Fresno to Pioneer Public Health Bonds

By Alice Daniel, KQED

Farming in California's Central Valley is a source of smog, a major contributor to the region's high asthma rates. (Getty Images)

The latest new thing in social policy circles is the social impact bond, and now Fresno is set to become the first city in the nation to test the idea of using this social bond idea to improve the health of the community.

Municipal bonds allow investors to put money into building roads or constructing schools. Health impact bonds aren’t much different, says Kevin Hamilton of the Fresno nonprofit health agency Clinica Sierra Vista. Instead of infrastructure, the investment is in public health, in this case asthma prevention.

“There’s no reason to think of the public health in any different way than you do the public transportation system or the public school system,” Hamilton says, “all of which are things that have benefited from bond issues over time. No reason not to think of this in the same fashion.”

The California Endowment is paying for Fresno’s pilot project. The concept was developed by a Connecticut firm called Collective Health. The goal is to show that a systematic asthma prevention program can save enough money to entice private investors. One in six Fresno residents suffers from asthma. Hamilton says about 20 asthma patients go to the ER every day and of those, three are hospitalized.

“In this situation the return on investment comes from the health insurance companies who make money when people are well and lose money when they’re sick,” Hamilton says. “So you have that same sort of incentive to invest.”

Starting in January, Clinica Sierra Vista will work with 200 low-income asthma patients on asthma intervention. Studies already show that symptoms are reduced with indoor air filters, clean or removed carpets and safe cleaning agents like vinegar and baking soda.  But clinicians will also work with the patients to make sure they are using their medications correctly and keeping medical appointments. Cost savings will be documented by public and private insurers, says Hamilton.

On average, these 200 patients rack up costs of about $16,000 a year for ER visits and hospital stays. The goal is trim those costs by close to $8,000 by educating and training patients to manage asthma correctly.

“It’s a way for a health insurance company to continue to make money, survive as an entity, and yet put money back into people’s health in a really, really positive way that has a chance of really changing their lives significantly,” Hamilton says.

The pilot project hopes to save about a million dollars in the first year and cut ER visits by 30 percent. If it’s successful, investors would provide intervention funding for about 1100 patients the following year.

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