Payment by results - Pay organisations who receive public money for what they achieve for people, not simply what they do with them: for outcome, not process.

The growing use of Payment by Results (PbR) has been met with concern by many in the voluntary sector. The principles of paying for impact and commissioning for outcomes are not commonly disputed. However, the way programmes are being designed and implemented is leading to questions about the viability of PbR as a method for improving public service delivery and for providing quality outcomes for service users.

A key concern is that the level of financial risk and the amount of working capital required from PbR is preventing voluntary sector organisations from bidding for contracts regardless of their ability to deliver the desired outcomes. Payment in arrears and the risk of making a financial loss also have implications for the provider’s capacity to innovate and look for new ways of delivering services. Voluntary organisations are also facing PbR payment models which do not provide sufficient incentives for working with service users who require more complex, sustained or costly interventions, and there is concern about the impact which PbR is having on personalised outcomes.

This paper explores the viability of PbR as an effective method for procuring public services, and in particular for harnessing the innovation and service quality which is delivered by the voluntary sector. It contains three chapters which address three key challenges to the voluntary sector’s capacity and appetite for PbR:

1) The financial and governance implications of PbR: we look at the ability of voluntary organisations to take on the risks of PbR and the impact which badly designed payment models have on provider behaviour.
2) Driving performance through innovation: we explore the impact which PbR has on the innovative capacity of the voluntary sector.
3) PbR outcomes and personalisation: we explain the centrality of personalisation to the voluntary sector and look at whether the outcomes-based commissioning model in PbR allows for increased personalisation of services to meet individuals’ needs.