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The unexpected consequences of payment by results

The issue of providers “gaming” PbR contracts is a hot issue in the literature. Commentators take different views with some stating that it is only rational and efficient for providers to focus on the outcomes incentivised by PbR payments to the best of their ability while others describe similar behaviour as “gaming.”

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Payment by Results

Getting payment by results contracts right

Designing PbR contracts can be a tricky business with plenty of examples in the literature of commissioners and providers wishing they had never signed on the dotted line. In addition to getting the outcomes and payment incentives right, two issues are particularly critical: the overall length of the contract and the he delay until, and interval between, incentive payments.

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Payment by Results

Attributing outcomes in payment by results contracts

When outcomes are the basis for payment, it is important that the provider receiving the payments is responsible for achieving the outcomes. Targets should not be unduly influenced by external factors (such as the state of the economy for Work Programme type schemes) or by the work of other agencies who are not receiving payment from the contract.

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Payment by Results

Understanding the market for payment by results

commissioners are urged to consider whether potential providers have sufficient financial resources to bid for a contract which requires considerable initial investment and where payments are delayed until the achievement of outcome measures has been verified.

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Payment by Results

Can payment by results transfer risk?

It is not possible to transfer all risk, be that risk reputational, practical or financial. Commissioners retain their responsibility for local citizens receiving a good quality and effective service.

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Payment by Results

Can payment by results improve outcomes?

The idea is that by commissioning outcomes rather than outputs, commissioners allow provider to work in any way they see fit, safe in the knowledge that if the outcomes are not achieved, they do not have to make payment. But do PbR schemes achieve better outcomes?

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