The US Healthcare system has faced tremendous uncertainty over the course of the last year, driven by relentless efforts from Congress and the White House to gut federal health funding and tear down the public health safety net.
After eight years of health IT stimulus funding and ACA-mandated coverage expansion, it seems we’ve abruptly reached the end of the paved road of federally-driven healthcare reform.
Yet at this juncture, these bitter lemons yield a clairvoyant lemonade. Let’s zoom out — what have we accomplished when it comes to optimizing the health of our citizens? For all of our recent achievements — coverage expansion, insurance reform, seeding the growth of value based payment, expansive and comprehensive health IT adoption, and more — what remains unaccomplished, or under-accomplished?
We’ve learned that industry incumbents can only change so quickly. Expecting electronic health record (EHR) vendors to speed towards interoperability, or hospitals to embrace social determinants data capture overnight — with or without the 1–2 punch of federal mandates and incentive dollars — is setting ourselves up to be disappointed with the results.
Framed differently, while we’re waiting for our federal institutions to change our system’s behavior from the top down, what can be done in the meantime? How many ‘Alt-Reforms’ could happen at the ground level, in communities across the country?
As it turns out, a lot. Some of the most progressive developments in public health innovation are coming from beyond hospitals, value-based care models, and federal healthcare programs. Private sector organizations are exploiting federal tax initiatives and economic development programs to steer money into health at the local level — increasingly, with an eye on earning a return. Public-private partnerships are springing up at the local level, led by city-level governments and community-oriented non-profits, and garnering cooperation and participation from financially-savvy for-profits and startup companies alike.
Instead of waiting for leadership from the Feds and the healthcare industry, would-be reformers are exploring, debating, and refining the growing evidence base for non-traditional investments in health. These new resources and business models — a handful of which are highlighted below — might hold the potential to improve the health of our citizens and our economy, from the local level to a national scale, even while Rome burns.
Emerging Opportunities to Invest in Health
Social Impact Bonds
A Social Impact Bond (SIB) is a public private partnership also known as Pay for Success (P4S). While they are relatively new in the US, these models are growing in popularity as a way to support the social sector with more than philanthropy dollars.
P4S models route money from private sector investors into social interventions with an anticipated, measurable ROI. An intermediary third party organization monitors the performance of the program against those predetermined targets and reimburses initial investors with public or philanthropic funds once goals are met.
These models work by moving around financial resources from sector to sector in a way that generates a social impact while addressing problems that are traditionally underfunded, or that simply fall in the gap between one agency’s jurisdiction and the next.
For example, in Ohio’s Cuyahoga County, a SIB is aiming to reduce social services spending by keeping children of homeless mothers out of foster care. A $4m initial investment is anticipated to break even with a 25 percent reduction in foster care days; A 50% reduction will net an anticipated savings of over $8m. Beyond those outcome metrics, the long-term impact of keeping children together with their mothers may be tough to measure, but it’s easy to understand. Other health-oriented examples include engagement of at-risk seniors in Baltimore, housing programs in Santa Clara and Denver, and pre-natal care for at-risk mothers in Virginia.
Although their popularity is growing, such programs are no easy undertaking. They require multi-sector partnerships and savvy, progressive public leadership, as well as intermediaries with high technical competency for measurement, analysis, reporting, and financing. We are still in the early days of such impact investing models; Ultimately, the success or inability of these programs to generate strong returns will determine their long term viability as a financing mechanism for investing in health at the community level.
CDFI and NMTC: A Leg Up for Local Community Businesses
Community Development Financial Institutions, or CDFI, are non-governmental, community-based organizations with a social mission to invest in their communities. CDFI receive funding through the Office of the Treasury across a variety of programs, as well as private-sector funding through banks, corporations, and foundations, and invest those dollars in local social programs.
In 2016 CDFI invested in over 13,000 businesses, financed over 35,000 affordable housing units, and spent $22m in healthy food for communities. Focus areas include counseling, financial literacy, and homelessness. CDFIs such as the Nonprofit Finance Fund and LISC administer Social Impact Bonds and P4S programs as well as run a variety of programs aimed at shaping the future of social impact investing with “good partnerships and good data.”
Similar to CDFI, an ancillary program called the New Market Tax Credits (NMTC) endows local Community Development Entities (CDE) with the authority to offer tax breaks to private funders in exchange for equity in the CDE’s investments. CDEs serve as a way to attract private sector funding into business ventures in vulnerable communities. According to the government, every federal dollar invested has generated $8 in private sector investments.
These programs tend to range from the tens of thousands up to several million dollars in size, spanning support of existing health programs all the way up to the financing of new community health centers. While CDFI and NMTC programs face the same challenges as any small business ventures (financial sustainability, finding and retaining talent), at the local level they represents valuable resource channels for public health reformers and social entrepreneurs, as well as attractive, tax-friendly investment opportunities for the private sector to support.
LIHTC for Affordable Housing
Low-Income Housing Tax Credit investments (LIHTC) is a federal program that provides incentives to encourage private developers to create and maintain affordable housing. To date, LIHTC has enjoyed bipartisan support, and remains out of the crosshairs of federal tax reform — for now. A recent study found LIHTC housing projects help improve access to schools and reduce violence in communities, even if they have a negligible impact on poverty concentration in general.
UnitedHealthcare (UHC), the nation’s largest health insurer, offers a look into the opportunities and challenges of LIHTC. Starting in 2009, UHC began investing in housing projects for underserved members using the LIHTC. After an initial analysis of ROI, UHC began investing more aggressively in the program in 2011 and 2012. In 2013, with the Affordable Care Act’s Medicaid expansion taking place, UHC formed a social determinants of health team to serve as a ‘health and housing’ lens to figure out how to integrate housing interventions with clinical programs at the local level. All in all, UHC has invested more than $350m to date into the LIHTC since 2009.
While LIHTC represents a strategic investment vehicle for corporations, the program comes with its share of challenges. States have a limited number of credits, which usually results in a waitlist of investors trying to get in. UHC also found that the LIHTC requirements are narrow, limiting the extent to which such investments can dovetail with other programmatic activity involving social determinants of health. Ongoing political partisanship around subsidy programs also poses a risk to the program, with or without evidence of effectiveness.
While recent discussions on health innovation have shifted towards the promise of artificial intelligence for automation and efficiency, the truth remains that health is a fundamentally human-centric field. By definition, social work is about human interaction; many of the public health challenges we face come down to an inability to scale communication, guidance, or support.
Community Health Workers (CHW) are an integral part of public health strategy, fitting into interventions across an array of communities and issues. Though fragmentation and lack of integration remain sticking points to optimizing the efficacy of CHW, one of the biggest challenges is figuring out how to pay for these workers.
CHW cost around $41k annually. While Medicaid funds generally tend to be tied to a tight scope of clinical services, many states use the administrative portion of their medicaid budgets to fund CHW and other social workers. Under the ACA’s Essential Health Benefits rule, some reimbursement for CHW and social workers is allowed if it comes from a health care provider.
Some states like MA and VT have introduced fees on hospitals and/or payers to help fund community-level health and social services. Some value-based care programs are also bundling non-clinical support services into capitated payments as part of procedures like joint replacements, or as part of global wraparound payments for specific at-risk populations.
If funding these programs represents one side of the coin, the opportunity on the flipside is their potential to be self-sustaining. In New Mexico, Molina Healthcare found that adding CHW to their Medicaid program for 450 patients saved over $2m in hospital and pharmacy costs over a 12-month period compared to a control group, at a net hiring cost of about $521,000. Another study at the University of Massachusetts found that a similar wraparound program for 316 diabetic patients would produce a net savings of $47,000.
From an investment standpoint, the clinical ROI is just the tip of the iceberg that we can readily quantify. Hiring workers locally creates both an immediate and long-term positive impact on families and communities by redirecting financial resources to those who need them the most, and by improving trust and engagement in the trenches of public health intervention.
Even beyond the clinical or social workforce, local hiring allows health systems deepen their roots and standing into the neighborhoods they serve. Health systems are the largest employers in 12 states, and major presences in virtually every major market area. Hospitals in Chicago, Charleston, Cleveland and elsewhere have leveraged their business relationships with supply side vendors to improve local recruitment, sourcing, and purchasing practices. In Austin, United Healthcare hired local “housing navigators” to drive cross-sector partnerships with shelters and non-profits.
As public health takes on a more strategic outlook driven by real-time data and enabling technologies, investing in health-via-workforce can also mean creating new leadership roles to drive progress forward. That might mean a new c-suite position at the city level, diverse graduate talent at the startup level, or other strategic alignment of private resources with public mission.
Private Grants and Philanthropic Investment
A recent estimate suggests that philanthropic giving comprises roughly six percent of total US health expenditures, led by organizations such as the Robert Wood Johnson Foundation, the DeBeaumont Foundation, and dozens of other private or non-profit organizations. Individual donations from billionaires like Michael Bloomberg, Bill Gates, and more recently Mark Zuckerberg bring social cachet to the table along with dollars, which helps to draw additional interest and subsequent support.
While definitions vary, the size of this sector has been estimated at around $11–12b a year for the last several years. Investments tend to vary in size, with most falling into the $1-$10m range. The money goes towards a wide range of direct and indirect support, ranging from education and advocacy to programmatic and research investment to clinical interventions. In many cases, these investments dovetail with the work being done at the ground level by CDFIs.
Though traditional venture capital firms have displayed a herd mentality towards profit-focused, trend-driven investments, change is slowly bubbling up in Silicon Valley and the broader investment community. P2Health is one of the first healthcare funds dedicated to social disparities. Techstars, one of the largest technology accelerator programs, recently announced an impact investing arm focused on startups with a social mission.
Though the impact investing zeitgeist has its share of skeptics, it’s inarguably a welcome trend for an under-resourced social services sector, especially insofar as it provides a direct opportunity to bring technological innovations to underserved markets.
Beyond traditional investment groups, hospitals and health systems have $400b in investment assets nationally. While many advocates and public health practitioners remain rightfully wary of hospitals profiteering at the expense of their community’s health, there are some examples of hospitals investing towards social mission. For example, Dignity Health has a $100m community development loan fund that it’s used to invest in everything from community cultural centers to housing projects, neighborhood revitalization, water projects, and technology research programs. Moreover, as outlined above, local hiring and sourcing can help steer dollars back into the communities (though quantifying this impact remains a challenge.)
It’s not always about giant investments. At the smaller end of the spectrum, Bon Secours health system partnered with Virginia LISC, a local chapter of the national CDFI, to administer a program to invest $110k and provide additional guidance and support for dozen small local businesses. Not-for-profit health systems are required by law to invest a certain portion of revenues into a community benefit, which includes a wide range of programs and services. While these dollars may not replace large federal funding streams or offset more dubious business behavior by large hospital chains, they can nonetheless provide valuable opportunities for local support and social entrepreneurship.
Emerging Ideas and the Path Forward
The convergence of several issues — widespread adoption of social technology, persistent socioeconomic trends, a widening evidence base, local multi-sector collaboration, and a growing frustration with the limitations of the US healthcare system, among others — is priming the emergence of new methods and approaches of investing in community health.
- In Los Angeles, a “Parks After Dark” program extended public programming and recreation during the summer months. Over the course of four years, this resulted in a 32 percent decrease in violent crimes, compared to an 18 percent increase in non-participating areas; an 80 percent physical activity engagement rate, translating to an estimated 5 percent decrease in costs of care for diabetes, heart disease, and dementia; as well as nearly $1M in criminal justice costs to the county. The overall cost savings represented a 1.5x return on investment.
- In Michigan, a group of nurses exploited the economics of medical debt collection to turn a $10,000 investment into a $1M return by acquiring unpaid medical debt and then forgiving it. Medical debt is the number one reason for bankruptcy in the US; beyond the magic of making financial shackles disappear for more than 500 families and netting a 100:1 return, such an intervention’s impact on families’ long-term emotional and social health is palpable, if not yet neatly measurable.
- In Columbus, Ohio, at-risk infants cost city taxpayers $38,000, as opposed to $4,000 for a healthy baby, with most of those families located in a few troubled pockets of the city. While Google’s urban innovation arm, Sidewalk Labs has provided an action plan for how to improve structural access to care using simple SMS intervention, the city has not yet acted on those recommendations. This opportunity and dozens, if not hundreds more like it across the country remain wide open for social impact bonds, private investment, or mission-driven entrepreneurs.
At times of tremendous social and political uncertainty, the instinct to wait and see what will happen next is an understandable one — particularly in an information age driven by headlines and soundbytes. To be sure, federal policy is and will always be critical to making healthcare work in America: From the state exchanges and Medicaid expansion to the financing of demonstration projects, tax policy, and incentive programs of all varieties, federal programs and funding play a central and undeniable role in supporting public health infrastructure.
However, our healthcare system has reached a point where continued progress on cost-savings and clinical outcomes depends on expansion beyond its comfort zone to focus on ‘health’ more broadly. Federal partisanship is not the only factor limiting progress towards a more equitable society; The ripple effect of institutional thinking is an over-reliance on the methods and models of yesterday.
The next phase of creative financing for our country’s most pressing health problems is already underway; tomorrow’s social innovators are increasingly turning to ‘alt-reforms’ that transcend politics and populism. This next generation of leaders must combine the ability to think outside the box, work across sectors, see all the pieces of the pie, and tap into alternative funding opportunities.
If you liked this piece, please consider “clapping” to make it more visible to others.