New M

1. Outcomes Based Commissioning in other sectors
Lessons the NHS can learn
PCC Conference
Leeds Hilton
30th June 2015
Mike Thorogood

2. Plan to cover
• Experiences in other parts of the Public
Sector:
• Employment – Benefits to Work
• MoJ – Reducing Re-offending
• Lessons for the NHS

3. Employment – The Work Programme - Background
Objective
• Aims to help people who have been out of
work for long periods to find and keep jobs
• It targets 10% of those claiming benefit –
assumed that 90% of claimants will find work
within 1 year, the rest are referred to the
Work Programme
• Target cohort divided into payment groups
– easier-to-help groups such as Jobseeker’s
Allowance claimants and harder-to-help
groups such as people who claim
Employment and Support Allowance.
•
• introduced in June 2011 referrals will
cease in March 2016
• 40 contracts with 18 prime contractors,
who operate in18 geographic areas

4. Employment – The Work Programme - Background
Objective
• It replaces previous welfare-to-work
programmes such as the New Deals,
Employment Zones and Flexible New Deal,
which were developed and delivered over
the past decade.
• These programmes suffered from several
problems: they were:
• fragmented;
• interventions were over-specified; and
incentives were poor,
• allowing providers to stay in business
without delivering strong results.
• Outcome based payments now make up
80% of the total. For previous schemes such
as Flexible New Deal they made up 60%

5. Employment – The Work Programme –
Contract incentives
Start Fee
• Providers paid a small
fee for each participant
• Reduced and
eliminated after 3 years.
• In past schemes most
of the revenue was
earned here
Job Outcome Payment
• Payment made once participant in
work for 3 to 6 mths (depending on
payment group
Sustainment
Payments
• Payment made
every 4 wks a
participant stays in
employment
beyond the
outcome payment

6. Employment – The Work Programme – NAO & PAC
Early Performance
• Did not allow sufficient ramp up time
o Bad publicity in first year – only 2.3%
found work for > 6 mths
o NAO in 2014 found success rate of
27% with more recent performance
around 32%
Base lining & Value added
• DWP did compare performance with
earlier programmes e.g New Deal
(which performed at 26%. Didn’t
assess against people who would
have found jobs any way).
Cream skimming
• DWP paid contractors more for harder-to-
help payment groups
• To avoid “parking” contractors were asked
to set minimum service standards. They
developed 214 measures which DWP could
not monitor
• Contractors spend half as much on the
hard to help groups as they said they would
when bidding

7. Employment – The Work Programme – NAO & PAC
Missed opportunity to learn
• PAC found no attempt to relate
spending on different payment groups
and relate this to support given and
outcomes, or compare performance
across providers
Flaw in contact
• A key metric resulted in fewer clients
making performance look better. As a
result a contractor who was sacked from
the scheme was contractually entitled to
incentive payments because of this
distortion

8. Justice – Tackling re-offending
The Problem
• Breaking the Cycle Green Paper
(2011)
• 75% of all offences committed
are re-offences
• 31.2% of offenders had 15 or
more previous convictions /
cautions
• 26.7% reoffend within one year
Proposal
• Introduction of a case management
approach to offender management
• A single point of contact for offenders
and the design of tailored support
packages based on identified need.
Pilot – HMP Doncaster
•Pilot outcome based contract signed in
April 2011

9. Justice – Tackling re-offending
What’s changed?
• Offenders did not have dedicated case
managers.
• Offenders were responsible for
accessing services, requested through
an “ATM” machine. Services provided in
a fragmented way:
• Community Re-integration Team –
focuses on resettlement at end of
sentence
• South Yorkshire Probation Service
• Offender Management Unit –
carried out some risk assessment
• “Through the Gate” support post
release and ad hoc
• No triaging / despite risk assessment –
offenders served on a first come first
served basis

10. Justice – Tackling re-offending
What has stayed the same?
• The process by which offenders access
services to support their resettlement has
changed
• The interventions available to offenders
remain unchanged as has the budget /
resources which have been reallocated
to fit the new model

11. Justice – Tackling re-offending
What Doncaster the pilot is
testing
• The impact of
• case management
• replacing a multitude of
process / output targets
with a single outcome
based target with a strong
financial incentive
• Existing outcome /
performance measures are
still collected but are not part
of the contract.
These include:
• Numbers receiving mandatory
drug treatment
• Training & education measures
• Tornado training sessions

12. Justice – Tackling re-offending
Contract incentives
• Target - % of offenders reconvicted
across the cohort within one year of
discharge
• A threshold has been set which will
trigger payment, base year 2009 –
• if the reconviction rate is not at
least 5% lower than the baseline,
MOJ will reclaim 10% of the core
contract value
• above 5% the provider is entitled
to the core contract plus a
performance payment up to a
maximum of 10% reduction

13. Assessment by MoJ
Pilot assessment
• Interim assessment focuses on
qualitative evidence
• Generally very positive
• Good feedback from services users,
staff and in particular the offender
management service providers
• Provider already showing an ability to
innovate
Cream skimming & Gaming
• Concern that this may be present
• Case management largely
dependent on willingness of
offenders to engage
• Opportunity to use offender
transfer system covered by the main
contract to game - exclude harder to
help

14. Performance management
• Quantitative assessment has been
severely hampered by failings in the IT
system (MegaNexus Case Management
system)
Risk & Reward
• Case management provider “Catch 22”
are a supply chain partner of the main
contractor Serco who run services at the
prison
• Serco has not passed contract risk
down to Catch 22, which has been
commended
• However, there is criticism from some
that Catch 22 that the risk / reward link
is broken
Assessment by MoJ

15. Lessons For the NHS – Appropriateness of
Outcome Contract
Overall
• Clear need for innovation e.g. statistics
on re-offending shocking, and
deteriorating
• Absence of good practice solution to
use as a remedy
Specific payment mechanism
• In Employment
• Too much coverage?
• Measures not well developed
• In Justice
• Mix of outcome measure with input
measures
• Pilot status allows the approach to
evolve

16. Lessons For the NHS – Perverse Incentives
x
Carrot
Stick

17. Lessons For the NHS – Keep it simple
Simplicity
• Impacts very hard to predict –
• Keep the number of measures as
low as possible
• Keep the measures as simple as
possible
“Everything should be
made as simple as
possible. But not
simpler.”
Albert Einstein
• DWP’s contractors
developed 214 measures
which DWP could not monitor
• Flaws in measures resulted
in bonus payments to poor
performers

18. Lessons For the NHS – Perverse Incentives
Cream skimming
• Need to introduce differential funding
and incentives to reward and incentivise
providers to focus on hard to help
groups
• Employment used “payment groups” to
stratify the target cohort. But didn’t
monitor or enforce through the contract
• Justice have 4 “pathways” which
reflect differential risk and resource

19. Lessons For the NHS – Avoid over specifying
If the purpose is to innovate, then
you want to allow room for a nice
surprise! ” The secret is to achieve a clear separation
between those service requirements that are
unavoidable with those that give freedom to
innovate
•In Justice there are activities such as tornado
training, that must be delivered. These are not
covered by outcome payments
• The offender support services, however, are more
discretionary, these are matched to outcome
measures
• Justice has allowed the contractor a lot of
freedom.
• Contractor is introducing innovative community
based teams

20.  Outcome based contracts can be
complex to design and difficult to
implement. Piloting may require patience
and some upfront investment in evaluation
but will help avoid significant costs from
getting it wrong at scale.
 Justice is piloting a range of local pilots
including a re-offending initiative which is
based at the probation service rather tan
offender support in prison as in HMP
Doncaster
Lessons For the NHS – Value of testing and
piloting

21.  Delivering savings is an outcome in its
own right and need to be thought through
carefully i.e.
 What is their priority more, equal,
less important than quality outcomes
 Do they conflict with the other
objectives?
 Should they sit with the core
element of the contract rather than the
outcome based element? etc
Lessons For the NHS – Savings

22. Some common factors for success
• Ask – is outcome contracting
appropriate?
• Don’t underestimate how difficult it is
to get incentives right?
• Be realistic about how long it takes to
see results
• Keep it simple / don’t over specify
• Invest in pilots – it is likely to save you
money in the long run
• Distinguish clearly between savings
and other objectives

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mike.thorogood@capita.co.uk
07757 801291