By Kathryn Jantz and Eva Batalla-Mann
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If any medication had the equivalent health impact as a lifetime of nutritious food or safe and quality housing, it would be covered by every health plan. The effectiveness and nonexistent side effects of these interventions would make them a routine prescription, a vaccine against social harms.
Yet as we explore health care’s opportunity to invest in services to help address basic needs, we hold a different standard. It is not enough for an intervention just to improve health—instead, many expect a return on investment (ROI). In other words, our often for-profit healthcare system justifies social-needs spending by striving for investments where it will earn more than a dollar back in revenue or savings (through reduced, potentially preventable utilization) per dollar spent. In the public sector, this framework is formally built into policy. For the Medicaid 1115 waivers and In Lieu of Services policies that support social services, the foundational concept is that investments in social needs must offset healthcare costs.
To support community-based nonprofits and health care systems working within this context, HealthBegins has developed a new Quick Calculator with the support of the Commonwealth Fund and the SCAN Foundation, that allows partners that may not have access to local healthcare data to quickly estimate potential ROI on several social interventions, based on national data sets and evidence. The Quick Calculator, which is based on the more robust ROI Calculator first developed by the Commonwealth Fund, includes prepopulated data from national research, enabling users to rapidly identify potential financial rewards and risks associated with projected improvements in healthcare utilization.
“Assessing ROI alone omits numerous outcomes that matter—including improved health.”
This matters because in the short term, we have an opportunity to use an ROI framework to support some social investments for some populations. These social interventions can both meet critical health needs and lay the foundation to bring social-needs investments to a larger scale. However, measuring success through ROI alone will not suffice to meet the greater aim of creating a more integrated health system that supports health and health equity for all people. To achieve that we will need to expand our focus beyond ROI and cultivate and apply a broader Value on Investment (VOI) framework.
VOI is crucial because assessing ROI alone omits numerous outcomes that matter—including improved health. Robust social investments can improve patient experience and staff retention, reduce health inequities between populations, and potentially reduce utilization over the long term. But none of these benefits is captured in a calculation of the short-term bottom line.
It is also difficult to drive equity through ROI alone because achieving an ROI requires earning revenue or savings within the current healthcare system, which has ingrained inequities. For example, the current healthcare system places more financial value on tertiary care than primary care, thus making it difficult to achieve a meaningful ROI on populations like children for whom the focus is prevention. Healthcare ROI also doesn’t support investing in communities who are already underutilizing the healthcare system—for example, populations who have been disenfranchised or who have compelling historical reasons to mistrust the healthcare system don’t use it. (Read more here about the challenges of relying solely on ROI calculations to assess the value and impact of healthcare equity and social needs interventions.)
For these reasons among others, HealthBegins urges leaders of clinical-community partnerships to weigh ROI as one measure within a broader VOI framework to better understand the full impact of an equity-focused, upstream investment. If ROI is playing Monopoly, VOI is building a better, more equitable board.
VOI calculations consider financial returns (which we conventionally think of as direct ROI); economic returns (all the tangible and intangible benefits that confer economic value to each partner institution, such as boosts to capacity, productivity, or branding and goodwill); and social returns (benefits that accrue to a broader set of organizations, stakeholders, and constituents in a community).
We encourage users of the ROI calculator to situate the results of the ROI calculator within a broader Value on Investment approach by considering the following:
- Additional monetary and non-monetary benefits: Identify and predict or track benefits to the healthcare institution beyond the limited financial utilization metrics in the ROI Calculator. These could include:
- Improved quality and safety
- Improved patient experience and trust
- Staff retention
- Reputation in the community
These benefits may have direct financial benefit or indirect financial benefit for the investing healthcare institution. For example, improved reputation and establishing trust in the community may result in retention and expansion of a patient population, which would have a direct financial benefit.
- Benefits accrued to other systems: Many social care investments will result in savings to other systems, including partner community-based organizations, the business community, government-funded systems, and others. For example, states may be investing significant resources through non-healthcare channels, such as child welfare, criminal justice, and education. Savings in these systems would lessen the strain on many state budgets.
- Time to impact: Upstream investments often only address short-term downstream results that may require more time to see a meaningful impact. The new ROI Quick Calculator, like most ROI tools, is based on savings within a year. But for some interventions, especially high-intensity or expensive interventions such as supportive housing, programs may not be “budget neutral” or show an ROI until years two or three. In the case of children and youth, it may take up to twenty years to show an ROI. While this calculator won’t show multi-year returns, you can start to estimate them by reducing your fixed costs and assuming those costs are spread over a two-to-three-year period.
- Centering equity: In some populations, communities most harmed by social arrangements use health care less than populations who do not have a history of maltreatment and insufficient access to care. Systemic racism in healthcare has resulted in Black and Brown people utilizing the healthcare system less than White people. This means that there is less opportunity for savings or “ROI” for marginalized communities who avoid the healthcare system due to mistrust or other systemic barriers to care. A VOI framework can capture the improved health outcomes and potential for increased engagement that social investments bring for these communities.
Each healthcare institution has its own vision and mission, but the overarching goal of most healthcare institutions is to improve health. For nonprofit hospitals, the goal is even more explicitly to improve health for populations who have been left behind. We know that social investments have the power to help reach this goal, bringing a greater impact on overall health than healthcare investments, yet the financial incentives baked into the current healthcare system omit this kind of genuine value.
“If ROI is playing Monopoly, VOI is building a better, more equitable board.”
The only way for healthcare to overcome this hurdle and transition to financial incentives that fully align with driving equity is for healthcare systems to start implementing social needs interventions that may not always show a clear short-term ROI but are sure to have a robust VOI. In the long game toward delivering and incentivizing equitable, upstream care, providers and payers each tend to wait for the other to make the first move. The responsibility, of course, belongs to both parties. But ultimately the game will only change when providers help create the infrastructure to drive equity by implementing interventions and demanding that the financial incentives follow—aligning our social mission and financial goals.
The ROI Calculator is an important, pragmatic tool for organizations to be able to wield within the current landscape of healthcare. While we want organizations that provide social services to be able to succeed and operate within this system, we hope to simultaneously strive for something better—a system that supports true well-being across all spheres of life within communities that have historically been marginalized. Achieving well-being in these communities may not always demonstrate a clear ROI, but we know that it is the right thing to do in pursuit of improved health for all. And within a broader view of what constitutes value, it delivers real returns.