Stakeholders

Pay for Success projects are partnerships between service providers, government leaders, and often investors that help bring solutions to some of the most entrenched challenges facing our communities. Together, the public, private, and non-profit sectors collaborate to drive resources toward effective programs and innovative solutions for achieving improved outcomes for people in need.

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Service Providers

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.

High-impact Resources

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.

Government

Across the country, local, state and federal government agencies face tough budget constraints and often lack robust systems for measuring the effectiveness of the social service programs they fund. Innovative models, such as Pay for Success, are helping address this issue by incorporating outcomes tracking into program designs, tying payment for services to measurable results, and leveraging new sources of financing from the private and philanthropic sectors.

Health systems, insurers, foundations and philanthropy are also exploring filling the same role as government in Pay for Success models, as the end payor for these programs, potentially tapping new resources for effective service delivery.

Protecting Taxpayer Dollars

Pay for Success drives resources to effective social programs and tax payer dollars are protected because independent experts establish performance goals for the programs that must be met for government to pay. If the program does not deliver on its agreed upon goals, government does not pay. When social impact financing is employed private investors, rather than service providers or governments, bear this financial risk.

Given the focus on measurable outcomes, governments gain better information about the effectiveness of social programs so they can make informed future funding decisions. By embracing Pay for Success, governments can expand their ability to meet community needs, while paying only for results.

Funding Preventive Services

Governments are historically inclined to focus their attention on the visible symptoms of social issues rather than underlying causes. As such, government social spending tends to prioritize maintaining emergency or responsive services, such as jails, rather than early intervention or preventative programs. Pay for Success allows governments to more readily support programs that intervene early to avoid or reduce the long-term impact of negative factors, ultimately leading to better outcomes for individuals, families, communities, and society.

This emphasis on prevention is further enabled by the collaboration embedded in the Pay for Success model. When government and service providers work together it allows for the right mix of interventions to be integrated and delivered to those in need.

Investors

Private funders—including individual and institutional investors as well as philanthropic organizations—are looking for innovative and meaningful ways to apply their resources to make a difference. Pay for Success gives investors an opportunity to support their communities while receiving both a financial and social return. Foundations and philanthropies serve as both Pay for Success project investors, and as catalysts for the Pay for Success movement, by providing expertise and financial support to test new models of social service funding and delivery. In some cases, Pay for Success leverages private resources toward demonstrated social programs.

Social and Financial Returns

Today, investors have limited opportunities to make investments that measurably improve the lives of people in need and offer the potential of making their money back or even realizing a modest return. In Pay for Success projects, funders—both private and philanthropic—provide an upfront investment in specific social programs that have been selected based on their track record for measurably improving people’s lives.

When investors engage in Pay for Success projects, they bear financing risk by providing upfront capital for service delivery that enables service providers to focus on providing high-quality services to meet outcomes goals, rather than fundraising. The result is upfront resources for effective service providers, a greater likelihood of better outcomes for those in need, and a means for investors to align their investments with their social values.

Reinvestment in Future Programs

Pay for Success programs are structured to incentivize investments that allow high-performing service providers to expand and innovate their services. If these programs achieve mutually agreed upon, measurable goals over a defined period of time, as tracked by independent experts, the investment is repaid by government. Based on program performance, investors may earn a modest return in addition to being repaid.

The Pay for Success model not only assures funders that their investment is having a demonstrable impact, but also provides the opportunity to reinvest their dollars in future programs and interventions. The potential for reinvestment can drive even great impact in communities for years to follow.

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