Clouds around health care transformation lifted as election results became clear. Health care changes have huge—but still hidden—ramifications for the entire nonprofit community. Without deliberate preparation, many nonprofits may experience unpleasant surprise and declining financial support.

Why will health care transformation affect the larger nonprofit community and not just groups related to health care? To get to an answer, let’s follow the money.

Health care transformation is about creating networks of providers working together. These networks, called accountable care organizations (ACO), will ultimately replace today’s system of fragmented care. To make health care transformation work, we must do two things: 1) find lots of cost savings in the clinical side of care, and 2) help people to get and stay healthy to limit future costs.

Breaking the cost curve

To make this transformation successful, we must break the cycle of increasing health care costs. By way of comparison, if food costs increased as much as medical costs since the 1930s, we might pay $108 for a dozen oranges or $80 for a dozen eggs at the grocery store today. There are many reasons to believe that we can effectively cut health care costs.

Oregon is leading the way in health transformation, according to Secretary Kathleen Sebelius at the US Department of Health and Human Services. And she is not the only one who expects Oregon to serve as a model for the nation. In Oregon ACOs, called coordinated care organizations there, have been given $1.9 billion in federal money to get to work. Supported by additional state funds, the CCOs will be held accountable for a number of outcomes or results. The CCOs get to spend the money on things that are based on evidence and that do the job—not a private wish list or simply billing for medical services provided. 

Of course, CCOs will start by doing things that cut the most cost quickly. The state’s largest CCO, Health Share of Oregon (HSO), for example, may focus on expensive emergency room visits and reasons for avoidable hospitalizations. Some savings will be accomplished more easily than others; many will be one-time wins.

Investing in prevention

No one, however, expects long-term savings without preventative health care services. The concept of prevention must become more than an idea. The healthier people are today, the less likely it is that they will need expensive treatment in the future.

Back to the money trail. In the case of CCO’s, how will they invest in prevention that’s proven to work? The prevention must work—and it must work for large numbers of people—or we won’t get the cost savings we need.

The role of nonprofits in building a healthy community

First, we must look at what exactly prevention is. We know health isn’t just doctors, nurses, and hospitals; research shows that these entities contribute only about 10 percent to 15 percent of what we need to remain healthy. Many other factors count more. Root social and economic causes, good food, safe places to walk, clean air, transportation options, solid schools, and decent jobs all play vital parts in creating healthy communities.

Nonprofits of all stripes and sizes work hard in all these areas. Much like the larger healthcare system, nonprofits are paid, charge fees, and are given grants or attract donations for things they do. Examples: “We served 5,000 children,” or “We served 1,000 holiday meals,” or “We helped inspire and mentor 136 local at-risk youth.”

How much does such good work contribute to creating a healthy community? Intuitively it seems on track—but too little is linked to measureable impact or larger community outcomes. There is strong interest on the part of donors, foundations, and public agencies for nonprofits to link activities to measured impact, but progress has been slow.

While there has been much talk and many conferences about outcomes and impact, there were no real economic drivers to push these ideas—until now.

Prevention: a new economic driver

Prevention won’t happen without significant investment and coordination. Without prevention, CCOs have no hope of breaking the cost curve and will fail to live up to expectations.

On the horizon for HSO is the question of how to build partnerships with and invest in services that most affect health outcomes and costs, including social services, housing, family support programs, school programs, and more. HSO and its public and private partners have the opportunity to become the drivers for this evidence-based, outcome-oriented work. Over time, other public sector support for creating, building, and maintaining a healthy community will be expected to follow. Private donors will readily embrace and, more likely, actively work to accelerate this shift.

Back to the money. Government grants and fees for services account for about a third of the total revenue for nonprofits nationally. Combined with private donations, together they provide half the revenue for the sector. The other half is in the form of fees such as tuition, hospital revenue, or tickets. When motivations that drive up to half the revenue for the sector start to shift, nonprofits will have to respond.

Nonprofit business models might not fit

As HSO gains clarity about what kinds of prevention can be linked to continued or future lower costs, it will make sense for them and all of their allies in the public sector to invest in it. Nonprofits will, by necessity, need to follow the money when funders of all types begin to sharply focus on shared outcomes.

Nonprofits will be challenged to assess their current work in terms of these larger, community and prevention oriented outcomes—that is, if they want continued support from key donors and public agencies.

There are a number of questions that nonprofits will face in the immediate future:

  1. How will our organization concretely link our work to the kinds of upstream or prevention-based work needed to create a healthy community?
  2. How will the social service sector efficiently and effectively link our work with a clinical care-oriented sector? How can the sector hold onto its values in the face of a shift in supporter revenue?
  3. What will happen to the many small nonprofits that have relatively high infrastructure costs compared with impact?
  4. How will we as a community make important choices about which methods of prevention and what kinds of services to invest in?

The drive for even greater and more measurable outcomes will require that nonprofits work differently. We will need organizations that provide economy of scale and compassion. We need organizations that effectively and powerfully connect people in need and for purposes of prevention, and we need advocates with clear agendas focused on long-term results.

This will have a strong ripple effect throughout the entire nonprofit sector, and will change both public and private supporter and service population expectations. How will the sector prepare?