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Anchor institutions vs. social enterprises. Let's sort the signal from the noise.

By Miles Cottier

June 1, 2022

    It would be an understatement to say that in the eyes of health care's stakeholders, the hospital's set of responsibilities has expanded to address the environmental and social impact of their work and footprint. These expectations accelerated in the last two years and they're only going to increase over time. Board members, executives, and financial planners need to find ways to meet them.

    How ProMedica scaled up SDOH interventions

    To meet these rising needs and expectations, progressive nonprofit hospitals are reinventing themselves into something else: Powerful social hubs within the community with services and actions that extend beyond only providing care. Think of this like a university. University campuses have long been social hubs that offer more to the local community than just high-level academia.

    For providers, this can mean providing non-clinical services in local communities to improve the health and wellbeing of their patient population. For example, hospital may invest in educational smoking cessation campaigns at local schools to help reduce the number of patients that present with respiratory conditions in the future.

    Historically in health care, we have called these types of organizations "anchor institutions." Previously, only the most progressive provider organizations were in this category. But now, more organizations are becoming exposed to the benefits of being an anchor institution, such as:

    • Contributing to a healthier and happier local population, reducing their future health care burden
    • Bolstering their reputation as an employer of choice, making it easier to attract and retain talent
    • Enhancing their brand, expanding their partnership potential with innovative companies
    • Improving their social standing within the local community, providing greater lobbying power and influence
    • Increasing their likelihood of being accepted for social financing mechanisms or fundraising, enhancing the potential for social and clinical innovation

    Not every organization can be an anchor institution. But they can use anchor strategies.

    Most businesses within the rest of the health care ecosystem such as payers or pharmaceutical companies, cannot be anchor institutions. This is because:

    1. These businesses—even if they invest in social or community projects—still operate in service to growth, profit, or shareholder preferences. Any capital earmarked for social investment is therefore at risk of being redirected toward other means to satisfy these traditional imperatives. In contrast, anchor institutions are always nonprofit.
    2. Most of these businesses prioritize scale while anchor institutions are inherently tied to, and operate within, their local communities. Businesses that grow and scale-up their footprint outside of their locality naturally lower their impact solely on the local community.

    But businesses that can't become anchor institutions don't have to go all in: All businesses can incorporate anchor strategies into their mission. These are objectives or projects that directly benefit the local community in a systemic manner instead of via one-off efforts.

    Some examples of anchor strategies include:

    • Hiring people from your locality, ensuring you are truly inclusive in your recruitment process.
    • Purchasing goods from local suppliers when you can.
    • Donating services or supplies to match demand in the most vulnerable communities.
    • Investing in educational campaigns that improve the health and wellbeing of the local population.

    These strategies can be accomplished by redistributing capital away from growth and reinvesting it into local social programs. This financial mechanism is also a typical trait of what the business world calls "social enterprises." These are similar to anchor institutions in many ways, but there are some differences.

    Can't become an anchor institution? Practice social entrepreneurship instead.

    In essence, social enterprises set out to achieve a specific social or environmental problem through a market-driven approach. They can be for-profit or nonprofit, operating under social entrepreneurship as their primary business model. The major difference between anchor institutions and social enterprises is what they do with their finances:

    • Social enterprises marry the foundational, community-driven missions of nonprofit organizations to the business model of for-profit entities. Social enterprises can earn income on their services and products which they reinvest into social objectives. They must be financially sustainable by themselves, without needing philanthropic or governmental support as anchor institutions do.
    • In contrast, anchor institutions invest all their income into their public-serving mission and cannot directly pass their income to stakeholders. They also rely solely on charitable or governmental income.

    Social enterprises can also use some of their funds to incentivize a mission-driven workforce to contribute to the enterprise's objectives. This often establishes an internal culture of innovation, where staff are encouraged to continuously innovate and improve operations and services to further the organization's objectives and benefit the community.

    Social enterprises can often contribute as much to the local community as anchor institutions, but because they can still scale-up their business outside of the local geography (as long as it's in pursuit of their mission), it is often difficult for these organizations to retain the power or political sway in the local community that anchor organizations have accumulated over decades.

    Is this something you should pursue?

    All types of organization in the health care ecosystem can pursue anchor strategies to help improve the health and wellbeing or spark structural change within the community, even if they cannot become anchor institutions themselves.

    And for those organizations willing to undertake the structural changes needed to become social enterprises, they'll unlock unique benefits to their organization. For example, nonprofit social enterprises will unlock additional revenue streams for their organization, even if governmental or charitable income is limited. And for-profit social enterprises are appealing beneficiaries to investors, especially investors that prioritize ESG (Environmental, Social, Governance), which could mean more scale and growth.

    Both anchor strategies and social entrepreneurship can bolster your reputation and self-marketing power. They can help you engage and empower your workforce and partnership network. And most importantly, they drive positive social changes in the local community. 

    How ProMedica scaled up SDOH interventions

    imageCovid-19 put a spotlight on the role that non-clinical factors, or social determinants of health (SDOH), play in health care outcomes. During the Covid-19 pandemic, a wave of provider and payer organizations increased their focus on non-clinical care.

    As organizations continue to uncover the root causes of their patients’ health needs, they face the simultaneous challenge of having to assess those needs and address them with social interventions. Here are five principles to increase non-clinical care delivery.

    Read more

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