Environment


Webinar: HICCup Communities Will Create Investable Markets for Health

Date: January 28, 2014, 12:00pm-1:00pm

Presenters: Esther Dyson and Rick Brush

Host: Maine Quality Counts

What’s the return on $3 trillion per year? A smart portfolio manager would invest a better part of our nation’s health spend into community health and prevention that reduce the need for high-cost care in the first place.

That’s the thinking behind HICCup, the Health Initiative Coordinating Council. Launching in 2014, HICCup will work collaboratively with five communities competing to win the HICCup Prize for the greatest cost-effective improvement in health (not health care) over five years. Together, we’ll create community marketplaces that refocus competition, business models and investment on better health with financial returns.

Join us and share your ideas for communities ready to create investable markets for production of health.

Esther Dyson, founder of HICCup and chairman of EDventure Holdings, is an active angel investor, best-selling author, board member and advisor concentrating on emerging markets and technologies, new space and health. She sits on the boards of 23andMe and Voxiva (txt4baby), and is an investor in Crohnology, Eligible API, Keas, Omada Health, Sleepio, StartUp Health and Valkee, among others. Her sisters include a nurse who lives in Pownal, Maine, and a vet, a cardiologist and a radiologist.

Rick Brush, executive director of HICCup and founder of Collective Health, is a former corporate strategist in health and financial services, including nearly a decade at the health insurer Cigna. He’s now focused on creating markets for health-impact investing. Collective Health’s project to reduce childhood asthma emergencies in Fresno, California, is laying the groundwork for the first Health Impact Bond in the U.S.

“With a 20% countywide pediatric asthma rate, Fresno, California, is the first U.S. community to test a health care funding strategy that could both reduce treatment costs and provide a financial incentive to investors.” – coverage in Environmental Health Perspectives (web, PDF), published by the National Institute of Environmental Health Sciences (NIEHS).

Other recent coverage in ForbesThe Bond Buyer, Fast Company, and Nikkei (PDF in Japanese).

Recent coverage of Health Impact Bonds and Collective Health’s projects with Fresno and Whirlpool Corporation…

  • “An unusual experiment is underway in Fresno, Calif., that could usher in a new era in managing chronic illnesses and reducing related health care costs… Meanwhile, Collective Health is talking with other self-insured employers and health plans around the country about using the health impact bond model to benefit plan members and corral costs.” – City looks to fund asthma program through bond sales, Employee Benefit News
  • “The idea is to attract money from investors to pay for up-front treatments, in this case relatively small steps that can reduce indoor air pollution. Health providers save money with reduced costs, and they share those savings with the investors… This is the first time that a social impact bond has been focused on health care.” – Social Impact Bond May Fund Asthma Prevention in Fresno, KVPR – Valley Public Radio

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.

As a follow up to our earlier post on Health Impact Bonds℠, here’s an example focused on reducing asthma-related emergencies among children in Fresno, CA (see illustration: Asthma Value Model)…

Fresno County has an estimated 200,000 individuals living with asthma, who each year account for more than 6,000 emergency room visits and 1,100 hospitalizations, plus follow-up care and doctor office visits. When lost worker productivity is included, the annual cost of asthma in Fresno totals $87 million.

Yet despite the staggering impact of asthma-related emergencies, less than half of those with asthma have been taught how to avoid asthma triggers, and almost half of those who have been taught do not follow most of this advice. Many of these asthma triggers include indoor air quality issues (dust, mold, pest infestation and other allergens) that can be addressed by adding an environmental assessment and remediation in the home.

The linked diagram shows the four process steps for using a Health Impact Bond℠ to reduce asthma-related emergencies in Fresno:

  1. Identify: The cost of asthma among a target group of 1,100 children in Fresno includes $17.1 million in health care costs for emergency department services, hospitalizations and follow-up care. This assumes average cost of $15,567 per person, based on service utilization and unit cost data for the county. Additional costs related to missed school days, missed work days, and other medical and non-medical costs are not included in this total. Of the $17.1 million, Medi-Cal alone pays $8.1 million (47%) annually. However, an evidence-based intervention aimed at reducing home-based asthma triggers may save $6.3 million in reduced medical costs for these targeted service areas—$3 million of that savings for Medi-Cal alone.
  2. Invest: A $1.1 million investment ($1,000 per individual) required for this intervention will be raised through a Health Impact Bond℠. The bond investors—individuals and institutions among a growing market of impact investors—provide upfront capital based on an anticipated share of medical cost savings to be generated by the intervention. The bond term sheet specifies rate of return and timing—in this case, 5% return in 18 months.
  3. Improve: The $6.3 million savings projection noted above is based on evidence from a series of studies on home-based asthma interventions reviewed by the Centers for Disease Control and Prevention “Guide to Community Preventive Services”. In these studies, best practice interventions were able to significantly reduce annual medical costs for emergency room visits and hospitalizations within 18 months. The intervention is delivered by local service providers that are sourced based on efficacy and efficiency metrics, and are accountable to measurable results.
  4. Return: The financial benefits of these savings would accrue through reduced medical claims to Medi-Cal ($3 million) and local employers with self-funded insurance plans ($2.3 million), and also to local health care providers in capitated payment arrangements, accountable care organizations (ACOs), and similar incentive structures ($1 million). A portion of validated savings are used to repay principal and interest to the bondholders. Additional savings can be used as re-investment capital in expanding the approach to other populations and health conditions.

While we are using an asthma example here (and in our related paper on health impact investing), this approach can be used to finance any evidence-based intervention that reduces health care utilization/costs within a reasonable time frame (1-5 years).

What are the best interventions for diabetes, obesity, heart disease, and other chronic/acute illnesses? We’d like to hear your ideas! rick@collectivehealth.net

A study published in the New England Journal of Medicine “found that families who moved to lower-poverty neighborhoods had lower levels of obesity and diabetes than those who stayed behind. What’s more, the improvements in health were as significant as those that typically result from targeted diet and exercise interventions or the use of medications to treat diabetes,” reported TIME Healthland.

“Most of the families…were followed for an average of 12 years. (Those who moved) were 19% less likely to have a BMI of 40 or higher, the cutoff for morbid obesity, and 22% less likely to have glucose levels typical of diabetes, compared with those who stayed in public housing.”

The moves were made possible by a 1990 U.S. Department of Housing and Urban Development (HUD) program called Moving to Opportunity. The study does not provide cost-benefit analysis on the associated health improvements; however, as author Jens Ludwig of the University of Chicago notes, “The results suggest that over the long term, investments in improving neighborhood environments might be an important complement to medical care when it comes to preventing obesity and diabetes.”

Health Impact Bond is one way to support this investment.