Link Payments to Outcomes: Getting Started

How to Get Started

1. Identify priority outputs and outcomes: Workforce agencies will need to first identify the outputs and outcomes that are most important to their overall goals for the program. Doing so can help clarify the agency’s values and priorities and focus the attention of service providers. A logic model, also called a theory of change, is a useful tool to capture this information. Prioritizing a limited number of outputs and outcomes that are linked to payment will also narrow the scope of data collection and reporting for providers, lowering the administrative burden placed on them and requiring them to track a smaller quantity of data. This lower administrative burden may also make performance-based RFPs accessible to a wider, more diverse pool of applicants.
2. Determine if data is available for those metrics or if new data collection is necessary: For performance-based contracting to work, it is crucial to have access to data in a timely way to review performance and pay providers. When starting with performance-based contracting, it can help to use administrative data that is already accessible. This will make data collection easier and, since agencies are already familiar with this data, they will have a better sense of how clean and reliable it is and how often they’ll receive it. However, this approach may not work for agencies that are prioritizing things that haven’t been measured before, like job quality. Agencies will need to find a balance between ease of data collection and achieving program goals, and this balance may look different across workforce areas.
   1. Another approach is to ask the provider to collect and directly report data. Agencies can meet with providers to understand what data they currently collect and what they can feasibly collect in the future. In cases where data is not already being tracked, the local workforce agency will likely have to pay for new data collection, identify how data will be collected, and examine how the burden of this data collection will fall on providers or program participants. For example, if field staff will need to collect more data from participants, are there sufficient staff to handle this task?
   2. Data can be collected and shared in several ways, including enrollment forms, surveys, interviews and focus groups. For data that sits outside of an agency’s direct control, it can be accessed through data-sharing agreements. 
3. Decide what portion of payment to link to the achievement of priority outputs and outcomes: Setting these thresholds is a balancing act that depends on the workforce agency’s goals and the financial situation of providers. Tying too large a share of overall payment to performance and making the base payment too small may leave providers without enough funding to operate. When tying payment to particular outputs and outcomes, workforce agencies should set thresholds at levels that are challenging yet achievable. Agencies may tie a larger portion of payment to outcomes when those outputs or outcomes are more achievable, such as the number of people enrolled, and a smaller portion of payment to outcomes that are more challenging to achieve or that are longer-term outcomes. Tying less than 5% of payment to achieving a given output or outcome is usually not enough of an incentive for providers. Download this sample language for use in performance-based grants/contracts.
4. Identify a data verification process to determine whether providers truly achieved outcomes: In cases where providers are collecting and reporting data, agencies may choose to verify the data by matching it to narrative reports submitted by providers, auditing a random sample, or asking for information on the provider’s data collection, storage, and reporting procedures and systems. The aim is to understand how the data emerged and how it ties back to actual participants. For example, did providers collect earnings data through a survey or did they use participants’ Social Security information? Workforce agencies will need to allocate sufficient staff time to data verification and ensure that providers have capacity, both in terms of data systems and personnel, to collect complete and accurate data. Ultimately, workforce agencies need to build trust-based relationships with providers.