Service providers are often best positioned to understand the complexities, realities and challenges of achieving positive social change. However, service providers often lack adequate funding to expand successful programs or innovate approaches to addressing persistent community needs. Government resources are limited, often do not cover the full costs of delivering services, and are not always directed to the most effective providers or services. While there is increased interest in outcomes-based funding, this requires most service providers to make additional investments in skills and capacity. Providers are further constrained by annual budget cycles that make planning for the long-term difficult as many experience delays in reimbursements for services they deliver. Pay for Success aims to leverage private-sector financing to drive reliable, flexible, up-front funding to programs that hold the promise of delivering measurable results.
Focus on Outcomes
In Pay for Success projects, goals and metrics of success are set collaboratively with service providers to ensure they are ambitious, yet realistic by taking into account the resources needed to achieve sustained positive social change. Measuring program impact shifts the focus from outputs to outcomes, leading to a better, more holistic approach to serving those in need.
While current funding systems focus on reporting outputs, such as beds filled at a shelter, Pay for Success seeks to reward impact by effectively measuring outcomes, such as long-term placement in permanent housing. To do this, Pay for Success also provides the resources to track outcomes over a longer period of time to demonstrate the meaningful impact of effective programs for individuals and communities, setting the stage for future support of programs that work.
Pay for Success drives innovation—both in the services that are provided to target populations and in the way service providers and government collaborate to expand promising programs with evidence of achieving outcomes. The Pay for Success model allows service providers to focus on achieving their program’s goals by providing funding in advance of service delivery, rather than on a reimbursement basis, and on a set schedule, helping to alleviate funding uncertainty and delays. Service providers can apply resources most efficiently toward results, can modify their approach based on feedback to continuously improve, and can benefit in myriad ways from new collaborations. For example, Pay for Success can lead to closer collaboration between government agencies and service providers to ensure people receive access to the services they need. Pay for Success can also lead to structuring a program with multiple, integrated services to comprehensively address an issue that otherwise would be funded through separate, disjointed projects. For example, a Pay for Success program focused on recidivism can include a suite of post-release services; such as housing, access to benefits, education, and transitional work.