As business leaders, we put capital to work to create value. We strategically use that capital to develop innovative solutions with an eye to maximizing results and managing risk. That’s Business 101. But it’s not generally the approach used to confront complex and persistent social challenges. That’s why we are encouraged by the Municipality of Anchorage taking the bold step of introducing a new public policy approach and financing mechanism called Pay for Success to tackle persistent homelessness.
Nearly 375 people in Anchorage experiencing homelessness are considered “frequent users” of corrections, shelters, emergency rooms and other crisis services. These are some of the city’s most vulnerable citizens — who often live with multiple, co-occurring health and behavioral health disorders. Their needs create dispersed costs that fall on businesses, governments, health care and social service organizations, and the individuals themselves. Although these issues are felt citywide — and are among our most important public priorities — costs are diffuse while solving the problem is expensive.
Usually government pays for programs and services to address challenging social problems like homelessness. But there is always a risk that those services may not result in measurable changes. And there are rarely enough funds to build up provider capacity to deliver the service as well as they could. The concept behind a Pay for Success approach is that we should measure the success of social programs and services by whether they improve lives and community conditions. Pay for Success allows government to shift its funding from paying for the numbers of people enrolled in a program, or administering a checklist of programmatic activities, to instead paying for achieving verified results.
Study after study demonstrates that the most promising approach for people with serious mental illness and disabilities who experience ongoing homelessness is stable housing combined with specially designed, intensive support services. A significant body of evidence suggests that this approach promotes long-term housing stability, physical and behavioral health, and less need for crisis services. While it may seem expensive, the cost of supportive housing may be offset by cost reductions from the lower use of homeless services, corrections, and medical services.
Last summer, Home for Good was launched as a pilot to provide stable, supportive housing for some of the hardest-to-house homeless people in the community. Managed by United Way of Anchorage in close collaboration with the Municipality, and with support from the Rasmuson Foundation and the Alaska Mental Health Trust, it is serving close to two dozen people with services delivered by RurAL CAP and Southcentral Foundation. The program is looking to expand to serve as many as 190 people within three years.
That’s where Pay for Success, as a proven financing tool, comes into play. It allows communities to implement evidence-based solutions, test promising innovations, and scale programs that have demonstrated measurable results—with minimal risk to taxpayers. In a Pay for Success project, everyone with a stake in achieving better community outcomes—local, state, and federal governments, hospitals, insurers, and others — commit to paying for the beneficial outcomes. Those outcomes are defined in contracts, measured in objective data and verified by an independent evaluator.
Simultaneously, private, socially minded investors put up the money to perform the services that can deliver the targeted outcomes. If the outcomes are achieved, the private investment is repaid by those who committed to pay for them. If outcomes are not achieved, the investors bear the risk that their investment will not be repaid.
Action pending before the Anchorage Assembly will authorize the Municipality to support Home for Good, Alaska’s first Pay for Success project. The Assembly is considering ordinances that would commit up to $4.5 million to be paid if agreed-upon outcomes are achieved. The federal government, health providers, health insurers, and philanthropy have also committed funding or are considering doing so.
The Pay for Success financing mechanism is a game changer that promotes accountability and objective measures of success. Accountable financing models like Pay for Success are essential to align public-private partnerships to solve the complex challenges facing our community. We support the Mayor’s Office and United Way of Anchorage for leading an unprecedented collaboration for the most ambitious and promising effort Anchorage has ever undertaken to break the cycle of persistent homelessness. It promises both minimal risk to taxpayers and maximum accountability for results, with a focus on driving resources toward the most effective programs. And it promises better outcomes across the board. That’s good business.
Greg Cerbana is Vice President of Government Affairs for Weidner Apartment Homes. Greg Deal is Alaska Regional Bank President at Wells Fargo. Diane Kaplan is president and CEO of Rasmuson Foundation. Joe Marushack is president of ConocoPhillips Alaska. Sophie Minich is president and CEO of Cook Inlet Region, Inc. Amanda Moser is executive director of Anchorage Downtown Partnership. Bill Popp is president and CEO of Anchorage Economic Development Corporation. Preston Simmons is CEO of Providence Health Services’ Alaska region.
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