A new social support model – performance-based funding under the Social Support Act
Since 1 January 2013, the regional social services unit for the Drechtsteden area in the Netherlands’ South Holland province has been procuring domestic support based on performance agreements with care providers. By putting performance first, instead of the number of hours of support provided, care providers are incentivized to work more efficiently. The new method comes with benefits for users, for the Drechtsteden region, and for care providers.
The regional social services unit, Sociale Dienst Drechtsteden (SDD), works for a total of seven local authorities in the Drechtsteden area, paying benefits and arranging support for residents. In the Netherlands, responsibility for benefits and social support has been devolved to local authorities, who receive funds from national taxes to perform these tasks as part of the implementation of the Social Support Act (Wet Maatschappelijke Ondersteuning). Residents receive practical support whenever they are insufficiently self-reliant and do not have a personal network to fall back on. The idea behind this kind of support is to ensure that residents can continue to live independently and be active members of society for as long as possible. Residents can, for example, turn to their local council for domestic support. In the Netherlands, such support is not only offered when someone has a long-term care need, but also in other cases. In countries such as Denmark, Germany, and Austria, domestic support is provided only to people with long-term care needs.
Since 2007, local authorities have been responsible for providing domestic support to their residents under the national Social Support Act. Nearly all local authorities have opted to basically continue existing services as provided under the Exceptional Medical Expenses Act. This means that the local authority looks at how much support a user needs and captures that need in a number of hours of support per week. The local authority subsequently enters into a contract with a care provider, under which the care provider provides the agreed number of hours of support and bills the local authority based on the hourly rate specified in the contract. In practice, care providers almost always bill local authorities for the agreed number of hours. After all, if they manage to clean someone’s home in fewer hours, they will earn less money. And so, it is all about the number of hours, and not about the end result. There is no incentive for the provider to work as efficiently as possible.
In late 2011, one care provider initiated a rethink of the procurement model for domestic support in the Drechtsteden region (260,000 inhabitants). ‘Why are you still so keen on estimating costs based only on hours of care provided?’ was the question this care provider asked. This question marked the start of an innovative procurement process that has culminated in an entirely new procurement model. The new model no longer revolves around the number of hours of care provided but instead consists of the care provider and the user agreeing on a certain end result. This also factors in what the user can still do himself or herself or what informal carers from his or her environment can do. The agreement on the end result is recorded in great detail in a support plan that both parties sign and is subsequently submitted to social services.
The twenty care providers contracted to SDD have agreed on a fixed price for domestic support per four-week period with SDD. For some users, the care provider can achieve the agreed end result in fewer hours than before, while they may need more time for others. The newly agreed fixed price is lower than the average costs that social services used to cover per user.
What Makes Your Project Innovative?
The innovation consists in basing service procurement on an end result. Instead of an accounting result, i.e. the number of hours of care provided, the effective result was put first: a clean home. This performance orientation also leads to greater involvement of users themselves, as they define the support target together with the care provider. And a user who is not satisfied with the service can easily switch to another regional care provider. At the same time, the parties also agreed on how the results would be monitored: 20 percent of users are called every year, and Zorg-Lokaal auditors visit 10 percent of homes every year to verify that they are actually kept clean.
The process innovation, in this case, is a procurement method that brings the public sector and the market closer together. In a so-called public procurement process, SDD and the existing care providers negotiated about the terms and conditions of the new contract. Providers could subsequently tender for the result.
What is the current status of your innovation?
Performance-based funding has now been implemented in full and been copied by numerous other local authorities across the Netherlands. However, this new working method does not, like the old hour-based method, have a clear system that makes it possible to trace back what decisions are based on. This was the reason for the Central Appeals Tribunal for matters pertaining to public service and social security to rule that performance-based funding of domestic support offers users insufficient legal certainty. To still make it possible for organizations such as SDD to use performance-based funding, the Ministry for Health, Welfare, and Sport has tabled an amendment to legislation that requires, among other things, that the support plan be appended to each decision to award domestic support. The switch to performance-based funding that SDD has made thus constitutes a further development of the funding system for domestic support.
Collaborations & Partnerships
The innovation drive came from persons such as the Head of the Care Front Office, the (external) legal counsel for procurement, but certainly also from the care providers who saw a business opportunity. By engaging with the market, what initially seemed to be contradicting interests (budget cuts versus profits) turned out to be compatible in some cases.
Users, Stakeholders & Beneficiaries
Some parties struggled to stop thinking solely in terms of the hours of care provided. The Dutch Ministry of Health, Welfare, and Sport found it hard to drop the link between users’ personal contribution and the number of hours spent on their domestic support. The Care Assessment Centre, too, needed some convincing, as it initially seemed that a small group of users would have fewer hours of support and would be worse off financially. For this group, a separate solution was created in the system.
Results, Outcomes & Impacts
All parties benefit from the new way of procuring domestic support. For the social services unit, the new model brings cost savings of between 15 and 20 percent due to the reduction of billable hours. Performance agreements between providers and users incentivize care providers to work more efficiently, enabling them to achieve greater margins than before. And social services and care providers have seen their red tape reduced and have to do a lot less monitoring. In total, these savings have covered the 40 percent budget cut by the national government in full, without having to compromise on the quality of domestic support. And, at least equally importantly, customer satisfaction has grown, with ratings between 8 and 9 out of 10, while users’ personal contribution has also been reduced because the procurement expenses are lower. On the downside, the resulting efficiency drive in domestic support also means there is less time for social contact (a coffee and a chat).
Challenges and Failures
Partnering with the market is not what the municipal authority was used to. It required great effort from both sides to get it right.
It was challenging to change the mindset of the different parties involved. Funding social support based on hours of support provided seemed to be fairer on users, despite the fact that it lacked clarity on the intended result. Although result-based funding has proven to be effective in practice, measuring the quality of the result continues to be complicated. It is up to the social services unit to be on the alert and keep checking that decisions they make achieve the intended result.
Another challenge was to prevent resistance among users. The social services unit put a lot of time into getting users on board for the change. In the case of another large municipality, a lot less time was devoted to properly preparing users for the introduction of results-based funding, and the change consequently met with a lot of resistance.
Conditions for Success
The Drechtsteden social services unit chose to engage in far-reaching collaboration with the market. And they opted to implement result-based funding gradually. Prior to the transition, Social Support Officers visited users to explain the changes to their situation. It was a major investment, but it ultimately prevented problems. In fact, only one user took the social services unit to court to object to the change. Other local authorities that adopted result-based funding faced far more resistance.
Result-based funding as it was developed by the Drechtsteden social services unit can be replicated by other public organizations that are in charge of the funding of social facilities. Meanwhile, numerous municipal authorities across the Netherlands have switched to result-based funding. Authorities that want to do the same need to be willing to take a different approach to the operation of the social security system, and have the courage to incorporate result obligations.
Result-based funding has turned out to work and deliver better outcomes for all stakeholders. During the innovation process, it is important to accurately predefine the results and get all stakeholder parties to buy into the reasons why result-based funding is needed.
Partnering with the market has turned out to be crucial for the success of result-based funding. The innovation by the Drechtsteden social services unit marks a fundamental breakthrough in the approach to the interplay between market and public sector in a social system.