1A. Can payment by results improve outcomes?
PbR is frequently championed as the commissioning approach to use to focus on outcomes rather than outputs — so, for example, providers get paid for the number of unemployed people they get into jobs, rather than the number of people they provide information, advice and guidance to.
The idea is that by commissioning outcomes rather than outputs, commissioners allow providers to work in any way they see fit, safe in the knowledge that if the outcomes are not achieved, they do not have to make payment.
But do PbR schemes achieve better outcomes?
A mixed picture
One of the clear lessons from the literature review is that, currently, the evidence base is a long way off being able to determine whether PbR consistently delivers better outcomes.
There are a number of examples of positive PbR schemes in this and other countries. There are, probably, even more examples of badly designed PbR schemes which have failed.
In 2002 the US state of Delaware introduced PbR contracts for its outpatient drug and alcohol services with the main outcomes (linked to payments) being increased take-up of services and active patient participation in treatment. Although one provider failed to meet these targets, most providers succeeded:
- Average capacity utilization from 2001 to 2006 increased from 54% to 95%
- The average proportion of patients’ meeting participation requirements went from 53% to 70%
Both these targets were met despite no notable changes in the patient population. One of the key design elements which made the Delaware experiment successful is that the outcome measures appeared meaningful to all the key partners because they:
“had intuitive appeal to all parties associated with the process. Patients, program [sic] administrators, clinicians and policy makers immediately understand the essence of the intervention. Providers proudly talked about how the performance contracts could work for them clinically and financially. The strategy as implemented simply makes economic, managerial and clinical sense.”
Another successful PbR initiative is the London Rough Sleepers scheme which is funded via Social Impact Bonds. Both providers, St Mungo’s and Thames Reach, have been very successful at finding accommodation for rough sleepers and supporting them to sustain it.
On the other hand, there are plenty of examples of where PbR schemes have not succeeded in improving outcomes; including these two examples.
- The interim evaluation of the eight drug and alcohol recovery pilots compared outcomes against the majority of other treatment services in England and Wales who weren’t operating PbR and found the introduction of payment for outcomes had a significant, negative impact on successful treatment completion.
- It also seems unlikely that the Doncaster Prison PbR project will meet its target of reducing the reoffending of released prisoners by 5% although we need to wait until summer 2016 to get the final figures. Many criminal justice commentators considered this target relatively unambitious since the short term prisoners at which the scheme was targeted were not receiving any service at all before the PbR pilot was launched.
So, if some PbR schemes work and others don’t, where does that leave us? The literature review provides four main learning points.
- PbR is not a magic bullet. Changing to a PbR approach will not inevitably produce better outcomes unless there is sufficient funding to do so.
- Providers need to have sufficient control over the specified outcomes to achieve them – see Question 4 for more detail.
- We do seem to have a growing understanding of the main critical success (and critical failure!) factors associated with PbR schemes, many of which are covered in the other questions which make up the interactive tool.
- Even many advocates of PbR are keen to remind us that payment by results is only one commissioning model and that, just because everyone else in a sector is using PbR, there’s no requirement for you to.
Ideally, all commissioning should be outcome-based and there are numerous ways of incentivising providers to meet outcomes (and of penalising those who don’t) besides PbR.
The one thing that the literature is very clear about is that, by directly linking outcomes to payments, PbR schemes will definitely ensure that providers focus all their attention and activities on achieving the outcomes which are specified in the contract.