Health disparities caused by health inequities cost the US billions each year; the National Vital Statistics Reports estimates that disparity-related direct medical care expenses cost $230 billion annually. Actuarial analysis of high-cost diseases puts that estimate at $320 billion a year. Conversely, providing equitable care—or ensuring that all individuals receive the tools and resources they need to achieve health and well-being, regardless of gender, ethnicity, geography, or socioeconomic status—could save the US upwards of $1 trillion per year.
Payers, providers, and self-insured employers face a moral imperative to improve health equity for members, patients, and employees. Beyond civic and societal benefits, these parties can also realize additional value and market strength through sound business investment in health equity initiatives.
Here, we'll discuss why traditional investment valuation approaches are inadequate to reveal the full impact of health equity strategies. We'll outline 7 reasons why investing in health equity is a smart business move and provide specific guidance on how to prove the ROI of health equity, sharing real-world examples across all payment models.
Why is making the business case for health equity so difficult?
As health equity gains traction as a quality initiative, some frameworks can be used to guide efforts. Still, few guidelines and no standards exist for quantifying all the value points gleaned from health equity efforts.
Health equity drivers are complex and reach out into areas of research that have historically fallen outside the typical scope of traditional healthcare. As organizations hire chief equity officers, conduct community health assessments, create strategies, and possibly pursue health equity accreditation, they are navigating the nuances in health equity performance quantification and measurement.
Initiatives, interventions, and programs to address health inequities and disparities are multi-dimensional, accounting for economic, social, and environmental drivers, as well as personal beliefs and preferences. Plus, the tools and methods required to engage an individual in a meaningful and person-centric way can be straightforward, much like a personal conversation. Or they could require a complex chain of assessment, referral, follow-up, engagement, and tracking.
Like the previous point, gathering and measuring all the influencing factors that create change takes effort and diligence. Health equity program representatives need adequate time, tools, and opportunities to document and curate KPIs. Leaders need appropriate data analysis tools and methodologies to reflect a program's value points accurately.
7 reasons why investing in health equity is a smart business strategy
Quantifying the economic impact of health equity investments can encompass a variety of variables, including direct medical savings, indirect savings, and other benefits that ultimately advance the healthcare organization itself, its surrounding economy, and community well-being.
Numerous studies have demonstrated that improving health equity and addressing downstream disparities in health outcomes could vastly lower healthcare costs, support longer and healthier lives, increase productivity, and positively influence society. Without an effective and comprehensive reflection of health equity investment returns, payer and provider organizations will cut pilots short or never implement promising programs.
Here are 7 compelling factors to consider when creating a business case for health equity investment and board leadership endorsement.
1. Move beyond the moral imperative
Sukanya Soderland, Chief Strategy Officer for Blue Cross Blue Shield of Massachusetts, said, “Taking steps to make healthcare more equitable is the right thing to do, but it also makes good business sense." As organizations see that their mission and quality care commitment are synonymous with health equity goals, they will realize that health equity is essential to long-term business success. Although making a compelling business case involves looking at financial and resource costs and benefits, starting but not ending there is vital.
2. Direct and indirect cost savings
Direct benefits from a health equity initiative—or positive ROI—result when the cost of an initiative is expected to be less than healthcare expenditures. These direct benefits could include fewer preventable illnesses, improved mortality rates, more cost-effective chronic care management, and reduced emergency room utilization. Another way to view positive ROI as a direct benefit would be when the initiative's cost is less than a realized revenue increase from new members, value-added services, or value-based performance incentives.
However, the business case for health equity should also capture the indirect value and benefit from investments, which is typically ignored by standard ROI analysis. Indirect cost savings can come from gains from operational efficiencies, improved workforce health and productivity, economic benefits from a healthier patient-member population, as well as the value of people living longer lives and needing services as they age.
3. Avoiding future and opportunity costs
There is an opportunity cost to not reducing health disparities. For example, a study estimated that if “death rates and health outcomes of individuals with a high school education were equivalent to those of individuals with college degrees, the improvements in life expectancy and health would translate into $1.02 trillion in savings annually in the US." For healthcare organizations, the future missed revenue and increased costs due to poor health in the communities they serve are measurable and devastating. And these costs go beyond charity care and lost revenue from collections; they speak to the value of a healthier person to the local economy, tax base, philanthropy, and workforce.
4. Future (not-too-distant) value of more diverse consumers with more money
A short-sighted view of consumer power could cost healthcare organizations dearly. When people are supported through health equity and SDoH programs, and they reap the many benefits of improved health, their income can increase, as well as their buying power. Using health equity initiatives to build more positive and trusting relationships with historically marginalized groups is a sound investment in future consumers. And, while racial and ethnic minorities represent one-third of the US population now, that group will grow to become the majority by 2050.
5. Future (not-too-distant) value of a healthier, able-bodied workforce
Lost productivity and workforce shortages will continue to impact healthcare organizations. And since healthcare relies heavily on employees across various populations, economic backgrounds, and education levels, investing in health equity makes sense. Improving health and engagement, as well as preventing diseases, creates a broader and more capable talent pool. For current employees, demonstrated efforts to enhance health equity make a more loyal and productive workforce with less absenteeism and less presenteeism.
6. Government and organizational grants, funding, innovation dollars
Health equity investments also help healthcare organizations meet quality goals, comply with regulatory requirements, and achieve eligibility for federal and state grants and funding, according to the Robert Wood Johnson Foundation's Making the Case for Equity. For example, organizations like the AAMC Center for Health Justice, HHS Office of Minority Health, CMS, the NIH, and the FDA offer many grants and funding opportunities.
7. Market value and mindshare in the community
Health equity efforts can build or rebuild trust with historically marginalized people who have undergone harmful and racist treatment and experienced poor health outcomes from healthcare systems. Acknowledging, engaging, and addressing key health issues prioritized by people in the community can create measurable value in goodwill, positive sentiment, and loyalty. Data gathered from CAHPS and other satisfaction and engagement surveys provide movement in beliefs and attitudes over time. Results indicate greater trust translates into patient and member retention and growth.
Approaches to support health equity ROI measurement
A compelling business case for health equity requires a clear rationale supported by rigorous analysis and punctuated with concrete objectives toward measurable health equity outcomes and tracked over a reasonable timeframe. As we've reinforced, widening the view of ROI beyond direct revenue and cost impacts provides a more realistic and longitudinal view of value.
Value depends on payment model - FFS, VBP & at-risk contracts
Provider organizations—from clinician groups, hospitals, and health systems—and payvider partnerships should view health equity ROI from the vantage point of what payment models they contract. Fee-for-service (FFS), value-based payment (VBP), at-risk contracts, and alternative payment and delivery models can achieve varied and unique value from health equity investments.
Fee-for-service (FFS) arrangements could measure increased revenue from improved patient engagement, utilization, patient retention, and referral. Value-based and at-risk arrangements could track quality bonuses from improved patient outcomes or lower total cost of care.
Timeframes need to be longer than 1 year
Health equity impact measurement needs to adopt a longer timeframe with more systematic analysis. Typical ROI models look at single year time horizon, which makes sense from a budgetary perspective. However, it doesn't match the timeline for ramping up, building rapport, and the time it takes to create momentum for positive change that's measurable in health and life quality outcomes. If investments show promise at 6 months and 1 year, they should be supported for up to 3 years or longer to adequately evaluate ROI over time.
Expand the division of "value"
In 2021, the National Center for Complex Health and Social Needs convened focus groups as part of the Community Ecosystem Learning Collaborative. Their input led to the publication of "Rethinking Value: Perspectives on the benefits of cross-sector collaboratives serving populations with complex health and social needs." These curated conversations added a broader “value" as part of the ROI equation, including:
- Intrinsic benefits that align with shared purpose: Health equity initiatives deliver on participant missions, values, and beliefs, bringing a sense of purpose in giving back to communities.
- Collaboration with community members and individuals: Working together helps identify needs, develop solutions, and share resources.
- Demonstrate outcomes at multiple levels: Expand the definition of ROI to include value through individual-, organizational- and collaborative- level outcomes.
- Sustained improvements yield long-term value: Addressing systemic issues in a sustained way builds value through long-term relationships, robust communication channels, and co-developed solutions.
Want to know your health equity ROI? Ask your patients and members.
One often overlooked area for discovering the value of health equity initiatives is the people supported and the communities they live in. Similar to the personalized nature of assessing and addressing social needs, documenting the value gleaned by program participants provides a broader view of outcomes. While more challenging to measure, input directly from individuals can give novel feedback on what aspects of a program they found most helpful in their health journey. Like asking: What activities or supports most improved your diabetes? Was it cooking classes that helped you change your diet, a free gym membership to support more exercise or food subsidies that helped you afford your medications?
Health equity investments yield measurable success
More health equity investments yield quantifiable, positive impacts on individual and population health, as well as the financial health of invested payer and provider organizations.
University of Mississippi Medical Center: They initiated a Diabetes Telehealth Network pilot program to treat patients in the Mississippi Delta region, one of the most impoverished areas in the US. The Center saved $339,000 in healthcare costs to Medicaid.
Sinai Health System: They instituted a program using community health workers to help children living with asthma in Chicago. Not only did the program reduce children's symptoms, but it significantly decreased ED visits and inpatient utilization. SHS estimates that for every $1 spent on the program, they avoided $3 to $8 in cost.
Parkland Health and Hospital System: This Dallas-based safety-net hospital launched a program that supported uninsured patients to self-administer long-term antibiotics. This program freed up 5,893 inpatient bed days, realizing a direct cost avoidance of more than $7.5 million in unreimbursed care.
Four Oregon Health Systems: Kaiser Permanente, Providence St. Joseph Health, Oregon Health Sciences, and Legacy built multi-unit mixed-use development housing for 350 individuals. The housing stabilized the patients and their families while reducing preventable healthcare utilization. The 4 organizations used monies from their traditional investment portfolios and put them in a community development corporation.
Reading Hospital: They joined the CMMI Accountable Health Communities (AHC) model to create the Community Connections Program (CCP) that conducts screening, referral, and community service navigation for people using Medicare and Medicaid coverage. The CCP significantly reduced avoidable ED visits for patients with chronic conditions; that equals an estimated $1 million in avoided ED care in 1 year.
Blue Cross Blue Shield of Massachusetts (BCBS MA): Their Health Equity Partnership started in late 2022, using value-based payment contracts to reward clinicians for eliminating racial and ethnic inequities in care. This program incorporated health equity measures into their contracts with 4 of the state's largest participating healthcare systems, affecting nearly 500,000 covered lives. They also launched a Health Equity Business Accelerator that provides 9 months of financial, strategic, and mentorship support to 5 startups.
It's time for payers and providers to clarify and quantify their role in health equity
Payer and provider leaders are wrestling with what health equity means to their organization, how it fits into their priorities, and how to quantify the value to their organizations. Toyin Ajayi, Chief Health Officer for Cityblock Health, asked in a New England Journal of Medicine article, “Does that mean I'm responsible for paying for housing and for roads and for solving poverty and trauma and institutional racism and despair? Where does my job end? What exactly am I supposed to be doing around this?"
Kaiser Permanente leader, Ray Baxter, provided a broader perspective:
“On the one hand, we, the health care system, could simply pretend that these issues don't exist in our patients' lives, which is mostly what we've all done. On the other hand, we could go build affordable housing. The question is, neither of those seem tenable, but what is the sweet spot? What is the role and the responsibility of our healthcare system relative to our patients' social needs?"
When leaders surmise the more considerable gain to improved health in the communities they serve, alongside the cost avoidance benefits that health equity programs can yield, they can quantify and realize that health equity is a new kind of investment into their organization's health and market strength.
Create a compelling business case for health equity with RTI Health Advance
Investing in health equity is a new endeavor that creates a set of planning, budgeting, and operational challenges. RTI Health Advance supports organizations at the forefront of healthcare. Our team of experts covers the spectrum of health equity issues faced by payers and providers. We can help you establish health equity goals, create a community assessment and action plan, as well as provide the data analytics to support your business case. Contact us.