Community Reinvestment Act: Case Study

KIN Challenge: Funding Roadmap Katie Golden, Lexi Mele-Algus, Rochelle Ross, Sheila Shah

June 2014 1 KIN Challenge Methodology

• Identify the portfolio of emerging financing opportunities Objective for HICCup communities to fund “production of health” efforts

• The team identified a broad range of funding Philanthropic Financial Approach mechanisms available to communities • The mechanisms were narrowed down to 8 prioritized options based on scalability, feasibility, and timing

• Based on interviews and research, the findings of the prioritized mechanisms are packaged in a Funding Output Roadmap which can be delivered to the interested communities to help them navigate their options

2 Table of Contents

HICCup Discussion • KIN Challenge Methodology • Strategic Considerations • Funding Roadmap Overview

Funding Roadmap • Range of Investing Options • Overview of Funding Mechanisms • Supporting Detail on Funding Mechanisms • Community Benefit • Community Development Financial Institutions • Community Reinvestment Act • Conditional Cash Transfers • Creative Fundraising • Medicaid 1115 Waivers • Social impact Bonds • Wellness Trusts

3 Sample of Interview Contacts

Contact Category / Organization Nirav Shah Social Finance Laura-Min Proctor J.P. Morgan Lisa Thomas Microfinance/Kellogg Professor Nikki Taylor Social Impact Bonds David Chen Impact Investing Josh Shapiro Investment Banking David Dranove Healthcare Economics Andrew Ziskind Huron Consulting Group Tim Shannon Student/General Investing Aaron Isaac Baum Earth Institute Zoila Jennings J.P. Morgan Daniel Byrne Private Wealth Management Barrett Willich Private Equity Scott Kleimen Social Impact Bond Technical Assistance Lab

4 Strategic Considerations for HICCup

Timing and Evaluation • Not all positive outcomes of production of health efforts will be seen within 5 years. HICCup should consider how to continue evaluation and lessons learned beyond the 5-year competition period • Smaller communities may have difficulty with having a great enough prevalence of a condition (e.g., 100k may not be a large enough population to be statistically significant if only a fraction of that population has diabetes)

Community Leadership • As community leaders (e.g., government officials) within an area turn over, HICCup should focus on continuity and ensuring an integrated Way to Wellville stakeholder group over time • Addressing other areas (e.g., education, poverty) may provide greater production of health outcomes than narrowly focused healthcare initiatives

5 Strategic Considerations for HICCup (continued)

Integration • Ensure potential partners and informational sources for funding are available to benefit all communities that seek support; limit competition among communities for limited funding sources to extent possible • Consider facilitating a competition-wide business development / financing forum to share best practices and ensure communities leverage the power of “one HICCup” instead of separate communities

Funding • There may not be one ideal funding option for the communities to utilize given the investment requirements and nuances of health ROI • Funding (and other aspects of production of health) may benefit from the larger, aggregated scale of multiple communities. However, this brings additional complexity with healthcare needs and measurement. HICCup should work to leverage the “Way to Wellville” overall brand and strength, while balancing this with the needs of the individual communities

6 Funding Roadmap Overview

The communities can refer to the following Funding Roadmap to help navigate the range of funding mechanisms that are available to them.

The roadmap includes the following key components:

Overview of Community Criteria Detail on Funding Impact Investing for Mechanisms Options

7 Funding Roadmap: A Guide for HICCup Communities to Fund Production of Health

8 Finding Capital to Fund Initiatives

Production of health is expensive.

• We recognize that production of health within a community requires significant health capital, and securing this financing may seem like a daunting task

There are a variety of options that a community can pursue.

• This Roadmap provides an overview of 8 prioritized financing options. The list is not exhaustive; some options are already used in the healthcare industry, but others are new and relatively innovative for healthcare

• For each of the options, we outline what they are, how they can be scaled, what a community can do to help make them successful, risks, and potential partners

There is no one-size-fits all approach to funding.

• Health capital will likely come from a variety of public and private sources, some which can be realized quickly for use as seed money, others will take some time to set up

• Based on differing characteristics of each community, what is best for one community may not be the best option for another community 9 Range of Investing Options

Philanthropic Activities Investment Management

negative returns below market returns market returns

Impact Impact Venture Investing Investing Responsible Traditional Grants Philanthropy (Impact (Financial Investing Investing First) First)

Prioritized Funding Options in this Roadmap: • Community Benefit • Community Development Financial Institutions • Community Reinvestment Act • Conditional Cash Transfers • Creative Fundraising • Medicaid 1115 Waivers • Social impact Bonds • Wellness Trusts

Key Questions to Consider When Determining Which Mechanisms to Use

• What is the financial or (non-financial) return required for the investment? • What is the risk tolerance of the community? • Who bears the risk in the investment? • What is the payor mix of the community? • What is the time frame the community is working with?

11 Overview of Prioritized Funding Mechanisms

Community Solution Mechanism Description Characteristics Characteristics ACA requires non-profit • Sufficient number Community hospitals to engage in the • Activities per IRS of not-for-profit Benefit community to maintain specifications hospitals tax-exempt status Community Provides credit/financial Development • Low-to-mid income • Positive financial services to underserved Financial level returns markets Institution • Open to new, non- traditional funding Community Law mandating • Requires tangible methods for the Reinvestment commercial banks to re- assets (e.g., industry Act invest in communities fitness center) • Low-to-mid income level • Active involvement Creative Crowd-funding, lotteries, from whole • Varies Fundraising sponsorships community 12 Overview of Prioritized Funding Mechanisms (continued)

Community Solution Mechanism Description Characteristics Characteristics Payment contingent Conditional • Have active on individual • Individual or family Cash involvement from participants meeting based Transfers whole community certain criteria Medicaid Federal Medicaid • Significant Medicaid 1115 funds for innovative • Budget neutral population Waivers experiments Social Private investments • Be open to risk and • Targeted intervention Impact that generate financial innovative, new for targeted Bonds & social return funding methods population Pool of money • Willing and capable Wellness reserved for • At community of instituting new Trusts promoting health discretion legislation production

13 Community Benefit

14 Community Benefit: Overview

Community benefits are “initiatives and activities undertaken by nonprofit hospitals to improve health in the communities they serve.”

Community benefit is a requirement for tax-exempt hospitals to sustain their 501(c)(3) status. Activities must address one of the following Description objectives: improve access to health care services, enhance population health, advance increased general knowledge, relieve or reduce the burden of government to improve health. The three main categories of community benefit are: financial assistance, government-sponsored means-tested health care and community benefit services

Investment Variable - some states have requirements for minimum spending on community benefit (e.g., IL requires community benefit equal property Scale tax liability) but others do not specify and use a case-by-case basis

Time to Variable Implement

http://www.hilltopinstitute.org/publications/WhatAreHCBsTwoPager-February2013.pdf 15 Community Benefit: Additional Information

Requirements and ACA Reform

• Federally, the IRS provides guidelines on what can be reported as community benefit • States have differing regulations, but some federal requirements to prove tax-exempt status include: • Conducting community health needs assessment • Developing implementation strategy every three years • Adopting and publicizing a financial assistance policy • Limitations on charges, billing and collections for those under the financial assistance policy • Community Building Activities – part of Part II of tax exemption requirements and if used, must be specified how it improves community health. Examples include: physical improvements and housing, economic development, community support, environmental improvements, etc. • State requirements may be more stringent and will need to be looked at for each community to understand what will qualify for their local hospital • State profiles can be found at the following site: http://www.hilltopinstitute.org/HCBP_CBL_state_table.cfm with a snapshot on the next page 16 Community Benefit: State Profiles

17 Community Benefit: Success Criteria

Community benefit must be significant in order for non-profit hospitals to remain tax-exempt. These requirements are outlined by the IRS, but success criteria include:

Part I: Community Benefit Activities

• Falls under the list of approved activities under Schedule H • Shows engagement and dialogue with the community • Aligns with goals of the government and public health officials in the community

Part II: Community Building Activities

• Articulates explicitly how community building activities promote the health of the communities it serves • Note: Community building activities have been controversial on if they count towards community benefit • Provides certainty that being involved in activity will count towards community benefit

18 Community Benefit: Success Criteria (continued)

Requirements for activities to be considered community benefit (specifically community health improvement services) vs. community building

• Be carried out or supported for the purpose of improving community health or safety

• Be subsidized by the organization • Not generate an inpatient or outpatient bill • Not be provided primarily for marketing purposes • Not be more beneficial to the organization than the community • Not be required for licensure or accreditation • Not be restricted to individuals affiliated with the organization • Meet at least one community benefit objective (e.g., improving health service access, public health enhancement, advancing general knowledge, relief of a government burden relating to health improvement) • Respond to a demonstrated community need

19 Community Benefit: Case Study

Richland County, Montana Diabetes Project Overview

The Community Diabetes Project was created as a project between Richland’s hospital, county health department, health network, and Commission on Aging. It involved screening, assessment, health education, and case management for the elderly at risk for preventable hospitalizations.

Benefits

• The involvement of several different parties helped the Project remain relevant for the current community needs • The hospital had fewer rehospitalizations and the ability to show community benefit in an effective way • The health department had reduced costs for treating chronically ill patients • The community as a whole benefited from a healthier population and greater awareness for prevention activities

http://www.hilltopinstitute.org/publications/HospitalCommunityBenefitsAfterTheACA-HCBPIssueBrief3-February2012.pdf 20 Community Benefit: Risks and Considerations

Considerations • Currently, hospitals provide most of their community benefit through reduced cost of care and charity care. With a significant portion of the uninsured population moving to insurance through the ACA, they will be looking for new opportunities to provide community benefit and will be great partners • Communities in states which have stricter regulations and support for community benefit activities may be at an advantage when trying to partner with hospitals • Activities need to be within the allowed activities for hospitals to be interested Risks • Sustainability of hospital participation needs to be discussed to ensure it is not a one time contribution • Roles and accountability will need to be defined early on to ensure partnership is effective • Must be able to articulate how the hospital will not lose money from reduced revenues • Some hospitals may not be aware that community building activities will be relevant for them and will need to be educated on the topic

21 Community Benefit: Informational Sources

• IRS – Hospitals and Community Benefit Interim Report http://www.irs.gov/ Charities-&-Non-Profits/Charitable-Organizations/Hospitals-and-Community- Benefit-Interim-Report • The Hilltop Institute – analysis to advance the health of vulnerable populations. Discussion about Hospital Community Benefit Programs http://www.hilltopinstitute.org/hcbp.cfm • Healthlaw.org description and detailed report about Community Benefit http://www.healthlaw.org/issues/health-care-reform/nonprofit-hospitals-and- community-benefitpdf#.U4_o__ldX0Q • The Hilltop Institute: Hospital Community Benefits after the ACA – Addressing Social and Economic Factors that Shape Health http://www.hilltopinstitute.org/publications/ HospitalCommunityBenefitsAfterTheACA-ShapeHealthIssueBrief9-May2014.pdf • The Hilltop Institute: Hospital Community Benefits after the ACA – Partnerships for Community Health Improvement http://www.hilltopinstitute.org/publications/ HospitalCommunityBenefitsAfterTheACA-HCBPIssueBrief3-February2012.pdf • Catholic Health Association: Detailed information about community benefit http:// www.chausa.org/communitybenefit

22 Community Development Financial Institutions

23 CDFIs: Overview

A financial institution that provides credit and financial services to underserved markets and populations. A CDFI may be a community development bank, a community development credit union (CDCU), a community development loan fund (CDLF), a community development venture capital fund (CDVC), a microenterprise Description development loan fund, or a community development corporation

CDFIs have loaned and invested over billions in our nation’s most distressed communities and have leveraged billions from the private sector for development activities in low wealth communities.

$30K - $500K Investment Scale Since its creation, the CDFI Fund has awarded almost $1.7 Billion to community development organizations.

Time to N/A – dependent on access to and relationships with local CDFIs Implement 24 http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5290

CDFIs: Different Types

http://www.minneapolisfed.org/community_education/cdfi/index.cfm 25 CDFIs: Success Criteria

Requirements • “Double Bottom Line” – economic gains and social impact on local community • Business plan or ability to show that you will be able to make a profit in the future • Usually require proof that you were not able to receive money from another entity • Investment opportunity should lend itself to the CDFI strategy/ mission • If used, helps them achieve better ratings under the CDFI Assessment and Ratings System (CARS) • Provide returns (mainly 0% - 5%) in a reasonable time period (e.g., 1-5 years) • Must serve underserved markets

http://www.socialfunds.com/education/article.cgi?sfArticleId=7_1 26 CDFIs: Sources of Capital

There are several ways to locate CDFIs: • Locate CDFIs through: http://ofn.org/cdfi-locator • Search award database: http://www.cdfifund.gov/what_we_do/need_a_loan.asp • This database will allow to see specializations of different CDFIs • If there are none located in your community, it may be worth broadening your search to different, adjacent counties and/or the whole state • Search list of certified CDFIs: http://www.cdfifund.gov/what_we_do/programs_id.asp? programID=9#certified

27 CDFIs: Case Study 2

IFF • IFF is a prominent, national CDFI with a focus on fostering comprehensive community development, strengthening bonds with all sectors, facilitating capacity building • IFF can provide below-market loans through use of a revolving loan fund • IFF’s focus on healthcare through: • Affordable loans for facilities or equipment • Real estate planning and development • Planning, construction and financing packages for large scale projects • IFF focuses on healthy food access through: • Grocery initiatives: Illinois Fresh Food Fund, Healthy Food Access Fund • Nonprofit initiatives: loans for healthy food related projects, real estate services and technical assistance • Ex: Angelics Organics Learning Center (Caledonia, IL) • IFF lent $40K for finalization of a community-supported organic farm and learning center. The center promotes programs for inner city youths, harvest share programs and produce sales to the greater public

http://www.iff.org/about-iff 28 CDFIs: Case Study (continued)

• OneUnited Bank, headquartered in Boston, MA is the largest African-American owned CDFI in the country and focuses on serving and developing urban communities. The Bank has achieved consistent profitable growth through both bank acquisitions of similar mission driven banks and organic loan and deposit growth. The Bank has provided innovative products and services to fulfill its community development mission in the urban communities of Boston, Massachusetts, Miami, Florida and Los Angeles, California. OneUnited Bank continues to be integrated into the social and economic fabric of each of these communities in every respect from not-for-profits, small business, affordable housing, churches, etc.

• The Center for Community Self-Help, another leading CDFI, was founded in 1980 in Durham, North Carolina. Self-Help's home and business lending has provided low-wealth, minority, rural and female borrowers with over $5.24 billion in financing. Much of this is through Self-Help's national secondary market program, which enables conventional lenders to make more home loans to low-wealth families

• The Reinvestment Fund (TRF) is a national leader in rebuilding America’s distressed towns and cities, through the innovative use of capital and information. TRF has invested over $1.2 billion in Mid-Atlantic communities since 1985. A Community Development Financial Institution, TRF finances housing, community facilities, healthy food access, commercial real estate and energy efficiency projects. It also provides public policy expertise by helping clients create actionable solutions and by sharing data and analyses.

29 CDFIs: Risks and Considerations

Considerations for Health • CDFIs can focus on social determinants that increase health, good partners • Possible partnerships: affordable housing, community health facilities, healthy food retail stores • CDFIs can provide gap financing • CDFIs can convene community stakeholders, help identify goals and help in evaluation processes

Risks • Only viable if you: • Have away of generating revenue and payback in a reasonable time • Can prove you serve underserved communities • Interest rates can be higher than traditional banks • May take longer to obtain a loan • May have a cap on loan amount

http://www.entrepreneur.com/article/222683# CDFIs: Informational Contacts and Potential Partners

There are a number of trade associations and other resources applicable to the CDFI industry. For more information, see: • Association for Enterprise Opportunity • CDFA Community Development Finance Association • CDFI Coalition • Community Development Bankers Association • Community Development Venture Capital Alliance • Fair Finance Consortium • Fair Finance • National Federation of Community Development Credit Unions • National Community Investment Fund • Opportunity Finance Network • U.S. Department of the Treasury - CDFI Fund • CU Strategic Planning

31 Community Reinvestment Act

32 Community Reinvestment Act: Overview

United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their Description communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods. Traditionally seen in housing market.

Investment Varies – there are both small loans to individuals and larger Scale loans to businesses / communities. Below or above $1M

Time to Varies depending on structure of loan Implement

33 Community Reinvestment Act: Success Criteria

To maximize the benefits of CRA within local communities, NCRC encourages community stakeholders to develop a CRA strategy that involves a combination of any or all of the following activities:

• Submit written comments on the community reinvestment performance of banks in local area when these banks undergo their regular CRA examinations; • Monitor bank mergers, acquisitions and expansions to identify strategic opportunities to encourage banks in your local area to improve their community reinvestment records; • Meet periodically with banks operating in local area, even if they are performing well on their CRA exams, to discuss the community’s credit/capital/bank service needs and to suggest actions a bank can take to better meet those needs; • Meet with bank regulators to discuss the performance of specific banks, as well as improvements to the CRA exam process; • Encourage local government or other local institutions with substantial bank accounts (e.g., churches, foundations, etc.) to establish a linked deposit program to ensure that only those banks with reasonable community reinvestment records are eligible to benefit from a financial relationship with major local depositors; and • Become a shareholder advocate – owning even a small number of shares in a publicly-held bank allows you to introduce, vote on and/or speak at shareholder meetings about shareholder resolutions that address community reinvestment concerns. 34 hp://www.ncrc.org/programs-a-services-mainmenu-109/policy-and-legislaon-mainmenu-110/the-community-reinvestment-act-mainmenu-80/ community-reinvestment-act-q-a-a-mainmenu-159 Community Reinvestment Act: Sources of Capital

Type Source Required Return Contact Small / Large financial Varies depending on Banks FDIC / NCRC institutions nature of loan

35 Community Reinvestment Act: Case Study

• In May 2010, First Tennessee implemented a plan to support the recovery of local communities adversely impacted by natural disasters, principally flood victims in Middle and West Tennessee. Following the disaster, First Tennessee provided payment assistance to 50 consumer and business customers and extended more than $27 million in new credit to consumers at favorable terms. • Another example of CRA lending is the Affordable Home Improvement Program. This allows homeowners to get a fixed rate loan for up to four years to do minor home improvements. Homeowners throughout many low- and moderate-income communities have used this product to improve their homes, which brings value to the homeowner and improves the overall community. • Another example of CRA lending is the use of the New Market Tax Credits program to help the Collegiate School of Memphis get started

36 Community Reinvestment Act: Risks and Considerations

• Primarily used for low- to moderate- income communities and for traditionally underserved populations • Typically utilized in the housing market, as it requires a tangible asset to collect a return or to be used as collateral against a loan • However, some banks, like Goldman Sachs and J.P. Morgan, are beginning to explore the intersection of CRA and healthcare

37 Community Reinvestment Act: Potential Partners

Use this search tool to find CRA performance evaluations for a specific bank or for all the banks in a state. You can also further narrow your search to focus on a specific performance rating:

hp://www.occ.gov/tools-forms/tools/compliance-bsa/cra-perf-eval- search.html

38 Community Reinvestment Act: Informational Sources

• Understanding how a community can extract value from the CRA: http://www.ncrc.org/programs-a-services-mainmenu-109/ policy-and-legislation-mainmenu-110/the-community- reinvestment-act-mainmenu-80/community-reinvestment-act- q-a-a-mainmenu-159

39 Conditional Cash Transfers

40 Conditional Cash Transfers: Overview

Investor pays for program contingent on individual Description participants meeting certain criteria

Investment $40 million in private donations raised to finance the Scale Opportunity NYC Family Rewards program

Time to Little time needed to raise funds once grant-providers identified but will take time to design and implement Implement programs

http://www.nytimes.com/2010/03/31/nyregion/31cash.html?_r=0 41 Conditional Cash Transfers: Sources of Capital

Required Type Source Contact Return Rockefeller Foundation Fund does not Edwin Torres Grants NYC Cultural require a ([email protected]) Innovation Fund, match to its supporting equity grants and resilience

42 Conditional Cash Transfer: Success Criteria

• Intermediary organization with experience in social science projects such as MDRC can help design the program and track progress to goal

• Must consider how results will be measured and communicated back to funder

Philanthropic Financial

Philanthropic Focus Financial Focus

43 Conditional Cash Transfers: Case Study

Opportunity NYC Family Rewards, an initiative led by Mayor Bloomberg’s Center for Economic Opportunity

Goal: To reduce poverty Timeframe: An experimental 3-year pilot program, 2007-2010 Intermediary: Social science non-profit organization MDRC led design and evaluation of program; non-profit economic development organization Seedco led implementation of program Collaborating Institutions: Harvard University researchers, NYC Department of Education Investors: $40 million in donations from a Consortium of private funders including Rockefeller Foundation and Mr. Bloomberg’s foundation Programs: Low-income NYC families received $6,000 a year, on average over 3 years in housing vouchers, services, and savings plans for achieving specific health, education, and employment goals. As a result, families were 16% less likely to live in poverty Other CCT Examples: Earned Income Tax Credit (EITC), Temporary Assistance for Needy Families (TANF), Oportunidades Mexican welfare program

Sources: http://www.mdrc.org/publication/conditional-cash-transfers-new-york-city http://www.nytimes.com/2010/03/31/nyregion/31cash.html?_r=0 44 Conditional Cash Transfers: Risks and Considerations

• Some of the NYC Opportunity programs were successful in changing individual savings, educational performance, and employment behavior, while other programs had little impact on individual behavior. Check out the MDRC research results for more info.

• There may be difficulty in proving short-term results due to the lag in data for individual results from various community initiatives

45 Conditional Cash Transfers: Informational Contacts and Potential Partners

• Seedco, an economic development organization (intermediary) • MDRC, a social science non-profit organization (intermediary) • Rockefeller Foundation (primary investor)

46 Conditional Cash Transfers: Informational Sources

About Opportunity NYC • http://www.mdrc.org/project/opportunity-nyc-demonstrations • http://www.rockefellerfoundation.org/our-work/current-work/new-york- city/opportunity-nyc • http://www.rockefellerfoundation.org/uploads/files/ 56c564b3-4765-4442-ae25-42cc94e1d270-cultural.pdf

47 Creative Fundraising Crowd-funding / collaborative funding Lotteries & lottery bonds Donation matching Sponsorships, in-kind donations, and other fundraising

48 Creative Fundraising: Overview

A: Crowd-funding / collaborative funding B: Lotteries & lottery bonds C: Donation matching D: Sponsorships, in-kind donations, fundraising Description walks, and individual fundraising

A combination of the above fundraising mechanisms can supplement other funding options selected

49 A: Crowd-funding / Collaborative Funding: Overview

The use of small amounts of capital from a large number of individuals to finance a new business venture. Has the Description potential to expand pool of investors beyond the more traditional ones

Investment Varies; Example: Seaside Heights, NJ raised $1 million on Scale Indiegogo based on their “Restore the shore” campaign

Time to • Campaign set-up can be as quick as putting up a website and advertising locally Implement • Fundraising period can be open as short/long as needed

http://en.wikipedia.org/wiki/List_of_highest_funded_crowdfunding_projects 50 B: Lotteries & Lottery Bonds: Overview

A portion of the revenue earned through state lotteries funds education initiatives and bond issuances. Also known Description as prize-linked savings, lottery bonds give the bondholders a chance to win a random monthly drawing for a tax-free cash prize

Investment Varies; Britain’s premium bond program attracts roughly Scale one third of UK citizens with $70 billion in total holdings

Time to May require significant upfront time to establish necessary Implement regulatory and legal structures

http://www.moneywise.co.uk/banking-saving/savings-accounts-isas/are-premium-bonds-really- good-deal 51 C: Donation Matching: Overview

For-profit corporations have been increasingly matching Description any donations its employees make to charities.

Investment Varies; Example: GE Foundation matches over $35 million annually to 501(c)(3) organizations and educational Scale institutions

Time to Upfront time dependent on how long corporations need to Implement add HICCup to list of charities employees can donate to

https://doublethedonation.com/matching-grant-resources/list-matching-gifts-companies/ 52 D: Sponsorships, In-kind Donations, Walks, & Individual Fundraising: Overview

For-profit corporations may be interested in opportunities to (a) sponsor an initiative, to (b) provide in-kind donations to support an initiative, to (c) contribute to a fundraising Description event such as a walk or run.

Individuals can also raise money for the HICCup cause.

Investment Varies; Example: over the past 5 years, 650 NYC marathoners have raised nearly $4 million for the anti- Scale poverty organization Robin Hood

Time to Upfront time dependent on discussions with community Implement development groups within corporations

https://www.crowdrise.com/teamrobinhoodnycmarathon2012 53 Lottery Bonds Case Study

UK Lottery Bonds

Goal: To encourage financial savings Bond Issuer: National Savings and Investment (NS&I) Bond Holders: Purchase a minimum of £100 in bonds and get a chance to win a random monthly drawing for a tax-free cash prize Other players: UK government backs investment to ensure protection

Other examples: Save to Win in Michigan

54 Creative Fundraising: Potential Partners

Crowdsourcing / Collaborative funding • Crowdfunder (intermediary)

Lotteries & Lottery bonds • Oregon Lottery Bonds

Donation Matching • Rockefeller Foundation (investor) • Double the Donation (intermediary)

Sponsorships & non-cash donations • YMCAs, gyms, fitness tracking device companies, corporate “day of service” events, etc.

Fundraising Walks • American Cancer Society’s Relay For Life & Making Strides

Individual Fundraising • Crowdrise (intermediary) 55 Creative Fundraising: Informational Sources

Crowdsourcing / Collaborative funding • http://www.forbes.com/sites/chancebarnett/2013/05/08/top-10-crowdfunding-sites-for- fundraising/ Lotteries • http://nylottery.ny.gov/wps/portal/!ut/p/ c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os_jggBC3kDBPE0MLC0dnA09vT0fLQDNvA0dfU_2CbEdFA Lm-TnU!/?PC_7_SPTFTVI4188AC0IKIA9Q6K0QS0_WCM_CONTEXT=/wps/wcm/connect/NYSL +Content+Library/NYSL+Internet+Site/About+Us/Mission+for+Education/Where+the+Money +Goes Lottery bonds • http://www.finweb.com/investing/what-is-a-lottery-bond.html#axzz33rqR6azi • http://www.nsandi.com/savings-premium-bonds • http://www.bloomberg.com/news/2012-04-16/lottery-securities-beating-aaa-provide-winning- bet-muni-credit.html • http://mi.savetowin.org/ • http://www.d2dfund.org/files/publications/consumer-demand-prize-linked-savings.pdf Donation Matching • http://www.rockefellerfoundation.org/grants/grants-and-grantees/ 7163be20-0418-4e10-8158-38eb3979c2b2 • http://www.philanthropyjournal.org/resources/fundraisinggiving/maximizing-matching-gifts • https://doublethedonation.com/blog/2012/10/raising-money-from-volunteer-grant-programs- seven-frequently-asked-questions/ Charity Walks • http://www.livestrong.com/article/234033-how-to-organize-a-charity-walk/ 56

Medicaid 1115 Waivers

57 Section 1115 Medicaid Waivers: Overview

Medicaid 1115 waivers allow a state to use federal Medicaid funds in ways that are not otherwise allowed under federal rules, which can include broad changes in: • Eligibility • Benefits Description • Cost sharing • Provider payments • Specific services and/or population coverage

The waivers provide states an opportunity to test and implement coverage approaches that do not meet traditional federal program rules.

Investment Must be budget neutral (i.e., the demonstration cannot cost the federal government more than what would have otherwise been spent absent Scale the demonstration)

• Set Up: Significant variation in the length of time it takes to get final Time to approval of a waiver; state-dependent Implement • Execution: Generally approved for 5 years, can be renewed for 3- year period 58 Section 1115 Medicaid Waiver: Success Criteria

Waiver Approval

• States can and should discuss waiver ideas with CMS or submit concept papers before submitting an application to increase likelihood of approval • Engage the community - as part of the application process, states will need to show CMS that they have held a meaningful comment period and that they have taken the comments they received into consideration when finalizing their waiver applications • Use the press to help publicize the waiver and its intended use. The press can help publicize the proposed changes and make sure that information on the comment process is widely available to the community • States can obtain comprehensive waivers to make broad changes in eligibility, benefits, or cost sharing; yet for “production of health” initiatives across a population it is recommended to explore a Section 1115A waiver: • 1115A waivers allow the Center for Medicare and Medicaid Innovation (CMMI) to test, evaluate, and expand different service delivery and payment methodologies to foster patient-centered care, improve quality, and slow cost growth in Medicare, Medicaid, and CHIP

59 Section 1115 Medicaid Waiver: Success Criteria

Waiver Approval (continued)

• Local governments and stakeholders should work with state Medicaid leaders on the complexity of starting up a local program to ensure approval and funding at the local level • When policymakers look to Medicaid financing, they can be challenged by trying to make a local model apply across a statewide program, but there are several federal options for states to use to provide services in limited geographic regions

60 Section 1115 Medicaid Waiver: Success Criteria

Evaluation

• The Affordable Care Act now requires greater transparency and public notice in 1115 waiver approval and renewal process; communities should be mindful of and monitor these new rules to ensure successful evaluation of initiatives funded through these efforts

Execution Philanthropic Financial • Develop and leverage “integrators” - individuals or organizations that can bridge Medicaid, public health, and child welfare to provide sustained leadership and champion progress • “Integrators” can navigate the different programmatic requirements, understand data, and still see the big picture in order to move positive systems change forward while implementing prevention initiatives

61 Section 1115 Medicaid Waiver: Case Study

Boston Community Asthma Initiative

Background Rates of poorly controlled asthma among low-income children, particularly racial and ethnic minorities, remain disproportionately high in Boston area. Comprehensive asthma programs, including education, case management and home environmental interventions have reduced disparities but few sustainable payment models exist. Local stakeholders turned to Medicaid 1115 Waivers to finance interventions.

Waiver Coverage The state utilized waivers to fund bundled pediatric asthma services for high-risk patients, including coverage of non-traditional home visits and interventions by community health workers

62 Section 1115 Medicaid Waiver: Case Study

Boston Community Asthma Initiative (continued)

Results

• 80% reduction in the percent of patients with one or more asthma-related hospital admission • 60% reduction in percent of patients with any asthma–related emergency department visits • 41%Philanthropic reduction in the percent of patients with any missed school days.Financial • 46% reduction in the percent of parents/caregivers with any missed work days • For every $1 spent on the program, $1.46 is returned to society/insurers

63 Section 1115 Medicaid Waiver: Active Waivers (as of June 2011)

64 Section 1115 Medicaid Waiver: Risks and Considerations

• Need to have cooperation and buy-in at state and local levels to ensure waiver approval for limited geographical area or community • The federal government enforces budget neutrality by establishing a cap on federal funds over the life of the waiver, placing a state at risk for all waiver costs above the cap • There may be limitations to coverage and/or waiver approval for certain communities based on payor mix (i.e., if a low portion of residents are Medicaid-eligible)

Philanthropic Focus Financial Focus

65 Section 1115 Medicaid Waiver: Informational Sources

• Kaiser Commission on Medicaid and the Uninsured: Five Key Questions and Answers About Section 1115 Medicaid Demonstration Waivers: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8196.pdf • Myths, State Successes Overcoming Barriers and the Promise of Integrated Payment Models: http://www.nemours.org/content/dam/nemours/wwwv2/filebox/about/ Medicaid_Funding_of_Community-Based_Prevention_Final.pdf • Boston Children’s Hospital Approach to Community Health: Using Programs to Achieve Systemic Change: http://healthyamericans.org/assets/files/TFAH2013HealthierAmericaXrpt07.pdf • Budget Neutrality Form: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/ Waivers/1115/Downloads/Interim1115-Budget-Neutrality-Form.pdf • How the ACA Makes the Section 1115 Waiver Process More Transparent: http://familiesusa.org/sites/default/files/product_documents/Section-1115- Waiver-Process.pdf • Transforming Population Health: Case Studies of Place-Based Approaches: http://www.nemours.org/content/dam/nemours/www/filebox/healthpro/ advocacy/boston.pdf

66 Social Impact Bonds

67 Social Impact Bonds: Overview

An intermediary raises up-front capital from private investors to invest in a proven social impact intervention in expectation of the investor receiving Description a return if desired social outcomes are achieved. The intervention must generate savings for the government, or a payer, who will be responsible for repaying the investor if outcomes are achieved.

Investment >$7M due to necessary scale and fixed costs Scale

Development stage = 1-2 years Time to Implementation stage = 3-5 years Implement (steps further detailed in next slide)

Source: Information based on informational conversations 68 Social Impact Bonds: Steps for Implementation

Development Stage • Stakeholders decide on issue that needs to be addressed • Intermediary completes Request for Qualifications and, subsequently, requests for proposals to identify qualified programs to meet social impact need • Stakeholders develop multi-year contract and schedule of repayment for payer to ensure repayment if outcomes are achieved • Investment firm creates bonds, which are offered to investors and social entrepreneurs

Implementation Stage • Capital is used for community intervention • Independent evaluator assesses impact of intervention • If intervention generates savings, portion given back to investors and others used for additional interventions 69

Social Impact Bonds: Steps for Implementation (continued)

Philanthropic Financial

Philanthropic Focus Financial Focus

http://www.socialfinanceus.org/sites/socialfinanceus.org/files/BAML%20SF_PFS%20Playbook.pdf 70 Social Impact Bonds: Success Criteria

Requirements for Current Social Impact Bond Structure • Outcomes must be clearly defined, achievable and measurable in an acceptable time period • Target population must be well-defined and sizable • Proposed interventions should reflect best practices (research-tested and evidence-based), should focus on prevention, and should be replicable/ scalable • Outcomes must be independently validated • Clearly defined savings or return value should be established • Savings must go above and beyond cost of intervention • Public agencies, nonprofits, investors and community stakeholders must all be willing to work together

Return Requirements • Variable based on type of investors, riskiness of project • Return based on conversations = 5% - 15% on an annualized basis

71 Social Impact Bonds Case Study: NYC Recidivism

Players • Investor = Goldman Sachs Urban Investment Group • Guarantor = Bloomberg Philanthropies • Intermediary = MDRC • Program Operator = Osborne Association and Friends of Island Academy • Intervention = Adolescent Behavioral Learning Experience (ABLE) Program • Target Population = 16-18 year old youth at Rikers Island • Independent Evaluator = Vera Institute of Justice • Evaluation Payer = Mayor’s Fund to Advance NYC • Payer = City of New York

Logistics • Goldman Sachs Urban Investment Group invested $9.6M to MDRC to operate the ABLE program at Rikers Island, backed by a guarantee of $7.2 from Bloomberg Philanthropies • MDRC set up financial arrangements, selected intervention/provider, trained staff, piloted intervention, monitored implementation and served as primary liaison • NYC repays Goldman Sachs based on repayment schedule (on following page) • Goldman Sachs has limited downside as the most they can lose is $2.4M

($9.6 - $7.2) if outcomes are not achieves 72 http://www.mdrc.org/key-partners-nycs-social-impact-bond Social Impact Bonds Case Study: NYC Recidivism (continued)

50% of teenagers released returned within 1 year

+ $9.6M $7.2M

Philanthropic Financial

Philanthropic Focus Financial Focus

73 Social Impact Bonds: Risks and Considerations

Risks • Time of implementation may be too long • Evaluation methodology may be non-existent or difficult to implement • Data may be difficult to collect • Competition goals and initiatives may not be targeted enough, as collective impact social impact bonds have not been structured at this time • Ever changing healthcare field may make it hard for investors to feel comfortable investing • Legal/political implications may add additional risks – investors fear governments inability to pay as representatives change and through election cycles

Considerations • Likely need for a foundation to guarantee the loan, as investors are still concerned with riskiness of projects • May need to get up-front funding from another source to reduce the risk for the investor • Significant fixed costs to get the project up and running may be a reason to try and do several social impact bonds and combine administrative functions • Possibility of using payer outside of government (e.g., insurer, employer) • If Medicaid is used as a payer, will need to think through state/federal/local

budgeting and who is ultimately accountable 74

Social Impact Bonds: Potential Partners

Investors Foundations Bank of America/Merrill Lynch Robin Hood Foundation Goldman Sachs Urban Rockefeller Foundation Investment Group Kresge Foundation J.P. Morgan Social Finance Laura and John Arnold Foundation

Intermediaries Other Social Finance Social Impact Bond Technical Third Sector Capital Partners Assistance Lab Instiglio Federal Reserve Bank of San Francisco Payers Nonprofit Finance Fund Medicaid Living Cities Employer Insurer Public Health Funding 75

Social Impact Bonds: Informational Sources

• Social Finance: SIB Playbook http://www.socialfinanceus.org/sites/socialfinanceus.org/files/ BAML%20SF_PFS%20Playbook.pdf • Discussion About Requirements • http://www.americanprogress.org/issues/open-government/ report/2014/03/03/85106/networking-for-success/ • Payforsuccess.org • McKinsey Report on Social Impact Bonds http://mckinseyonsociety.com/downloads/reports/Social- Innovation/McKinsey_Social_Impact_Bonds_Report.pdf

Philanthropic Focus Financial Focus

76 Wellness Trusts

77 Wellness Trusts: Overview

A pool of money set aside for the purpose of promoting and supporting health production initiatives.

Description The pool of funds contributing to the Trust can be found through taxation (e.g., on hospitals, insurers, people), private foundation resources, or redirection of existing government funding.

Investment $0 – $60M Scale

Time to Ranges; may require significant upfront time to establish Implement necessary regulatory and legal structures

78 Wellness Trusts: Illustrative Structure

79 Wellness Trust: Success Criteria

Garnering External Support to Pass Law

(as utilized by state of Massachusetts) • Several events: press conferences, rallies, lobby days • Series of “mini-lobby days” to educate/engage Reps and Senators • Open letter to legislators from civic leaders – over 300 signatures • Earned media, including event coverage, LTEs, and Op-Eds (including from mayors) • Organized support in key districts • Broad set of allies: faith groups, mayors, business

Philanthropic Focus Financial Focus

80 Wellness Trust: Success Criteria

Criteria for Prevention Initiatives Financed from Trust

• Sustainable – unlikely to be diverted to other uses • Sufficient to impact healthcare costs and population health (e.g., not mini-grants) • Logical link between funding sources and cost savings • Administrative simplicity • Politically viable Philanthropic Financial Criteria for Partnership Initiative for Funding

• Demonstrated history of past collaboration • Defined roles and responsibilities for each organization • Clearly defined process for decision making • Agreement on preliminary milestones and timelines for capacity building phase • Budgets demonstrate equitable funding distribution among partners

Wellness Trust: Success Criteria

Execution

• Initiative champions from state and local level • Foundation of advocates with credibility and relationships in health care policy and public health • Active conversations with private sector of employers, especially hospitals and insurers • Mix of short to long term investments in the trust • Performance measures should be relevant to community

Evaluation

• Assessment should analyze health improvements, job creation, improvement in education programs, impact on physical environment • Performance measures should be relevant to community • Coordinate cross-site evaluation with outside evaluator • Utilize a data system that connects community and clinical data

Wellness Trust: Sources of Capital

Type Source Requirements Contact Grant Example: • Must support area with < 500k CDC, Division of CDC: Community citizens Community Health Transformation • Must support the five "Strategic Grants – Small Directions" from the National http:// Communities Prevention Strategy: 1) www.cdc.gov/ tobacco-free living, 2) active nccdphp/dch/ living and healthy eating, 3) programs/ high-impact quality clinical and communitytransfor community preventive services, mation/small- 4) social and emotional communities/ wellness, and 5) healthy and index.htm safe physical environments Taxation Hospitals • May not require a financial Taxation Heath Plans return in taxed or if funds are redirected Taxation Employers

83 Wellness Trust: Case Study

Massachusetts Prevention and Wellness Trust

Overview The Prevention & Wellness Trust Fund will invest $60 million over 4 years in evidence- based community prevention activities, with the goal of reducing costly preventable health conditions. The majority of funds will be awarded through competitive grants.

Details of Funding & Distribution • $60M over 4 years for Trust • Sourced from a tax on insurers and assessment on large hospitals: • Assessment on Health Plans • Assessment on Acute Hospitals with > $1B in net assets • < 50% revenue generate by public payers • The Department of Public Health (DPH), in consultation with a new Wellness and Prevention Advisory Board, administers the funds • The Trust awards money in the form of grants to fund specific initiatives • 10% of funds used for credits to employers to set up wellness programs • Health insurers provide premium discounts to small businesses that launch wellness programs

84 Wellness Trust: Case Study

Massachusetts Prevention and Wellness Trust (continued)

Funding Activities • Oversight board created to document most prevalent health conditions in state and to identify evidence based interventions • A minimum of 75% of funds must be spent on competitive grants to: • Reduce rates of the state’s most costly preventable health conditions • Reduce health disparities • Increase healthy behaviors • Increase the adoption of workplace-based wellness programs • Develop a stronger evidence-base of effective prevention programs

Evaluation • 20-person Commission created to monitor impact and effectiveness • Use of an outside organization to conduct evaluation

Financial Outcome • Identified Outcome Measures were created by Advisory Board • Goal = budget neutral

Wellness Trust: Case Study

Massachusetts Wellness Trust (continued)

86 Wellness Trust: Risks and Considerations

• Instituting the Wellness Trust within a community requires extensive legal and regulatory changes; buy-in from government across multiple levels is required • Taxation must be across several different stakeholders to ensure one insurer, employer, etc. is not disproportionately affected • There may be difficulty in proving short term results due to the lag in data for results from various preventative care measures in communities

87 Wellness Trust: Informational Sources

• Fact Sheet: The Massachusetts Prevention and Wellness Trust Fund: http://www.mphaweb.org/documents/PrevandWellnessTrustFund- MPHAFactSheetupdatedOct12.pdf • Massachusetts Prevention and Wellness Trust Fund: http://www.healthpolicyohio.org/wp-content/uploads/2014/02/ OWPNribble_mpha_june_24_2013_collaborative_meeting_presentation.pdf • Massachusetts Prevention and Wellness Trust: An Innovative Approach to Prevention as a Component of Health Care Reform: http://www.northeastern.edu/iuhrp/wp-content/uploads/2013/12/ PreventionTrustFinalReport.pdf • A Wellness Trust to Prioritize Disease Prevention: http://www.brookings.edu/~/media/research/files/papers/2007/4/useconomics %20lambrew/04useconomics_lambrew.pdf