To keep their tax-exempt status, not-for-profit (NFP) hospitals must quantify the “community benefits” they provide to improve the well-being of their communities. While most of these benefits come in the form of free or reduced medical care, hospitals are also expected to address community health needs. Two new studies suggest that by collaborating with local health departments (LHD), NFP hospitals can increase their spending on population health and address identified priority areas, such as overdose deaths.

In 2012, the Affordable Care Act (ACA) expanded the decades-old community benefit requirement by requiring NFPs to submit a triennial community health needs assessment (CHNA) and an implementation strategy. Some states took community benefit regulation even further, by requiring NFPs to collaborate with LHDs in health planning. For example, New York’s Prevention Agenda requires all NPFs and LHDs to collaborate on assessing local needs, selecting two health priorities, and planning and implementing initiatives to address selected priorities. The concurrent implementation of ACA’s requirements and the NY Prevention Agenda created a natural experiment that we used as the framework for the two companion studies.

The first study examined whether the NY requirement for NFP-LHD collaboration was associated with larger population health spending by NFPs. Population health spending includes community benefit dollars spent on “community health improvement services and operations,” “cash and in-kind contributions,” and “community building activities.” Using Internal Revenue Service (IRS) data and a difference-in-differences approach, we found that NFP-LHD collaboration was associated with increased average population health spending of approximately $393,000 to $786,000. The increase in population health spending was driven primarily by urban hospitals. Rural hospitals often have thinner profit margins than their urban counterparts, which likely translates into lowered capacity to invest in population health.

We found that significant increases began in 2015, three years after the ACA requirement.  However, given that CHNAs are conducted every three years, it may reflect the timing of the hospital’s first post-2012 CHNA, which includes the strategic plan for addressing the needs identified in the CHNA. Historically, it has been challenging to influence hospital community benefit spending, especially in population health categories. It may take a few years for collaboration with LHDs to translate into larger spending on population health. However, the effect was still significant in 2016, which suggests a sustained impact of this type of collaboration on hospital investment in population health.

In the second study, we used data from more than 1,500 NFP implementation strategy reports collected from hospital websites to examined whether NFP-LHD collaboration and joint selection of drug use as a health priority led to decreased county-level drug-induced mortality. When these local planning efforts identified drug use as a community priority, NFP-LHD collaboration was associated with a deceleration in county-level drug-induced mortality, with an estimated reduction of 8 deaths per 100,000 residents per year.

New York is not the only state that has promoted cross-sectoral collaboration between its NFPs and LHDs. More recently, Ohio and Oregon have also leveraged state regulations to require this type of public-private collaboration, and other states, such as Maryland and Maine, encourage it but don’t require it. 

These state policies reflect a common belief that collaboration between NFPs and LHDs may be important in improving community health and population health investment by NFPs.  Perhaps, as more evidence suggests that this type of collaboration is effective, more states may adjust their community benefit regulations to require NFP-LHD collaboration.

Given the size of federal, state and local tax exemptions—estimated at $24 billion in federal exemptions alone in 2011–NFPs are expected to increase their investment in population health improvement. States, or the Federal government, can influence these investments and encourage population health improvement activities through NFP-LHD collaboration. As other states begin to require this type of collaboration, it will be important to examine whether the findings from the two studies persist in other jurisdictions.

This post is based on the following studies:

Can Collaboration Between Nonprofit Hospitals and Local Health Departments Influence Population Health Investments by Nonprofit Hospitals?, published online in Medical Care, April 23, 2021. Authors include Tatiane Santos, Shoou-Yih Lee, Chloe East, and Richard Lindrooth.

Hospital Collaboration With Local Health Departments To Improve Drug-Induced Mortality: County-Level Estimates Using Mortality Data, 2009-2016, published online in Medical Care, July 26, 2021 Authors include Tatiane Santos and Richard Lindrooth.


Tatiane Santos, PhD, MPH

Postdoctoral Fellow, Leonard Davis Institute of Health Economics, Wharton School

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