Why run a PFS Pilot Program? (Third Sector Capital Partners)

By Nadia Ahmed and Mary Beech

It’s said that marathons are won well before the starting gun goes off. When the runners arrive on race day, the most successful will have put in enough training to know exactly what to expect.

When governments pursue a model as innovative as Pay for Success (PFS), pilot programs (“pilots”) function like a runner’s training. Before government and project partners enter into multi-year ‘marathon’ contracts with various financial obligations, pilots play a key role in ensuring the success of PFS projects. Unlike a formal PFS project, they are smaller-scale, use upfront philanthropic funding, and do not require a government to make outcomes-based success payments.

Sometimes referred to by different terms (ramp-ups, trial periods, etc.), pilots can benefit governments exploring PFS by:

1. Addressing Operational Challenges:

A pilot can reveal unforeseen challenges in scaling operations and help stakeholders decide whether or not to move forward with PFS. By highlighting adjustments that need to be made in the delivery of services, pilots preempt any possible obstacles of a future project. Refining the internal mechanisms of a project allows all stakeholders to more confidently move towards a PFS contract.

2. Gathering strong, relevant baseline data:

A pilot can also be used to allow service providers to better understand their impact on a target population, and improve their program model to achieve key outcomes. As the government collects outcomes data on a specific population receiving an intervention, service providers can build a strong track record of impact. This data is critical to all stakeholders – in developing a PFS contract, end payers would use this data to determine the size of success payments, and funders would use it to inform their funding decisions.

Pilots have already been implemented in several jurisdictions across the country. In Cuyahoga County’s Partnering for Family Success Project, a pilot allowed Frontline Services, a crisis response and housing service provider, to make operational adjustments to scale services in preparation for a PFS contract. The pilot smoothed out the processes of identifying and referring families into the program, randomizing participants to receive treatment, and referring clients into housing before the program officially launched. FrontLine was also able to identify the best combination of services to provide to project participants.

In California, the Alameda County Asthma PFS Initiative is preparing to launch a one-year pilot program. The pilot will help determine the impact of the County’s asthma management and prevention services on pediatric asthma patients. If successful, the pilot’s programmatic and operational insights, as well as its more robust track record, will benefit any PFS project that may follow.

Pilots can better prepare PFS projects to measurably improve the lives of those in need - all the way to the finish line.

Though their tenure is short, pilots hold the potential to convert directly into longer-term PFS contracts and can possibly be replicated across other jurisdictions. Pilots help governments and service providers apply innovative tools towards critical social problems, and can make projects more attractive to funders interested in supporting evidence-based solutions.

For these reasons, pilots can better prepare PFS projects to measurably improve the lives of those in need - all the way to the finish line.

Nadia Ahmed and Mary Beech, Analysts, work from Third Sector's San Francisco office and Boston office, respectively.