What are social-impact bonds?

Social-impact bonds use private investment to address pressing such social problems as prison recidivism, early childhood education and infant mortality.

Investors turn a profit if the government realizes long-term savings. If the proposed solutions don’t work, investors lose money.

For example, Goldman Sachs recently invested $4.6 million in a Utah program that is testing a theory that comprehensive early childhood education will keep students out of special education classes through sixth grade.

If the program works, “Kids start kindergarten well prepared and ready to learn. The jurisdiction saves money, and the investor gets paid with a return,” said Andrea Phillips, vice president of Goldman Sachs’ Urban Investment Group.

If the pilot program doesn’t work, the state will need to continue financing special education, and investors walk away empty-handed.

South Carolina recently won a grant that will offer technical assistance as the state develops a way to use social-impact bonds to improve its infant mortality rate.

Babies born into poverty are more likely to grow up poor, drop out of high school and have babies of their own as teenagers than are infants born into wealthier families. Studies also show they are more susceptible to chronic disease and will probably lead shorter lives, which is exactly why Lori Robinson and Yesenia Figueroa have been spending so much time together these last few months.

Infant mortality

In South Carolina, about 7.4 out of 1,000 babies born died before their first birthday in 2011, the most recent year data for which data is available.

In the U.S., the estimated infant mortality rate is 5.90 for 2013.

S.C. DHEC and the Central Intelligence Agency.

Their relationship is built on the back of an expensive but promising program called Nurse Family Partnership. Robinson is the nurse; Figueroa, 26, and her 7-month-old son, David, are the family. They meet every two weeks at Figueroa’s house on Johns Island.

“Is he crying more than usual?” Robinson asked Figueroa during a visit in late June.

“No, I think he’s doing better.”

“Good. About how many hours does he sleep a night?”

“Like six. He’s starting to eat more food, so I think that’s helping.”

Robinson asked about the toys David plays with, how he scoots around on the floor and if he’s drinking from a sippy cup yet.

She discouraged his grandmother from letting him taste ice cream, even if he seems to like it.

“They say no whole milk until 1, so I wouldn’t recommend it.”

This one-on-one interview is similar to dozens that Figueroa has sat through since early in her pregnancy.

Nurse-Family Partnership is designed to match low-income, first-time moms like Figueroa with nurses who can help them raise healthy babies through intense intervention.

Health experts believe the program could play a key role in addressing the state’s persistently poor infant-mortality rate, improving children’s health in South Carolina and potentially saving millions of dollars down the road.

Initial results show it’s working, which is why the state is now turning to Wall Street for help.

The results

Since 2008, when South Carolina first implemented the program, 90 percent of babies born into families participating in the Nurse Family Partnership were carried full term, and 89 percent were born at a healthy birth weight.

The state recently compared a cohort of babies born into the program to babies outside the program and found that 8.2 percent of Nurse Family Partnership babies were born prematurely versus 17.3 percent outside the program, and only 4.8 percent of Nurse Family Partnership babies were admitted to a neonatal intensive care unit versus 13.1 percent who did not participate.

“The results as you contrast those two groups are pretty significant,” said Tina Markanda of the Duke Endowment, which has given South Carolina $8.5 million to help fund the program since 2008.

State officials realize that using grant money to pay for the program forever isn’t sustainable, and the government can’t afford to pick up the tab because it’s too expensive. In South Carolina, Nurse Family Partnership costs nearly $8,000 per mother who enrolls, and Figueroa, who doesn’t pay anything to participate, was one of 568 mothers who signed up last year.

The investment

This is where Wall Street comes in.

South Carolina is exploring ways to use private investment to expand the program. These investments, called social-impact bonds or pay-for-success bonds, have been used in other states to address complex social problems such as prison recidivism and early childhood education.

“People call these social-impact bonds, but they’re not really bonds in the traditional sense,” said Andrea Phillips, vice president of Goldman Sachs’ Urban Investment Group. “The government is transferring risk ... off of itself. Where private capital comes into play is to provide the up-front financing and to absorb that risk.”

Investors make their money back with profit if the government saves money. A national report published last year shows that government saves more than $70,000 per family that participates in Nurse Family Partnership over a lifetime.

These social-impact bonds have never been used in South Carolina before, and whether or not they can help improve state’s infant mortality rate is unknown, although there is a high expectation of success.

“Investors are, in many times, willing to take on more risk,” said Tony Keck, director of South Carolina’s Medicaid agency. “(Social-impact bonds are) seen as a way to do that.”

Keck is participating in a workshop at the White House today to discuss how South Carolina can use social-impact bonds to finance Nurse Family Partnership.

South Carolina won a grant in May from Harvard University and the Rockefeller Foundation that will provide technical assistance as state leaders craft a plan to use this investment model to improve infant mortality.

When the grant was announced, Gov. Nikki Haley said, “We see public-private partnerships as the best way to bring innovative solutions to government.”

The meeting

When Robinson and Figueroa meet every two weeks on Johns Island, they don’t talk about social-impact bonds or private investment or the state’s infant mortality rate.

They don’t discuss how President Barack Obama’s Democratic administration is collaborating with Haley’s conservative health care adviser.

They mainly talk about the baby.

“When he eats, he gets excited. He swings his hands back and forth,” Figueroa said.

Robinson laughed. “Do you let him play, make a mess with his food?”

“Yeah.”

“Good.”

Interactions like this may seem unimportant, but the sheer volume of information Figueroa will accumulate over time is significant. Robinson will continue meeting with the family until David turns 2.

“They help me with like, for one, how to be a mom,” Figueroa said. “I kind of know what to do, but if I have questions, they answer them. If I need help in anything, they’ll help me.”

Robinson travels the Lowcountry, meeting with up to four new moms a day. She is one of six Nurse Family Partnership nurses serving Charleston, Berkeley, Colleton and Dorchester counties. The program is available in only 15 other counties in the state.

These meetings are not meant to replace doctors’ office visits, but Figueroa, sitting on her couch with David perched on her lap, said she prefers meeting with Robinson.

“It’s better because you get to express yourself more, how you feel,” she said. “It’s more comfortable.”

Reach Lauren Sausser at 937-5598.