usually focused on marketing in general and not necessarily on individual marketing channels.

Despite this some information on TV budgets was available. In terms of TV advertising, in April 2017, St. Jude's was the top ad spender. In that month, the hospital spent "$8.7 million, running 15 ads 2,212 times on national TV." The hospital also had 133.4 million TV ad impressions and an average view rate of 95.51%. St. Jude's also allocated $109,606,000 of their budget to informational activities and materials, $41,898,000 to fundraising, and $16,847,000 to administrative expenses.

Another hospital, Shriners Hospitals for Children, spent $1 million during April 2017 on TV marketing. They ran "18 ads 783 times on national TV" with 51.3 million TV ad impressions, and a 94.57% average view rate.

CONCLUSION

In conclusion, it is estimated that on average children's hospitals spend $10.24 million on marketing. In 2014, for a few years, Boston Children's Hospital had consistently spent approximately $5 million on their marketing budget.
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Children's Hospitals Corporate Sponsors / Affiliates

OVERVIEW

In the United States, for every dollar raised by children’s hospitals, as much as 25 cents is spent on marketing towards potential sponsors/affiliates. Among the four organizations provided as representative examples (Children’s Hospital of Philadelphia, Boston Children's Hospital, St. Jude Children's Hospital, and Seattle Children's Hospital), total annual spend on sponsor/affiliate marketing ranges from $35,478,000 for the smaller Seattle Children’s Hospital, up to $223,881,000 for the larger St. Jude’s Children’s Hospital. Although disclosure of fundraising expenses is a requirement in the United States, financial reports can be misleading due to underreporting bias and company structure. We therefore triangulated annual marketing spend up to 25 cents/dollar by using data from the Association for Healthcare Philanthropy as compared to revenue reported by those hospitals on their Internal Revenue Service Form 990, using the latest public resources available.

DISCLOSURE OF FUNDRAISING EXPENSES

In the United States, all organizations exempt from income taxes, including non-profit organizations such as children’s hospitals, are to report their annual revenue on an Internal Revenue Service (IRS) Form 990. Apart from the IRS, there are groups such as the Association for Healthcare Philanthropy (AHP) that track funds raised by these hospitals and the associated fundraising costs. According to a Forbes article on bias in fundraising reporting, AHP president William McGinly is quoted as stating these organizations “…say they spend less than they do...”, and specifically cites St. Jude Children’s Hospital. The article suggests that underreporting occurs because there are no standards on reporting the costs of fundraising.

Similarly, revenue reported on an IRS form 990 can be misleading due to how a nonprofit can structure its company; the groups that are actually raising funds for the company can be created as separate entities and therefore not appear in the nonprofit’s financial statements. With respect to St. Jude, they created an organization called the American Lebanese Syrian Associated Charities (ALSAC), designating it as their “fundraising and awareness organization,” with its sole mission to “raise the funds and awareness necessary to operate and maintain the hospital.”
With this in mind, we performed a deep-dive of the revenue reported by the four chosen hospitals on their most recently available IRS Form 990, versus national data gathered by the AHP, year 2016.

ASSOCIATION FOR HEALTHCARE PHILANTHROPY (AHP) 2016 REPORT

The AHP is an international organization that exists, in part, as a resource for professionals that encourage fundraising for the healthcare industry in North America. Using data provided by multiple nonprofit hospitals, the AHP releases an annual report that tracks key metrics such as total funds raised, return on investment (ROI), cost to raise a dollar, trends in giving, and includes an analysis of top-performing organizations. The 2016 report includes data contributed from several US children’s hospitals, and summarizes that for all institutions contributing data, the median approximate cost of raising a dollar was 25 cents.
With respect to top performing organizations, the AHP defines high performers as those in the top 25th percentile for net production returns. While the four hospitals in question (Children’s Hospital of Philadelphia, Boston Children's Hospital, St. Jude Children's Hospital, and Seattle Children's Hospital) did not contribute data for the 2016 report, it is interesting to note that the four children’s hospitals that did in fact contribute (Children's Hospital Los Angeles, Children's Hospital & Medical Center Omaha, Cook Children's Health Foundation, and Dayton Children's Hospital) were all rated as top performers. This may indicate that children’s hospitals in general tend to be top performers. Further, the 2016 breakdown of funding sources for high performers versus all institutions notes that "high performers depend less on annual gifts and special events... and more on corporate gifts and major gifts."
With respect to gifts, the AHP publishes guidelines for contributing organizations as to the types of gifts to report, and how to report them (page 16 of the AHP’s Benchmarking Toolkit). Using this data, we can compare the AHP’s ROI calculations to the revenue reported on each hospital’s IRS Form 990.

BOSTON CHILDREN’S HOSPITAL, 2015 IRS 990 REVENUE

The Children’s Hospital Corporation, doing business as Boston Children’s Hospital, reported total 2015 revenue of $432,431,459 as coming from contributions, gifts, grants, and other similar amounts. Further, total functional fundraising expenses were reported as $23,249,890. These reported amounts suggest that 5.4% of total revenue was spent on fundraising (divide functional fundraising expenses by total revenue). Recall from the 2016 AHP report that the median cost of fundraising is 25 cents/dollar, or 25% of total revenue. We can therefore set the possible range of annual fundraising spend at Boston Children’s Hospital from $23,249,890 (8.6%) to $108,107,865 (25%).

CHILDREN'S HOSPITAL OF PHILADELPHIA, 2015 IRS 990 REVENUE

Children’s Hospital of Philadelphia reported total 2015 revenue of $253,639,321, and has reported $0 for total functional fundraising expenses. Recalling that a nonprofit’s annual financials can be misleading (via either underreporting or company structure), the true fundraising spend for Children’s Hospital of Philadelphia is unknown. However, using AHP’s 2016 median cost of fundraising of 25 cents/dollar, the annual spend could range from $0 (0%) to as high as $63,409,830 (25%).

SEATTLE CHILDREN'S HOSPITAL, 2015 IRS 990 REVENUE

Seattle Children’s Hospital reports 2015 total revenue of $141,913,396, and also reports $0 for total functional fundraising expenses. With the true annual cost of raising a dollar unknown, we again use AHP’s 2016 median cost of fundraising of 25 cents/dollar to define the annual spend range of Seattle Children’s Hospital from $0 (0%) to as high as $35,478,349 (25%). Of the four hospitals in question, this amount of annual spend represents the lowest dollar amount.

ST. JUDE CHILDREN’S HOSPITAL, 2015 IRS 990 REVENUE

Total revenue reported by St. Jude’s Children’s Hospital for year 2015 was $895,523,715, with total functional fundraising expenses reported as $0. Applying the 25 cents/dollar median cost of fundraising from the 2016 AHP report, we can set annual spend range for St. Jude Children’s Hospital from $0 (0%) up to $223,880,928 (25%). This dollar amount represents the largest annual spend of our four hospitals.

FUTURE MARKETING TRENDS

While this report has focused on traditional data used for calculating marketing spend, there are other marketing trends on the horizon. With the advent of data analytics, St. Jude Children’s Hospital is experimenting with data-driven fundraising to more effectively target donors. Using Big Data, St. Jude can use metrics such as “cost per donor acquisition,” variances in lifetime value, response rates, and churn ratio, all of which ultimately affect ROI. St. Jude is also using Big Data to shape how potential donors perceive the St. Jude brand. For example, visualization of complex genetic data can be created in a more user-friendly format.

Similarly, while traditional marketing and fundraising remains an important part of generating revenue for nonprofit hospitals, other areas of potential revenue are being examined. An article from the Children’s Hospital Association highlights the value of entrepreneurial partnerships between Research and Design, for example, and outside investors. Niki Robinson, vice president of the Center for Technology Commercialization (CTC) at Cincinnati Children's Hospital, states, "the CTC has a $1 million annual fund for developing the proof of concepts for new therapies, drugs, and inventions... [which attracts] medical device or drug company to talk to us... and develop these ideas into something more."

CONCLUSION

While there may be bias in how a nonprofit children’s hospital reports its annual marketing spend, we can analyze revenue reported on an Internal Revenue Service Form 990, alongside data available from the Association for Healthcare Philanthropy, and triangulate that up to 25 cents/dollar earned is spent on marketing towards potential sponsors/affiliates. Additionally, Big Data may affect how nonprofit hospitals target potential donors in the future via analyzing new data metrics, and exploring other entrepreneurial partnerships that may represent new sources of fundraising.
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