Itís the Outcomes, Stupid!

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Shifting to paying for outcomes not inputs could save costs and deliver substantial benefits, says a new report from the independent cross-party think tank 2020 Public Services Trust. 

Better Outcomes argues that both central and local government need to rethink radically how they achieve the outcomes they seek. The traditional focus on paying for inputs should be scrapped wherever possible in favour of ‘payment by results'. Service providers, public, private or third sectors would be paid when and if they achieved desired outcomes.

The authors argue that an outcome driven approach should be explored across a wide span of government functions. Where this was done, instead of government agencies or service providers being given budgets, grants or paid for inputs, government would pay them for when they delivered the desired outcomes or outputs. It could bring about a revolution in the delivery outcomes desired by the public.

The report argues outcome commissioning should be explored and applied wherever possible to help minimise the risk of cuts in public services over the next decade. It explains how such an approach is possible.

Payment on performance has major advantages; the state only pays for what it wants, it transfers the risk of delivery to providers, it empowers and incentivises them to succeed and it generates great innovation.

This approach, the authors argue, should be utilised by whichever party forms the Government after the General Election.

Its application should be explored widely by central government, by local authorities and Primary Care Trusts. Government agencies might also be paid on performance with grants and subsidies might be awarded when outcomes are achieved.

For example, this system could be explored by PCT's and local authorities to transform the management of long term health conditions, by the Ministry of Justice to break the cycle of re-offending, and to improve offender management and by UK Border Agency to improve immigration management. PCT's should explore paying agencies when they get people off drugs, not for drug treatment courses. Third sector organisations might be paid by schools and LEA's when they get children with poor literacy to read well. The same approach could be used for the internal processes of government which would not pay companies for installing IT systems but pay them when they delivered defined business benefits.

Commissioning for outcomes will not be simple, the authors acknowledge, as it requires the joining up of budgets, skilled procurement and strong political and managerial leadership. But it is essential that this is actively explored and developed wherever possible so that in 10 years time we have much more effective public services.

Lord Geoffrey Filkin, Chair of Better Outcomes and of 2020 PST, said:

"The fiscal crisis has changed everything. We have to transform the efficacy of state action or we will have to cut services. We have to create very strong incentives for innovation to reduce costs and improve outcomes. This can happen if we switch wherever possible to paying for outcomes or outputs and stop paying for inputs."

Francis Maude, Shadow Minister for the Cabinet Office and Shadow Chancellor of the Duchy of Lancaster, said:

"Outcome commissioning is the direction in which procurement should be headed. A focus on inputs stifles innovation but a focus on outcomes paves the way for personalisation of services and incentives to become more efficient. I welcome the 2020 Public Services Trust's report and the work it is doing in this tremendously important area."

James Stewart, Chief Executive of Partnerships UK, said:

"The Better Outcomes report demonstrates that outcome-based commissioning can drive-up efficiencies, while at the same time secure much-needed innovation. Partnerships UK is pleased to support this important and ground-breaking report which points an important way forward for commissioning."

Notes to Editor

  • Better Outcomes - argues that, to cope with the fiscal challenges the UK faces and still deliver world class public services, government will need to re-think the ways it delivers services at the central and local levels. Government will need to encourage and reward innovation and create powerful incentives to focus providers on the results citizens want from public action. Better Outcomes describes a radically new approach to realising public outcomes. A full copy can be downloaded here.
  • The report was kindly supported by Partnerships UK.
  • The report is launched at a seminar which Lord Filkin, the Rt Hon Francis Maude MP and James Stewart, Chief Exec of Partnerships UK  will all be contributing.

What is outcome commissioning?

  • Outcome commissioning is when a commissioner specifies outcomes to providers and pays them a proportion of the total payment when those outcomes are achieved/delivered.

 The four phases to outcome based commissioning:

  • Select the outcomes - this will depend on the priorities of the state, citizens and communities. Outcomes must be abstract enough to allow for innovation but specific enough to enable measurement
  • Establish the baseline - the commissioner has to set appropriate benchmarks for service improvements
  • Develop a theory of the services -is a hypothesis about how inputs are most effectively connected to outputs, and outputs to outcomes
  • Manage the system over time - commissioners will need to monitor and evaluate the behaviour of providers and the levels of achievement of outcomes, and make changes to the system accordingly

The report makes a number of recommendations of where outcome commissioning can be applied:

  • Offender management - outcome commissioning would transfer the risk of re-offending to providers giving them powerful incentive to better understand the factors that lead to offending and to work with participants to change these factors
  • Long term condition management - outcome commissioning in long term condition management would involve providers helping patients to better manage their conditions in the community, with commissioners paying providers based on reducing the number of unplanned hospital admissions, reducing mortality/morbidity rates and increasing levels of patient satisfaction
  • Foster care - outcome commissioning in foster care is already occurring in the US. The federal government financially penalise state governments that fail to fulfil their commitments in relation to measures of child safety and permanency, and child and family well-being
  • Waste management and recycling - paying waste management providers based on increasing recycling rates and decreasing waste would encourage providers to find innovative and locally-tailored methods of persuading residents to ‘go green'

 2020 Public Services Trust & the Commission on 2020 Public Services

  • The 2020 Public Services Trust is a registered charity which exists to develop a deeper understanding of the challenges facing UK public services over the medium term.  It has launched an independent and cross-party Commission on 2020 Public Services, chaired by Sir Andrew Foster, which aims to lay the basis for a new post-Beveridge public service settlement. 
  • The Commission's membership is made up of leading figures from from across the political spectrum, public services, academics, the voluntary sector and business. The full list of Commissioners is available here.
  • The Commission on 2020 Public Services will release its final report in the summer of 2010 outlining a new settlement for public services.

 Download the full press release as a PDF

Media Enquiries

For media enquiries please contact:

Ashish Prashar
Stakeholder & Communications Manager
+44 (0)7775 501 839

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