Selling to a Not-For-Profit Hospital? Could Endowment Funds Help You?

Most MedTech sales professionals don’t realize that when selling to a Not-For-Profit (NFP) hospital the funds for the purchase of their product, service or solution may come from the use of Endowment Funds. There are two types of funds:

  • Permanent Endowments are those that have been restricted by donors and are monitored by the hospital in perpetuity.
  • Temporary Restricted Endowments are those where use by the hospital has been limited by donors to a specific time frame or purpose.

If you sell to Not-For-Profit hospitals information about their Endowments Funds is located in Part V of their Form 990 that they are required to file each year.

What is an Endowment?

An endowment is a permanent fund of property or money, usually created with a gift of $50,000 or more, and usually in honor of the donor, patient or other individual chosen by the donor. It has a specific purpose defined for which the income derived from the money invested can be used.

An endowment fund is setup by the hospital (or institution) in which regular withdrawals from the invested capital are used for on-going operations or other specified purposes.

In an endowment fund, the principal is invested for growth in a diversified financial portfolio and only a portion of the investment earnings is spent. The rest of the earnings are directed back into the fund, so that the endowment grows in value over time. This allows the endowment to become a perpetual source of funding for whatever purpose the donor desires to achieve.

Endowment Examples

Here are some specific examples of the types of endowment funds available. The examples are from filings of the Form 990 which is the form that the IRS requires tax-exempt organizations to complete (some restrictions apply).  These are just a few of the many examples that are funded in NFP hospitals each year.

  • Permanent Endowment

o   One hospital lists thirty (30) separate endowment funds where the earnings will be used as needed for equipment, technology and patient programs and services.

  • Restricted Endowments

o   Donor Name-Nursing Scholarship Endowment Fund

o   Donor Name- Infant and Children’s Endowment Fund

o   Donor Name- Emergency Room Endowment Fund

o   Donor Name –Equipment Endowment Fund

o   Donor Name- Physician Recruitment Fund

o   Donor Name- Heart Institute Endowment Fund

Parting Thoughts

Foundation gifts are usually provided by donors as memorial gifts but many hospitals often have specific fundraisers in which donors can honor their loved ones in other ways. Patients and care givers benefit from these gifts by being able to acquire funds to support equipment, technology and patient programs and services. Savvy sellers should ask if these funds are available for their specific project. You should also consider making a donation to this very worthwhile cause.