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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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Commissioning outcomes

This is the third post in a blog series looking at the lessons I’ve learned from a recent review of the payment by results literature. PbR is frequently championed as the commissioning approach to use to focus on outcomes rather than outputs — so, for example, providers get paid for the number of unemployed people they get into jobs, rather than the number of people they provide information, advice and guidance to.

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?

[button-blue url=”” target=”_self” position=”left”]You can download the full literature review here[/button-blue]


A mixed picture

If you read the first post in this series, you will know that the evidence base is a long way off being able to determine whether PbR  consistently delivers better outcomes.

There are a number of examples of positive PbR schemes in this and other countries. There are, probably, even more examples of badly designed PbR schemes which have failed.


In 2002 the US state of Delaware introduced PbR contracts for its outpatient drug and alcohol services with the main incentives (linked to payments) being increased take-up of services and active patient participation in treatment.

Although one provider failed to meet these targets, most providers succeeded:

  • Average capacity utilization from 2001 to 2006 increased from 54% to 95%
  • The average proportion of patients’ meeting participation requirements went from 53% to 70%

Both these targets were met despite no notable changes in the patient population. One of the key design elements which made the Delaware experiment successful (and to which I will return in a future post) is that the outcome measures appeared meaningful to all the key partners because they:

“had intuitive appeal to all parties associated with the process. Patients, program [sic] administrators, clinicians and policy makers immediately understand the essence of the intervention. Providers proudly talked about how the performance contracts could work for them clinically and financially. The strategy as implemented simply makes economic, managerial and clinical sense.”

[If you are interested in reading more about this programme, here’s the full reference of the evaluation: McLellan, A.; Kemp, J.; Brooks, A. & Carise, D. (2008) Improving public addition treatment through performance contracting: The Delaware experiment. Health Policy 87 pp. 296-308.]

Another successful PbR iniatiative is the London Rough Sleepers scheme which is funded via Social Impact Bonds. Both providers, St Mungo’s and Thames Reach, have been very successful at finding accommodation for rough sleepers and supporting them to sustain it. You can read my summary of the scheme’s evaluation here.


On the other hand, there are plenty of examples of where PbR schemes have not succeeded in improving outcomes; including these two examples.

The interim evaluation of the eight drug and alcohol recovery pilots compared outcomes against the majority of other treatment services in England and Wales who weren’t operating PbR and found

the introduction of payment for outcomes had a significant, negative impact on successful treatment completion.

You can find further details of this project here.

It also seems unlikely that the Doncaster Prison PbR project will meet its target of reducing the reoffending of released prisoners by 5% although we need to wait until later this summer to get the final figures. Many criminal justice commentators considered this target relatively unambitious since the short term prisoners at which the scheme was targeted were not receiving any service at all before the PbR pilot was launched. [Further details on the Doncaster Prison scheme here.]


So, if some PbR schemes work and others don’t, where does that leave us?

The literature review provides two main learning points.

Firstly, we do seem to have a better idea of the main of the critical success (and critical failure!) factors associated with PbR schemes, many of which will be covered in detail in subsequent posts.

Secondly, even many advocates of PbR are keen to remind us that payment by results is only one commissioning model and that, just because everyone else in a sector, is using PbR, there’s no requirement for you to.

Ideally, all commissioning should be outcome-based and there are numerous ways of incentivising providers to meet outcomes (and of penalising those who don’t) besides PbR.

The one thing that the literature is very clear about (again, the subject of an upcoming post) is that, by directly linking outcomes to payments, PbR schemes will definitely ensure that providers focus all their attention and activities on achieving the outcomes which are specified in the contract.


Next Wednesday’s post will explore what the literature tells us about the effectiveness of using PbR to reduce costs or improve value for money.

I reviewed the literature as part of a project funded by the Oak Foundation to develop an interactive tool to assist commissioners and providers to decide whether a payment by results approach might be an effective approach to commissioning a particular service.

The tool is now live – please check it out at:

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