Leveraging Community Benefit To Increase Health Care Value

Editor’s Note

This article is part of a Health Affairs Forefront short series, “Enhancing Value By Evaluating Health Care Services.” The series discusses ways to extend the use of tools for clinical and economic evaluation beyond medical technologies to the services and procedures that account for the bulk of health care spending; the goal is to create a more robust evidence base for the effectiveness and value of health care services. The articles in the series were completed with support for the authors from the Research Consortium for Health Care Value Assessment, a partnership between Altarum and VBID Health, through a grant from the Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA extended complete independence to Altarum to select researchers and specific topics. Health Affairs retained review and editing rights.


The search for value in health care has historically focused on the two concepts most closely connected with achieving that goal: the quality and cost of clinical care. By increasing quality or lowering cost while holding the other stable, health care delivery can achieve greater value. Technological innovation, early reimbursement reforms, and operational efficiencies tend to focus on one or both of these dimensions of value.

More recently, the US has begun recognizing the importance of social context for individual and population health. Bon Secours Mercy Health is one of many health systems investing significant resources in quality housing in the communities they serve. Such investment is not limited to providers, as evidenced by UnitedHealthcare’s deepening investment in analytics and a database of community resources. In addition, the government’s shift in reimbursement to value-based payment models is driving many of the attempts to achieve value through investment outside of traditional medical care.

One’s social context, commonly described through social determinants of health, affects the value of health care in two important ways. First, and perhaps most obviously, a better social context makes it less likely for an individual to need clinical care at all. Better education, higher quality housing, and greater food security, as just a few examples, are associated with greater well-being and, therefore, reduced need for clinical care. Nevertheless, even those with a very healthy social context will at some point need clinical care.

That improved social context cannot entirely prevent the need for care suggests the second way in which social context can affect value in health care. A more advantaged social context has the potential to improve the value of individual care without directly changing the cost or quality of the clinical intervention itself. The same surgical procedure, pharmaceutical, or behavioral intervention is often more effective for individuals in better social contexts. This can influence cost and quality in positive but indirect ways.

To achieve value, the health care system must aim to avoid unnecessary care and at the same time ensure that necessary care achieves the best balance of cost and quality as possible. Improving the social context of communities and individuals helps accomplish both of these goals and also helps us recognize that health equity may mean that certain types of care may be necessary for some groups but not others.

Nonprofit Health Care And The Promise Of Community Benefit

There are many reasons, particularly shifts in how care is reimbursed, why health care organizations are increasingly attentive to the social context of the patients and communities they serve. However, nonprofit health care, which operates over two in three hospital beds in the US, has an incentive that goes beyond any financial imperative. As part of the justification for tax exemption, these organizations provide services meant to benefit their communities. This is known as Community Benefit (CB).

For both historical and contemporary reasons, CB is strongly associated with charity care. The Hill-Burton Act in 1946 required those hospitals receiving grants to provide free or discounted care for those unable to pay. In 1956, the IRS formalized the tax-exempt status of nonprofit hospitals, requiring them to offer as much charity care as they could afford. With the passage of Medicare and Medicaid a decade later, policymakers wondered whether the need for charity care would largely be eliminated, so the justification for tax exemption went beyond charity care to include a broader notion of “community benefits”.

Federal CB regulations were relatively stable for nearly 50 years. From 2004 to 2008, both the US House and the US Senate held hearings and commissioned studies that focused largely on whether the amount of CB spending was sufficient to justify tax exemption. As a result, the IRS revised the disclosure (Schedule H Form 990) where hospitals detail their annual spending. The form now includes categories not only for care delivery (e.g., charity care, unreimbursed costs) but also community health improvement and contributions to community groups, as well as health professions education and research. The ACA placed additional requirements on CB activities in 2010, including a triennial Community Health Needs Assessment and an Implementation Strategy for responding to identified needs.

An expanded notion of community benefits was first suggested in the 1960s but shifting resources from clinical care to community health has proven difficult. Although there is significant variation in levels of spending across hospitals, on average approximately 85 percent of the over $60 billion spent each year on community benefit are expenditures related to medical care delivery.

Since public advocates and policymakers have largely positioned CB as a way for nonprofit hospitals to justify their tax exemption, nonprofit hospitals are incentivized to demonstrate high spending on CB. Yet the Form 990 establishes a strange disincentive for many activities that would likely reduce the cost of care delivery. The annual disclosure makes a distinction between “community health improvement” (which hospitals can count as CB) and “community building activities”, such as housing improvements, economic development, and environmental improvements, and coalition building (which the form suggests should not count as Community Benefit). This distinction also has the potential to minimize investment in the efforts that would best achieve health equity and perhaps achieve higher value.

Not A Single Measurement Of Value

The increased interest in social context and its influence on health raises the question: How ought these activities be prioritized? There are limited resources and nearly unlimited needs. The challenge in answering this question, however, is that determining and comparing the value of interventions is not straightforward.

One dimension of value in CB is whether the value is achieved by preventing the need for health care altogether or by making the clinical care that is delivered more effective and/or lower in cost. These are not always mutually exclusive, but the distinction is important because of where the value primarily accrues. In the prevention of care, the primary beneficiaries are the patients who do not experience illness and the public or private payers who save on health-related costs or other costs. Depending on the payment model, the providers may benefit somewhat, but preventing care when fee-for-service is still a dominant model of reimbursement is a risky proposition for most providers. When hospitals are sponsoring CB programs, devoting resources to community health improvement rather than clinical care often means actively choosing to place the health of the community over the financial health of the hospital. I suspect most leaders of nonprofit hospitals would make this choice, but we should not pretend it is always an easy one.

Another dimension of value in CB is the time horizon over which quality and cost are considered. Some interventions may demonstrate meaningful results in the short-term, yet many of the most important outcomes for these activities will be measured in decades and generations rather than months or even years. We know, for example, that the effects of childhood trauma can be seen over the entire life course. Therefore, an intervention that reduces traumatic experience for children may not reveal its true value for a generation. The preference for more immediate results is yet another reason why organizations often prioritize interventions that target individual social needs as opposed to structural determinants of health.

In addition, one can apply the insight of clinical nuance, advanced by value-based insurance design, to community health improvement. The value of community health activities depends on who receives it, who provides it, and where it is provided. A violence prevention program may deliver better results, and thus more value, if delivered by trusted leaders rather than someone from outside the community. Or a policy promoting community gardens may be lower cost, and thus deliver more value, in a part of the city where unused land is more available.

A final, yet essential, caveat to the search for value in CB is that there are objectives that are sometimes more important than achieving the highest quality at the lowest cost. It is possible that to achieve equity across social contexts, a narrow notion of value will have to be amended to account for distribution across populations. For example, it may be more expensive to translate materials in second and third languages, but the additional cost is justifiable in order to move closer to health equity.

The Social Location Of Community Benefit Efforts

Even though incentives are strongly aligned toward devoting resources to clinical care, there are some notable projects that show the promise of CB efforts for community health improvement. A conceptual framework suggested by the World Health Organization differentiates between collective structural determinants (socioeconomic and political context), individual structural determinants (socioeconomic position, gender, ethnicity), and individual intermediary determinants (material circumstances, psychosocial factors).

Intermediary Determinants

This area currently has the most CB investment. Material circumstances, such as housing or food security, are often the focus of interventions. This is likely because they are more proximate to health outcomes than other elements of one’s social context. Some interventions can be done at the individual level while others occur at the community level.

Social Cohesion And Social Capital

To make CB efforts more effective, some hospitals have invested in building coalitions across organizations, including some that would otherwise be considered competitors. Many adopt shared strategies for community health, such as a Collective Impact Model.

It is less common to find examples of hospitals directly investing in improving the social cohesion of the communities they serve. Perhaps increasing participation in civil society and increasing trust in institutions and neighbors is beyond what we expect hospitals to provide. Yet in communities where hospitals are anchor institutions, we may wish to incentivize these sorts of initiatives.

Socioeconomic And Political Context

Hospitals do not commonly engage in efforts to shape public policies other than those that directly affect their operations. Even when policies are directly related to health, such as policies concerning tobacco or food, this domain of social context is not yet a priority area. Further, even though policies on housing, transportation, land use, labor, or education could significantly affect the health of populations, hospitals will rarely spend capital, political or otherwise, on such matters.

The first section suggested several reasons why CB resources are devoted largely to clinical care rather than community health improvement. Of the relatively small percentage that goes to community health, there are also several reasons why the majority of resources are devoted to intermediary determinants rather than structural determinants. Among those reasons is the challenge of measuring the effectiveness of any specific intervention in a way that is acceptable to the health care or policy communities that highly value evidence of causation.

Leveraging Community Benefit To Realize Greater Value

There is a great deal that remains unknown about how CB resources can best be used to improve the value of health care. However, several things are already clear. First, we must encourage or require evaluation of billions of dollars nonprofit hospitals spend every year and the sharing of these evaluations. At the same time, we must not let the need for better evaluation incentivize short-term interventions over long-term projects that are almost always more difficult to evaluate.

Second, we must address the reasons, regulatory and otherwise, why nonprofit hospitals continue to spend such a significant proportion of CB on clinical care. Given that much of this is driven by the large number of uninsured people and the below-cost reimbursement for Medicaid, reform in this area will not be an easy task. But a change such as the IRS clearly indicating that many community building activities should be recorded as community benefit would be a relatively easy step in the right direction.

Nonprofit health care, through its significant spending in CB, is in a unique position to help facilitate the shift to value-based care. However, efforts in community health improvement can be just as wasteful as the elements of clinical care that we are now trying to correct. It will be easier to get it right from the beginning rather than fix a system that is already in place. To do so will require a clearer commitment to value and an appreciation for its complex nature.

Authors’ Note

Rozier serves on the board of directors of SSM Health Care Corporation but does not receive financial remuneration for this work. Enard is paid consultant for the Memorial Hermann Community Benefit Corporation and CHI Health.

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