An Ounce of Prevention is Worth a Pound of Cure

by | January 25, 2021

Even before COVID-19 upended life as we know it, the United States was dead last among G7 countries according to the World Health Organization’s (WHO) ranking of healthcare efficiency. Healthcare efficiency is a composite measure of the cost per capita for healthcare and the subsequent health outcomes associated with that spending. In fact, the US was ranked 37th among 191 countries that were analyzed. 

How can this be? And, more importantly, what can be done to change it? 

Research points to overuse of low-value health services and a chronic underutilization of primary care and preventive services. COVID-19 both illuminated and compounded this problem, which stems partly from prolonged under investment in both health and social care for low-income and underserved populations. Activists and economists alike have called for more investment in preventive care and in programs and services that address the Social Determinants of Health (i.e., factors other than healthcare that impact individual and population health, such as housing) that lead to a more vibrant and productive country. 

With stagnating GDP growth before the pandemic and an aging population, incentives have not been aligned to improve healthcare. Responsibility for these dire outcomes is distributed across multiple sectors of the economy that communicate infrequently (payors, hospitals, and government). Poor communication has contributed to a lack of coordination between health entities, which ultimately slows progress for those who lack the resources to meet their basic needs. 

But what does it mean to invest in healthcare interventions that lead to better health outcomes? 

Simply put, we need specific, proven actions to invest in health interventions that work for the nation’s most vulnerable. 

Policy change is necessary, but not sufficient, for those suffering now. Investments must be made that both provide better care at a lower cost in the short-term and generate clear evidence for long-term policy change. Investment in social determinants like low-income housing for those experiencing homelessness or meal services for those experiencing food insecurity are proven interventions that deliver a dual return: they address the needs of the individual and they reduce inappropriate healthcare spending. 

Since the beginning of the pandemic, we have heard increased calls to build resilience and sustainability within community-based organizations so that they can better deliver against their missions of serving those in need. But what would this look like? How can these organizations move away from perpetual fundraising and program operations on razor thin margins? 

One (but certainly not the only) opportunity involves the use of outcomes-based financing, a financing structure that aligns both community-based organizations (CBOs) and payors to coordinate the achievement of, and payment for, health outcomes.  This approach hinges on four groups of actors to align on outcomes and coordinate as follows:

  1. Community-based organizations that can (i) build capacity to identify and collect data on metrics that matter to a variety of stakeholders (e.g., payors) and (ii) work to secure value-based contracts with Medicaid health plans and providers, which establishes a revenue stream and collateral to take on low-interest debt to scale programs;
  2. Managed Care Organization (MCOs), which are receiving greater pressure from state Medicaid agencies to deliver more innovative models of care at a lower cost that in turn encourages more value-based contracting health care services; 
  3. Impact Investors, who can provide low-cost financing as the scaling capital for community-based organizations and manage financing risk based on the revenue streams of value-based contracts taken on by community-based organizations; and
  4. Philanthropic institutions, which can act in the first-loss tranche in the deal to further de-risk the investment for the senior debt lenders.

Structuring deals with a blend of capital is both feasible and supportive of longer-term objectives and helps to align interests and outcomes. The influx of new capital to robust social programs works to create a virtuous cycle for impact-focused investors and community-based organizations alike, creating the foundation to deliver better health outcomes at lower costs. 

Greater investment in Social Determinant of Health programs also provides incentives and evidence for policymakers to confidently evolve healthcare policy and narrow the healthcare gap that has opened between the US and other wealthy nations. Investing in basic needs (food, shelter, etc.) creates large healthcare savings and delivers better health outcomes relative to the status quo of treating downstream ailments as they arise. 

Entering 2021, we have nearly all the conditions necessary to make this work – low financing costs, a heightened focus on healthcare due to the COVID-19 pandemic and increasing pressure from state and federal policy makers to deliver better outcomes for less money. Now we need to summon the will and act. 

Ready to engage is a group of impact-focused funders, backed by over $700 billion in funding, working alongside community-based organizations hungry to forge new partnerships and revenue streams. Needless to say, the healthcare insurance and medical industries also need better models of care and are incentivized by the lower costs associated with these programs. 

The pandemic, recession and growing inequality have all revealed and exacerbated disparities in the provision of basic healthcare. It is time for innovative thinking, fresh partnerships, and a focus on models of preventative care to put America’s healthcare system back on track.

Filed Under: Politics

About the Author

Kyle has a strong passion for the impact investing field and believes that by creating and deploying new financing vehicles, incentives can be aligned to solve the most important problems of our time. Kyle currently is a Senior Associate at Quantified Ventures where he works on health engagements with multiple groups of stakeholders to structure outcomes-based financing deals. He has experience in financial modeling within impact investing and in building impact focused health organizations in emerging markets. His social consulting experience ranges across Western Europe, South America and the United States. Kyle holds a BS in Economics from the University of Pittsburgh and an MBA from IE Business School.

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