Dignity Health is one of the largest nonprofit health systems in the nation, with 39 hospitals and more than 400 care centers in communities across California, Arizona, and Nevada. In this installment in our series of conversations with NFF CEO Antony Bugg-Levine, Dignity Health's VP of community health, Pablo Bravo, shares his vision for how hospital systems can support community-based organizations in shared pursuit of better health for all.

Pablo leads Dignity Health's $100 million community investment program, which provides low-interest loans to community organizations addressing issues that impact people's health and well-being. This approach to investing in the community began decades ago with Catholic sisters who founded Dignity Health. As national healthcare reform shines a new light on similar efforts, Dignity’s experience holds lessons for everyone invested in reducing healthcare costs and building healthier communities.

Antony Bugg-Levine: From its early days, Dignity has understood that health means more than providing good clinical care in a hospital setting. As a hospital system, how are you seeing the broader industry change its understanding of what it means to support better health?

Pablo Bravo: The way that hospitals are being reimbursed for services is changing, and we have new requirements being placed on hospitals. Hospitals are now shouldering responsibility not only for the improvement of health in our communities, but for addressing the social determinants of health. We need to go beyond providing physical health and urgent care needs to address the upstream social determinants of health, such as access to good affordable housing, access to food, and access to transportation and other services.

ABL: We at NFF are very excited about the potential for great organizations delivering those critical services — like healthy food, and housing, and transportation — to work in partnership with hospital systems in order to ensure healthier communities.

In theory, it seems so obvious that we should be providing people with better services so they don't get sick, rather than just treating them when they are sick, but it's not the way our system has been built. So there are many opportunities, but also many challenges, in helping hospital systems and community-based groups work together.

PB: In many cases, there is a need to develop the capacity of organizations that are addressing these issues. That is one of the goals of our investment program. If we expect more from these organizations, we need to ensure they have the resources they need.

ABL: Dignity Health has been a leader in using not only grant money, but investments, to benefit low-income communities. Can you share a few examples of how you use loans improve an organization's ability to serve its community?

PB: We made a loan to a clinic that wanted to become a Federally Qualified Health Center. However, it didn't have the working capital to develop and grow into the new business model. Our loan provided the startup costs needed until the clinic was eligible for reimbursements from State and Federal government at the higher FQHC rates. Now, in addition to that core clinic, that FQHC has several additional “look alike” facilities that are similarly on the path to being able to receive more stable revenue to support their services.Our investment really expanded services throughout an entire region.

Our support of the Children's Museum of Phoenix is an example of how a community investment loan can jump start a stalled project. The original organization behind the museum was approached by the city with an opportunity to use an old high school as a potential site. They started a capital campaign for the build-out of the museum within that facility, but it wasn't gaining traction in the community. It was hard to secure donations for an idea. Dignity Health provided a loan to finance the construction. Sure enough, donations came through the minute they opened the doors.

Beyond the direct benefit to children who visit the museum, it helped spur a renovation of the area. There is now a rail system running next to the museum, and there’s now much-needed economic development in the neighborhood as a result of the museum.

ABL: While these type of community investments can be powerful, they are not the core business of a hospital. How do you make sure that your relatively small team is able to identify and support great projects?

PB: We draw on the expertise of partners.There's only so much a hospital provider can do. Partnerships such as ours with NFF allows us to leverage our money and extend our reach, and also to access knowledge. When NFF identifies deals that meet our impact and financial parameters, we are happy to join as a co-investor. The thing that NFF brings to the table is really the innovative way that you're looking at how to invest in communities.

ABL: In thinking about our work together, financingHealthRIGHT 360's San Francisco facility is a good example of how a health system and CDFI can bring unique assets together for community health. HealthRIGHT serves some of the city's neediest residents, but was at risk of closing if its existing lease was not renewed. The project to secure a permanent home had huge potential to support a wide range of great outcomes, but required investors who understood the complexity of the project and were willing to stay with the borrower through the inevitable twists and turns.

Impact investors can be creative in how we lend without being reckless. Sometimes people make the mistake of thinking that because you're doing the work that others are not, it means you are going to lose your shirt. In our experience, it comes down to the ability to really understand how to manage risks rather than just either ignore them or stay away.

PB: Yes. Though in order to support healthy development of community-based organizations, we need investors who will provide low rates and easy access to capital. We think of our program as a beacon for investment in new areas. We're going to continue to invest in places with serious economic challenges and try to entice other investors to come along. There is a lot of opportunity to have a real impact in low-income communities.

ABL: That potential impact is what excites us most about the shift toward organizing service delivery — and funding — around the outcomes we all want to see. In your work with community-based organizations and clinics, how important is it for them to be able to demonstrate their outcomes?

PB: The ability to demonstrate outcomes is definitely becoming more and more important to us, not only to us but I think to everybody. We have a grants program as well as the investment program, and in both cases we look for results such as: How many individuals did you serve? Or, how many meals did you provide? How many units of housing were built?

We now need to consider outcomes in a new sense. If we build a unit of housing, how did that unit of housing improve an individual's health? For example, did a child's asthma episodes reduce because they're now in a cleaner, newer home? Perhaps they don't need to go to the emergency room as often. Or did access to food improve a person's health by reducing the possibility of the individual becoming a diabetic? Did the new transit-oriented village bring needed services to families ? Or allow them to get closer and be able to walk outside?

As a health care provider, we need to better measure the outcomes we're getting from investments and grant dollars, and better understand how these connect to gains in community health.

ABL: You have a vision for what would be possible, where organizations that borrow money are able to measure those outcomes that they achieve, and to quantify the financial impact that those outcomes have on the investor, in your case the hospital system. Tell us how that would make a difference.

PB: Pay for Success— an approach where investors are reimbursed based on service providers' success achieving measurable outcomes —is a good example. Pay for Success projects are helping to demonstrate that when an individual has housing, it can lead to better outcomes around health, and reduce the cost of health care. It can also lead to related benefits and reduced costs.

We have the opportunity to reduce the costs of health care by creating good outcomes with the investments that we make. Ultimately, this is going to show health care payers like HMOs, or even Medicaid or Medicare, that some of services should be paid by them, because they reduce problems and ultimate costs. I think that there's potential here for revenue streams to come from nontraditional sources.

ABL: Could you imagine a scenario where an investor such as Dignity would quantify financial return based on both a loan's interest rate, and also based on savings that the supported organization creates? For example, if a loan to a group helping people manage diabetes through healthy food and results in fewer costly ER visits.

PB: Yes. As we move into this world of population health management, hospitals and hospital systems are increasingly held responsible for the overall health of a segment of the population.

Our investments need to create positive outcomes and reduce our risk, in an effort to really be able to manage a population within the financial structure that we're going to have. The creativity doors are going to have to open, and all kinds of stakeholder organizations are going to have to think about the best ways to mitigate risk, share revenues, and improve community health.

ABL: If we, as a society, continue to work to realize the promise of an integrated, prevention-focused health system that works in partnership with community groups in an empowering way, where do you hope we could be in five years?

PB: There is no way to be certain, but I believe we could make significant progress stabilizing low-income communities. Stabilize in the sense of stabilizing housing, improving the access to care, building the capacity for accessing food, not just in the purchase of food but in the distribution and even the growing of fresh produce within those communities, and improving access to transportation. We can make these things happen in five years.

Disclosure: NFF has a loan from Dignity Health to support community health investments, and an informal origination partnership. The Chair of Dignity Health’s Board is also a Board member of NFF.