Collaboration versus Competition: Lessons from a Banker for Hospitals

October 1, 2014

By Craig Nolte

Under the Affordable Care Act (ACA), hospitals are finding themselves in a similar environment that banks were when the Community Reinvestment Act (CRA) was passed in 1977.  Hospitals now have a clear obligation to the communities (especially under-served ones) they serve through Community Benefits requirements, similar to the way banks are required to serve the needs of low-income communities through the CRA.  Both hospitals and banks have to define a specific geography they serve and identify as well as prioritize how they will meet the needs of their communities.  Finally, they are “examined” by a “regulator” to determine compliance and satisfaction of the laws’ requirements.

Banks struggled initially with this new mandate and it took many years until the CRA began to produce measurable impact in low-income communities.  As someone who’s spent a great deal of his career as a CRA examiner and community development professional working with the CRA, there are potentially many key lessons, but perhaps the most essential one is the importance of collaboration.

Beginning last January under the ACA, nonprofit hospitals across the country are required to make public their community health needs assessments (CHNA), which describe the top health needs of their service areas and identify the needs they intend to address.  In addition, the hospitals developed implementation plans, which outline how the hospital intends to address the identified needs.  In many cases, the hospitals conducted the needs assessment totally independent of other hospitals which cover the same service area, and they then created strategies that did not consider the plans of other hospitals or take into account available outside resources.  However, many hospitals are now planning to conduct CHNAs jointly next time, avoiding the unnecessary duplication of effort and expense, and looking for ways to be more effective in their approach to improving the health of their communities.

An increasing number of hospitals in our district understand the benefits of working together and have formed or joined local public private partnerships, such as the Healthy Living Collaborative of Southwest Washington, Oregon’s Healthy Columbia Willamette Collaborative, and Alaska’s Community Health Improvement Collaborative. The organizations’ activities may include gathering data, discussing policy issues, engaging in advocacy, conducting training, holding community meetings, employing evidence based strategies, or other activities to improve the health of the community. In a few cases, banks have been involved with the organizations, providing additional information on the community and their lending and investment resources. The thrust of the partnerships are to seek cross-sector solutions to address underlying drivers of health needs, coordinate efforts, and leverage resources to improve health.

Still, other hospitals are unsure about partnering to improve community health. Earlier this year, the Federal Reserve Bank of San Francisco held one of several meetings with hospitals to discuss the benefits of collaborating to improve the health of their common service areas.  While nearly all of the hospitals understood and embraced the notion of working together to assist the highest users of health care (e.g. homeless, seniors, asthma patients), a small percentage feared that working together would lead to erosion of their competitive stature despite the lack of any obligation to divulge proprietary information. Certainly, the community had plenty of health needs to utilize the capacity of local hospitals.  The area’s high concentration of poverty, racial diversity, and individuals without health insurance, were only a few of the challenges facing the health sector.

Despite intense competitive pressures, banks have proven that they can remain competitors while working together to promote the needs of under-served communities through affordable housing, financial education, and access to credit and bank accounts.  Banks recognize that certain communities, such as those with low- and moderate-incomes, are difficult to assist independently, and seek strategic partnerships.  Simply put, a single bank does not have sufficient resources to address the wide range and depth of needs in these under-resourced communities.  Cooperation takes the form of partnering with other banks, nonprofit organizations, foundations and government agencies. The bank’s assessments, called “performance evaluations” are public too, and some bankers read other bank’s reports to increase their understanding of the community’s needs and meet with other bankers, their regulatory agencies or banking associations to develop collaborative strategies. The Federal Reserve has been holding meetings with bankers for over 20 years to educate them on community reinvestment opportunities and provide a venue for innovation.

Hospitals have a strong motivation to seek outside partners because many health inequities cannot be fully solved by clinical care.  Also, research on health has broadened our understanding of the leading causes of death, such as physical inactivity, unhealthy eating, tobacco use, and motor vehicle injuries, and that prevention needs to be based in the community through a variety of enhancements such as more walking paths, greater access to healthy foods, healthier homes, and cleaner indoor air. Focusing on these “social determinants” and “built environments” require more resources than the hospitals alone can provide.  Multiple partners working together in a “collective action” model could be very useful to help partners organize with a focus on results. Banks recognize that serving the breadth of needs in low-income communities requires a multi-prong and collaborative approach, and hospitals can utilize this opportunity to better serve their communities through a more holistic and coordinated effort.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.