Review of the evidence for outcome-based payment systems

This chapter reviews the current state of evidence on what works in outcomes-based commissioning using published evaluations of Payment by Results (PbR) and Social Impact Bonds (SIBs) in the UK and SIBs in the US. Findings from these evaluations are arranged under the following broad headings: designing and commissioning, development of markets, performance management, innovation, the role of incentives, and overall outcomes. The evaluations address issues such as the complexity of PbR commissioning models compared to other commissioning exercises, the impact of PbR on the market for social goods, and the development of new or enhanced performance management systems as a result of outcomes-based commissioning. Two areas of innovation are also highlighted: innovation in service design and delivery, and innovation in financing.

Conclusions, cautions and future directions

This book has examined some technical, economic and political questions about outcomes-based commissioning as well as key theoretical debates, arguing that outcomes-based commissioning in its various guises may be theorised as a logical extension of New Public Management (NPM) or marketisation. It has also shown that outcomes-based commissioning might be theorised as policy makers' response to complexity and risk management, and/or as a means of facilitating philanthropists and other private sector actors in social innovation. This chapter draws conclusions from the evidence that has been reviewed, discusses the theoretical issues that have been identified, and considers future directions for Payment by Results (PbR) and Social Impact Bonds (SIBs).

Pay for Success and Social Impact Bonds in the US

This chapter discusses the development of Pay for Success (PFS) and Social Impact Bonds (SIBs) in the US. PFS ties payment for service delivery to the achievement of measurable outcomes. PFS projects to date have clustered primarily in three issue areas: criminal justice and recidivism, early childhood education and wellbeing, and homelessness. The chapter first provides an overview of the extent and trends relating to PFS and SIBs before discussing lessons learned from PFS programmes. It also considers the infrastructure support, evaluation approaches, and financial models for such programmes and concludes by analysing how the development of PFS in the US compares to that of programmes in other countries, and how PFS has been connected to the broader performance management practices in the US.

Payment by Results and Social Impact Bonds in the UK

This chapter discusses the development of outcomes-based commissioning in the UK, focusing on Payment by Results (PbR) and Social Impact Bonds (SIBs). It first considers key policies that have underpinned outcomes-based commissioning in the UK since 2010 before analysing PbR programmes and SIBs in more detail, highlighting results and some of the important issues related to these areas of policy. It shows that the themes of New Public Management (NPM) and risk management are evident in the development of PbR and SIBs, whereas the theme of social innovation is present but less prominent. The chapter also provides an overview of the social investment market and two PbR programmes, namely, the Work Programme and the Troubled Families programme. Finally, it describes two SIBs: HMP Peterborough SIB and Nottingham Futures SIB.

Outcome-based commissioning: theoretical underpinnings

This chapter discusses some key theoretical issues that are raised by outcomes-based commissioning. It begins by outlining three potential theoretical drivers of outcomes-based commissioning. First, Payment by Results (PbR)/Pay for Success (PFS) and Social Impact Bonds (SIBs) can be viewed as the logical next step in the New Public Management (NPM) reforms aimed at improving public sector efficiency. Second, they can be explained as an attempt by policy makers to deal with complexity in the social world. Third, they can be interpreted as a means by which policy makers seek to facilitate and develop new and existing philanthropic activity and social enterprise. The chapter goes on to consider the underlying theories and objectives of outcomes-based commissioning as well as how practice and theory may differ, focusing on issues relating to perverse incentives, conflicting policy objectives, risk management, and contracting. Finally, it examines questions of delivery and outcomes.

Introduction: outcome-based payment and the reform of public services

This book examines outcomes-based commissioning as an important element of the public service reform agenda, focusing on Payment by Results (PbR) and Social Impact Bonds (SIBs) in the UK (also known as Pay for Success (PFS) or outcomes-based funding and Pay for Success financing in the US, respectively). It considers whether PbR/PFS and SIBs/Pay for Success financing drive efficiency and innovation in the delivery of social outcomes, and whether attempts to reconcile corporate profits and social goods may lead to perverse incentives and inefficiency. It also analyses the impact of PbR and SIBs on not-for-profit and smaller players in the market for social outcomes. This introduction provides an overview of outcomes-based commissioning, the distinction between PbR/PFS and SIBs/Pay for Success financing, some key questions raised by outcomes-based commissioning, and the chapters that follow.