As governments struggle to meet the cost of delivering social services, many are turning to private capital and new funding models called “pay-for-success.” Instead of funding a service itself, governments will contract with outside groups to deliver certain pre-determined outcomes. For example, New York City has a contract with Goldman Sachs and Bloomberg Philanthropies to cut the rate of re-offending at Rikers Island prison. Goldman and Bloomberg fund the project, which is carried out by local nonprofits. If the consortium reduces re-offending by certain amounts, the city agrees to pay a higher rate of return to the investors than otherwise.
Also called “social impact bonds” or SIBs, the world first saw this model appearing in 2010 in the U.K., which has continued to embrace the idea. Its latest project is in the north of England, in Newcastle, and it aims to improve the health of a specific population of 11,000 people who make most use of the national health care system, the NHS. It’s funded by Bridges Ventures, which has now set up 13 S.I.B.s in total, and it’s been the called the first SIB for health anywhere (though California has experimented with a similar idea for asthma patients).
The funding model isn’t the only innovative aspect. Instead of simply giving the high-risk group more drug-based treatments, it employs “social prescribing” where patients are asked to adopt new lifestyle practices. The prescription could be in the form of a gym membership or a healthy eating program, and the health outcome will assessed with two metrics. First, has the intervention improved the wellbeing of the patient? And two, has it cut the frequency with which they use health facilities? (To judge the second question, the NHS will compare the usage of the target group with a similar reference sample of patients).
“Instead of just prescribing more antidepressants, we can actually prescribe a social intervention, whether that’s improving their lifestyle, fitness, socializing or diet,” says Antony Ross, head of Bridges’s social sector funds arm. “Often, these things are the root cause of the medical problems doctors typically end up treating.”
If one of the 11,000 patients visits a clinic, doctors can refer them to a “link worker” who connects them up with a social prescription in their area. All the group suffers from a chronic condition, like diabetes or heart disease, which limits their ability to take part in everyday activities. “The common phrase we hear from people [when they start collaborating with a link worker] is that ‘you helped move my life forward.’ I think often people just get stuck,” Ross says.
It’s too early to say if the project will work. Very few SIBs have reached the stage where their success can be judged either way (the first SIB in the U.K. is an exception and it has under-delivered, albeit only by a small amount). But then chronic patients are a logical group to focus on, as they tend to account for a disproportionate volume of spending (including in the U.S.). Even if the SIB improves the group’s health at the margins, it could have an outsized benefit to the U.K. health budget.