This week’s news that four former employees of work programme contractor A4e have been arrested has provoked a lot of knee-jerk reactions and comments in the media. Many of these merely reiterate what some have always thought—that it is wrong to have for-profit providers involved in delivering social outcomes. But I think the lessons from the A4e story are more subtle, and more about the issue of Payment by Results.
One of the great advantages of Payment by Results is that it sharpens up the incentives for providers—for-profit or not-for-profit—to deliver the outcomes that commissioners want. It forces the commissioner to be precise and stops the provider wasting time and effort unnecessarily.
So far so good.
But it does mean that the provider will naturally bust a gut to try and hit the outcome targets desired—even more so if they get more money the more ‘outcomes’ they achieve (like NEETs into jobs, or prisoners away from re-offending).
Again, so far so good.
But there are several possible consequences of this. One is the temptation to ‘park and cream’. In other words you work hardest with those that you think you can get over the line and so achieve your outcome targets and associated payments. If a person is going to reoffend whatever you do then it is pointless putting much effort into them. This is a natural response to the incentives faced, but it means those who are harder to help get ignored (even with fancy incentive payments that are supposed to be weighted by the degree of difficulty of helping that person). It also means that prime contractors (often for-profit organisations like Serco and A4e in the Work Programme) might pass the toughest cases to the charity sub-contractors.
The other consequence is the temptation to fiddle the figures. If head office is putting massive pressure on the organisation to hit targets, incentivising staff in different ways, then people may well be tempted to make sure the data says what head office wants to hear, whatever the truth. All those involved in Payment by Results will need to watch very carefully to avoid this—be they the providers (for-profit and not-for-profit), commissioners or indeed public watchdogs.
The more that data is open and publicly available the less room for this sort of thing to go on, as people can monitor and pick up on fraud more easily.
Payment by Results is a good idea. But it could learn a thing or two from history—in the early days of the Labour government the Individual Learning Accounts, designed to encourage more people to get themselves trained up, were brought down by fraud, despite being very promising. If people don’t get a grip of the potential for abuse early on, Payment by Results is in danger of becoming similarly fatally tainted.
Thanks Dan – agree with your comments. There are of course other dangers. One is that it takes responsibilty away from providers for meeting need and transforms this into meeting targets. A good example of this was exposed earlier this week on BBC Radio 4s programme File on Four – which highlighted what happens when a target is set too low – a low target with regard to Diabetes Screening and Support led to GPs hitting the target, getting the money and then not making sufficient further effort to reach out to other people with the condition – for too many the absence of a financial incentive demotivated them from taking action. In this case a nationally led target allowed government to claim success but people with diabetes ended up poorly served. leading to too many experiencing increased morbidity and mortality.
And of course the other side of the coin is that if PbR projects are designed with too much focus on the risks of gaming the system, the innovation and outcome-focus can be constrained. It’s very tricky to get this balance right. In my opinion, the drug treatment PbR pilots in some areas have gone too far this way: http://www.russellwebster.com/second-commandment-of-pbr-first-do-no-harm/
Good points raised Dan and I do agree, however important to recognize that the recent claims regarding A4E are retrospective and linked to the last Government’s work programme which was not really based on PBR…makes me think that worse is yet to come.
You do know that on the new programmes the prime contractor doesn’t choose which sub contractor the client goes to, its automatically decided at source ( DWP) by a computer system – this is what I was told by a JCP advisor last week
You’re spot on to highlight the problems of Payment by Results. But, i think you’re wrong to say that it’s a good idea badly implemented. PbR was always a bad idea, because it distorts organisational priorities (making them focus on the easiest to reach) and undermines effective frontline practice (by forcing frontline workers to treat people as means to produce outcome data, rather than building relationships with them – which enables workers to understand and address people’s actual needs. This isn’t some weird side-effect of PbR – it is PbR. See here for a great study which shows the outcomes-based accountability undermines the effective practice of workers: http://oss.sagepub.com/content/33/1/97.abstract. I’ve got a paper about all this coming out shortly in Public, Money & Management, if you’re interested…
I agree with Toby that it is deeper than poor implementation. There are issues around quality of outcome data, priorities, and measuring social good. Let’s not bet the farm too soon.
Pingback: Big Society Capital opens for business | New Philanthropy Capital's Blog
Pingback: Auditors advise Eastleigh on "Payment by Results"