Stanford Social Innovation Review: A Checkup on Program-Related Investments
Back in 2006, I helped the California Health Care Foundation (CHCF) launch its Innovations for the Underserved program. The goal of the program was to fund “disruptive innovation.” In using that term, we took our cue from Clayton Christensen, a professor at Harvard Business School, who defined a disruptive innovation as one that “brings a much more affordable product or service that is much simpler to use into a market.” We quickly realized, however, that most typical CHCF grantees — nonprofit health care organizations and research centers, for example — were not likely to engage in that kind of disruption.
At about the same time, a number of companies that create disruptive technologies were knocking on our door. CHCF had sponsored a project that explored how online medical visits could expand patients’ access to care, and that experience had put us in contact with various mission-driven, for-profit technology companies. We did not, at that point, have a mechanism for working with them. But we saw an opportunity to recruit entrepreneurs in Silicon Valley — the epicenter of health care innovation and investing — to join us in serving the needs of underserved populations. Indeed, we believed that we could catalyze a new market for disruptive health technologies.
In the fall of 2010, CHCF launched the Innovation Fund — a $10 million experiment in program-related investing. Through the fund, we were able to invest programmatic dollars in for-profit companies as long as the primary purpose of each investment was to advance our mission. In making program-related investments (PRIs), we aimed to accelerate the adoption of innovations that either showed cost savings to safety-net providers or improved access to care for patients. (We used the term “safety-net providers” to describe entities that serve Medicaid patients, people without health insurance, and other populations that have difficulty accessing care.)
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