Through the Pay for Success model, LISC is working with the National Kidney Foundation of Michigan to scale an evidence-based lifestyle change program to reduce the prevalence of Type 2 diabetes. One of three LISC Pay For Success projects, the goals of the Michigan program are potentially game-changing: find effective healthcare interventions that reduce short- and long-term healthcare costs at the same time.
Healthcare officials, doctors, and hospitals across the United States are working to accomplish a lofty and complicated goal: reduce the amount spent on healthcare, while simultaneously improving health outcomes for patients. According to the Centers for Medicare and Medicaid Services, spending for the Medicare program which insures the nation’s elderly grew by 4.5%, to over $640 billion dollars, in 2015. Meanwhile, expenditures for Medicaid, which provides health coverage for low-income Americans, grew by nearly 10%, to over $545 billion, during the same period. As more Americans retire and enroll in Medicare and others obtain health coverage due to the expansion of Medicaid under the Affordable Care Act, the healthcare industry is seeking new ways to decrease costs and also improve health outcomes.
This is where Pay for Success (PFS) comes in. PFS is a financing mechanism in which a private sector investor provides upfront funding for a social service program. If the program is evaluated as a success and outcomes are met, a back-end payor (typically government) pays back the investor. Insurers, healthcare philanthropies, and government entities should consider utilizing the PFS model when exploring new health interventions because the model focuses on outcomes and can evaluate the efficacy of public health interventions.
In addition to expanding healthcare coverage, a major component of the Affordable Care Act is an intense focus on holding doctors, hospitals, and insurers accountable for health outcomes. The law mandates that healthcare providers improve overall quality by making healthcare more patient-centered, support evidence-based interventions, and lower overall costs.
LISC is working with the National Kidney Foundation of Michigan (NKFM ) to reduce the prevalence of type 2 diabetes among Medicaid-eligible residents in six Michigan counties through the Diabetes Prevention Program (DPP). The DPP is a year-long, evidence-based lifestyle change program implemented by trained lifestyle coaches that will work with up to 3,500 program participants that are at risk of developing type 2 diabetes. The program will measure weight-loss achieved, number of minutes that participants engage in physical exercise, and workshop attendance rates.
LISC and the NKFM are coordinating with health insurers to scale this public health intervention. The DPP has been proven to lower participants’ chances of developing type 2 diabetes and save costs for both health insurers and patients. Similar public health interventions that demonstrate cost savings and improve health outcomes could be ideal candidates for PFS transactions.
A commitment from health insurers and government, particularly the Centers for Medicare and Medicaid Services and state Medicaid agencies to reimburse investors for outcome payments will enhance the volume of healthcare-oriented PFS programs. The Green & Healthy Homes Initiative’s Pay for Success State Playbook highlights changes in federal healthcare regulations that enable managed care organizations to develop value-based contracts. States can amend their Medicaid contracts to support outcomes-based financing. This will allow governments to assess what healthcare interventions are effective, expand them, and reduce short- and long-term healthcare costs.