May 2, 2017

A new way to fund diabetes prevention

Daily Briefing

The National Kidney Foundation (NKF) of Michigan will use the so-called "pay-for-success" model to expand a proven diabetes prevention program, Sherri Welch reports for Crain's Detroit Business.

NKF of Michigan is one of three social service agencies in the nation selected by New York-based Local Initiatives Support (LISC) to get technical assistance to launch the financing model, Welch reports.

How the model works

The financing model originally launched in 2010 in the United Kingdom. It came to the United States in 2012, and it's since been used for over a dozen projects, in areas ranging from homelessness to early childhood education. Michigan's first pay-for-success program launched in August 2016 to expand Spectrum Health's Strong Beginnings pilot program, which aimed to curb preterm birth and rapid repeat pregnancies among an estimated 1,700 participating families, Welch reports.

Under the model, private investors front the cost for a not-for-profit to scale a program that has demonstrated success in addressing a persistent social issue, Welch reports. The investment is typically called a "social impact bond." A back-end payer, such as a health insurer or the government, return money to investors—who make a small profit—provided the not-for-profit meets its success goals.

According to Welsh, the model offers not-for-profits an alternative funding stream to the traditional options of grants and philanthropy. And while contracts or grants usually focus on short-term results, the social impact bond model lets the not-for-profits focus on longer-term outcomes. "The goal," Welsh writes, "is lower-cost, preventive interventions that can save money for the payer in the long term."

NKF's plans

NFK will use the funding from LISC to test the pay-for-performance model to expand a diabetes program, originally established in 2012.

Arthur Franke, SVP and chief science officer at NKF, said since the program's launch, about 1,700 individuals at risk for diabetes have enrolled. Participants overall increased their level of physical activity to an average of 221 minutes per week, and about half of the participants lost more than 5 percent of their body weight. But Franke said currently, individuals most at risk of diabetes—including low-income individuals who do not have Medicare or private insurance—do not have access to the program because Medicaid insurers do not cover it.

Welsh writes that NKF plans to use the pay-for-performance model to bring the program to at-risk, low-income populations in Oakland, Wayne, Macomb, Genesee, Kent, and Muskegon counties. The goal is to get $1.5 million to add 1,000 new participants annually over three years, according to Franke.

Charlene Cole, director of program operations at NKF of Michigan, said the expansion of the program through a social impact bond will be a win for all involved. "It will save health insurers money; the Kidney Foundation will be happy because it's serving more people, and investors will get some small return on their investment."

To get things going, LISC is helping the foundation set up an agreement with investors, a validator to measure program outcomes, and the back-end payers that would benefit from the cost savings.

Franke said Medicaid plans—such as Meridian Health, Molina Healthcare, and Health Alliance Plan—stand to gain cost savings from individuals not progressing to diabetes are expect to pay on the back end. "We're wanting to talk to any health plans that offer Medicaid. ... We'd like to demonstrate that the program has proven success with that population" (Welch, Crain's Detroit Business, 4/23). 

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