This is the fourth in my series of 10 commandments for payment by results.
Thou shall not covet milestones
The last two commandments have explored the fact that complexity is all too frequently the enemy of successful PbR schemes.
We have seen that setting too many outcomes or developing complicated ways of measuring those outcomes typically produces three unwanted results:
- Very substantial amounts of commissioner and provider time and resources diverted to gathering and analysing data rather than planning and delivering services.
- Considerable associated expense which, again, actively inhibits innovation, a key aim of PbR.
- Unintended consequences as a plethora of outcomes and their measures drag the focus away from the overall objective of the scheme (reducing reoffending, finding sustained employment, etc.).
Perhaps the best UK example of a successful PbR scheme is the West Yorkshire Youth Justice initiative to cut the level of youth custody locally.
In this scheme, the outcome was defined very simply: to reduce the number of custody bed nights.
The outcome measure was simply the number of custody bed nights, a measure which was already being counted. The target was to reduce the number of bed nights by 10%.
The simplicity of this target and the fact that it was so easy to measure were one of the key reasons for the scheme’s success.
The local Youth Offending Teams were able to measure the number of custody bed nights instantly (every time a young person appeared in court) and were therefore able to get instant feedback on the effectiveness of different initiatives they had put in place.
The YOTs not only met their 10% target, they reduced the use of youth custody in West Yorkshire by 33%.
Unfortunately, this simple approach to setting outcomes and ways of measuring them is not the norm.
Milestones, Proxy Indicators and Interim Targets
In several areas, commissioners have not only set several outcomes and developed complex ways of measuring them, but they have developed interim measures as well, sometimes called Milestones or Proxy indicators.
Milestones have arisen because in many PbR schemes, outcomes take a year or two to emerge and another year or two to measure. So lots of commissioners have introduced interim measures as a way of acknowledging that most providers can’t afford to deliver a service for five years without receiving any payment.
The introduction of milestones exacerbates the problems of complexity highlighted above, requiring even more time and resources from commissioners and providers and even more onerous data collection systems.
But even worse is the fact that as soon as you have indicators, people start focusing on them, instead of the intended outcomes.
Which takes us straight back to the culture of micro-management by targets which PbR is trying hard to leave behind.
Almost everyone understands that the core principle of payment by results is to set a clear outcome and to measure solely the achievement of this outcome, allowing providers the flexibility and creativity to do this in any way they choose.
And yet many people seem to forget this principle as soon as they start designing a PbR contract and payment mechanism.
It is true that most providers cannot wait years for outcomes to be measured before they get paid.
Milestones are not the answer to this problem.
A more effective approach is that proposed by the MoJ which intends to operate only a partial PbR scheme with a substantial “fee for service” and which will pay a proportion of the expected PbR monies up front and claw these back if providers fail to achieve their outcomes.
The next post will look at the Fifth Commandment of PbR:
“Thou shall not pay for deadweight”
Browse my comprehensive resource pack on Payment by Results.
Check out my Marmite Infographic for a simple explanation of key PbR jargon.
