Insights Into the Strategy of Organizing, Modeling, and Implementing a Large, Evidence-Based, Multi-Partner Pay for Success Project
Pay for Success (PFS) is a financing model that provides funding to tackle social issues. Funders are repaid only if measurable outcomes are achieved. This ensures funds are spent effectively on programs that are proven to work.
The Impact Finance team at the Sorenson Impact Institute is a leading innovator in the impact capital markets. The team works with public and private allocators and mission driven organizations to leverage impact capital to drive positive social and environmental outcomes including helping partners fund and execute evidence-based PFS projects. The Institute partnered with the Institute for Child Success (ICS) to organize a successful PFS-financed early child development program called “Hello Family.”
To enable service delivery, the Community Outcomes Fund at Maycomb Capital funded the project provided PFS financing — an upfront working capital loan repaid as outcomes are achieved. The Community Outcomes Fund is the largest investment vehicle in the United States dedicated to PFS financing, also known as outcomes financing.
In a recent Sorenson Impact Institute virtual convening, collaborators of the program discussed the benefits and challenges of the PFS model and the initial success the project has achieved. Hello Family focuses on the community of Spartanburg, South Carolina. This evidence-based, multi-partner PFS project includes an alliance of more than 60 partner organizations that aim to bring services to families in the area. There are four main outcomes the government aims to achieve:
- Increase school readiness
- Reduce the incidences of child abuse and neglect
- Reduce avoidable emergency room visits
- Improve birth outcomes and early childhood health development
ICS tapped Sorenson for assistance in structuring the program’s financial model to ensure these outcomes were achieved for the community.. Simone Gross, Director of Investments at Maycomb said investing in the project was very appealing to her team. “When we provide outcomes financing, what we’re looking to do is provide capital that can expand or scale upon social programs that deliver real, measurable outcomes to communities. By aligning our financing with spending that is geared towards results, we are able to allow for that scale without compromising any of the impact, accountability, or transparency and collaboration that came in through the project development.”
Hello Family is one of the first PFS projects of its kind, requiring the team to be innovative and thoughtful about its design. “One of the things we really wanted to be intentional about was fully capturing the impact that this continuum of services population-based project would have,” said Janis Dubno, Managing Director of Impact Finance at Sorenson Impact Institute. “We wanted to build a financial structure that could handle disruptions or changes and not negatively impact the financial returns or the outcomes for the community.”
The Hello Family initiative is also unique in that it impacts the entire community. “It reaches every family. Every person who gives birth in Spartanburg, South Carolina has at least one meaningful contact from a nurse about what’s going on and providing the support they might need,” said Bryan Boroughs, Chief Operating Officer and General Council for ICS. “We meet every family, and we meet them where they are… It’s rare that you’re actually reaching everyone in a community from any social service perspective. Pay for Success really makes that possible because it allowed us to get the necessary capital to launch at that scale.”
“I think it’s really flipping the script on how it had been done in the past because it used to be that programs, in general, were focused on cost savings from the payer perspective,” said Gross. “Because of that, we’re centering our participants and the community. That helps to rectify something that’s somewhat broken in how social services are procured in this country in that the payers are setting the terms of what success looks like. ‘Success’ is the key term here, not the ‘pay’ part. It’s a success generated for families. This really makes sure that we’re shrinking that gap.”
The large-scale impact of the Hello Family model demonstrates that transformative social change can be both effective and financially sustainable. The team has connected with other communities interested in adapting the model. Said Boroughs, “Interest is growing as the outcomes are providing proof points that this type of model can provide the outcomes that the community needs and the support that the families need.”
Watch the full conversation: