What We’ve Learned from LA County’s Transition to Outcomes-Oriented Contracting (Part II)

Part two of two.

In October, LA County launched their first Pay for Success project. Third Sector has been a PFS advisor to the County since 2012. In this series, Third Sector director Dan Peck reflects on Third Sector's work and the lessons we learned from the project. The following are second and third takeaways that can be applied to other governments looking to replicate LA County's transition towards PFS and outcomes-based contracting. To read Part 1 which includes the first takeaway from the project, please click here.

Take the time upfront to understand the operational realities required for PFS

For most communities, PFS is departure from business as usual. PFS requires:

  1. Governments to understand their own operational capabilities and be willing to change; and
  2. The traditional departmental siloes to broken down and new cross-departmental coordination to take hold.

In their original August 2012 resolution, the Board of Supervisors recognized the enormity of what they were asking the County to embark upon. The Board understood that bringing PFS to a County of over 10 million people would require an understanding of their current operational realities (and capabilities), as well as deliberate planning and coordination across their multiple departments. Given this, the Board of Supervisors charged the LA County CEO’s Office with developing a “LA County PFS Blueprint” outlining:

  1. How the County’s existing contracting, treasury, procurement, legal, and data systems would need to be repurposed and aligned for PFS; and
  2. The protocols for identifying, developing, funding, and managing PFS initiatives and outcomes-oriented contracts

Beginning in 2014, Third Sector was engaged by the CEO’s office to develop the “LA County PFS Blueprint.” Third Sector’s role during this development process was to bring together representatives from the CEO’s office, Board of Supervisors’ offices, Treasury, Procurement, Legal, and the Enterprise Linkages Project (integrated data systems), educating them on the merits and operational mechanics of PFS, and facilitating the development of LA County-specific PFS protocols in the areas of:

  1. Sourcing, evaluating, and developing PFS project intervention concepts;
  2. Outcomes-oriented contracting features;
  3. Procurement;
  4. End-payer funding mechanisms;
  5. PFS project management;
  6. Data accessibility and continuous learning.

Most importantly, this “blueprinting” process created a deep sense of PFS ownership amongst key County stakeholders.

With a Board ratified “Blueprint” in December 2014, the CEO’s Office and Third Sector spent the next year soliciting PFS initiative concepts from various departments, conducting feasibility analyses on these initiatives, and ultimately selecting the Department of Health Service’s “Just-in-Reach” homelessness and recidivism reduction initiative. With a comprehensive realignment of existing County operations towards PFS as well as deliberate planning and coordination across departments, the County’s first PFS project was rapidly becoming a reality in 2017.

Leverage existing funding sources

PFS does not have to mean an arduous search for new government appropriations. PFS is often most effective when it plugs into existing (ideally flexible) funding streams.

At the County level, the “Just-in-Reach” PFS Project has leveraged existing funding and resources from the County General Fund, the Sheriff’s Department, and DHS’s unique Housing for Health Flexible Housing Subsidy Pool (County subsidies for permanent supportive and affordable housing units).

The “Just-in-Reach” PFS Project also leveraged existing State of California funding streams. Funds from the Mental Health Services Act (MHSA) funds as well as MediCal (California’s Medicaid) “Whole Person Care” fund are two flexible funding streams that can be employed for outcomes-oriented contracting.  Both of these funding sources have been repurposed for PFS in Santa Clara County and LA County respectively.

Existing funding streams help ease the process of securing an end-payor commitment and embed PFS into the existing budgetary fabric of the jurisdiction, ensuring future funding longevity and stability.

The next phase for LA County

The development of LA County’s first PFS contract was an enormous and time intensive effort to align public and private funding in the name of improved life outcomes for 300 homeless Angelinos.

Which raises the question--how do we scale this work in LA County and beyond?

We ask that question at every day at Third Sector as we seek to improve the performance of the social sector. What we have come to realize is that PFS is a tool, not the tool for aligning resources with impact. As we strive to scale impact through PFS or other types of outcomes-oriented contracting, we find it helpful to keep the following principles in mind:

  1. Follow the money: Look to enable existing public funding streams to reward outcomes instead of finding new appropriations. There's a lot more money in existing funding streams that can measurably improve lives.
  2. Act systemically: Work with governments on how to shift their contracts to be outcomes-oriented across multiple providers and/or programs in an agency, vs. focusing on one provider
  3. Build outcomes infrastructure through every project: Use each project as a chance to embed and grow an outcomes-orientation within a government jurisdiction. Ensure that administrative data is integrated and available to underwrite outcomes contracts. It seems like more work now, but it will pay off for every project in the future.
  4. It's all about implementation--and therefore people: Support providers and government agencies to implement how to orient their service delivery around outcomes for people, not compliance to budget expenses. Don't write a report, project, contract, and run. It's all about implementation and people are always responsible for making recommendations actionable.

These principles are easier said than done, and it will take time and effort from all sides to create a new normal for how government does business. Given the opportunity to transform how over $1 trillion is spent on social services every year in America, we think it's worth it.