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Hospitals adopt anchor institution economic development strategies

November 1, 2015

By BETSY TAYLOR

In the report Hospitals Building Healthier Communities: Embracing the Anchor Mission, lead author David Zuckerman explains that a mid-20th century economic model centered on core corporate employers in a community providing reliable blue-collar jobs is increasingly hard to find in the U.S. Instead, nonprofit or public employers such as hospitals and universities often are among a community's most resilient anchor institutions. These organizations, once established, rarely move from a region and remain tied to their communities due to "their mission, invested capital and customer relationships," he writes in the 2013 report, released by The Democracy Collaborative.


Zuckerman

Zuckerman is The Democracy Collaborative's manager for health care engagement. The collaborative supports equitable and sustainable economic development to build wealth in low-income communities.

He spoke with Catholic Health World about how and why hospitals and health systems are devising anchor institution strategies to strengthen local economies.

What's an anchor institution strategy?

An anchor institution is a nonprofit or public institution that has a mission to support the local community beyond its bottom line because of its nonprofit or public ownership. Since it's unlikely to get up and move, it can plan for its long term by investing in its surrounding community. An anchor institution strategy embeds the philosophy of community benefit throughout the organization's business practices, including hiring, purchasing and investing, so that all of its activities are fully aligned to achieve its mission.

What's a good starting point for a not-for-profit hospital developing an anchor institution strategy?

A community health needs assessment can provide insights into the root causes of many community needs, which often go well beyond access to health care. They are everyday issues: stable employment, clean and safe streets, affordable housing. Adopting an anchor mission means exploring how to use an institution's assets to strengthen the local economy and address long-standing inequities. For example, a hospital might deposit its cash in community banks or credit unions that lend more locally. It might invest in affordable housing initiatives. It could adopt supply chain protocols to incentivize supporting minority-owned and local businesses with the dollars it will spend anyway.

How do affordable housing, a low unemployment rate and clean and safe streets relate back to health care issues?

There's been significant research showing that conditions that create premature mortality or the conditions that create poor health are really the social, economic and environmental factors that people live, work and play in every day. Access to quality medical care is an important element of that, but it's only about 20 percent of the equation. The other 80 percent is the social and economic conditions and the environmental factors and the behaviors that those social and economic conditions ultimately influence. If we're going to talk about creating healthy communities, then we really need to focus on those other factors. So what we're trying to do is strategically leverage health care dollars to treat issues that could be better treated through community development investment. Obviously, no one institution can do this alone, but the hospital is often the largest employer. It can serve as a community leader around how non-clinical interventions can improve health and well-being for everyone.

What are some innovative ways that Catholic health care systems have invested in the low-income communities they serve?

There's a tremendous opportunity to leverage the investment portfolios of health care systems — some that exceed several billion dollars. Catholic health care systems are leaders in using these resources as a tool for community health improvement in their service areas. A number of Catholic health care institutions have set aside a portion of their investment portfolios for low-interest loans to either nonprofits or financial intermediaries that support community development.

For instance, Dignity Health has a $100 million loan pool that represents a little more than one percent of its investment portfolio. It's being used to make low-interest loans. Pablo Bravo Vial (Dignity Health's vice president of community health) said during the Great Recession the loan fund outperformed the overall investment portfolio.

They are invested in everything from affordable housing to expansion of federally qualified health care centers to community development financial institutions, which then take that money and relend it out for affordable housing or to microenterprises, etc. They have thought strategically about these investments. There have been very few defaults. The loans range in size from $50,000 to $5 million, and amplify the impact of their community benefit grants.

Several Catholic health care systems don't give direct loans, but invest a portion of their dollars in community development financial institutions — financial intermediaries that support community development work and are an important part of community development finance in the United States. Those institutions help fund grocery stores in low-income communities, charter schools, federally qualified health care centers, affordable housing and even small businesses. Health care systems receive a return on these dollars, but at a slightly lower interest rate (than they might if they invested elsewhere).

What percent of its portfolio should a hospital commit through an anchor institution strategy?

I don't think there is a limit. An anchor mission, or "all-in for mission" as Tyler Norris (vice president for Total Health Partnerships at Kaiser Permanente) refers to it, is about taking an asset-based approach to community health improvement. The question that needs to be asked is how can you leverage the … resources of the institution to support health promotion.

Over the next year, The Democracy Collaborative, with the support of the Robert Wood Johnson Foundation, will be developing anchor mission tool kits to allow hospitals to more easily integrate community health principles into local and diverse purchasing; community investment (focused on investment portfolio funds); and local hiring and workforce development.

In all of this, what is important to keep in mind is the geography or community an institution wants to impact. If the population or geography is too large, you'll never be able to demonstrate impact. This is one reason why institutions need to partner and form coalitions with other anchors in their community to amplify their impact. First, though, it starts with changing internal practices, and recognizing that healthcare needs to adopt a new way of doing business.

Copyright © 2015 by the Catholic Health Association of the United States
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