The role of social impact bonds in pediatric health care.

Abstract

* Abbreviation: SIB — : social impact bond In 2010, the United Kingdom’s Ministry of Justice entered into an agreement with a nonprofit known as Social Finance to prevent reoffending by juvenile offenders released from prison in Peterborough, England. What made this contract unique is that the government payments to Social Finance were not based on delivery of services but instead on the level of government cost aversion from reduced recidivism. To cover the upfront cost of funding this prevention effort, Social Finance raised $5 million from private investors. If the effort successfully reduces recidivism 7.5% by 2016, then they will receive back their initial investment plus a performance bonus—totaling up to $8 million. This contract, now commonly known as a social impact bond (SIB), represents an innovative financing strategy that leverages private investment to move public services upstream to prevent greater costs in the future. Interim results from the Peterborough SIB indicated that recidivism has dropped 6% compared with the rest of England.1 Since its implementation, new SIBs are being developed to target a wide array of public problems (eg, reducing recidivism, preterm births, and special education). These bonds are attracting substantial interest and support from the private sector. For instance, Goldman Sachs is supporting a $9.6 million SIB to reduce recidivism on Rikers Island in New York City. In addition, they are supporting, along with the J.B. and M.K. Pritzker Family Foundation, a $7 million bond in Salt Lake City, Utah, to reduce special education needs. Goldman Sachs has also recently announced the development of a $250 million social impact … Address correspondence to D. Max Crowley, PhD, Center for Child and Family Policy, Box 90545, Durham, NC 27705. E-mail: max.crowley{at}duke.edu