7.6 Could social impact bonds or “pay for success” models help with the initial financing?


If CMS or another entity funds the quality measure development and evaluations of the overall initiative and provides technical support (including support for collaboration), then the start-up costs with this model of expanding PACE are modest. Medicaid and PACE programs will need data to anchor negotiations to settle initial prices and packages of services. If the program aims for rapid expansion, personnel recruitment and training costs might be substantial. Contracting with existing and expanding businesses will require some time. PACE centers might need to be expanded or to have alternative sites contracted. Each of the initial sites will need to develop specific business plans.

Perhaps CMMI will fund these investments in their portfolio of models to test. However, if the site needs to raise the start-up costs, would it be helpful for investors to foot these costs, or for some level of government to offer a pay for success deal? At least in the first years of developing this model, it seems unwise to have investor interests competing with the interests of frail elders and their families for the funds made available by prudent medical care, as would happen in conventional for-profit business. However, a social impact bond could work because it would have a limited and agreed return on investment, perhaps with payment delayed to allow a well-developed start-up phase.

Pay for success does not have much of a track record in health care, but that approach would allow a governmental agency to enable a private business to take the risks that this will not work and, when it does work well, would pay a bonus sum for having taken that risk. This would seem to align with the useful incentives, but it may not really be necessary since there should be enough savings from more prudent medical care to limit the downside risks for a financially healthy PACE program.

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