Giving Compass' Take:

•  Naveen Rao, writing for Medium, investigates the opportunities for impact investments to help improve healthcare reform. 

• What are the challenges with incorporating impact investing into the health care system?

• Here is a guide to impact investing in health. 

The US Healthcare system has faced tremendous uncertainty over the course of the last year, driven by relentless efforts from Congress and the White House to gut federal health funding and tear down the public health safety net.

After eight years of health IT stimulus funding and ACA-mandated coverage expansion, it seems we’ve abruptly reached the end of the paved road of federally-driven healthcare reform.

As it turns out, a lot. Some of the most progressive developments in public health innovation are coming from beyond hospitals, value-based care models, and federal healthcare programs. Private sector organizations are exploiting federal tax initiatives and economic development programs to steer money into health at the local level — increasingly, with an eye on earning a return. Public-private partnerships are springing up at the local level, led by city-level governments and community-oriented non-profits, and garnering cooperation and participation from financially-savvy for-profits and startup companies alike.

Instead of waiting for leadership from the Feds and the healthcare industry, would-be reformers are exploring, debating, and refining the growing evidence base for non-traditional investments in health.

A Social Impact Bond (SIB) is a public private partnership also known as Pay for Success (P4S). While they are relatively new in the US, these models are growing in popularity as a way to support the social sector with more than philanthropy dollars.

P4S models route money from private sector investors into social interventions with an anticipated, measurable ROI. An intermediary third party organization monitors the performance of the program against those predetermined targets and reimburses initial investors with public or philanthropic funds once goals are met.

These models work by moving around financial resources from sector to sector in a way that generates a social impact while addressing problems that are traditionally underfunded, or that simply fall in the gap between one agency’s jurisdiction and the next.

Although their popularity is growing, such programs are no easy undertaking. They require multi-sector partnerships and savvy, progressive public leadership, as well as intermediaries with high technical competency for measurement, analysis, reporting, and financing.

We are still in the early days of such impact investing models; Ultimately, the success or inability of these programs to generate strong returns will determine their long term viability as a financing mechanism for investing in health at the community level.

Read the full article about impact investing by Naveen Rao at Medium.