It’s been established that an effective way to manage an individual’s health is to address the root cause of health complications, known as social determinants of health (SDOH). Unfortunately, interventions that address SDOH often exist outside the scope of the traditional healthcare payment system.
There is a relatively new methodology that can be used to increase spending on SDOH while transparently enforcing accountability and outcomes. Social impact bonds, also known as “pay-for-success” models, are multi-stakeholder performance-based contracts.
The five key stakeholders and their roles are as follows:
1) Service Provider: Agrees to conduct a program designated to yield a future outcome that is valuable to the payer. (Usually a nonprofit organization.)
2) Investor: Provides up-front working capital for the service provider to channel toward the designated program. In exchange, the investor will receive a “success payment” if the committed outcome is produced on schedule.
3) Payer: Commits to pay the service provider a “success payment” when the specified outcome is produced. (Usually a government agency.)
4) Intermediary Organization: Facilitates the SIB contract, establishes payment and financing terms, and supervises the service provider’s program.
5) Independent Evaluator: Determines if the committed outcome was achieved upon conclusion of the contracted period.