When That Pay-for-Success Project Ends

Early adopters have a lesson for the next generation of PFS projects: It's important to plan from the start for what comes next.
September 25, 2018
What's Next written on a post-it note.
(Shutterstock)
By Danielle Cerny  |  Contributor
A program director at the Government Performance Lab

With the federal government's recent passage of $100 million for pay-for-success programs, numerous jurisdictions are likely contemplating new PFS initiatives, and for good reason: Pay-for-success, in which private investors who fund a promising program are repaid only if the intervention is successful, can be a powerful tool for improving outcomes and overcoming barriers to innovation.

Yet launching these multi-year, multi-party projects is time- and resource-intensive. Given the effort it takes, it can be tempting to postpone discussions about what happens at the end of these projects until, well, the end. But jurisdictions intending to pursue new federal PFS funds would be wise to learn a lesson from the country's first-generation projects: Plan for the end from the beginning.

While most of the initial state-level PFS projects have several years left before completion, many early adopters are finding that they need to plan for what comes afterward long before their contracts expire. In some cases, this realization may be precipitated by outside pressures, such as the pending expiration of a Medicaid waiver supporting South Carolina's Nurse Family Partnership pay-for-success project. In other instances, next-step planning has been triggered when overlooked operational challenges threatened providers' ability to continue delivering services while awaiting formal evaluation results.

But even without such action-forcing events, jurisdictions should start planning early to amplify the impact of their PFS projects. After all, pay-for-success contracts are time-limited and have never been intended to be permanent fixes to entrenched challenges. Nor were they meant to be one-off experiments. Instead, well-designed projects should pilot broader systems change, paving the way to spread their underlying results-driven strategies into core spending.

As jurisdictions begin designing the next generation of PFS projects, there are several actions they can take to lay that foundation:

Avoid gaps between service funding and early evaluation results: The multi-year structure of pay-for-success contracts creates a unique opportunity to evaluate programs' long-term impacts. These projects also allow jurisdictions to expand promising services to more individuals and locations than previously possible. Jurisdictions should create ways to maintain gains in service scale while providers await initial evaluation results. Doing so prepares the jurisdiction to quickly and efficiently build off of the reach of the expanded services should the evaluation demonstrate the success of the intervention.

Establish triggers for timely discussions of what comes next: Few PFS contracts have included specific timelines or triggers for planning for what happens if projects prove successful. Establishing contractual triggers for such planning does not mean committing to specific actions before knowing if interventions work. Instead, such reminders help ensure that governments don't miss opportunities -- such as aligning with procurement and funding deadlines -- to make informed decisions early enough to avoid gaps in service.

Seize opportunities to make specific results-driven innovations permanent: While jurisdictions will, understandably, want to see evaluation results before committing to expansions or continuations of specific interventions, there are often much earlier opportunities to lock in innovations in data sharing, resource coordination and improved client targeting. In a PFS project addressing chronic homelessness in Massachusetts, for example, the state committed 145 project-based rental vouchers to the project that will remain it place once it concludes. Combined with reformed Medicaid billing practices, this created a new model of sustainable funding for housing serving chronically homeless individuals.

Identify priority opportunities to spread results-driven strategies: Pay-for-success can help bring diverse partners together to develop innovations in service delivery, such as improvements in how governments target priority populations, match individuals to appropriate services and use data to manage contracts. Government should use this momentum to spread results-driven strategies beyond PFS projects. For example, after launching a pay-for-success project that connects in-need families to substance-use recovery and parent support services, Connecticut's Department of Children and Families evolved that project's data-driven referral techniques to improve social workers' ability to match clients to services system-wide.

Translating pay-for-success into core operations is a somewhat less daunting prospect today than when the first U.S. projects launched. In recent years, a growing number of governments have adapted and spread the results-driven strategies initially tested in early PFS projects. Seattle, for example, has used results-driven contracting to reorient all of its homeless services contracts to focus on performance. And Rhode Island's Department of Children and Youth Services was recently highlighted by Results for America as the nation's leading example of contracting for outcomes after it restructured, re-procured and began actively managing its entire family-based and residential service array.

We now have a blueprint for stable PFS projects that can lay the groundwork for far-reaching and lasting improvements. The next generation of these projects shouldn't wait to apply this learning.