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Hospitals’ Community Benefits
A Measure of Social Responsibility in Health Care

Michael K. Gusmano
New York Medical College; The Hastings Center, United States

Corporate social responsibility is an idea that has grown in popularity in recent decades. In the 1980s’ and 90s’, companies like Ben & Jerry's and The Body Shop became well known for their adoption of policies and practices that reflected broader social values that went beyond the usual corporate focus on profit maximization (Liodice 2010). For example, some companies placed limits on the income gap between the highest and lowest paid employees. More recently, concerns about the environment have led some companies to adopt ‘green’ policies, which may include greater recycling of materials used by the company, efforts to make their facilities more energy efficient, or efforts to purchase material from local sources and reduce the so-called ‘carbon footprint’ associated with the production of the goods and services they sell. The concept of corporate social responsibility has gone global. In 2011, the United Nations endorsed and published Guiding Principles on Business and Human Rights, a document that explains state and business responsibilities to protect and promote human rights (United Nations 2011).

Although there has been less attention in the media to the application of the corporate social responsibility in health care, there is actually a long tradition of applying these ideas to hospitals and other health care institutions. In addition to practices with global implications (e.g. environmental protection, including proper disposal of medical waste), many hospital practices take the form of ‘local public goods’ that provide support to the community in which it is located (Gusmano and Schlesinger 2001). In the U.S., this idea is reflected most obviously in the use of a ‘community benefits’ standard to evaluate the performance of hospitals, particularly not-for-profit hospitals that receive significant tax subsidies. Although its origins are particular to the U.S. and its use of the federal and state tax codes to foster the development of a not-for-profit hospital system, the concept of community benefits can be adapted to health care systems that rely primarily (or exclusively) on public hospitals, as well as those that rely on a mix of public, private not-for-profit and private for-profit hospitals.

Health care organizations, by providing high quality care to their patients, contribute directly to the community. But in addition to their direct legal and financial obligations to patients, there are a variety of other ways that hospitals might contribute to health and well-being of individuals and the communities in which they operate. Measuring these activities can provide governments and community leaders with a mechanism for rewarding hospitals for promoting community well-being or sanctioning them when they fail to do so.

A brief history of the concept of corporate social responsibility

As early as the eighteenth century, ideas about corporate or ‘employer’ responsibility began to emerge and were reflected in some corporate behavior. Railroad, mining and steel companies, for example, often set up entire ‘towns’ in which they provided subsidized housing, groceries and medical care for workers in remote locations. By the early twentieth century, these ideas led to a social movement known as ‘welfare capitalism’ (Jacoby 1997: 4). Reformers were concerned that inequalities generated by capitalism might lead to revolution. While Karl Marx and other critics of 19th Century capitalism predicted – or called for – its destruction, members of the National Civic Federation (NCF) and the American Association for Labor Legislation (AALL) worked to reform capitalism by encouraging policies that would preserve multiclass support for the existing political economy (Brandes 1976). The political victories of Progressive Party candidates, particularly President Theodore Roosevelt, bolstered this social movement and led to the adoption of laws that required changes in corporate practice that were consistent with the welfare capitalism vision. For example, workman's compensation laws adopted between 1911 and 1920 provided medical assistance and income support for workers with job-related injuries (Green 1956: 255).

The enthusiasm for welfare capitalism, however, was short lived. Ironically, organized labor was a major opponent of such policies because they were viewed as paternalistic and gave employers too much say over the lives of their employees. The Great Depression, followed by the election of Franklin Roosevelt who viewed many forms of corporate welfare programs with suspicion, led to the decline of this system (Kammerman and Kingston 1982; Brandes 1976: 142–143). Many existing employer health and welfare programs remained in place (Dobbin 1994; Jacoby 1997; Katz 2001), but the idea of corporate social responsibility remained in a latent stage until the late 1970s’ (Gusmano et al. 2002).

Starting in the late 1970s’, a number of corporate conferences devoted to the needs of employees outside the workplace were organized (Jacoby 1997). By the mid-1980s’, the notion of employer responsibility began to gradually re-emerge as a normative standard for public policy related to health care. By the time it did so, the concept of hospital community benefits had been established and was available for use by government officials and other reformers.

Community benefit as a measure of hospital responsibility

In the U.S., the idea of community benefits was first developed to justify the favorable tax status of not-for-profit hospitals. To this end, the U.S. Internal Revenue Service developed a ‘community benefit’ standard in the late 1960s’, but the definition was not precise and there were few efforts to enforce it. During the 1980s’, states began to define their requirements for hospitals and other health care organizations that qualified for tax exemption. Most of these efforts focused on the relief of poverty and the high cost of medical care. State regulations also required hospitals to provide socially valuable, but unprofitable services such as emergency rooms and transplant units.

During the past 15 years, hospitals and regulators, particularly at the state level, have considered other ways hospitals and other health care organizations can address the needs of their communities (Schlesinger and Gray 1998). Previously, four categories of potential hospital community benefits have been defined in the literature (Schlesinger and Gray; Schlesinger, Carrino, Duncan, Gray, and Gusmano, 1998; Schlesinger, Gray and Gusmano, 2004). The most common category is the legal-historical perspective focused on focus on poverty relief. Other potential community benefits address ‘market failures,’ ‘community health,’ and ‘healthy communities’ perspectives. The market failure perspective recognizes that some hospital practices have spill-over effects – what economists call externalities – that reach beyond the well-being of individual patients. These include such specific issues as how hospitals address the quality of practice among their affiliated clinicians, the extent to which hospitals shift the costs of treating illnesses to other parts of the health care system or other community agencies, and the willingness of hospitals to collect and disseminate data about community health needs. By addressing market failures, hospitals are in a position to affect the overall trustworthiness of the health care system.

Another potential aspect of community benefit focuses on the ways in which hospitals could support or undermine the local health care delivery system. For example, the degree to which a hospital is willing to treat a fair share of complex, unprofitable cases can have a profound effect on access to care for these patients and the capacity of clinics and other ambulatory care providers to address other community health needs. Hospitals may also invest in the local health care infrastructure by helping to train health care professionals or by sharing staff or supplies with clinics that provide care to the poor and other vulnerable populations, including migrant worker and other immigrant populations that may not qualify for public health insurance. Hospitals may also improve the local health system by sharing data with public health departments and other providers about emerging health problems. Finally, following the lead of companies like the Body Shop, which pioneered the practice of reporting about socially responsible activities (Liodice 2010), hospitals can collect and disseminate information about their performance. This may involve information about the quality of care provided at the hospital and/or the extent to which the hospital provides community benefits.

Perhaps the most creative extension of the community benefit concept builds on the idea of a health community embodied in, among other things, the World Health Organization's ‘Healthy Cities’ initiative. Rather than focusing on the ways in which a hospital can improve the health of individuals, this perspective encourages hospitals to think about the community itself as the focus of its efforts. To satisfy this dimension of community benefit, a hospital could facilitate the community's own capacity for making effective decisions related to health and health care or encourage a shift in resources from less effective clinical interventions to various social determinants of health (Marmot and Wilkinson 2005).


A broad definition of community benefit highlights the many ways that hospitals and other health care organizations can contribute to the public good. While providing high quality medical care to their patients will and should always be the primary focus of health care organizations, there are many opportunities for these organizations to go beyond this immediate goal. The exact mix of community benefits offered by a hospital is likely to vary from community to community. Indeed, involving representatives of the community in making these determinations is an important way that hospitals can contribute to and empower their communities.

About the Author

Michael Gusmano, PhD, is Research Scholar at The Hastings Center, and Associate Professor of Health Policy and Management at New York Medical College. His research interests include politics of health care reform, comparative health systems, health and health care inequalities, and normative theories of policy analysis. His most recent book, Health Care in World Cities (Johns Hopkins University Press, 2010), documents the implications of national and local health care policies for access to care in New York, London and Paris. He holds a PhD in political science from the University of Maryland at College Park and a Masters in public policy from the State University of New York at Albany. He was also post-doctoral fellow in the Robert Wood Johnson Foundation Scholars in Health Policy program at Yale University (1995-1997). Michael Gusmano is member of the Academy of Management, the American Political Science Association (APSA), the American Public Health Association, the Gerontological Society of America, and he serves as the secretary of APSAs Organized Section on Health Politics and Policy. He is also on the editorial boards for the Journal of Health Politics, Policy and Law and Health Economics Policy and Law.


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Michael K. Gusmano and Mark Schlesinger (2001). “The Social Roles of Medicare: Assessing Medicare's Collateral Benefits”, Journal of Health, Politics, Policy and Law 26(1): 37-81.

Gusmano, Michael K., Mark Schlesinger, and Tracey Thomas (2002). “Policy Feedback and Public Opinion: The Role of Employer Responsibility in Social Policy”, Journal of Health Politics, Policy, and Law 27(5): 731-772.

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Mark Schlesinger and Bradford Gray (1998). “A Broader Vision for Managed Care, Part 1: Measuring the Benefit to Communities”, Health Affairs (May/June): 152–168.

Mark Schlesinger, Bradford H. Gray and Michael K. Gusmano (2004). “A Broader Vision for Managed Care, Part III: The Scope and Determinants of Community Benefits Provided by HMOs”, Health Affairs, May/June.

Mark Schlesinger, Vincent Antonelli, Gerald Carrino, Mary Duncan, Bradford Gray, and Michael Gusmano (1998). “A Broader Vision for Managed Care, Part II: Toward a Typology of Community Benefits Provided by HMOs”, Health Affairs, September/October: 26-49.

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