1G. Can payment by results reduce inequalities?

One of the reasons that the interactive tool includes “reducing inequalities” as one of the possible rationales for payment by results schemes is that PbR contracts can be designed to incentivise providers to focus on particular groups.

This approach can also address the problems of “creaming” (focusing on the easiest to help) and “parking” (providing a minimal service to) those with more complex needs.

For this approach to work, commissioners need to “segment” a tightly defined group of people who are not currently engaged in a specific service as mainstream populations and/or not achieving the same level of outcomes.

An example is the Department for International Development’s Girls’ Education Challenge programme which included differential payments which reflected the higher costs of reaching marginalised girls.

By setting specific outcome targets for these segments with sufficient incentive payments tied to their achievement, commissioners should be able to drive increased performance with an accompanied reduction in inequalities.

Payment by results providers will then have the opportunity to work in new ways to ensure that the service they deliver meets the needs of any particular disadvantaged groups.

See also Question 5 which deals with the issue of protecting vulnerable groups within PbR contracts.