September 2012


Living Cities’ President & CEO Ben Hecht writes on Fast Company’s Co.EXIST site that there are “5 Transformational Forces That Should Be Driving The Social Sector (But Aren’t)”:

  1. Portable, Participatory and Personal Information
  2. Social Networks and Media
  3. Big Data
  4. Frugal Innovation
  5. Collaboration Is the New Competition

Another transformational force is the shift from traditional “funding” to “pay-for-success” financing. A good example is social impact bonds. And with Goldman Sachs’s recently announced $9.6 million investment to reduce prison recidivism in New York City, the door is opening wider.

In the health sector, Collective Health is using data to “hot spot” significant illness and costs linked to unhealthy social/community conditions. More than half of all health care spending is concentrated in just 5% of the population with the greatest health burden. So there’s a real opportunity to use data and Health Impact Bonds (PDF) to pay for community-based prevention that reduces/avoids future costs.

As Ben Hecht asks, what can happen when these transformational forces are “fully unleashed”? The social sector needs to sharpen its pencils, build a business case for smart investors, and discover what’s possible.

Arkansas is moving from “fee-for-service” payments, “in which each procedure a patient undergoes for a single medical condition is billed separately,” to a “bundled” approach, in which “the costs of all the hospitalizations, office visits, tests and treatments will be rolled into one ‘episode-based’ or ‘bundled’ payment” (NYT, Sept. 5, 2012).

Aligning payment systems with outcomes vs. medical procedures makes sense. But what’s in the ‘bundle’?

The evidence is clear that social determinants (the conditions and choices where we live, work, learn and play) account for more than half of what sends us into the medical care system in the first place. Payment systems need to incentivize primary prevention that improves the environment and behaviors essential to health.

Anything less and we’re still spending our money in the wrong place.