Hospital Community Benefit: How Do You Measure and Why Should You Care?

Healthcare Transformation, Business & Financial Planning, CON/CHNA/Regulatory

It seems like everyone is grading hospitals these days. Safety, value, clinical outcomes, patient satisfaction – the list of metrics for judging a “good” hospital just keeps growing and growing, so maybe it’s no wonder that the American Hospital Association is pushing back on the newest report card from the Lown Institute.

Now in its second year, the Lown Hospital Index ranks more than 3,000 U.S. hospitals on a composite “social responsibility” score that includes three factors: value of care, patient outcomes, and health equity – and it’s that final category that rankles some in the industry.

According their 25-page report on methodology, Lown defines health equity by trying to measure things like executive pay, inclusivity, and community benefit. That’s a messy and complicated affair, with plenty of missing data and big assumptions.

On “inclusivity,” for instance, Lown tries to define a catchment area for each hospital and then compare how patient demographics match up to the local Medicare population. As AHA points out, that measure is fundamentally flawed: “Hospitals treat the patients who come through their doors regardless of their ability to pay … [y]et Lown penalizes hospitals whose patient mix does not match the local Medicare population.”

As for “community benefit,” Lown relies on metrics like charity care and Medicaid revenue, while ignoring factors such as unreimbursed Medicare expenses, according to another detailed critique from the AHA. The bottom line: “In total, hospitals of all types have provided more than $702.51 billion in uncompensated care to patients since 2000 for which no payment was received for patients in need.”

Hospitals Benefit from Community Partnerships

At Ascendient, we can understand the concern over flawed measures of health equity, but we did see one part of the formula that looked intriguing. In addition to charity care and Medicaid revenue, Lown scores hospitals on “community investment,” which it defines likes this:

“Community investment comprises a subset of hospital spending including: Subsidized health services, such as free clinics, some emergency services, telehealth services, and other services provided at a loss to the hospital; community health improvement activities such as health fairs, community health education classes, immunizations, interpreter services; contributions to community organizations; and community building activities that help increase the capacity of the community to address health needs and often address the “upstream” factors that impact health, such as education, air quality, and access to nutritious food.” [italics original]

That’s not just a measure of equity – it’s also a measure of good business strategy. We’ve long been telling our clients that community hospitals need much deeper partnerships with local nonprofits to provide the kind of population health services that can help to cut expensive admissions by addressing the social determinants of health. That’s a key trend in healthcare transformation and a major factor in our Healthytown model.

Data from the AHA show that community building activity barely registers as a management strategy for most hospitals. Community benefits represent 13.9% of total expenses for the average hospital, but the vast majority of that expense goes to financial assistance for patients who can’t pay their bills. By contrast, cash and in-kind contributions to community groups represent just 0.2% of expenses for small and medium hospitals [pp. 3-4].

This is a missed opportunity, because smarter investment in community building is not about charity or “checking a box” for the IRS. Instead, it’s about improving the health of under-resourced, hard-to-reach populations – the very patients who tend to run up the highest unreimbursed costs when admitted to the hospital for conditions that could have been avoided with better care.

Churches, schools, food banks, shelters, clubs and membership organizations – the nonprofit infrastructure reaches deep into every community, offering a cost-effective channel for relationship-building, education, and service delivery. These organizations already have a stake in the health and wellness of their members; they are partners waiting to be activated.

If you’re a healthcare executive, it’s easy to check your Lown ranking on community investment. Just click here, scroll on the left side to select your location and facility type, then click the buttons for “Community benefit” and “Community investment.”

Remember, it’s not a perfect measure, but it might be a good conversation starter – and we’d love to be a part of the conversation. Please contact us if you’d like to discuss smarter community partnerships as a part of your broader strategy for healthcare transformation.

[cta 1]