Applying Principles for Outcomes-Based …

1 Applying Principles for Outcomes-BasedContracting in a Public health ProgramPeggy A. Honor e, Eduardo J. Simoes, Ramal Moonesinghe, Harold C. Kirbey, and Meg Renner Anational movement is underway for government agenciesand their program implementation partners, suchas contractors and grantees, to explicitly demonstratethe benefits acquired from the expenditure of public funds. Givensuch expectations, agencies have adopted initiatives, such asoutcomes- based contracting , as quality improvement tools tofacilitate performance improvements and to document using Outcomes-Based contracting methods, paymentsare linked to accomplishment of mutually agreed upon are not defined in terms of what is performed, but onthe impact of what has been achieved. This case studydocuments the implementation of some fundamental principlesfor Outcomes-Based contracting in a state health departmentcommunity partnership program.

2 Results are also presentedfrom an interview of contractors that participated in this newcontracting process. Interview objectives were to document theimpact of Outcomes-Based contacting on building collaborationsand improving accountability. Results revealed perceptions of ahighly collaborative relationship between the agency andcontractors where contractors viewed outcomes-basedcontracting as improving accountability by focusing on results,establishing and monitoring performance targets, and facilitatingcontractor flexibility. Respondents also indicated strongly thatunder this contracting method, they utilized the funding moreeffectively by linking it with other community WORDS: Outcomes-Based contracting , performance-basedcontracting, public health finance, public health qualityimprovement, public health outcomesIn the early 1990s, surveys showed that Ameri-cans believed that $ of every dollar was wasted1and only 10% had confidence in what governmentJ Public health Management Practice, 2004, 10(5), 451 457 This material was developed in the public domain.

3 No copyright were trying to re-sponded with sweeping legislation aimed at increasingaccountability, improving government performance,and demonstrating a return on taxpayers invest-ments (ROTI).3 (p45)Laws and quality improvement ini-tiatives such as the Balance Budget Act (BBA), Gov-ernment Performance and Results Act (GPRA), andthe National Partnership for Reinventing Government(NPR) were all implemented during this period. TheBush Administration has continued this momentumfor results- based government practices with the im-plementation of the President s Management Agenda4(PMA). The PMA4is grounded in Principles for resultsto be supported with evidence, promises to impose con-sequences for nonperformance, and expectations forprogrammatic as well as financial this results- based operating environment thathas emerged, government agencies and their pro-gram implementation partners, such as contractorsand grantees, have scrambled to adopt innovative ap-proaches to measure accomplishment of outcomes, doc-ument benefits of government spending, and demon-strate fulfillment of legislative intent.

4 The focus of thisarticle is to document initial efforts to implement basicCorresponding author: Peggy Honor e, DHA, MHA, 570 East Woodrow Wil-son, PO Box 1700, Jackson, MS 39215-1700 (e-mail: Peggy A. Honor e, DHA, MHA,is Director, Office of health , Mississippi StateDepartment of health , Jackson; an Adjunct Assistant Professor, Medical University ofSouth Carolina, Charleston; and Visiting Scholar, Rollins School of Public health ,Emory University, Atlanta, J. Simoes, MD, MSc, MPH,is Director, Prevention Research CentersProgram, National Center for Chronic Disease Prevention and health Promotion,Centers for Disease Control and Prevention, Atlanta, Moonesinghe, PhD, MA, MS,is Statistician, Public health Program PracticeOffice, Centers for Disease Control and Prevention, Atlanta, C. Kirbey, BS,is Chief, Primary Care and Rural health Unit, Section ofCommunity health Systems and Support, Division of Community health , MissouriDepartment of health and Senior Services, Jefferson Renner, MEd,is Director, The Rensselaerville Institute, St.)

5 Louis Office, Journal of Public health Management and Practiceprinciples for Outcomes-Based contracting in a statepublic health department program to assist in meetingthe challenges of improving program results while doc-umenting the benefits of government spending. Description of Outcomes-Based ContractingCommonly referred to as performance- based contract-ing, this form of contractual agreement structures pay-ment terms to verification of accomplishing mutuallyagreed upon an Outcomes-Based contractingframework, the focus is on what is accomplished versusmerely on how the work is performed. Outcomes arenot defined in terms of what is done, but rather on theimpact of what has been accomplished. For example,in an Outcomes-Based health prevention or promotioncontract requiring client education, payment would bemade only if supported with evidence that participantsreceiving the education actually acquired some knowl-edge as opposed to making payments to contractorspurely for outputs such as conducting a set of educa-tional sessions.

6 This is a critical factor because even ifFIGURE multilevel outcomes in a state public health analysis is performed to establish this as themost effective prevention funding option, without re-alizing outcomes, the intervention will not achieve op-timal Behn and Kant s6critical examination ofoutcomes- based contracting noted that these contractsspecify results to be accomplished with an additionalbenefit of allowing contractors theflexibility to deter-mine how best to be successful. In the case of statepublic health agencies, contractorflexibility is criticalsince programs are often implemented through legalagreements with contractors at the local level. Thisflex-ibility is an important factor for local contractors thathave expectations of contributing to the improvementof community health conditions. Outcomes-Based con-tracting provides this degree offlexibility and repre-sents a systems-thinking approach to contracting thatconsists of interacting elements working toward sharedoutcomes at various 1 presents this rela-tionship of interacting multilevel outcomes in a statepublic health outcomes in this model (Figure 1) can bedescribed as the different results that can be reasonablyOutcomes- based contracting in a Public health Program 453expected of the state, agency, program, and contrac-tor.

7 Interacting describes the relationship between thesedifferent outcomes. Funding public health programs ina state to improve the heath of the population wouldbe very contingent on achieving outcomes set at theagency, program, and contractor level. Holding any ofthese entities individually responsible for such a long-term outcome as improving population health may behighly unrealistic especially given the evidence for themultiple determinants of even when themultiple determinants are considered, this theoreticalconcept will only work if the available resources areadequate to meet the public health agency may set outcomes to reducechronic disease rates that support state-wide outcomesof improving the health of the population. However,achieving that agency and state level outcome wouldbe linked to program and contractor success in achiev-ing different but interrelated outcomes at those levelsthrough a portfolio of related programs both internaland external to the agency.

8 Given the limited amountof resources allocated to public health agencies, it maynot be realistic for the agency alone to change health sta-tus; however, it is reasonable to expect accomplishmentof some related result that facilitates the desired changein health status. The absence of any performance expec-tations linked to an outcome simply reinforces negativepublic perceptions of a lack of an adequate allocation of resources to funda portfolio of related programs, some health relatedoutcomes- based contracts extended over multiple con-tracting periods could potentially link payments to anactual outcome for a change in health status. Sincesuch modifications typically can only be measured oververy long periods, it would not be realistic to tie pay-ments to a change in health status in a single 12-monthcontracting period. This concept is similar to a call byKindig9for reforms through an Outcomes-Based pay-ment system (p152)where health outcomes would besupported byfinancial rewards in an integrated , there is growing interest in Congress touse an Outcomes-Based framework in Medicare fee-for-service, population- based disease management pro-grams (DMP).

9 10 Strengths and weaknesses of outcomes-basedcontractingDocumented benefits of Outcomes-Based contractinginclude increased client satisfaction, ability to reduceand manage costs, and the opportunity to manage andreduce shift to a more collaborative long-term approach to contracting versus an adversarial re-lationship with contractors has also been noted as funding agencies, which techni-cally function as investors,3often seek to accomplishlong-term outcomes typically through renewable one-year contracts with providers, it is critical to estab-lish long-term relationships with contractors that areeager to view the contracting affiliation as a partner-ship. In implementing an Outcomes-Based model forcontracting in the Maine department of Human Ser-vices (DHS), Clary, Ebersten, and Harlor12noted thatagencies should be aware of the need to develop last-ing capacity building relationships in order to achievelong-term contracting is not derived fromprinciples of scientific , it isnot surprising that some advantages noted in the lit-erature were actually cited as disadvantages by to the collaborative efforts betweenfunding agencies and contractors as too relaxed andmay not be in the best interest of the public.

10 This is indirect conflict with Behn and Kant6and Clary, Eber-sten, and Harlor12who saw these long-term collabo-rations as a solid strength. Chapin and Fetter14notedthat a zero sum negotiation is not optimal under anoutcomes- based contract when a state and local healthagency work collaboratively versus competitively to-wards a common outcome of improved public , they explained how equilibrium could beachieved under these arrangements when parties uti-lize game theory Principles of negotiation, compro-mise, and countermoves to arrive at deals that maxi-mize their needs. 14 (p110)The distinction and understanding of the relation-ship of outcomes for contractors at the implementa-tion level and the broader longer-term outcomes atthe agency and program level is critical for a sys-tem of Outcomes-Based contracting to produce de-sired program results.