Projects that follow the Pay for Success model, in which funding for a program is provided by private investors who are paid back by the government if the program proves successful, help to deliver health interventions in disadvantaged populations, according to a study by researchers at the University of Michigan in Ann Arbor.
The model reduces the risk to taxpayers, as the program is only funded by the government if predetermined metrics of success are achieved. It is a fairly new model.
As part of the effort, U-M researchers developed a landscape surveillance system that identifies new projects and tracks their progress.
“The key finding from our study is that all Pay for Success projects launched globally to date are delivering interventions that have the potential to improve the health and social welfare of populations, especially among low-income and other marginalized groups,” says Samantha Iovan, lead author of the study and project manager at the Policies for Action Research Hub at the U-M Ford School of Public Policy.
The researchers looked at 82 projects across 20 countries that were launched from 2010-2017; 33 are in the United Kingdom, 18 are in the U.S., and the rest are in 18 different countries including Canada, Israel, Mexico, and South Korea. They address issues such as homelessness, mental and behavioral health, and youth education.
“The model provides financing for interventions in high-need populations — such as the chronically homeless or people who have been incarcerated — that taxpayers sometimes find undeserving of publicly funded programs and services,” says Paula Lantz, professor and associate dean at the Ford School of Public Policy. “It also is being used as a way to provide the ‘proof of concept’ for a program or intervention that a government might decide to fund itself in the future.”
One of the projects, Massachusetts Chronic Homelessness PFS Initiative, launched in 2015 to help chronically homeless individuals achieve housing stability through supportive housing interventions.
Initial funding came from private investors. If 80 percent of the tenants achieved 12 months of housing stability, the investors would receive full repayment of the amount invested. If more than 80 percent met the same requirement, the investors would get their money back with interest.
The first-year results show 92 percent of tenants have stayed. Since its launch, 973 homeless individuals have been put in permanent housing.
Of the 82 projects identified in the study, 21 were completed by the end of 2017. Of those, 11 reported making successful payments to investors, one did not meet outcomes for success, and nine did not report their results. The other 61 projects are still in progress.
“This model can provide funding to help vulnerable populations, and there’s a lot of interest in the approach,” Iovan says. “Now, we can also show that PFS is being used to deliver interventions to improve health.”
The study is published in the November issue of American Journal of Public Health.