Considering challenges to financing health interventions with pay for success

Of the pay for success (PFS) projects that have launched in the United States, only a handful have included health care system funding, such as state and federal Medicaid dollars in South Carolina’s Nurse-Family Partnership PFS Project. And while many current PFS projects track secondary health outcomes, few have focused primarily on health, either as services funded or payable outcomes.

Nonetheless, many nonprofit and governmental entities continue to look toward PFS as a potential mechanism to finance social programs designed to improve individual and population-level health outcomes and to reduce astronomical health care spending. Yet, obstacles remain. A new Urban brief outlines four important challenges that PFS projects in health care might face, and recommendations for overcoming these challenges.

One challenge is achieving net cashable savings. Let’s consider the hypothetical example of using PFS to finance a care coordination program to reduce unnecessary emergency department usage. A small number of individuals in many communities use emergency services several times a month. These patients often have immediate and complex medical and behavioral health needs, have difficulty navigating the health care system, and may not have insurance. This way of receiving care is inefficient both for the health care system and the patient, leading to high costs to public insurance and/or the hospital and continued poor health outcomes. Care coordination programs, which typically connect patients to a team of providers to help patients manage their complex needs and access preventive primary care services, offer alternatives to divert them from unnecessary ED use.

While care coordination programs can provide better care and may be more cost-effective, little evidence suggests that they yield net health care savings over the short term. In fact, a meta-review of 15 randomized controlled trials testing the effects of care coordination programs on health care expenditures showed no net cost savings in any of the 15 projects. Complex patients sometimes use more care when they’re first accessing higher quality and more stable services to treat an accumulation of health problems that emergency or patchwork services likely would not have treated. (This phenomenon has been observed when previously uninsured patients gain insurance coverage as well. The Oregon Health Insurance Experiment demonstrated that individuals newly covered under Medicaid used more care, including hospitalizations and emergency department use, than the comparable uninsured population.)   

However, a potential lack of short-term net cost savings should not prevent stakeholders from exploring PFS for health care interventions. During the planning process, stakeholders should conduct a thorough and objective literature review to assess the evidence on their chosen intervention’s cost-benefit estimates. If such estimates are not available, evidence on the intervention’s health care use outcomes, like reduced emergency department visits, may help to forecast potential cost savings. A pay for success project could also test whether an intervention proven to improve health saves the health care system money.

There may also be less pressure for a project to achieve cashable health system savings if a government entity serves as the end payer. If evidence suggests the intervention improves health and wellbeing and is also a more efficient use of resources, a government may not see cashable savings as a requirement. In addition, when assessing the value of an intervention, a government could consider savings in other sectors that the intervention brings about, like reduced costs for the housing or justice systems.  

In sum, there are challenges to doing PFS in health care, but there are opportunities to circumvent these challenges. As more health-related pay for success projects launch, we’ll be able to learn from their experiences, and apply lessons going forward.

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As an organization, the Urban Institute does not take positions on issues. Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. Photo via Shutterstock.