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Changing Public Health Solutions with Private Sector Investments

Public health care systems need an upgrade. Learn how private sector investments can achieve quick ROI as well as positive change.
How Private Sector Investment are Helping Public Health Care Systems | WalterSchindler.com

Public health is defined as “the art and science of preventing disease, prolonging life and promoting health through the organized efforts of society” (Acheson, 1988). It consists of three main domains: health protection, disease prevention and health promotion.

Health Affairs describes Public Health as “the natural and historic bridge between the healthcare system and the community – both in terms of linking the health care system with services and organizations that address health-related social factors and in creating healthy conditions in the community”.  Source

The Failures in Public Health Systems

Achievements in public health have resulted in a 25-year increase in average life expectancy in the United States. However, public health agencies have arguably been ill equipped to sustain these successes and address the complex threats we face today, including morbidity and mortality associated with persistent chronic diseases and emerging infectious diseases. Source

For the first time in generations, life expectancy is declining. This rise in mortality is, according to experts, attributed to determinants of health that are not being properly addressed by the public health care system.

The public health infrastructure is chronically underfunded and is not able to fulfill its purpose. Of the $3 trillion in health spending in the US, public health receives only at best 3 percent. In consequence, governmental public health is toiled to maintain even its basic, statutory responsibilities, much less support the emerging needs of addressing the social determinants through partnerships such as with the health care system.

In their article on the topic of merging private sector processes with public health strengths, the scholars conclude that “while the private sector conventionally resorts to innovative thinking, experimentation, and risk-taking in the face of threats, this approach is not yet embraced in public health’s program planning models.

A new public health framework, which incorporates successful processes of the private sector and maximizes the strengths of the public sector, may be a major key to significant improvements in our most pressing and complex public health threats.”  Source

Quick ROI for the Public Health Sectors

According to the World Health Organization, there are quick returns on investments for health and other sectors. This is especially true for interventions that promote physical activity and healthy employment, address housing and mental health, and reduce road traffic injuries and violence. Vaccinations and screening programs are largely cost-effective.

Investing in health in general has been shown “to give economic returns to the health sector, other sectors and the wider economy, with an estimated fourfold return on every dollar invested” Source

The WHO states that even small investments promise large gains to health, the economy and other sectors, with sustainable outcomes.

Private equity investors are particularly interested in the health sector due to its resilience in the face of potential market volatility and the perceived opportunity for attractive returns.

In the year 2018, one in seven PE firms made at least one healthcare investment. $32.9B was invested in 647 transactions in the US, double the investment in healthcare in 2014.

There is new interest in venture capital approaches to advancing population health and public health capacity through so-called pay-for success models, including the use of social impact bonds. Governmental agencies can generally take on no risk or only to a very limited extent, but through partnerships with foundations there may be options to demonstrate value for private sector investment in population and public health.

According to the Harvard Business Review investors will benefit most by solving the healthcare system’s legion of problems and by adding true value to our health care system – delivering high-quality service at affordable prices and eliminating waste.

A study by Ernst and Young surveyed the experience of more than 80 health care company founders and executives with direct experience of PE investment in their physician practice management companies and found that “90% of those surveyed said PE involvement with their company has been positive overall, with 80% of those surveyed highly likely to consider PE investments in the future”.  Source

EY concludes that “not only is PE perceived to have a beneficial overall impact on health care businesses, it is also considered to positively influence the focus on quality and clinical services”.

Health executives have a positive perspective of the impact of private equity investment on their business.

Impact investment in the markets of renewable energy, water, sustainable agriculture and healthcare must have direction, focusing on the impact of improving system efficiency in one or more of those markets. This result is achieved through private investment. In addition, impact investing includes investment into the sustainability nexus where one or more of these areas converge and benefit human and animal health.

In order for any project or investment to be sustainable, it must first be profitable. We must work across the entire spectrum of energy, water, agriculture and healthcare, and our research and analysis must be based on science and total system efficiency.

Therefore, we redefine Impact Investing as:

Where Sustainability Meets Profitability – for the Future and the Present.

July 29, 2020

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