| Notes |
Pay for Success
A Connecticut Overview
January 2019
Innovative New Concept
Private investment
funds needed human
services
Government pays only
for successful
outcomes
Requires rigorous focus
on measurement and
outcomes
Better
Results
Measuring
Outcomes
Funding
“upstream” –
preventing
negative costs
Social Impact Bonds (SIBs) are not bonds in
the traditional sense, because payment is
contingent upon achieving agreed goals that save
the government money.
The term Pay-for-Success (PFS) is used to
describe transactions that emphasize outcomes
over outputs, including Social Impact Bonds and
similar projects. It can also be a way to structure
traditional government contracts.
Social Impact Bonds & Pay for Success
Key Elements
1. High-quality preventative services
2. Rigorous measurement of results
3. Capturing savings or avoided costs
Most projects attract private investment to pay for proven, high-quality
preventative services.
Focus areas include early childhood, workforce, housing the homeless,
and others where program success avoids a future negative cost.
Government, or other payor, only pays after agreed-upon outcomes,
which will save money, have been attained.
SIBs Began Very Recently
The first SIB:
2010, Peterborough England
An innovative new tool, created by investors,
government, and providers, to increase impact.
Investors paid for comprehensive services with the
goal of reducing re-offending for people who were
incarcerated.
Services began pre-release and continued with
participants into community. The program was
voluntary but offered to all people with short
sentences.
Outcomes closely and continuously tracked.
Providers worked together in real time to change
services as needed.
The reduction in re-offending exceeded the goal,
and investors were repaid with interest.
New Architecture: Pros and Cons
New parties are involved:
Intermediary, investor &
evaluator
Providers get stable funding for
the life of the contract, usually
several years
All parties get detailed and highquality data about what works, and
how to improve services and
outcomes
Projects are complex and initially
take longer to structure
Government pays only for results
achieved, which typically have
avoided a negative cost.
NEW
NEW
NEW
“Classic” PFS / SIB Model
All entities are engaged in planning and agree
at outset to goals, metrics & timeline.
Not for Everything… Needed Conditions
1. Potential for savings or avoided cost,
attributable to government or other
payor
2. Measurable outcomes that can be
agreed upon by all parties
3. Defined population and intervention
4. Safeguards against harm for target
population
5. Issue ranks high among
government/payor priorities
Pay for Success
should NEVER
replace a
society’s
safety net.
PFS in the US Today
Twenty projects are underway,
addressing:
• Homelessness
• Early Childhood
• Recidivism
• Workforce
• Early Childhood Education
• Mental Health
• Environment
• Child Welfare
Source: Nonprofit Finance Fund Pay for Success Hub
payforsuccess.org
Nearly 60 more are in the planning stages.
Elements of PFS Lead to Improved Services…
no matter WHO pays
Pay for Success Continuum
Conventional Contracting Complete Pay for Success
Pays for SERVICES
Generally limited capacity to collect and analyze data.
Frequent re-bids; generally, limited provider input into
service design. Payments from state do not
necessarily cover the cost of providing services.
Providers report on expenditures and services
delivered.
Little incentive for systems to share information on
the people they all serve.
Pays for OUTCOMES
Rigorous, independent data collection inherent in
program design. Data used continuously to make
adjustments as needed to attain results. Leads to better
data collection with benefits beyond PFS project.
All parties - providers, government/payors, evaluators and
intermediaries – integrally involved in negotiating
contract and terms.
Evaluators determine outcomes as agreed. Avoided
costs/savings are identified and can be captured and
reinvested.
Systems encouraged and incentivized to share
information.
Why Bother with PFS? The CT Example. Connecticut’s non-profit
sector struggles to provide core services…and the system is not able to attain population-level
outcomes.
CT nonprofit service providers:
50% reported deficits
5
th highest in U.S.
77%: payments don’t cover cost of service:
7
th highest in the U.S.
Many employees eligible for state
assistance themselves.
-Institute for the 21st Century
Meanwhile: 53% of Hartford’s
children are in poverty. Youth and adult
unemployment, poverty overall, recidivism
and other measures also unacceptably high.
If you’ve seen one Social Impact Bond….
You’ve seen one Social Impact Bond.
Transactions are inherently complex, involving numerous data systems and parties, and
usually requiring them to develop and track new metrics.
However, they can provide stable funding for services and prompt better use of data to
improve outcomes. Ultimately, they can help government and the public learn and fund
what truly works to improve communities.
PFS in Connecticut
Activity includes:
• Office of Early Childhood: Outcomes Rate Card is applying PFS principles to
child care providers.
• CT Housing Education Finance Authority is working with Urban Institute
to determine identify possible CT PFS projects, and is interested in developing
capacity to act as an intermediary.
• Department of Children and Families: Family Stability Project, launched n
2016, is a SIB providing Family Based Recovery to decrease parental substance
abuse and increase family stability for DCF-involved families.
Recent and Emerging Developments
The 2017 federal budget created the Social Impact Partnerships Pay for
Results Act (SIPPRA), creating the Evidence Based Policymaking
Commission and mechanisms to use PFS to tackle social and public
health issues.
The legislation provides for a $92 million fund to be housed at the Department of
Treasury. It highlights a wide range of outcomes eligible for the program, including
improved child and maternal health, reduced homelessness, lowered rates of
recidivism and increased youth employment.
The key criteria is that outcomes must “result in social benefit and Federal, State,
or Local savings.” The Treasury was instructed to publish request for
proposals from states and localities in February 2019.
Capacity and Interest
Others now engaged in Pay for Success include:
• Corporation for Supportive Housing
• Urban Institute
• MDRC
• John Kaiser Family Foundation
• LISC
• United Ways (various)
• National Council on Crime and Delinquency
• Living Cities
• Jobs for the Future
• U.S. Corporation for National and Community Service
…And numerous regional and national foundations, universities,
school districts and other entities.
Most Promising Focus Areas
1. Recidivism
2. Health Care
3. Workforce Development
4. Homelessness
5. Early Childhood
Projects also address
areas of environmental
impact, foster care and
substance abuse
treatment.
Lessons Being Learned: Ohio
A series of public meetings explored available services against their potential
for PFS. The resulting Partnering for Family Success Program provides housing
and services to stabilize and reunite families weakened through poverty, illness
or crisis, with the goal of reduced foster care and reunification.
“This has resulted in our fiscal and administrative staff breaking
down costs and expenses in a way we’ve never seen. We are also
now matching administrative data sets that were never
compared before: child welfare, homelessness, juvenile justice and
adult jail systems.”
~David Merriman,
Deputy Chief of Staff, Cuyahoga County
Upstream Solutions
Upstream Solutions supports programs and policies that lead to better
individual and collective outcomes, and work that creates equity, social justice
and positive systems change.
Services include connecting interested stakeholders, communications and
marketing, innovative financing, grantwriting and advocacy.
A core focus is Pay for Success (PFS)/Social Impact Bond financing. Upstream
Solutions works to promote understanding of PFS, and to ensure it is applied
responsibly and benefits individuals and communities.
Liz Dupont-Diehl
(203) 667-5956, ldd001@gmail.com
Upstreamct.org |