How to Calculate the Costs of Addressing the Social Determinants of Health

Healthcare stakeholders—purchasers, payers, providers, policymakers, researchers—all agree that social determinants of health (SDoH) factors impact health outcomes, and many providers, in their clinical workflows, now not only screen patients for social risk but also connect them with relevant community resources.

This shift to whole person care has, as demonstrated by state-level research, resulted in population health improvement. A study, published in 2016 by the journal Health Affairs, found that states with more money allocated to social services spending (than health spending) had better health outcomes for illnesses like asthma, cancer, diabetes, mental health, myocardial infection, and obesity, when compared to states that primarily invested in health spending.

Social Determinants of Health (SDoH) Costs to Healthcare Providers

Yet, while stakeholders all agree on the health and financial benefits of addressing patients’ non-medical needs—and many providers have been taking action on addressing them, they face a critical business issue: structuring payment plans to account for social risk and reimbursing hospitals and health systems for their provision of health-impacting social services.

Fee-for-Service (FFS) is the most common reimbursement payment model in healthcare, but it does not account for social risk and services. Without accounting for social risk and services in coding and billing, providers are not reimbursed for their nonclinical services, which are usually behavioral, educational, environmental, nutritional, transitional, and translational in nature.

This especially comes with a high cost for safety-net providers. While some health systems, such as Kaiser Permanente in California, have the ability to invest its own money into SDoH initiatives, others (retain their “charitable” mission but) lack the financial resources to do so without limitations—and would benefit from more healthcare money to support their efforts.

America spent $3.5 trillion dollars spent on healthcare in 2017, Centers for Medicare and Medicaid Services (CMS) research showed. Yet, evidence shows: in comparison to other Organization for Economic Cooperation and Development (OECD) countries that spend $1.70 on social services for each $1 on health services, the United States spends 56 cents.

Increasing the amount of money spent on social services would prove beneficial to healthcare organizations with community health programs that provide diverse care to special and underserved groups, regardless of their ability to pay. Altogether, this increase would better support the integration medical and social services.

Covering These Costs through Value-Based Reimbursement

Redirecting a budgetary focus to funding social services expenses hasn’t been easy, but there’s good news.

First, the nation’s healthcare industry has been slowly transitioning away from the Fee-for-Service (FFS) to value-based reimbursement models. Unlike the FFS model, which reimburses for delivered medical services and treatments per person and per visit, value-based and alternative payment models reimburse healthcare providers based on the Triple Aim’s value indicators—health outcomes, quality care, and cost efficiency.

This move to value-based reimbursement incentivizes providers to focus on clinical outcomes and preventative care for all patients, which in turn will lower overall healthcare costs. Healthcare organizations have been seeing positive results supporting their transitional efforts, too. Humana, for instance, has seen fewer emergency room visits (seven percent) and fewer hospital admissions (five percent) per thousand Medicare Advantage (MA) members with its value-based platform, compared to its 2017 outcomes through the traditional FFS model.

Second, public and private payers have taken an interest in financing SDoH interventions under this system. The Centers for Medicare and Medicaid Services (CMS), on the public side, has recently announced its finalization of Medicare Advantage (MA) policy updates that will expand “primarily health-related” supplemental benefits to also include social need expenses, such as air conditioning, food and produce, meal delivery, and transportation, to name a few.

Medicaid, on the state level, combines its limited funded with other sources, such as better care coordination and cross-sector partnerships, to address and finance nonclinical initiatives.

Privately, last year, the Aetna Foundation awarded more than $2.4 million in grants to support nationwide community health initiatives. The Foundation awarded this money as part of its Building Healthy Communities initiatives, and the recipients included 25 nonprofits.

The Challenge with Value-Based Payment

Value-based payment is the future, but brings its own challenge: capturing evidence-based data across communities. For this reason, the National Quality Forum (NQF) and the Aetna Foundation announced a partnership earlier this year to develop a uniform approach to measuring the impacts and outcomes of SDoH interventions. Shantanu Agrawal, President and CEO of NQF said “We know a visit to the doctor will not improve the health of people who lack stable access to food, housing, or transportation. We are deeply committed to improving health equity and the outcomes for all people and communities in our nation.”

An already launched approach to gathering SDoH information for measurement is the Protocol for Responding to and Assessing Patient’s Assets, Risks, and Experiences (PRAPARE). PRAPARE, a tool developed by the National Association of Community Health Centers and its partners, uses their research-backed assessment to collect data on patients’ social determinants of health. This assessment includes a total of 16 social determinant measures, such as housing stability, transportation, employment status, and social support—and helps health centers and other providers consider how to treat the person instead of simply reacting to emergencies.

Data integration and interoperability standards will continue to advance and become an increasingly central component of value-based payment models. Improved data sharing between patients, healthcare professionals, and community enables communities to deliver evidence-based care coordination that results in a better care experience, reduced costs, and improved health outcomes.

To learn how one community in Central Ohio used the ClientTrack Care Coordination Platform to improve outcomes for high-risk pregnant women, see our on-demand webinar “Connected Communities Treat the Whole Person.”

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