Dignity Health’s Community Investment Program Addresses the Social Determinants of Health

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Dignity Health’s Community Investment Program Addresses the Social Determinants of Health

The Community Investment Program (CIP) is a vehicle for funding housing and community development that is operated by Dignity Health, the fifth-largest health system in the country, with 400 facilities in 22 states and 39 hospitals in California, Nevada, and Arizona. Dignity Health generates considerable financial reserves, which it invests to earn additional revenues for the health system. Dignity Health dedicates a portion of those reserves annually to CIP to invest in projects that improve the social determinants of health in the communities it serves. As a Catholic hospital system with a mission that includes investing in the communities where its hospitals are located, CIP is one of Dignity Health’s major activities as an anchor institution. CIP is also among the largest mission-driven investment programs in the healthcare field.

From a Congregation Portfolio to a Systemwide Program

Dignity Health’s CIP invests in low-income communities with limited financial resources near the system’s member hospitals. The program originated in the late 1980s as an investment portfolio of several Sisters of Mercy congregations. The congregations operated the hospitals that eventually formed Catholic Healthcare West, which became Dignity Health in 2012. Investment decisions for CIP are guided by the health system’s mission; its portfolio currently includes health, community development, housing, and other quality of life projects. CIP funds typically fill the gap in the financing already committed to a project. Each year, the Dignity Health board of directors approves an allocation of up to 5 percent of its total investable assets to CIP to fund approximately five projects per quarter, and the vice president of community health, Pablo Bravo, manages the investments. In fiscal year 2017, CIP was allotted $120 million, approximately 1 percent of the system’s total investable assets.

Dignity Health’s member hospitals are involved in all CIP-funded projects in their communities. This involvement allows the hospital to develop a relationship with the borrowing organization. With local staff familiar with the projects, Dignity Health can be a patient lender, willing to work with borrowers who struggle with loan payments. Bravo attributes the low default rate on CIP loans to the commitment of each borrower to serve the community and the local hospital’s close engagement. Dignity Health has made more than 140 loans totaling $200 million with less than 1 percent losses.

Financial Products

The program’s investments have included stock purchases in community banks that provide access to capital in an effort to address financial inequality. Most CIP investments are various types of loans. One of the most straightforward types is a direct loan from CIP to a recipient organization. These loans range in value from $50,000 to $5,000,000, can be secured or unsecured, and have terms from 1 to 7 years. The interest rate is between 0 and 5 percent, typically lower than the market rate. As a variation on a direct loan, the program also extends lines of credit for a specific maximum amount and duration.

In addition, CIP makes indirect loans. Often these are a linked deposit at a local credit union or community development financial institution that loans the money to small businesses, clinics, or affordable housing developers. CIP also guarantees loans. CIP can allocate up to $10 million for loan guarantees annually. As of 2016, Dignity Health has provided only one guarantee: to Mercy Housing for affordable housing construction.

Community Investing and Affordable Housing

The breadth of CIP’s mandate has allowed Dignity Health to invest in diverse projects, including health clinics, children’s museums, and housing. CIP consistently makes its largest investments in housing-related development because these projects require such large sums. CIP has invested in permanent, supportive, transitional, and respite housing projects. For Bravo, two California projects demonstrate CIP’s impact in the housing sector: the Campus at LA Family Housing and the Stocktonians Taking Action to Neutralize Drugs (STAND) affordable home sales program.

In 2016, CIP issued a $3.1 million loan to construct a transit-oriented complex in central Los Angeles. Nearly 4 times larger than the aging shelter it replaces, the Campus at LA Family Housing will provide 50 permanent and 450 transitional housing units for individuals and families experiencing homelessness. The site will also include a federally qualified health clinic and offices for other services. Although the CIP loan made up only a small part of the Campus’s $50 million in funding, the Northridge Hospital Medical Center, the local Dignity Health hospital, believed strongly in the project. The Campus’s housing will address a major social determinant of health for more than 500 persons experiencing homelessness, and the clinic and other offices will provide direct care to more than 10,000 people each year.

Dignity Health also sees the value of investing in small programs, such as STAND’s affordable home sales program. Operating in low-income neighborhoods in Stockton, California, STAND purchases houses at auction after foreclosure or seizure by the city, renovates them, and sells them at affordable prices to low- and moderate-income families. In 2017, Dignity Health provided STAND with a $700,000 line of credit at an interest rate of 4 percent, which was substantially less than the market rate for commercial loans. That loan was the most recent of 5 loans CIP has issued to STAND since 2000, which STAND has used to renovate and resell 131 single-family houses and 3 apartment buildings in the city of Stockton and San Joaquin County.

An Industry Leader Continues to Grow

Whether it is a small direct loan to fill a funding gap in a large project or a line of credit to substantially fund a small organization’s efforts, Dignity Health’s CIP has delivered results. Bravo reports that CIP is beginning the 2018 fiscal year with even more opportunities to invest in low-income communities. In July 2017, the Dignity Health board of directors expanded the program to allow investments in for-profit entities that are making positive impacts in their communities. Bravo states that this policy change will open more opportunities for Dignity Health to make investments to improve the social determinants of health in the communities it serves. Dignity Health will also continue to encourage other health networks to pursue mission-driven investment, which Bravo believes should be more widespread among healthcare organizations.