Health Institution Investments in the Determinants of Health: An Emerging Practice, Shaped By Health Care Industry Changes

One of the primary ways to increase the capital absorption capacity of a place is to expand the boundaries of the set of stakeholders who participate in the community investment system. In March, the Center published a paper that explored how hospitals and health systems participate in community investment activities by thinking broadly about their roles and resources.

Our research suggested that only a small number of health institutions are actively investing—with the expectation of a financial return—in improving the determinants of health. Over the course of this year, we’ve been focused on understanding the following questions:

  • What would it look like if health institutions considered investing in the determinants of health a strategic imperative—a necessary part of their work to remain competitive?
  • Who are the key decision makers who determine whether to invest in the upstream determinants of health and what are the considerations that matter to them?
  • What are the full range of resources a health institution may be able to use, and what are the constraints, return expectations, and level of risk for each of those sources of funds?

As part of an ongoing effort to answer these questions, we convened a roundtable of health institution experts in mid-September, which surfaced two important themes.

Paradigm Shifts in Health Care are Reshaping What is Possible

Major shifts in the health care sector are resetting expectations and the realm of possible opportunities for health institutions to invest in strategies that address the determinants of health. For example, some integrated health systems are moving from looking at hospitals as profit centers to thinking about them as cost centers because the cost of treating patients is higher than the cost of keeping plan beneficiaries healthy.  This transition advances the argument for investing in determinants of health because an integrated health system’s business strategy shifts from focusing primarily on patients to focusing on “covered lives,” i.e. people who are part of their healthcare plan.

Further, as the context in which health institutions operate changes, there are new windows of opportunity to intervene and invest in the determinants of health. For example, some cities are currently “overbedded”—they have more hospital beds than are needed—as services continue to transition to community-based sites that are less costly and often easier to access. When institutions take facilities out of commission, there is an opportunity to convert the buildings to housing, or other community uses. This can be an especially useful strategy to pursue in cities with “right to housing,” where the public sector ends up paying for hotels to house otherwise homeless people. The incentive to explore more cost-effective strategies for social services can lead the public sector to partner with health institutions to their mutual advantage.

In New Field, A Proliferation of Strategies

While some health institutions have started right off with an investment in affordable housing, others arrive at similar investment decisions based on experiences with their patient population. Clinical interventions happening outside a hospital’s walls, such as school-based clinics, can establish expose health institution decisionmakers to the community, deepen their understanding of community needs, and begin the process of thinking differently about nonclinical interventions. Screening for social needs can also raise awareness of the need to intervene in the community among clinicians.

Additionally, health institutions—especially those that include their employees in the health plans they manage—may choose to experiment with interventions in the determinants of health by focusing on their workforce, particularly if they employ many low-income people.  This is true even for hospitals that are not already integrating value-based payment (as opposed to volume-based payment, where you pay per procedure) into their provider business.  Motivations to do so may include reduced health costs and lower employee turnover, which can reduce operations costs for institutions.

The sources of funds that can be used to pay for interventions that address the determinants of health vary, from operations to community benefit to endowments.  Interestingly, some institutions  have used overfunded reserves, liquid assets held by an institution in order to meet expected future plan payments and/or emergency needs, to invest in social determinants, yielding both financial and strategic returns to the institution.

Moving Forward

We continue to explore how health institutions can participate in the community investment system. And we will apply the lessons we have learned into Accelerating Investments for Healthy Communities, our new initiative aimed at helping innovative non-profit hospitals and health systems advance and deepen efforts to invest in their communities, and inspire others to do the same. Stay tuned to our upcoming newsletters for more information on this initiative.

Transforming investment in communities

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CCI is supported by the Robert Wood Johnson Foundation, The Kresge Foundation, JPMorgan Chase & Co, and The California Endowment.

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