Editor’s Note: With changes in the healthcare landscape catapulting social determinants of health from a topic for academics into an on-the-ground reality for providers, Manatt Health has produced a new report for The Commonwealth Fund, Skoll Foundation and Pershing Square Foundation, titled “Addressing Patients’ Social Needs: An Emerging Business Case for Provider Investment.” The report examines the economic rationale for investments in interventions that target patients’ social and clinical needs. It also describes the range of tools available for providers looking to address patients’ social needs and reviews the emerging evidence of their effectiveness in improving health and containing costs. With the confluence of sound economics and good policy, the report then looks forward, concluding that investments in social interventions are starting to make good business sense. Highlights are summarized below. Click here to download a free PDF of the full report.

Extensive research documents the impact of social factors—such as income, education, access to food and housing, and employment status—on the health and longevity of Americans. In fact, these nonmedical factors account for as much as 40% of health outcomes. Until recently, however, providers rarely addressed patients’ unmet social needs in clinical settings. Health policy, too, focused on medical rather than social needs. Payers also had little incentive to cover social interventions that promised long-term clinical and financial rewards when their low-income enrollees regularly churned on and off coverage.

Changes in the social landscape, however, are transforming social determinants of health from an academic topic to a practical reality for providers. With more low- and modest-income individuals gaining access to coverage through the Affordable Care Act (ACA); a growing focus on the “Triple Aim” of better care, better health and reduced cost; and the advent of value-based purchasing and other outcomes-based payment models, providers have a strong business case to invest in interventions that address patients’ social needs.

Impact of the Changing Healthcare Landscape

Several factors have coalesced to make 2014 an inflection point for the nation’s healthcare system. The convergence of these forces is potentially triggering a shift from an illness-focused system to a health-focused system:

  • The ACA is expanding coverage to millions more low- and modest-income individuals. For many, their social and economic circumstances will be a defining feature of their health.
  • Six years after the introduction of the “Triple Aim,” its goals of improved health, improved care and lower per capita costs of care have become the organizing framework for the healthcare system.
  • New public and private payment models are holding providers accountable for healthcare quality and costs, offering both an imperative and a financial opportunity for them to look beyond patients’ medical needs. Provider participation in contracts that include financial risk sharing for health outcomes more than doubled between 2011 and 2013. As a result, growing numbers of providers are realizing that investing in interventions addressing their patients’ social needs makes good business sense.

Impact of Social Needs on Patient Health and Costs

Compelling evidence has revealed the impact of unmet social needs on people’s health, as well as on healthcare costs:

  • More illness. Poor health is closely tied to inadequate housing, food insecurity, and unemployment or underemployment. Individuals with inadequate housing are more likely to experience lead poisoning, asthma and other respiratory conditions. Those with food insecurity face a higher risk of chronic conditions, such as hypertension and hyperlipidemia, as well as overall poor mental and physical health. Finally, those who lose their jobs are 83% more likely to develop a stress-related health condition, such as heart disease or stroke.
  • Shorter life expectancy. Better-educated adults have longer life expectancies. As of 2006, 25-year-olds with bachelor’s degrees or higher were expected to live eight to nine years longer than their peers without high school diplomas.
  • Increased healthcare spending. Unmet social needs are associated with higher rates of emergency room use, hospital admissions and readmissions. Several of the 10 conditions that accounted for the highest healthcare expenditures in 2011 are linked to unmet social needs, including heart disease, mental disorders, asthma, diabetes, hypertension and hyperlipidemia.

Economic Incentives for Addressing Patients’ Unmet Social Needs

The impact of social factors on patient health is playing out in new payment models that hold providers accountable for patient health and healthcare costs. These models give providers substantial economic incentives to incorporate interventions that target patients’ social needs into their care approach.

  • Capitated, global and bundled payments. Several payment approaches give providers a budget for managing covered services. Bundled payments cover a limited number of services for a limited time period or an episode of care. Capitation or global payments cover a comprehensive range of services for a fixed time period.
  • Penalties for readmissions. Medicare’s Hospital Readmission and Reduction Program, provided under the ACA, gives hospitals financial incentives to avoid readmissions. Under the program, the CMS reduces payments to hospitals with excess readmissions within 30 days of discharge for patients with at least one of three conditions: heart attack, heart failure and pneumonia. CMS already has penalized 2,225 hospitals for excess readmissions. Safety-net hospitals were hit hard, with 77% being penalized. However, Medicare hospital readmission rates have dropped by 10% since 2011.
  • Shared savings programs. Shared savings programs incentivize providers to reduce spending on a defined patient population by offering them a share of savings realized as a result of their efforts, if they meet quality metrics. In Medicare, there are more than 360 accountable care organizations (ACOs) participating in two shared savings programs—Medicare Shared Savings Program (MSSP) and the Pioneer ACO Program. Almost an equal number of ACOs have shared savings agreements with commercial payers. While the MSSP and Pioneer programs do not require ACOs to address patients’ social needs, anecdotal evidence suggests that many of the most successful ones do.
  • Enhanced reimbursement models. Models such as the patient-centered medical home (PCMH) require providers to address patients’ social needs as a prerequisite to payment. To achieve PCMH recognition, providers must meet standards focused on organizing care around patients by enhancing care coordination and supporting self-care through linking patients to social service agencies. As of April 2013, 43 states had adopted policies and programs to advance PCMHs.

Indirect Economic Benefits

When considering whether and how to invest in social interventions, providers need to take into account indirect, as well as direct, economic advantages.

  • Employee productivity. Some 40% of primary care physicians report that they are unable to spend enough time with patients. Yet many spend a substantial share of patient visits addressing social needs. Interventions that address social needs allow providers to allocate their time to patients’ physical needs. They also have been shown to boost office productivity.
  • Provider satisfaction. Eighty percent of physicians do not feel equipped to address patients’ social needs and therefore do not believe they are providing high-quality care. Physicians who believe they are offering high-quality care are more than twice as likely to report they are satisfied. Therefore, interventions that address social needs can improve the satisfaction of providers and other employees.
  • Patient satisfaction. Many new healthcare delivery and payment models hold providers accountable for patient satisfaction—and interventions that address patients’ social needs have been shown to improve that satisfaction.

Strategies to Address Patients’ Unmet Social Needs

Providers can tap into a growing number of tools and techniques to address the social needs of their patients. These interventions fall into two categories:

  • Broad interventions focus broadly on connecting low- and modest-income patients with social supports. Broad interventions typically depend on referrals from clinicians, who use a screening tool to identify patients’ social needs and connect them to appropriate services, usually within a clinical setting.
  • Targeted interventions target more medically complicated, high-cost patients through both clinical and social components. They integrate social supports into larger care management initiatives for people with chronic or debilitating conditions.

Paying for Social Interventions

Some providers are prepared to commit operating dollars to fund interventions connecting individuals to social supports while others are not. For those unwilling or unable to commit operating funds, “community benefit” spending by hospitals could be a source of funding.

To justify their tax-exempt status, nonprofit hospitals must provide a community benefit, usually equal to the value of their tax exemption. While the majority of community benefit dollars have gone toward care for underinsured and uninsured patients, expanded coverage under the ACA should enable providers to shift some funds toward programs targeting social needs.

The ACA also is triggering significant transformations in state-based systems for delivering and paying for healthcare, with social interventions often a key element of emerging models. Medicaid waivers are providing new funding opportunities through delivery system reform incentive payment (DSRIP) programs, which support state transformation plans.

Social impact bonds, which use private capital to address complex social needs, are another source of funding. If the efforts work, investors receive a portion of the savings.

Conclusion

Few working in healthcare doubt that social factors play a role in patients’ health. Until recently, however, that understanding did not translate into action. With the Triple Aim in place, coverage expanding and value-based reimbursement becoming standard, the healthcare system is poised for change. With this confluence of sound economics and good policy, investments in interventions that address patients’ social needs are starting to make good business sense.