Payment by Results

Payment by Results: what results and how do we know we are getting them?
In these tough times, the public sector cannot afford to invest in services that fail to achieve the outcomes they have been commissioned to achieve. The idea behind the Government’s interest in Payment by Results (PBR) is to open up the market by incentivising providers to directly improve outcomes, with much greater freedom in how they go about it. The most successful providers will attract more business. For vulnerable children and families of course, a focus on improved well being and life chances rather than on how much service is being delivered, makes much more sense.

Outcome based contracting has been developing over the past few years in the public sector, but there are essentially two problems that have meant that direct links to payment through contractual arrangements have often not been made.  The first is around the development and agreement of accurate outcome metrics, something that is essential for PBR to work.

Commissioning for outputs is simpler than commissioning for outcomes, which are often “soft” and difficult to measure. In some cases, effective indicators, or proxy indicators, can be agreed, such as under 18 conception rates, or NEET rates, although even here, this often involves judging the success of a service on an outcome that might only become clear down the line.  But other outcomes such as ‘children safe at home’ or ‘resilient young people’, lack clear metrics, and fudging in this area has hampered the progress of outcome based contracting.

Another issue here is attribution of success to specific outcomes. Effective multi- agency partnership working is a key success factor in improving outcomes for children and families, and it can be difficult to attribute measurable change in an outcome to the work of individual agencies, as several may have made a contribution. Using a Social Impact Bond (SIB) may resolve this issue, as the approach includes commissioning a basket of interventions designed to have a combined impact on outcomes. This notion gets around the problem of attributing improvements to one particular service, and Community Budgets also hold this potential.

Besides the results themselves, there will also need to be a strong focus on who will use the services. With the Peterborough SIB pilot, aimed at reducing re-offending rates, the population is clearly defined by virtue of a previous short sentence within a given geographical area and time period. Defining a target population for early intervention with vulnerable children and families is more complex. Effective identification of children most likely to benefit from early intervention is in itself critical to a targeted approach, since we know that intervening early to prevent escalation is more effective than at crisis point. Safeguarding issues add to the complexity here, as there are clearly circumstances in which a more costly intervention such as accomodation, would be in the child’s best interests.

It will also be important to ensure there are mechanisms to militate against “cherry picking” of children with the least intractable family issues. There are concerns that the most vulnerable families in areas of greatest deprivation where chances of success are lower, risk being overlooked.  We must not marginalise those with the greatest distance to travel to achieve a positive outcome; the evaluation of the DWP outcome-based contract for delivering Pathways to Work[1] found that providers focused more on “job ready” clients, and spent less time with clients who were further away from work.

Ways to overcome this include contracting for differential payments for working with families with different kinds of problems  – so called “distance travelled” payments – or incentivising working with the entire target population by varying payment in line with the overall results for all. The latter has the additional advantage of encouraging providers to work with those who are reluctant to engage with services, making approaches to sustaining engagement a key aspect of a programme’s success.

How long will services have to wait for results- based payments?
The second key difficulty with PBR has been concerns about how provider organisations, particularly smaller ones, can operate whilst awaiting results that trigger retrospective outcomes payments. External investment through bonds may offer an exciting opportunity to address this by providing working capital from the start.

However, if concerns amongst some social sector providers are justified, we may see external investors favouring schemes likely to deliver a return on investment over a relatively short period, such as crisis intervention services. We will need to ensure that long-term or early years schemes that can achieve more profound results but take much longer to show their success, do not lose out.

And some families will require longer term support than others, and across generations, with results only confirmed well after the service intervention has ended. Might we be back to agreeing “proxy” results for long term work, such as saying that we know evidence based programmes delivered with fidelity work so we assume a result and pay up?

© Carola Bennion

February 2011



[1] The in?uence of  outcome-based contracting on Provider-led  Pathways to Work, 2009, a report of research carried out by the Policy Studies Institute on behalf of the Department for Work and Pensions.

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