Does governmental public health spending crowd out private investment in population health? An analysis of the community benefit activities of tax-exempt hospitals

Local health departments (LHDs) play an important role in providing public health services in communities across the US, yet they are not the only ones to do so. Private community stakeholders, such as hospitals, also engage in activities aimed at improving population health. While economic theory suggests that increased public sector spending may reduce private sector spending, little is known about whether governmental public health spending crowds out private investment in population health. The  objective of this study was to explore the relationship between LHD spending and one component of private population health spending, the community benefits provided by tax-exempt hospitals.

Data for this study came from multiple sources including the 2010 Profile Study of the National Association of City and County Health Officials, the 2009 IRS Form 990, the American Hospital Association’s Annual Survey, and the Area Resource File. The sample included 1,273 tax-exempt hospitals and the corresponding LHD that serves the community that each hospital was located in. Generalized linear regressions were estimated with indicators of hospitals’ community benefit spending as the dependent variable and LHD spending as the key independent variable, controlling for LHD, hospital, and community-level characteristics.

The findings indicated that hospitals’ provision of community benefits was unrelated to LHD spending. Neither the provision of direct patient care services (such as charity care and treating Medicaid patients) nor the provision of programs and services that benefit the community more broadly was associated with how much the LHD spent on public health services. LHD spending thus does not appear to crowd out the investments of tax-exempt hospitals in population health. Given the low levels of investment in public health, this finding is encouraging. Further work is needed to better understand the relationship between LHD spending and the activities of community stakeholders beyond tax-exempt hospitals.