Loans and investments made as part of banks’ Community Reinvestment Act (CRA) activities are an important source of funding for hospitals and health systems to address social determinants of health, the physical and social conditions in the environment that influence health. By funneling resources into upstream determinants of health to address root causes of health disparities, such as poverty, economic mobility and supportive community resources, hospitals and health systems have the distinct opportunity to disrupt the cycle of inequity that stymies both health and economic outcomes.
Nonprofit hospitals must conduct Community Health Needs Assessments (CNHAs) once every three years to ascertain the status of the community health and create a plan to enhance population health in their geographic footprint, in accordance with the Affordable Care Act. By partnering with banks, hospitals can meet their CHNA requirements by collaborating on upstream efforts. Similarly, banks must meet their community benefits requirements as a result of the CRA mandate. When the two entities collaboratively engage and partner with each other as well as community stakeholders, the result is mutually beneficial to both community-focused anchors.
The Community Reinvestment Act and Healthy Communities
The Community Reinvestment Act (CRA) of 1977 states that financial institutions have an obligation to help meet the credit needs of the communities in which they are chartered. In accordance with CRA, financial institutions are evaluated by how well they meet these credit needs, particularly for individuals with low- and moderate-incomes (LMI) and in LMI neighborhoods. CRA incentivizes banks to increase the availability of credit and capital to underinvested communities. Various types of investment activities qualify for CRA consideration. According to the Federal Reserve Bank of St. Louis, the four categories of CRA-eligible community development activities are as follows:
- Affordable housing,
- Community facilities and services targeted to people with LMI (including financial education and capability, charter schools, community centers and daycare facilities),
- Activities that promote economic development by providing financing for small businesses or small farms (including workforce development and small business technical assistance),
- Neighborhood revitalization and stabilization in LMI geographies, distressed or underserved non-metro middle-income areas or designated disaster areas.
Along with aligning within one of these categories, the activity generally must also be completed within the bank’s assessment area, the defined geographical range in which the bank conducts most of its business activities. Banks can pursue community development activities outside of assessment areas provided they have first met community needs in their assessment areas.
By partnering with hospitals and health systems, financial institutions can directly contribute to the development of healthy communities and enhanced health outcomes. Banks and nonprofit hospitals share common goals in their community activities — banks’ CRA activities focus on community development and reinvestment, and hospitals must develop strategies that create a community benefit based on their community health needs assessments (CHNAs).
Nonprofit hospitals are required to promote community health and provide charity care (e.g. complimentary medical care and services) in exchange for the significant tax exemptions these nonprofit entities enjoy. Every three years a nonprofit hospital must conduct a CHNA in order to retain its nonprofit status. The CHNA is a process led by the hospital to engage the community (and its stakeholders) in identifying, analyzing, prioritizing and planning for community health needs and resources.
Thus, the activities of banks and hospitals can overlap significantly when considering their shared goal of community development. As hospitals are working to improve health outcomes and health access to care in their communities, they face a growing demand to address the social and economic determinants of health within their community. To fund these initiatives, health systems must partner with financial institutions, as well as other stakeholders such as Community Development Corporations (CDCs) and Community Development Financial Institutions (CDFIs) target upstream community interventions, within the areas of affordable housing, enhanced neighborhood conditions and increased socioeconomic status.
Banks may obtain CRA credit for working with hospitals and health systems in multiple ways. Funding for healthcare services, healthcare centers, homeless shelters and drug recovery centers are all CRA qualified activities that directly impact community health. Specific investments that have been approved as CRA qualified activities in the past include loans and investments that improve hospitals that serve LMI individuals, investments that fund the construction of health centers, grants to organizations to purchase specialty equipment for federally qualified health centers during a local health emergency, and loans to build health clinics in underserved areas.
Along with directly contributing to community health, many other CRA activities affect social determinants of health. Activities that promote affordable housing development can improve the health of LMI individuals and families by increasing healthy living conditions and financial accessibility to determinants of health. Families with LMI are more likely to experience unhealthy and unsafe housing conditions in neighborhoods that lack health promotion resources. Severely cost-burdened renters are less likely to have a usual source of medical care, more likely to postpone clinical care and more likely to face food insecurity. Affordable homes can, therefore, allow greater access to food, healthcare and education — all of which are social determinants of health. CRA activities can also improve financial equity and wellbeing for local residents; similar to housing development, this can also increase the affordability of health-promoting resources and services. Lastly, investments or initiatives that improve the local economy and support small businesses improve community health, as research supports a link between economy and health.
Several hospitals and initiatives have emerged in recent years as new leaders and innovations in multi-sector, health and wealth-focused collaborations in community investment, utilizing CRA with leveraged sources of funding from public investments, private equity, grants, government funding and philanthropy. Traditionally siloed in the health field with little overlap to the community development world, hospitals are now becoming more integrated into the CRA environment. Recognizing that personal behavior and clinical care account for only part of the picture of community-level health outcomes, hospitals and health systems are partnering with banks and financial institutions to make significant local investments to upstream social determinants of health.
Examples of collaboration
1.The Healthy Neighborhoods Equity Fund (HNEF)
Launched by the Conservation Law Foundation (CLF), via CLF Ventures, the nonprofit consulting arm of CLF, and in partnership with Massachusetts Housing Investment Corporation (MHIC), the Healthy Neighborhoods Equity Fund renews the focus on new sources of capital to community projects that create healthy communities. This innovative private equity fund tops $22 million, providing capital for mixed-income, mixed-use transit oriented development in traditionally disinvested neighborhoods, as gentrification begins to push out long-time residents. These projects offer quality housing across all income levels and job opportunities, both are social determinants of health, in the Greater Boston area. The fund is approaching full investment and will create over 550 units of housing and 150 jobs near transit. For the various banks that participate in the fund, CRA credit eligibility is a critical component to participation.
Boston Medical Center, in recognition of the role of housing in health, invests in the HNEF along with banks, as part of their $6.5 million commitment to target community development initiatives in the Greater Boston area. BMC will study the relationship between the community investment efforts and health outcomes, determining how these initiatives support the development of healthy neighborhoods. Working closely together, the fund targets financial and human resources to communities that both the banks and the hospital serve.
2. Republic Bank & Trust
In 2014 in Louisville, Kentucky, the Republic Bank & Trust helped provide a line of credit in the amount of $40 million to the University Health Center, which administers a prepaid health care program for Medicaid enrollees in Jefferson County, KY, and surrounding counties. With this line of credit, the community hospital was able to afford renovations to improve the hospital for moderate-income census tracts as well as provide additional employment opportunities. This CRA qualifying activity allowed Republic Bank & Trust to garner CRA credit for a health service activity.
3. Kaiser Permanente
In 2018, the largest integrated health system in the country, Kaiser Permanente, a mission-based nonprofit, committed to an impact investment of $200 million to address affordable housing, housing stability, displacement prevention, unhealthy housing and homelessness. Kaiser’s significant community footprint covers over 65 million residents across eight states and the District of Columbia. Kaiser Permanente’s early initiatives as part of the Thriving Communities Fund include a $100 million affordable housing national loan fund. JPMorgan Chase provided $15 million of capital to the fund. Additionally, Kaiser joined with Enterprise Community Partners and local organization East Bay Asian Local Development Corporation (EBALDC) to make needed upgrades to a 41-unit multifamily housing complex in East Oakland, California, in close proximity to Kaiser’s national office. First Republic Bank provided a private loan of just over a $5 million investment in the project. Kaiser’s early planning also includes ending homelessness for 500 individuals in Oakland, California, where homelessness has increased by 25% from 2015 to 2017. Working with a community partner, Kaiser will identify 500 individuals over the age of 50 who live with a chronic condition and provide housing and services to support the individuals.
ProMedica is a mission-based nonprofit healthcare organization with a footprint in 28 states and 13 hospitals. In 2017, ProMedica was joined by Cleveland-based bank, KeyBank, to commit over $2.6 million to community revitalization efforts in Central Toledo, Ohio, where ProMedica is headquartered. The funds rehabilitate rental housing units and support first-time homebuyers in downtown Toledo and surrounding areas. Recognizing the connection between substandard housing and risk of chronic health conditions, the project aims to increase health outcomes through stable, healthy and affordable housing. The partnership is acquiring vacant homes, rehabbing and then selling at market rate. KeyBank’s regional president noted that while the home may sell for $15,000 less than what was invested to transform it to a healthy home, the benefits to the neighborhood — eliminating blight, reducing risk of chronic conditions such as asthma and enhancing wealth — are too significant to ignore. This investment is part of KeyBank’s National Community Benefits Plan, a $16.5 million directive it developed with NCRC that goes toward mortgage lending and philanthropy targeted at LMI borrowers and communities.
While the United States continues to grapple with the Coronavirus pandemic, CRA is as critical as ever to the equitable revitalization and stabilization of communities. COVID-19 is hitting LMI households harshly, and it raises a new set of housing challenges for both the homeownership and rental markets, specifically LMI communities of color. LMI communities may be more susceptible to foreclosure, eviction, job loss, reduction in hours and reduced wages. Given health disparities, communities of color experience higher rates of death from COVID-19.
The disparate effect of COVID-19 on LMI and Black and Brown communities illustrates the relevance of CRA and its essential community purpose of preventing redlining and confronting systemic inequities in financial services and access to credit within LMI communities.
With more than 354,000 deaths and nearly 21 million COVID-19 cases (as of January 5, 2021), the United States is facing what may be the worst of the pandemic. In May 2020, the regulators of CRA, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, joined together to expand eligible CRA activities in response to COVID-19. Banks can receive credit for these expanded CRA until six months after the end of the pandemic national emergency declaration.
Qualified activities under the COVID-19 response include loans, investments and community development services that support the following:
- Emergency medical care, including medical facility services and supplies, temporary medical facilities and enhanced medical/hospital capacity;
- Purchase and distribution of personal protective equipment;
- Provision of emergency food supplies; or
- Assistance to state, tribal, territorial, or local governments for emergency management and to support communications of general health and safety information to the public.
Coronavirus activities may benefit the bank’s designated assessment area as well as areas beyond, such as statewide or regional areas as credit may be given outside of established assessment areas.
Given the urgency of the COVID-19 crisis, this expanded guidance from the CRA regulators offers both immediate and long-term opportunities for hospitals and health systems to collaborate with banks and financial institutions and community based organizations to impact health outcomes.
While banks and financial institutions have an urgent opportunity to collaborate during the COVID-19 pandemic, the health crisis has effortlessly exacerbated the inequality that existed in communities across the country well before the virus began. And when the virus is over, communities will need to pick up the pieces and address the widespread setback in housing, income, job opportunity and health outcomes that the pandemic has caused. The obligations of both hospitals and health systems and banks and financial institutions from the ACA and CRA respectively creates a mutually beneficial opportunity for the two community anchors to pursue long-term partnerships. Banks have demonstrated an interest in investing in projects with health impacts. Hospitals see the value in banks utilizing CRA credit to target investment in LMI communities, the same communities hospitals seek to improve population health. While the COVID-19 pandemic spurred targeted action from the CRA regulators, it is long-term engagement and collaboration between banks and financial institutions and hospitals that will ultimately create healthy communities, increase community wealth and advanced health outcomes.
Karen Kali is a Senior Program Manager at NCRC.
Marjanna Smith was an intern with NCRC.