In 2020, COVID-19, the murder of George Floyd and the Black Lives Matter movement created a groundswell of public awareness and activism for addressing disproportionate rates of mortality and other health disparities impacting Black and underserved communities. Following these events, many across the health care ecosystem looked inward to address structural inequities that perpetuate and exacerbate health disparities. Health equity emerged as a regulatory imperative with government entities and accrediting bodies launching a suite of initiatives pushing health equity to the forefront of organizations’ operational and business strategies.¹ Hospitals and health systems responded by launching internal and external equity campaigns, including increasing community benefit spending and hiring Chief Diversity Officers. Nearly half a decade later, many hospitals and health systems are struggling to maintain momentum on health equity efforts.

This note describes the business case for hospital and health system leaders to initiate, renew or enhance their commitment to health equity and details a four-point plan for doing so. Prioritizing health equity can create a strategic business advantage as the health industry continues to grapple with transformative changes in cost, reimbursement and compliance with new regulatory frameworks.

Challenges To Maintaining Momentum on Health Equity

Hospitals and health systems are finding it difficult to sustain meaningful advancements towards health equity due to:

• Financial pressures and other competing priorities: With critical staffing shortages, increasing costs and new industry trends and disruptors (e.g., artificial intelligence), hospitals and health systems are faced with the dilemma of how and where to prioritize spending, with health equity investments often being the first to go. For example, hospitals are investing a reduced portion of their community benefit dollars on community health improvement, community building and community groups, while needing to spend a growing proportion on Medicaid shortfall, charity care and other operating expenses.² And hospitals and health systems often lack a comprehensive understanding of their community investment impact and the organizational alignment required to move the needle on health outcomes.
• Lack of adequate resources and decision-making authority: In response to the events of 2020, health equity and Diversity, Equity and Inclusion (DEI) departments were quickly established, but many struggled to demonstrate impact due to inadequate staffing, resources and decision-making authority. In short, they were not set up for success. A 2023 American Hospital Association survey found that while 72% of the 1,356 respondents committed to advancing health equity, only half supported that commitment with planning or implementation actions (e.g., equity-focused strategic plan).³ And for the 51% of respondents with an equity strategic plan, the plans were often under-resourced for successful implementation—46% reported having zero budget allocated for their DEI departments.⁴ And in instances where a strong vision and resources were present, leaders often lacked the relationships and power to move priorities forward.⁵,⁶
• Pushback on health equity: Maintaining momentum has also been challenging due the mischaracterization and related criticism that health equity is solely focused on racial and ethnic equity, particularly for Black, Indigenous and other people of color (BIPOC). However, health disparities exist across a slew of social, geographic and economic factors beyond race and ethnicity (e.g., rural communities often have worse health outcomes, have less access to care, and are less diverse than urban communities, 43% of Medicaid and CHIP beneficiaries are White, non-Hispanic).⁷,⁸ And while hospitals and health systems that serve or seek to capture a greater proportion of the commercially insured (versus Medicaid patients) may feel less motivated to invest in health equity, it is crucial to understand that the social constructs that generate disparities also exist among the commercially insured. Consider Serena Williams—one of the most decorated tennis players—who experienced severe, life-threatening complications after her delivery in 2017 despite alerting her providers to her predisposition to and symptoms of clotting.⁹ She is not alone—disparities in maternal and infant health persist for Black women after controlling for income and education.¹⁰ There is a business (and moral) case for ensuring such events are avoided to capture and retain commercially insured patients.

Given the factors described above, it is natural that some hospitals and health systems find it difficult to sustain their equity initiatives. However, health equity is not a trend. Supporters position health equity as the fifth pillar of the “Quintuple Aim” of health care, two steps beyond the “Triple Aim” (improving population health, enhancing the care experience, reducing costs) and one step beyond the "Quadruple Aim" (addressing clinician burnout).¹¹ As the authors of the “Quintuple Aim” state: “Quality improvement without equity is a hollow victory. Quality improvement efforts without a focus on disparity reduction may have limited effects on health disparities and in fact unintentionally worsen them.”¹²

Emerging Business Imperative for Renewing Our Commitment to Health Equity

In addition to the fundamental, moral imperative and the surge in regulatory oversight, prioritizing health equity offers hospitals and health systems a strategic business advantage as the industry begins to grapple with transformative changes in cost, reimbursement and compliance:

• Addressing health disparities is critical to controlling costs: Operating expenses are rising at an alarming rate (17.5% between 2019 and 2022), outpacing growth in reimbursement.¹³ Most attribute the rising cost of care to staffing expenses, drugs, supplies, equipment and purchased services.¹⁴ Many overlook health disparities as key cost drivers. At the societal level, the economic burden of U.S. racial and ethnic health disparities and education-related health disparities are estimated at $451 billion and $978 billion, respectively.¹⁵ At the provider level, health disparities carry significant cost implications. Parkland Health & Hospital System in Dallas was able to free 5,893 inpatient bed days by launching a self-administration program for uninsured patients who needed long-term antibiotics, avoiding over $7.5M in unreimbursed care.¹⁶ The University of Mississippi Medical Center was able to save $339,000 in health care costs by implementing a Diabetes Telehealth Network to treat low-income patients across the Mississippi Delta region.¹⁷ Providers cannot afford to wait for new alternative payment models to incentivize implementation of health equity initiatives. By understanding and addressing the health disparities in the communities they serve, hospitals and health systems can stem financial losses and drive performance.
• Health equity-focused incentives and payment models are increasing: Payer incentives and reimbursement are increasingly tied to performance on population health and health equity measures. For example, Blue Cross Blue Shield of Massachusetts has entered “Pay for Equity” contracts with five network providers, who collectively provide care to over 500,000 members, to reward them for reducing racial and ethnic disparities.¹⁸ Meridian Health Plan of Illinois is covering part of the fee hospitals must pay to undergo health equity certification through the Joint Commission.¹⁹ Furthermore, lives in value-based care models are expected to double between 2022 and 2027, and CMS publicly announced their goal to move all Medicare beneficiaries and most Medicaid beneficiaries into accountable care. ²⁰,²¹ As accountable care models continue to expand, hospitals and health systems will need to bolster their population health capabilities to identify and make meaningful progress in addressing health disparities.
• Health Equity Aligns with Emerging Environmental, Social, and Governance Expectations (ESG): Hospitals and health systems are increasingly expected to report ESG data. Until recently, the ESG framework was used by financial institutions and other public companies to demonstrate corporate social responsibility to investors. There are now growing calls from accrediting bodies, investors and philanthropists for hospital and health systems to provide ESG information.^22,23,24 ESG performance is expected to become a factor in Medicare and other reimbursements.²⁵ To meet new accreditation requirements, attract new investors and philanthropists, and capture additional reimbursement in future payment models, hospitals and health systems must demonstrate and improve their impact on the environment, address the needs of their community and promote DEI across the workforce, leadership and governance.²⁶

4-Point Plan to Jumpstart Your Commitment to Health Equity

Partner with the Community to Amplify Impact The community voice must be uplifted and woven into health equity strategies and initiatives. This begins with ensuring health equity priorities are aligned with community need through a careful review of community health needs assessments and population health data. These priorities must be validated through direct engagement with communities via interviews, community advisory board sessions and focus groups. Strong community partnerships are critical to designing and implementing effective solutions.

Broaden the Scope of Health Equity Beyond Racial and Ethnic Boundaries Health equity is often conflated with racial and ethnic health equity, specifically for BIPOC. While health disparities are often greater in BIPOC communities, we must reiterate that health disparities are also an issue of (but are not limited to): Poverty and resource scarcity Sexual orientation Gender identity Education Socioeconomic status Geography (e.g., urban v. rural)

Embed Health Equity in Strategic Planning Processes Hospitals and health systems will benefit by embedding health equity in the way they do business, beginning with their strategic plans. As a best practice, organizations can create a health equity strategic plan that defines an approach to developing and managing a health equity portfolio aligned with community need to maximize community health impact and return on investment. For hospital systems and AMCs, equity strategic plans should align with clinical, research and education strategic plans. See more information on how to prepare a community health and health equity strategic plan here.

Establish Accountability for Advancing Health Equity To promote accountability for advancing health equity, hospitals and health systems must: Recruit or appoint a health equity officer to lead health equity and respond to growing regulatory oversight (e.g., The Joint Commission’s new health disparities standard and requirement for a designated individual to lead the reduction of health care disparities).27 Equity officers must be set up for success within the organization with appropriate decision making authority, staff and budget to effect change. Engage and align the entire organization, including operations, research, education, population health, quality, human resources and other operating units and functions. Designated leads of each operating unit should have projects and programs that improve or influence the equity agenda. For example, research priorities may be realigned with health equity priorities or new career pathways may be developed to attract and hire new diverse professionals from the community. Establish health equity goals and associated metrics that are reported to an organizational dashboard and monitored by the health equity officer.

References

¹ For example, in 2022, the Centers for Medicare and Medicaid issued a new rule to increase payments for acute care hospitals, with a focus on equity and released a framework to aid health systems in the assessment of their current scope of services and guide new programming to meet the needs of the underserved, which includes rural communities across the country. Medicare’s Hospital Value-Based Purchasing (HVBP) program will provide a health equity adjustment (HEA) to hospitals that have greater proportions of patients dually eligible for Medicare and Medicaid and that offer high-quality care beginning in fiscal year 2026. National organizations also established mechanisms to support or require health care providers’ health equity progress. These include The Joint Commission’s Health Care Equity Accreditation and Certification standards (2023) and the National Committee for Quality Assurance’s (NCQA) Health Equity Accreditation Programs (2021).

² Community Benefit Insight. (n.d.). National Trends. https://www.communitybenefitinsight.org/?page=national_analysis.home  

³ American Hospital Association Institute for Diversity and Health Equity. (2023, November). DEI Data Insights: Diversity, Equity and Inclusion Strategies in Hospitals and Health Systems. https://ifdhe.aha.org/system/files/media/file/2023/11/ifdhe_dei-benchmark-survey-1-strategy.pdf

⁴ Ibid.

⁵ Chen, T. A., & Weber, L. (2023, July 21). The Rise and Fall of the Chief Diversity Officer. The Wall Street Journal. https://www.wsj.com/business/c-suite/chief-diversity-officer-cdo-business-corporations-e110a82f?mod=hp_lead_pos9

⁶ Corley, T., Pamphile, V. V., & Sawyer, K. (2022, September 23). What Has (and Hasn’t) Changed About Being a Chief Diversity Officer. Harvard Business Review. https://hbr.org/2022/09/what-has-and-hasnt-changed-about-being-a-chief-diversity-officer

⁷ James, C. V., Moonesinghe, R., Wilson-Frederick, S. M., Hall, J. E., Penman-Aguilar, A., & Bouye, K. (2017, November 17). Racial/Ethnic Health Disparities Among Rural Adults — United States, 2012–2015. MMWR, 66(23), 1-9. http://dx.doi.org/10.15585/mmwr.ss6623a1  

⁸ Centers for Medicare & Medicaid. (2023, July 25). Race and Ethnicity of the National Medicaid and CHIP Population in 2020. https://www.medicaid.gov/medicaid/data-and-systems/downloads/macbis/2020-race-etncity-data-brf.pdf

⁹ Portée, A. (2022, April 6). Serena Williams on Her Near-death Experience After Giving Birth: ‘No One Was Really Listening.’ Today. https://www.today.com/health/womens-health/serena-williamss-essay-black-pregnancy-rcna23328 

¹⁰ Hill, L., Artiga, S., & Ranji. U. (2022, November 1). Racial Disparities in Maternal and Infant Health: Current Status and Efforts to Address Them. KFF. https://www.kff.org/racial-equity-and-health-policy/issue-brief/racial-disparities-in-maternal-and-infant-health-current-status-and-efforts-to-address-them/     

¹¹ Nundy, S., Cooper, L. A., & Mate, K. S. The Quintuple Aim for Health Care Improvement: A New Imperative to Advance Health Equity. JAMA, 327(6)521-522. doi:10.1001/jama.2021.25181

¹² Ibid.

¹³ American Hospital Association. (2023, April). The Financial Stability of America’s Hospitals and Health Systems Is at Risk as the Costs of Caring Continue to Rise. https://www.aha.org/costsofcaring 

¹⁴ Ibid.

¹⁵ LaVeist, T. A., Pérez-Stable, E. J., Richard, P., Anderson, A., Isaac, L. A., Santiago, R., Okoh, C., Breen, N., Farhat, T., Assenov, A., & Gaskin, D. J. (2023). The Economic Burden of Racial, Ethnic, and Educational Health Inequities in the US. JAMA, 329(19), 1682-1692. doi:10.1001/jama.2023.5965

¹⁶ Bathija, P., & Reynolds, D. (2019, November 12). Making a Financial Case for Health Equity. American Hospital Association. https://www.aha.org/news/blog/2019-11-12-making-financial-case-health-equity#:~:text=Did%20you%20know%20that%20health,2008%20inflation%2Dadjusted%20dollars

¹⁷ Ibid.

¹⁸ Blue Cross Blue Shield Massachusetts. (n.d.). Turning Action Into Equity. https://www.bluecrossma.org/myblue/equity-in-health-care

¹⁹ Waddill, K. (2024, March 22). Medicaid Health Plan Will Reimburse Health Equity Certification. HealthPayerIntelligence. https://healthpayerintelligence.com/news/medicaid-health-plan-will-reimburse-health-equity-certification

²⁰ Abou-Atme, Z., Alterman, R., Khanna, G., & Levine, E. (2022, December 16). Investing in the New Era of Value-based Care. McKinsey & Company. https://www.mckinsey.com/industries/healthcare/our-insights/investing-in-the-new-era-of-value-based-care

²¹ Centers for Medicare & Medicaid Services Innovation Center. (2021, October). Innovation Center Strategy Refresh. https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper

²² Grant Thornton. (2023, May 16). Creating an ESG Strategy at Healthcare Organizations. https://www.grantthornton.com/insights/articles/health-care/2023/creating-an-esg-strategy-at-healthcare-organizations

²³ Modern Healthcare. (n.d.). ESG: Healthcare’s New Imperative. https://www.modernhealthcare.com/esg/esg-healthcares-new-imperative

²⁴ Lee, C. C., Cho, Y. S., Breen, D., Monroy, J., Seo, D., & Min, Y. (2023). Relationship between Racial Diversity in Medical Staff and Hospital Operational Efficiency: An Empirical Study of 3870 U.S. Hospitals. Behav Sci (Basel), 13(7), 564. doi:10.3390/bs13070564

²⁵ Grant Thornton. (2023, May 16). Creating an ESG Strategy at Healthcare Organizations. https://www.grantthornton.com/insights/articles/health-care/2023/creating-an-esg-strategy-at-healthcare-organizations

²⁶ PWC. (2021, August). ESG for Healthcare Organizations: What’s Right for the World is Good for Business. https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-esg-health-insights-health-org.pdf

²⁷ The Joint Commission. (2022, June 20). New Requirements to Reduce Health Care Disparities. https://www.jointcommission.org/-/media/tjc/documents/standards/r3-reports/r3_disparities_july2022-6-20-2022.pdf