Healthcare and social impact bonds

1. HEALTHCARE AND SOCIAL IMPACT BONDS
16 NOVEMBER 2011
Richard Todd
richard.todd@socialfinance.org.uk
Social Finance is authorised and regulated by the UK Financial Service Authority FSA No: 497568

2. AGENDA 2
• Introduction to Social Finance
• Social Impact Bonds
• Applying the model in healthcare
©Social Finance 2011

3. OUR MISSION 3
WE BELIEVE THAT IF SOCIAL PROBLEMS ARE
TO BE TACKLED EFFECTIVELY, SUCCESSFUL ORGANISATIONS
SEEKING TO SOLVE THEM NEED SUSTAINABLE REVENUES AND
INVESTMENT TO ENABLE INNOVATION AND GROWTH.
OUR ROLE IS TO DEVISE THE FINANCIAL STRUCTURES AND RAISE
THE CAPITAL TO ENABLE THIS TO HAPPEN.
©Social Finance 2011

4. WHAT WE DO 4
Social Finance aligns government, investors and social organisations to address
key 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. WHO WE ARE 5
What 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. EXPLORING A PROBLEM: WHY IS THERE CONSISTENT UNDER- 6
INVESTMENT 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. SOCIAL IMPACT BONDS 7
Social 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 CONTRACTUALLY
SEEKS TO ALIGN FINANCIAL AND SOCIAL VALUE
©Social Finance 2011

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. SOCIAL IMPACT BOND: PETERBOROUGH PRISON 9
The 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. 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
Interventions
Support in prison, Support to Support needed by the
at 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. WHAT IS REQUIRED FOR A SIB? 11
Social Impact Bonds are appropriate where a range of conditions are met
For 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 outcomes
For 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 investors
In order for investors and commissioners to agree to a contract, it must possible to accurately measure
the 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. SOCIAL IMPACT BOND PROJECTS IN THE UK 12
In the UK we are developing proposals for SIBs for a number of social issues
Children 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 pot
Criminal Justice
• Exploring applications for the £20m UK Ministry of Justice Innovation Pilots funding
Substance misuse
• Developing a model for a SIB to fund innovative recovery – rather than treatment – programmes
with a UK local authority
Health 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. APPLYING THE MODEL TO HEALTHCARE 13
Our initial work to date has focused on a number of areas
Long-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 London
Reducing 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
restructured
Rare 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 year
Reablement 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. EXAMPLE: IMPROVING CARE FOR PATIENTS WITH LONG-TERM 14
CONDITIONS
There is a strong case for using SIBs to develop better care for people with
long-term conditions
Long-term conditions are a significant spending concern as the number of people affected
grows
• 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. A SIB COULD INVEST IN A RANGE OF INTERVENTIONS 15
Within each of the SIB models, there are interventions that could reduce
unplanned hospital admissions. It is clear that to be effective, a portfolio of
interventions 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. THERE MAY ALSO BE CONSIDERABLE POTENTIAL IN BETTER 16
TARGETING NEW SERVICES
Interventions are most effective and cost-effective if they are targeted at the
people who need them – in this case, people who are likely to be admitted to
hospital in an emergency in the future.
How can patients at risk of future hospital Segmentation of patient population using
admissions 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. ISSUES TO CONSIDER IN THE IRISH CONTEXT 17
Are 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. FURTHER READING 18
Online resources
• General information: www.socialfinance.org.uk
• Technical resources: www.socialfinance.org.uk/resources/social-finance
Clann 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
THANK YOU
©Social Finance 2011