Social Determinants of Health: The Impact on Health Outcomes and Hospital Profitability

Hospitals are experiencing decreasing profitability due to increasing healthcare cost. In this paper, I demonstrate that there is financial value to hospitals by addressing social determinants of health (SDOH) as this strategy improves health outcomes and yields cost savings. I estimate the impact of SDOH on the health outcomes using an IV probit regression analysis and estimated the impact of health outcomes on cost using a basic linear regression. I estimate that improving SDOH by one standard deviation will result in hospital cost savings as follows: addressing Violent Crime will decrease hospital cost between 0.16% and 0.21%, addressing Supplemental Nutrition Assistance program will decrease cost up to 0.5% and addressing Unemployment will decrease hospital cost between 1.2% and 1.7% resulting in a favorable impact on hospital profitability. I use the HCUP National Inpatient Sample 2014 dataset along with externally identified variables representing SDOH to estimate cost savings