USC Price School of Public Policy

Painter coauthors new book comparing Payment by Results social investment efforts in US, UK

April 25, 2018

By Matthew Kredell

Payment by Results and Social Impact Bonds book

Sometimes a panel discussion is so good that it inspires collaboration on a book.

This was the case in April of 2016, when Professor Chris Fox from Manchester Metropolitan University participated in a session on Social Impact Bonds at the Activating Markets for Social Change conference put on by the USC Sol Price Center for Social Innovation.

Moderated by Jessica LaBarbera of Nonprofit Finance Fund (NFF), the conversation brought to light the differences in how an innovative approach to financing social service programs called Pay for Success was being utilized in the United Kingdom compared to the United States.

Following the panel, Fox went to the Price Center’s director, Professor Gary Painter, and pitched the idea of co-authoring a book that would document the current landscape of Pay for Success – or Payment by Results, as it is called in the U.K. – while, for the first time, providing a comprehensive picture of the development of Social Impact Bonds in the U.S. and U.K.

“To date there has been very little written about Social Impact Bonds and relatively little about the wider phenomenon of Payment by Results, and yet both in the U.K. and the U.S. these represent significant innovations that are attracting considerable social investment,” Fox said. “I was keen to work with Gary because of his insights into the world of social investment, his interest in program evaluation and because of the great work the USC Sol Price Center for Social Innovation is doing around these issues.”

The resulting book, Payment by Results and Social Impact Bonds: Outcome-based payment systems in the UK and US, was published in February by the Bristol University Policy Press in the U.K. and will be released in the U.S. in May, distributed by The University of Chicago Press.

“I felt it was essential to make this contribution now to help those working in spaces where they might consider Social Impact Bonds to drive social change,” Painter said. “My hope is that this book helps those organizations understand the challenges, opportunities and outcomes they might expect if they go down that path. This is a new strategy and funding method for social services that a lot of people in the field still don’t fully understand, so the book can be very useful for the current public policy and social innovation landscape.”

Book bridges scholarship and practice

Professor Gary Painter

Pay for Success is an approach to contracting that ties payment for service delivery to the achievement of measurable outcomes. Private investors provide upfront financing for a social service and are repaid with a return on investment by a back-end payer (usually the government) only if pre-agreed-upon outcomes are delivered as determined by an independent evaluator. It can be a way for governments to scale up effective programs and interventions, as well as test innovative models of service delivery.

Originating from a conference that featured academics and practitioners, the book took a similar path. Fox and two of his colleagues at Manchester Metropolitan University, Kevin Albertson and Chris O’Leary, provided the documentation and academic analysis of Payment by Results in the U.K. In the U.S., Painter reached out to bring in NFF which, since 2011, has helped develop the U.S. Pay for Success market through financing and consulting as well as knowledge sharing that includes a curated website (payforsuccess.org), summits co-hosted with the White House under the Obama Administration, and a 2016 report Pay for Success: The First Generation, a comparative analysis of the first 10 U.S.-based Pay for Success projects. LaBarbera joined the book project, as did her NFF colleague Kimberly Bailey, a 2013 Master of Public Policy graduate from USC Price who had studied with Painter.

“To me, this is the holy grail for our center when trying to bridge practice and the academy,” Painter said.

“It was an exciting opportunity for NFF to bring into the academic realm our learnings from eight years of practical applications of Pay for Success, to benefit students and others interested in understanding how this financing innovation is playing out in real time,” LaBarbera said.

‘Radical new approach’ to social services

In comparing Pay for Success in the U.S. to Payment by Results in the U.K., the authors identified different motivations for the countries to employ this funding method. In the U.S., it has been utilized mostly to test out an innovative social-service program without losing tax payer dollars if it didn’t work. As a result, rigorous evaluation has always been a part of the U.S. approach. In the U.K., it has been ingrained into much larger government systems in health care and criminal justice.

The authors concluded that the evidence to date shows that models encouraging social innovation are attractive to governments concerned that public provision of services is resistant to reform and/or inefficient. Further, pay for success models demonstrate promise as a risk management tool, but it remains to be seen whether the tool can be broadly applied in a variety of policy areas and whether it will ultimately lead to changes in public systems.

As for the future direction of outcome-based commissioning, the authors see potential for addressing social challenges that have proven resistant to traditional policy responses. Expansion of Social Impact Bonds could include larger scale, additional sectors, stakeholders taking different roles, and developing variants that don’t rely on an outcome-based contract.

“Social Impact Bonds and Payment by Results represent an innovative and radical new approach to commissioning and funding important social services, and yet there has been remarkably little evaluation of these programs in the U.K.,” Fox said. “Hopefully, this book will stimulate a more informed debate on the role and future of Social Impact Bonds.”

Added Painter: “In both places, I think the book has the potential to help widen the scope of how this model is being utilized and what features are going to be embedded in these programs going forward.”