Health Impact Bond


Earlier this year,  Prevention Institute (PI) hosted a webinar entitled “How Can We Pay for a Healthy Population?” with four presenters describing promising approaches for generating sustainable and consistent funding for community prevention. In response to the many thought-provoking questions from participants, PI posted a follow-up Q&A on the topic…

PI: What is the potential in scaling up the approach you presented and/or replicating it elsewhere across the country?

Collective Health (CH): We think there is significant potential to scale up and replicate our asthma intervention, within Fresno and in other communities, using Health Impact Bonds or other forms of health-impact investing. At the end of phase one of our Fresno asthma project, we will have validated cost savings using insurance claims data. This will support scale up of the program through shared-savings contracts between payers (insurers, employers, and others that directly benefit from reduced health care costs) and investors (foundations, individuals, and institutions that provide upfront capital for the intervention). While our project focuses on asthma, we see many opportunities to expand the application of health-impact investing to other areas of prevention (e.g., comprehensive care coordination models to reduce avoidable emergency department visits, hospital re-admissions, at-risk maternity, serious mental illness, onsite/telehealth/in-home care).

PI: Do you think the four approaches (PDF download) — Accountable Care Community, Health Impact Bonds, Nonprofit Hospital Community Benefit Funding, Prevention and Wellness Trust — are potentially complementary? If so, how?

CH: Yes, it is worth exploring potential connections among these approaches. For example, could Community Benefit or Wellness Trust dollars be invested into Health Impact Bonds that support evidence-based prevention and generate better health and financial outcomes? In this case, it might be possible for these investments to earn a financial return that could then be re-invested in additional programs and expansion. Another example might be using Health Impact Bonds to finance the initial start-up costs for Accountable Care Communities.

PI: One of the challenges in promoting investment in community prevention is that in moving “upstream” the impacts of interventions become harder to capture (e.g., improving neighborhood air quality has multiple health benefits and cost savings potentially accrue to different health payers and other non-health sectors). How does the approach you discussed deal with this challenge?

CH: A fundamental and sustainable shift in health will only come about if we take on the big issues: the social, environmental and economic systems that influence our health, health behaviors and health choices. Changes at this level will require collective action — and generate collective benefits — across many stakeholders (i.e., all of us). It will require patient capital, long-term investment and a larger pool of investors to spread risk and return. In our white paper (PDF download) referenced in the PI report, we considered a Health Capital Market, where multiple Health Impact Bonds and other investment vehicles would connect a broader set of investors and public and private payers to finance community-wide health improvement and prevention efforts.

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Social Finance, Inc. and Collective Health announced today that The California Endowment (TCE) has awarded them $660,000 in grant funding to launch a demonstration project to improve the health of low-income children with asthma and reduce the costs that result from emergency treatments. Based in Fresno, California, the project will incorporate rigorous data collection and evaluation methodologies in order to demonstrate the dual social and financial benefits of up-front investment in asthma management and prevention. This project will lay the groundwork for Social Finance and Collective Health to design and launch the first health-focused Social Impact Bond in the U.S. (Read full story here.)

Prevention Institute’s “How Can We Pay for a Healthy Population” webinar recording and slides are now available here. The webinar covered four strategies to secure sustainable funding for community prevention efforts:

  • Accountable Care Communities
  • Health Impact Bonds
  • Hospital Community Benefit funding
  • Wellness Trusts

Presenter Q&A is also available here.

A new report and upcoming webinar hosted by Prevention Institute presents strategies to shift health care financing from treating illness to keeping people well.

  • The report, How Can We Pay For a Healthier Population?, highlights wellness trusts, social impact bonds/health impact bonds, community benefit funds, and accountable care organizations/accountable care communities with the potential for replication and scaling.
  • The webinar on March 6 (2:00pm-3:30pm EST, 11:00am-12:30pm PST) will explain more about how these approaches can create healthier community conditions that improve health and financial outcomes at the population level.

“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

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.

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