Social Impact Bonds: Small Model, Big Implications For Value-Based Reimbursement (Open Minds)

By Monica E. Oss

If your organization is going to prepare for the change to value-based reimbursement, what do you do and how do you get there? The answer — determine what health plans want, develop a model that delivers that, and build infrastructure with performance measurement capability. That was the focus of my recent piece featuring Brian Wheelan, chief strategy officer and executive vice president of Beacon Health Options (see Value-Based Reimbursement: 3 Steps To Go From Idea To Action).

This got me to thinking: How applicable are those organizational skills to other areas of health and human service reimbursement? I posed this question to my colleague, OPEN MINDS Senior Associate Paul Neitman, who wrote:

This reminds me of the advice given to executives of social service organizations developing pay-for-success and social impact bonds (SIB) initiatives. For SIBs, executive teams need to:

  1. Make short-term (a year or less) promised outcomes that include cost savings or results that can be reasonably linked to cost savings
  2. Ensure longer-term (two to three years) results that clearly demonstrate improvements in total cost, performance, and consumer well-being
  3. Develop a programmatic approach and infrastructure model that is scalable, so the results can be replicated on a large scale in social service systems

The SIB model (if you aren’t familiar with it, or need a quick refresher) involves private investors making a loan to a provider organization contracting with a government agency to start and manage a specific program — with a stipulation that payment will be made only if the organization meets agreed-upon performance requirements (sound familiar?).

Since launching in 2011, the SIB model of financing has hung on tenaciously as an option for dealing with social determinants of health (SDH) and other social services that have not traditionally found funding in the U.S. health and human service system (see Are Social Impact Bonds Financing The Future Of Social Services?). Over the past couple years, we have done some great coverage of this financing approach, including what you need to know about SIB, how to operate in one, and updates on some of the high-profile SIBs in operation — Have Social Impact Bonds Had An Impact?Two New Tactics For Non-Profit FundingSocial Impact Bond Initiatives Move Ahead, and Another View Of Social Impact Bonds For Health & Human Service Financing.

So where are SIBs at today? According to the Harvard Social Impact Bond Technical Assistance Lab, as of February 2017, there are 15 pay-for-success (PFS) contracts using SIBs launched in the U.S., amounting to $130 million in services for 20,000 individuals (see Social Impact Bonds 101). Many SIBs are focused on similar themes, including criminal justice recidivism, supportive housing to formerly homeless individuals, pre-kindergarten programs, and a variety of social services like adult basic education and assisting troubled youth.

Harvard’s takeaway — one that should drive an expectation to see more of these — is that SIBs have “demonstrated the … potential to improve the delivery systems for social services.” And once again, the keys to success for provider organizations lies with performance metrics and the ability to manage those metrics.

Don’t think this sounds like that large an opportunity to develop new services? Then consider the Social Impact Partnership Act (introduced in 2015 and currently with the Committee on Finance), which would direct federal resources to states and local communities to support Pay-for-Success arrangements while evaluating program performance closely. Eventually, this might be another performance-driven trend you can’t avoid.

For more, join me on August 16 for the session, “Planning For Turbulence In The Years Ahead: How To Diversify Your Revenue Streams & Develop Marketable New Services” at The 2017 OPEN MINDS Management Best Practices Institute in Long Beach, California.