#12: Let’s Make 2024 All About Social Determinants of Health
Investing in what truly defines our health.
I planned to start 2024 writing about Private Equity in healthcare. What it is, why it’s important, and if it leads to better (or worse) health outcomes.
But listening to an episode of The Dose titled “Private Equity Promised to Revolutionize Health Care. Is It Making Things Worse?” surprisingly steered me in a different direction.
Dr. Howard Forman, professor of radiology, biomedical imaging, public health, management, and economics at Yale University, and featured guest of the episode, was asked where he sees the most potential for healthcare innovation.
His answer: “It’s all about social determinants of health”
This got me thinking…
The World Health Organization defines social determinants of health (SDoH) as “the conditions in which people are born, grow, work, live, and age, and the wider set of forces and systems shaping the conditions of daily life”. SDoH include everything from income and education to structural violence and systemic racism.
Up to 80% of an individual’s health outcome is determined by social determinants of health.
Yet, it's the companies creating health tech, life science R&D, medical devices, and diagnostic solutions that are raising the most dollars from venture capital. Rarely have I seen funding announcements for companies addressing issues such as housing, transportation, food insecurity, and pollution.
Maybe I haven’t looked hard enough. Or maybe—up until now—the venture world has instead opted to invest in “exciting” companies building healthcare solutions we’ve never seen before.
One thing is for sure: Social determinants of health haven’t garnered the same level of attention from investors as health tech.
Numbers Don’t Lie. Neither Does Google
In 2023, $10b venture dollars were put toward digital health. That’s a significant drop from the $29b worth of funding in 2021. But compared to these numbers, VC investments into SDoH startups have been a one-off. So much so that I can’t actually find an accurate number for total funding.
Doing a quick Google search (”venture capital investments into SDoH”) yielded some less than promising results: Just three public health and SDoH-focused funds and one article highlighting a SDoH company that raised a $26m Series B round in 2022.
Not So Simple
To be fair, investing in SDoH isn’t the same as backing the next tech unicorn. Addressing food deserts, job insecurity, education, and childhood development all demand systemic changes beyond the scope of a single company.
As such, investors can believe in a prospective SDoH company all they want. Unfortunately, the success of such a company is still reliant on policymakers, community interventions, and other non-market factors.
For a VC thinking equally about financial returns and improving healthcare, investing in SDoH can prove to be too much of a gamble.
SDoH Funding
SDoH funding traditionally comes from a variety of sources—the main ones being payers, providers, and community-based organizations.
In 2021, for example, the Low Income Investment Fund created a $45m Accelerator Fund supporting housing, education, and wellness. Similarly, the Utah Housing Preservation Fund was built by health system Intermountain Health to increase Utah’s affordable housing supply.
Large insurers UnitedHealthcare and Humana also have existing funds targeting community development and wellbeing outcomes called the Health and Housing fund, and the Health Outcomes Fund, respectively.
Medicaid has even evolved to no longer focus on clinical care alone. Select State Medicaid Waivers push funding beyond healthcare into community-based organizations addressing health-related social needs.
But despite these sources, SDoH are still significantly underfunded—projected $4.5b annual shortfall—leaving a large gap for the private sector to fill.
Trailblazing the SDoH Venture Capital Industry
The SDoH/Public Health-focused funds found through my Google search are paving the way for a new era of healthcare investing:
Started in 2021 with a $5m initial investment as a venture fund focused on social determinants of health.
To date, $1.6m has been deployed into 6 companies including Fabric Health, a startup partnering with health plans to provide healthcare services for people at the laundromat.
Josh Harris, Managing Partner of the Philadelphia 76ers, has pledged to invest an additional $1m into companies chosen by the fund.
MBX invests in emerging companies pursuing public health challenges.
Portfolio companies Forum and Vivodyne have recently raised $5.3m and $38m, respectively.
Investments span vaccine development, disease surveillance, and improving health equity.
Adjuvant’s investing strategy aims to improve global health in low- and middle-income countries while pursuing “top-tier” financial returns.
Focus areas include nutrition, maternal health, and antimicrobial resistance.
As for the lonely SDoH startup that raised $26m back in June 2022?
That’s Socially Determined, a data analytics platform delivering insights on risks associated with social determinants of health to improve clinical outcomes and health equity.
More on the Way…
By the end of 2024, SDoH should be more synonymous with healthcare venture capital. Health tech is cool and all, but if public health campaigns are focusing less on point solutions and more on improving societal infrastructure, VCs should be asking themselves if they’re investing money in the right places.
Excited to diver deeper into public health and SDoH investing on an upcoming episode of Healthy Returns:)
This week in healthcare:
HHS plan to revitalize U.S. primary care falls short, experts say, Washington Post
A glimpse into the future of healthcare on social, HootSuite
5 Most Notable Hospital M&A Deals in 2023, MedCity News
Healthcare leaders share their biggest achievements of 2023 and goals for the new year, Healthcare Brew
Great post! I'm happy you addressed the reasons why VCs might not be investing in SDoH companies. Not only do very few exist, but unfortunately, VCs look for businesses with the potential to maximize returns and deliver an outsized financial impact. When it comes to SDoH and issues of inequity, you're typically dealing with a population without resources to pay for services which means the margins aren't there to be attractive for venture funding. More needs to be done in the public sector to systemically fix these issues via funding and programs so the private sector can chime in with creative solutions. Only then will founders start building in this space and VCs start investing.
While this is a great start for SDoH projects, they are really tiny. Lot more will have to happen with lot more money being spent in right way.