Lisette Vegas
Urban Institute
Project Associate
Urban Institute
Research Assistant

How PFS helps vulnerable people

November 30, 2017 - 11:43am

Pay for success (PFS) has received widespread interest from practitioners, policymakers, and investors since its inception in part because of its promise to measurably improve the lives of vulnerable individuals. Three characteristics of the model can make this possible:

The programs and services provided in pay for success projects are backed by evidence.

The repayment structure of PFS projects incentivizes stakeholders to choose evidence-based programs; programs with track records of success may be more likely to achieve the desired outcomes and therefore trigger repayments to investors. For example, a number of active PFS projects use permanent supportive housing to improve outcomes for individuals struggling with chronic homelessness, such as reduced incarceration rates, increased employment rates, and improved mental and physical health. Evidence has shown that providing supportive, wraparound services along with long-term housing is more effective at keeping people housed than providing housing alone. Wraparound services address foundational impediments—such as substance abuse and untreated mental illness—that make it difficult for people to stay housed. This means that in projects like the Massachusetts Chronic Homelessness Pay for Success Initiative, services like integrated case management, health care and mental health treatment help vulnerable individuals address the complex and multifaceted problems they are facing.

The South Carolina Nurse-Family Partnership Project scales a similarly well-evaluated program to improve maternal and child health. The Nurse-Family Partnership (NFP) pairs first-time mothers with nurses who visit them at home and provide from their pregnancy until the child reaches the age of two. NFP has undergone numerous randomized controlled trials (RCTs) over the last several decades; the results show that NFP services can reduce the likelihood of behavioral and intellectual problems when the child is older. First-time mothers receiving services from South Carolina’s PFS project will hopefully experience healthier pregnancies and provide their children with a stronger foundation for success later in life.

By tracking outcomes rather than outputs, PFS requires project stakeholders to focus on long-term solutions for vulnerable populations.

Because success payments to investors are contingent on achieving predefined outcomes, stakeholders focus not on delivering a certain quantity of services, but on how individuals have fared as a result of those services. This emphasis on outcomes also incentivizes “active performance management”—a commitment to monitoring and continually refining program performance in order to ensure that individuals are on track to achieving the outcomes. Consequently, focusing on outcomes rather than outputs provides lasting solutions rather than short-term relief. The Denver Supportive Housing SIB was developed to provide affordable housing to people struggling with chronic homelessness. Instead of the local government paying for a certain number of beds in a homeless shelter or prison, repayment to investors is contingent on a 35 percent reduction in jail bed days and the achievement of 83 percent of housing stability goals. So far, these services are paying off: early results demonstrate that out of the 100 participants recruited thus far,  88 have been engaged by service providers, 73 have approved housing applications, and 66 have signed a lease and moved into housing.

Evidence-building through evaluation can track what has worked, benefitting others looking to address similar issues in their communities.

PFS projects do not just use evidence—they also generate it. Each PFS project includes an evaluation to determine outcomes (and thus repayments), which expands our understanding of what works and what doesn’t. Repetition is crucial in social science, and to the scientific method more broadly; one study’s results does not prove a program’s effectiveness in all settings. In this way, the rigorous, independent evaluation of services provided in a PFS project can contribute to the evidence base and, in turn, expand the generalizability of program results. Even if the evaluation proves a program is unsuccessful at meeting outcomes, it provides the field with valuable information on a population or setting for which the program may not be best suited.

By scaling evidence-based programs and incentivizing outcomes rather than outputs, pay for success is a promising tool to help governments serve vulnerable populations more effectively—and, as a result, PFS has the potential to transform the way we think about the social safety net. 

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