Understanding payment by results Supplementary material from the - PowerPoint PPT Presentation

Understanding payment by results Supplementary material from the open ideas market sounding session 11 March 2015

Select a target group and establish a robust measurement framework Know what outcomes Consider the form of Measure the program’s you are aiming for. comparator you will use. performance by comparing STEP 1 STEP 2 STEP 3 Select a target cohort Establish comparison and outcomes in the comparison and from the population. treatment groups. treatment groups over time. Statistically reliable measure Comparison Comparison Treatment Treatment Treatment group needs to be large Positive change enough to be statistically reliable. 50-75 months 12 month KPI 24 month KPI End of Term measure measure KPI measure Performance payments linked to measurements of comparison and treatment cohorts

Risk and reward: Payments are linked to program performance I N D I C AT I V E O N LY Returns accrue to both investors and RISK/REWARD providers PAYMENTS Government’s exposure capped % of government savings REALLY BAD BAD POOR PROGRAM PERFORMANCE GOOD SUPERIOR OUTSTANDING Comparison and treatment group outcomes equal Provider’s exposure limited

Structure of government payments % direct service costs paid in arrears. Payment frequency is FIXED determined by contractual conditions. STRUCTURE OF PAYMENT Independent assessment of performance against KPIs. Timing VARIABLE of payments will depend on the transaction structure.

Proponent’s cash flows INDICATIVE ONLY. This model does not account for payments received from or made to private investors. The amount and timing of fixed and performance payments depend on the transaction model and contract conditions. Incomings and outgoings (and net position) may differ depending on the transaction model and program performance. Cash flow Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25 Operating costs Fixed payments Performance payments What are my costs? How do I get financing to cover the deficit? How do I service this debt?    Staffing – caseworkers, counsellors, etc. Bond Fixed and variable government payments   Overheads and on-costs Bank loan  Bank overdraft  Equity parent