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Richard todd


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Healthcare and social impact bonds

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Richard todd

  1. 1. HEALTHCARE AND SOCIAL IMPACT BONDS16 NOVEMBER 2011Richard Finance is authorised and regulated by the UK Financial Service Authority FSA No: 497568
  2. 2. AGENDA 2• Introduction to Social Finance• Social Impact Bonds• Applying the model in healthcare©Social Finance 2011
  4. 4. WHAT WE DO 4Social Finance aligns government, investors and social organisations to addresskey social issues. INVESTORS • Trusts & Foundations • High Net Worth Individuals • Private Banks • Mass Affluent • Institutional Investors • Big Society Capital GOVERNMENT SOCIAL ORGANISATIONS • Central government • Children in Care • Local government • Financial Inclusion • Commissioners Financial Structuring • Criminal Justice • Ministries Capital Raising • Employment • Policy Makers Research & Development • Health Care • Affordable Housing • Excluded Youth Key Social Issues SOCIAL VALUE©Social Finance 2011
  5. 5. WHO WE ARE 5What we are What we are not• Not for profit • Capital providers• A team with financial, consulting, • Grant makers governmental and social sector expertise • Dogmatic• Experienced in financial structuring • Healthcare sector experts• Able to raise investment • Clinicians• Focused on improving the flows of capital for social ends • In possession of a monopoly on good ideas©Social Finance 2011
  6. 6. EXPLORING A PROBLEM: WHY IS THERE CONSISTENT UNDER- 6INVESTMENT IN PREVENTION? A cycle of underinvestment • Only 4% of UK health spending is on Higher level long-term preventative services1 of spending on crisis • Budget cuts restricting services to core interventions ‘crisis intervention’ offer • Political pressure not to divert funding from core services • Public sector has enjoyed an historic lack of success in rolling-out Poorer social Fewer promising interventions outcomes, resources more require available for • Little evidence about what actually crisis early interventions interventions works • Innovative programmes seen as ‘just too risky’CAN THE LONG TERM SAVINGS BE USED TO INVEST IN PRESENT SERVICES? 1 - Young Foundation Health Launchpad, 2002©Social Finance 2011
  7. 7. SOCIAL IMPACT BONDS 7Social Impact Bonds are a way of raising investment for preventative services• A Social Impact Bond (SIB) is a contract with a public sector commissioner in which it commits to pay for improved social outcomes, such as reduced re-offending or improved health and well-being.• On the back of this contract, investment is raised from socially-motivated investors.• This investment is used to pay for a range of preventative services which improve outcomes and which reduce spending on costly acute services.• The financial returns investors receive are dependent on the degree to which outcomes improve.A SOCIAL IMPACT BOND IS AN INSTRUMENT THAT CONTRACTUALLYSEEKS TO ALIGN FINANCIAL AND SOCIAL VALUE©Social Finance 2011
  8. 8. HOW IS A SIB DISTINCT FROM OTHER PBR APPROACHES? 8 A SIB is distinctive amongst payment-by-results structures in being explicitly designed to bring in new investment Payment by results contract Social Impact Bond COMMISSIONER Improved social Payment-by-results: outcome leading % of savings from COMMISSIONER to public sector improved outcomes benefits Payment-by- INVESTORS results contract Up-front Implementation Services reliant on risk transferred SERVICE funding for funding through to investors PROVIDERS interventions existing resources of service providers SERVICE Service delivery PROVIDERS Service delivery TARGET POPULATION TARGET POPULATION©Social Finance 2011
  9. 9. SOCIAL IMPACT BOND: PETERBOROUGH PRISON 9The first SIB aims to reduce re-offending, with £5m of social investment Key Facts The Pilot • The six-year pilot scheme began in September • The first Social Impact Bond pilot has been 2010. launched with the UK Ministry of Justice. • Individuals receive a range of intensive • It is aimed at reducing re-offending. interventions from different service providers, both • It will work with around 3,000 short term male in prison and following release. offenders (those serving less than 12 months) from • Services are delivered by third sector providers Peterborough prison. with a proven track record of working with offenders, managed by a SIB-funded director. Peterborough Prison • The conviction levels among the target population are compared to a matched cohort taken from the Police National Computer. £5m has been raised from social investors • Initial investors are socially-motivated, primarily charitable trusts and foundations, who are focused on improving social outcomes. • If convictions are reduced by more than 7.5%, investors will start to make a return. • If the services are unsuccessful, the original investment is not returned.©Social Finance 2011
  10. 10. SOCIAL IMPACT BOND: PETERBOROUGH PRISON 10 Social Finance launched the first Social Impact Bond in Peterborough, UK in 2010 % of cost savings MINISTRY OF INVESTORS from reduced re- JUSTICE offending £5 million Reduction in re-offending SOCIAL IMPACT PARTNERSHIP St. Giles Trust St Giles Trust Ormiston Trust Ormiston Trust YMCA & SOVA Other Interventions Other InterventionsSupport in prison, Support to Support needed by theat the prison gates prisoners’ families Providing a prisoner, in prison and the and in the while they are in community base community. Funded as the community prison and post need is identified release 3,000 male prisoners sentenced to less than 12 months©Social Finance 2011
  11. 11. WHAT IS REQUIRED FOR A SIB? 11Social Impact Bonds are appropriate where a range of conditions are metFor commissioners to be willing to pay investors for outcomes, there must be:• The ability to transfer risk to investors/service providers and benefit from such risk transfers, e.g. when services are new and/or complex• Easily identifiable public sector benefits that are strongly linked to the measured outcomesFor investors to be willing to invest, there must be:• Scope for significantly increasing the productivity of existing services or promising new interventions that are known to achieve the target outcome at significantly lower cost than public sector benefits.• Providers that are independent of commissioners (unless they share some of the performance risk) and are willing to be closely monitored by investorsIn order for investors and commissioners to agree to a contract, it must possible to accurately measurethe impact of the interventions. This requires:• A robust outcome metric, which is objectively verifiable• A clearly-defined and accessible target population• A baseline/comparator group©Social Finance 2011
  12. 12. SOCIAL IMPACT BOND PROJECTS IN THE UK 12In the UK we are developing proposals for SIBs for a number of social issuesChildren in Care• Working with a number of UK local authorities to fund intensive interventions to divert young people in residential care and at the ‘edge of care’Employment• Supporting SIB applications to the UK Department of Work and Pensions Innovation Fund - £30m outcomes funding potCriminal Justice• Exploring applications for the £20m UK Ministry of Justice Innovation Pilots fundingSubstance misuse• Developing a model for a SIB to fund innovative recovery – rather than treatment – programmes with a UK local authorityHealth and adult social care• Exploring ways of improving the management of long-term health conditions whilst reducing spending on acute health services©Social Finance 2011
  13. 13. APPLYING THE MODEL TO HEALTHCARE 13 Our initial work to date has focused on a number of areasLong-term conditions• Exploring ways of improving the management of long-term health conditions whilst reducing spending on acute health services• We are about to begin assessing the potential for a SIB to fund a model of diabetes care in East LondonReducing emergency admissions• We undertook a feasibility study on a SIB to reduce emergency hospital admissions within a large UK city, initially focusing on reducing falls amongst the elderly, but then widened• A wider approach was promising but the project has been on hold until the commissioning environment is restructuredRare conditions• Improving the efficiency and coordination of services for sufferers of rare and complex conditions• We have published preliminary work on the potential for investment in conditions such as Sickle Cell disease and conditions where patients require highly complex discharge support (such as long-term ventilation)Public health programmes• Together with Matrix Knowledge, we have explored the feasibility of a Social Impact Bond for a city-wide physical activity programme – results to be published in the new yearReablement services• We are engaging with providers and investors on the potential for a SIB to fund discharge management and reablement services from acute trusts©Social Finance 2011
  14. 14. EXAMPLE: IMPROVING CARE FOR PATIENTS WITH LONG-TERM 14CONDITIONSThere is a strong case for using SIBs to develop better care for people withlong-term conditionsLong-term conditions are a significant spending concern as the number of people affectedgrows• In some countries, the impact of diabetes alone is consuming over 1% of GDP. It is easy to envisage spending on health, welfare and other impacts of long term conditions consuming 10% of GDP in the next few years, if not already.There is evidence that better primary and community care could reduce patients’ hospital use• Although some programmes have had mixed results, well targeted and managed specialist support, tele-care, homecare, self care and peer support could have a significant impact.There are tools to evaluate the impact of interventions on hospital use• Analysts are able to construct virtual control groups from national health care data.Transferring implementation risks would be beneficial• The implementation of many programmes has been poor under traditional commissioning.©Social Finance 2011
  15. 15. A SIB COULD INVEST IN A RANGE OF INTERVENTIONS 15Within each of the SIB models, there are interventions that could reduceunplanned hospital admissions. It is clear that to be effective, a portfolio ofinterventions will be needed. Review of evidence Example: Smethwick Medical Centre • One review of the literature found that is • Smethwick Medical Centre redesigned its some evidence to suggest that the following services to reduce secondary care use and initiatives may reduce unplanned improve the patient experience. hospitalisations and readmissions:1 • New services include telephone care – Self-management education; management and group consultations for people – Self-monitoring; with long-term conditions. – Group visits to primary care; • The results are encouraging (Figure 7.1). But – Broad managed care programmes; less than a year’s data is available so the evidence is not yet statistically significant. – Integrating social and health care; 0.4 0.37 – Multidisciplinary teams in hospital; 0.32 Urgent admissions per patient 0.35 – Discharge planning; 0.3 – Multidisciplinary teams after discharge; 0.25 0.17 0.2 – Care from specialist nurses; month 0.15 – Nurse-led clinics; 0.1 0.05 – Telecare; and 0 – Telemonitoring. Patients not Care Care receiving care management management management patients prior to patients after programme programme 1: Ham, C. (2006) Reducing unplanned hospital admissions: what does the literature tell us? University of Birmingham.©Social Finance 2011
  16. 16. THERE MAY ALSO BE CONSIDERABLE POTENTIAL IN BETTER 16TARGETING NEW SERVICESInterventions are most effective and cost-effective if they are targeted at thepeople who need them – in this case, people who are likely to be admitted tohospital in an emergency in the future.How can patients at risk of future hospital Segmentation of patient population usingadmissions be identified? Combined Predictive Model1• Creating ‘threshold criteria’ (for example, all people over 65 who have three recent hospital admissions) does not work. 0.5%: Very high relative risk Case• Analysis of several years’ of health data can management assess which factors are linked to future admissions. 0.5 – 5%: High relative Disease• Patient data can then be analysed to identify management risk which individuals are at risk of admission in the future. 6– 20%: Moderate• For example, the Combined Predictive Model Supported self-care relative risk uses data from hospital admissions, appointments and GP records to stratify populations by their risk of hospitalisation . 21-100%:• By segmenting the population, different Prevention and wellness Low relative promotion services can be appropriately targeted. risk 1: Health Dialog and King’s Fund (2006) Combined Predictive Model: Final Report©Social Finance 2011
  17. 17. ISSUES TO CONSIDER IN THE IRISH CONTEXT 17Are commissioners ready for payment by results?Are providers ready to take on delivery of new services?Is there an investor community ready to back these projects?©Social Finance 2011
  18. 18. FURTHER READING 18Online resources• General information:• Technical resources: Credo• Our strategic partner in Ireland, who is leading work assessing the potential for Social Impact Bonds for a range of social issues©Social Finance 2011
  19. 19. 19THANK YOU©Social Finance 2011