Fair Share Spending: Financing Community Health Initiatives
Hospitals are now being held accountable not only for care within their walls but also care for those beyond their institutions. The Lown Institute, a nonpartisan health care think tank, examined finances of 1,773 US nonprofit hospitals. Fair Share Spending: How Much are Hospitals Giving Back to Their Communities? is the recently published study evaluating “fair share spending,” comparing “tax exemptions to financial assistance and meaningful community investment—including community health improvement activities, contributions to community groups, community-building activities, and subsidized healthcare services.” IRS categories of Medicaid shortfall, health professions education and research were not included. This is the first ranking to measure meaningful community investment for nonprofit hospitals nationwide.¹
The summary listed 23 hospitals or systems with the largest fair share deficits, ranging from $246 million to $69 million. The entities listed are some of the most well-known institutions in our country. The shortfall of just these 23 institutions totaled $2.658 billion. The deficit of all hospitals analyzed totaled $14.2 billion.
Additionally:
Many (77%) nonprofit hospitals spent less on charity care and community investment than the estimated value of their tax breaks.
In four states (MA, MN, RI and Washington, DC), the total fair share deficit for all hospitals is enough to wipe out all medical debt on credit reports in their respective states.
In 41 states, the total fair share deficit for all hospitals is enough to cover the net losses of all rural hospitals in each state (2020).
The 25 largest surpluses (those exceeding their fair share estimate) totaled $1.080 billion.
The ramifications of this study are profound and certainly likely to reverberate at local, state and federal levels. While the methodology may be questioned by some, the message from the report is clear. It is time for hospitals to embrace and prioritize population health and health equity in their communities. It is time for hospitals to go beyond the minimum requirements legislated by the Affordable Care Act stating hospitals must be “accountable” to the communities they serve. It is time for elevated investment in fair share activities.
There is an increasing source of revenue many hospitals are capitalizing on for these increasing health and well-being initiatives. It is called philanthropy.
How can increased investment possibly occur as hospitals are often operating with little to no profit margin, among other financial challenges? Where can hospitals find funding to elevate community health when they often cannot cover operating costs? There is an increasing source of revenue many hospitals are capitalizing on for these increasing health and well-being initiatives. It is called philanthropy.
Philanthropy is not a panacea to all challenges faced by hospitals and health systems. However, by harnessing the power of philanthropy, hospitals and health systems can close fair share deficits while making strategic investments in the drivers that determine our individual and collective health.
Philanthropy starts with donors. Donors continuously determine where their dollars will make the most impact. Health philanthropy leaders have often directed donors to investments in facilities and equipment, rarely considering or even asking donors to invest in their neighbors. Those times are changing. When donors make investments in their neighbors, they are supporting community health improvements by providing access to preventive care, chronic care management, healthy food, exercise, education and more.
Philanthropy is not a zero-sum game for our institutions. Securing investments in our communities does not replace or decrease support for other organizational strategic priorities. However, community health investments are known to strengthen bonds to our mission with those we serve and who support us.
How can we elevate involvement and impact in community health? To improve our fair share deficits and community investment we must:
Assess our organization’s fair share calculation and where investments are being made.
Understand our Community Health Needs Assessment (CHNA) report and how, if at all, philanthropy is being utilized to support program investments.
Speak with community health leaders to discuss their visions and how philanthropy can be included in their plans.
Identify organizational strategic priorities that would be of interest to our donor population.
Incorporate these investments as part of our campaign plans, supported by effective communication that articulates our position and vision on addressing community health and drivers of well-being.
Now that this issue has been evaluated by the Lown Institute, it is likely to become an annual or periodic assessment that hospitals need to actively address. It’s time for us to take the lead on community health in partnership with our local, state and national agencies.
About the Author: John F. Donovan, CFRE, is a Principal Consultant with Accordant. He specializes in campaign strategies and implementation. He can be reached at John@AccordantHealth.com or through LinkedIn.
