In April, our president Lauren Hedinger attended a summit hosted by the American Academy of Actuaries (AAA), where our chief actuarial advisor and AAA Health Equity Committee vice chair Sara Teppema presented.

The summit was an incredible opportunity where we saw, firsthand, how the AAA is changing how risk and ROI are calculated and acted on as a strategic data point alongside its traditional use as a benchmark of success.

Historically, healthcare ROI has been too simplistic, incorporating too little data to account for financial signals via cost or outcomes. And, in the case of social risk factors on both of those impacts, not incorporating it at all. Short-term gains were over-extrapolated and then under performed, and long-term results were too difficult to fully calculate due to too much missing social risk data.  

In that spirit, today we’re taking a deep dive into how the American Academy of Actuaries developed this new approach and is working with their partners to implement it.

We’ll also unpack how Socially Determined already uses this approach to find where SDOH, outcomes, and ROI all intersect, having an enormous impact on preventative care that includes focused social risk interventions.

The Financial Big Picture of Social Determinants of Health

“Broadening the Focus” with Social Determinants of Health and ROI

The primary driver of the summit was the concept of“broadening the focus.”

In presenting the concept, Becky Sheppard, MAAA, FSA (Chair,AAA Health Equity Committee) & Ugo Okpewho, MAAA, FSA, described the challenge that financial ROI has become the default lens by inertia, not because it's the best tool. It is familiar, measurable, and defensible, but these virtues also make it resistant to being supplemented by additional data.

Some of the shortcomings include:

·     A narrow focus that excludes quality of life and equity, both tied to health outcomes

·     Short-term bias, disadvantaging prevention,affecting both outcomes and cost of care in the long and short term

·     A “wrong pocket” problem, in that fundamentally payers and beneficiaries are different entities          

To address these, the Academy introduced a five-domain framework meant not as a prescription, but a guide to surface overlooked questions.

·     Framing (clarify goals, time horizon,constraints)

·     Stakeholders (who is impacted and whose priorities matter)

·     Benefits (financial and non-financial, short-and long-term, who receives them)

·     Costs (not just what we pay, but when, who pays,and opportunity cost)

·     Measurement (data quality, bias, communication of results).

From our perspective, this was incredibly validating. These framework domains map directly to our analytical deliverables. At Socially Determined, we inform framing (understanding the upstream context), stakeholders(who is at risk and why), benefits (non-financial outcomes tied to SDOH resolution), costs (the cost of inaction when SDOH needs go unaddressed), and measurement(filling the data gaps that claims cannot fill).

That is ultimately how we address the iceberg of social factors driving outcomes and costs. We quantify the SDOH burden that inevitably materializes as future utilization and guide clients towards the correct interventions for those most at-risk.

In doing so, we bridge the practical gap between the AAA’s framework aspirations and all of healthcare as a whole’s ability to execute. In combining Socially Determined’s analytics and consulting capacity, we fill the social risk intelligence gap with concrete, defensible inputs. It’s also frequently put to the test. That’s why we work closely with Sara Teppema, as an academy vice chair and as our chief actuarial advisor to enable our actuarial partners to explain SDOH-informed analyses to CFOs, clinicians, and community stakeholders in terms each audience understands. When we tell you social risk is our domain of expertise, we mean it.

The Barrier of Conventional Social Risk Intervention ROI Calculations

At the American Academy of Actuaries summit, the keynote address, by Rishi Manchanda, MD, MPH, spoke to a central issue of health intervention ROI calculation. Effectively, conventional ROI models fail to take health equity into account and are therefore incomplete. And while the popular conception around health equity stems from an idea of addressing social inequity for its own sake (and stopping at the water’s edge), the reality is much more directly tied to health and financial outcomes.

Put more succinctly: conventional ROI analyses are leaving money, and a lot of it, on the table.

This is because there are immediate effects of not intervening on social risk factors that have a direct, immediate PMPM cost on a given population. There’s also a significant long-tail impact through the development and progression of chronic conditions, the measurement of which typically goes overlooked in a traditional 12-month budget cycle used to calculate an ROI.

There’s good news: At Socially Determined, our process already accounts for the missing data

Socially Determined's core value prop directly addresses the ROI gap Dr. Manchanda identified in his keynote on how this absence in traditional calculations should be addressed. By quantifying SDOH risk at the community and individual level, we enable actuaries, health plans, employers, life science companies, really any client, to see the upstream cost drivers that surveys,claims, and clinical data can’t surface.

To use a term also coined by Dr. Manchanda, Socially Determined’s approach aligns to a “three-tier framework” (financial, organizational, societal). Our approach means with our analytics, clients impact all three: financial savings from avoided ED visits, organizational benefits like improved quality measure performance, and societal benefits like reduced community disease burden.

All that comes together to deliver an actuarially (third party) validated ROI: we are the missing layer to any healthcare performance engine. Proactive social risk data is our core competency, ready to integrate with any enterprise workflow. No matter how clean a clinical and claims data technical stack is, without social risk data, it’s incomplete. That means spiraling care gaps and cost drivers remain out of reach.

But what does integrating that social risk data really mean in action?

Up Next: two SDOH ROI case studies to demonstrate, and validate, this rigorous, results-focused approach

If you haven’t subscribed or followed us on LinkedIn, now’s the time. Part two will deliver two case studies, one around behavioral health, the other covering food as medicine, and the complex, but incredibly impactful ROI of both.

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