Why a strong dose of innovation is needed to cure health inequalities
As traditional models emerge as part of the healthcare problem, innovation and scaling social enterprise are key to the solution, argues social investor, Apposite Capital.
One of the biggest challenges in developed economies today is the need for radical transformation of healthcare delivery systems. Social and demographic issues such as ageing populations – and the associated increase in dependency ratios – chronic diseases and rising medical costs, combined with constraints on public spending, mean society needs new models to provide healthcare.
On top of this, there is increasing recognition that the healthcare models we currently have can be poor at serving the disadvantaged – the average difference in disability-free life expectancy is 17 years when comparing the richest and poorest neighbourhoods in England, for example.
In terms of the broader cost to society, it is estimated that health inequality in the UK accounts for productivity losses of £31-£33 billion per year, lost taxes and higher welfare payments of £20-£32 billion, and additional NHS healthcare costs well in excess of £5.5 billion per year.
Tackling health inequalities is essential to improve social inequalities given the critical role our health plays in our employment prospects, self-worth and mental health more generally.
Traditional healthcare business models have arguably been part of the problem. They frequently rely on healthcare payers to continue to pay a higher price for each marginally better cancer drug, pacemaker or new healthcare intervention and services.
Availability of the latest technologies to an individual patient can too often be predicated either on ability to pay, or ability to negotiate their way through the system, none of which disadvantaged populations are best positioned to do.
Change and the role of social enterprise
But given the current fiscal positions of many governments around the work and the demographic tsunami approaching, this paradigm is changing rapidly.
Inevitably, future healthcare payers globally will wish to purchase health services that have proven successful for individuals and populations. They won’t be willing to pay for increasing numbers of piecemeal interventions, diagnostics and products.
Social enterprises are well placed in this transition. They don’t adopt the 'business as usual' focus on shifting more products or services, generating the maximum revenue per patient and making the next debt repayment. In contrast the social enterprise mindset often involves a more patient-centric, holistic and long-term approach.
They are often better able to work across traditional boundaries, working in partnership with other diverse organisations to deliver a full spectrum of services and products. This not only leads to superior outcomes but frequently can lead to more innovative and efficient models of care.
The result? Greater value for the patient, society, and for the payers and partners in the pathway, leading to the creation of both attractive social and financial returns.
The investor perspective
As an investor with a specialist fund that puts money into businesses in healthcare services delivery, we see proof that the focus on innovation and putting the patient or service user at the heart of everything you do works.
One example is a UK based provider of high quality foster care, particularly focusing on children with challenging needs, including those with a history of being abused. The company’s vision is to “give back to traumatised young people opportunities they have missed”.
The company’s differentiated approach is based on 'therapeutic' fostering which helps children to come to terms with the traumatic early life experiences that so many of them have suffered. The work this commercial business does transforms lives for some of the most vulnerable children in society.
The success of this approach allows the company to care in a foster care environment for a child whose profile would ordinarily have led to them being institutionalised in residential care. Not only does this enable much better outcomes for the child, but it also avoids the expense to the state of residential care.
The potential to create social impact by effective and innovative intervention here is immense – without it, children in care can go on to a life dependent on the state and perpetuate the cycle with unstable family situations of their own. This particular example has grown from a small regional business to one that is more than four times the size and approaching a national footprint.
In the same way as any other emerging organisation, ambitious entrepreneurs and intrapreneurs (those innovating from within traditional models) spinning out from healthcare charities, or the public sector, require not only the real equity risk capital to found and scale new organisations, but also access to business building expertise, commercial guidance and national and international healthcare networks.