Richard todd

HEALTHCARE AND SOCIAL IMPACT BONDS

Richard Todd [email protected]

Social Finance is authorised and regulated by the UK Financial Service Authority FSA No: 497568

16 NOVEMBER 2011

©Social Finance 2011

AGENDA 2

• Introduction to Social Finance

• Social Impact Bonds

• Applying the model in healthcare


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.


WHAT WE DO 4

Financial Structuring

Capital Raising

Research & Development

Key Social Issues

SOCIAL VALUE

SOCIAL ORGANISATIONS

• Children in Care

• Financial Inclusion

• Criminal Justice

• Employment

• Health Care

• Affordable Housing

• Excluded Youth

INVESTORS

• Trusts & Foundations

• High Net Worth Individuals

• Private Banks

• Mass Affluent

• Institutional Investors

• Big Society Capital

GOVERNMENT

• Central government

• Local government

• Commissioners

• Ministries

• Policy Makers

Social Finance aligns government, investors and social organisations to address key social issues.


WHO WE ARE 5

What we are

• Not for profit

• A team with financial, consulting, governmental and social sector expertise

• Experienced in financial structuring

• Able to raise investment

• Focused on improving the flows of capital for social ends

What we are not

• Capital providers

• Grant makers

• Dogmatic

• Healthcare sector experts

• Clinicians

• In possession of a monopoly on good ideas


EXPLORING A PROBLEM: WHY IS THERE CONSISTENT UNDER-

INVESTMENT IN PREVENTION?

6

Higher level

of spending

on crisis

interventions

Poorer social

outcomes,

more require

crisis

interventions

Fewer

resources

available for

early

interventions

A cycle of underinvestment

• Only 4% of UK health spending is on long-term preventative services1

• Budget cuts restricting services to core ‘crisis intervention’ offer

• Political pressure not to divert funding from core services

• Public sector has enjoyed an historic lack of success in rolling-out promising interventions

• Little evidence about what actually 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 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


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

COMMISSIONER

TARGET

POPULATION

SERVICE

PROVIDERS

Service delivery

INVESTORS

COMMISSIONER

SERVICE

PROVIDERS

Payment-by-results:

% of savings from

improved outcomes

Implementation

risk transferred

to investors

Up-front

funding for

interventions

Payment-by-

results contract

TARGET

POPULATION

Service delivery

Improved social

outcome leading

to public sector

benefits

Services reliant on

funding through

existing resources

of service providers

Payment by results contract Social Impact Bond


SOCIAL IMPACT BOND: PETERBOROUGH PRISON 9

The first SIB aims to reduce re-offending, with £5m of social investment

Key Facts

• The first Social Impact Bond pilot has been launched with the UK Ministry of Justice.

• It is aimed at reducing re-offending.

• It will work with around 3,000 short term male offenders (those serving less than 12 months) from Peterborough prison.

• The six-year pilot scheme began in September 2010.

• Individuals receive a range of intensive interventions from different service providers, both in prison and following release.

• Services are delivered by third sector providers with a proven track record of working with offenders, managed by a SIB-funded director.

• 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.

Peterborough Prison

The Pilot


SOCIAL IMPACT BOND: PETERBOROUGH PRISON 10

Providing a

community base

INVESTORS

£5 million

SOCIAL IMPACT PARTNERSHIP

St Giles Trust

Support in prison,

at the prison gates

and in the

community

Ormiston Trust

Support to

prisoners’ families

while they are in

prison and post

release

Other Interventions

Support needed by the

prisoner, in prison and the

community. Funded as the

need is identified

3,000 male prisoners sentenced to less than 12 months

Reduction in

re-offending

MINISTRY OF

JUSTICE

% of cost savings

from reduced re-

offending

St. Giles Trust Ormiston Trust YMCA & SOVA Other Interventions

Social Finance launched the first Social Impact Bond in Peterborough, UK in 2010


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 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


APPLYING THE MODEL TO HEALTHCARE 13

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

Our initial work to date has focused on a number of areas


EXAMPLE: IMPROVING CARE FOR PATIENTS WITH LONG-TERM

CONDITIONS

14

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.


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.

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0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Patients not

receiving care management

Care

management patients prior to

programme

Care

management patients after

programme

Urg

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mis

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pe

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atie

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• Smethwick Medical Centre redesigned its services to reduce secondary care use and improve the patient experience.

• New services include telephone care management and group consultations for people with long-term conditions.

• The results are encouraging (Figure 7.1). But less than a year’s data is available so the evidence is not yet statistically significant.

1: Ham, C. (2006) Reducing unplanned hospital admissions: what does the literature tell us? University of Birmingham.

Review of evidence

• One review of the literature found that is some evidence to suggest that the following initiatives may reduce unplanned hospitalisations and readmissions:1

– Self-management education;

– Self-monitoring;

– Group visits to primary care;

– Broad managed care programmes;

– Integrating social and health care;

– Multidisciplinary teams in hospital;

– Discharge planning;

– Multidisciplinary teams after discharge;

– Care from specialist nurses;

– Nurse-led clinics;

– Telecare; and

– Telemonitoring.

Example: Smethwick Medical Centre


THERE MAY ALSO BE CONSIDERABLE POTENTIAL IN BETTER

TARGETING NEW SERVICES

16

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 admissions be identified?

• Creating ‘threshold criteria’ (for example, all people over 65 who have three recent hospital admissions) does not work.

• Analysis of several years’ of health data can assess which factors are linked to future admissions.

• Patient data can then be analysed to identify which individuals are at risk of admission in the future.

• For example, the Combined Predictive Model uses data from hospital admissions, appointments and GP records to stratify populations by their risk of hospitalisation .

• By segmenting the population, different services can be appropriately targeted.

1: Health Dialog and King’s Fund (2006) Combined Predictive Model: Final Report

Case management

Disease management

Supported self-care

Prevention and wellness promotion

0.5%: Very high relative risk

21-100%: Low relative risk

0.5 – 5%: High relative risk

6– 20%: Moderate relative risk

Segmentation of patient population using Combined Predictive Model1


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?

ISSUES TO CONSIDER IN THE IRISH CONTEXT 17

http://www.clanncredo.ie/default.aspx






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

FURTHER READING 18







19

THANK YOU

Health & Medicine

Richard todd