The County Executive’s FY 2016 Recommended Budget for the Behavioral Health Services Department (BHSD) includes $4,000,000 to support the County’s two Pay for Success initiatives. For FY 2016, most of the funding would be used to support the Chronic Homelessness Pay for Success Project – now known as Project Welcome Home. The second Pay for Success project focusing on the acute mental health system is still under development.
In order to implement Project Welcome Home, the County must enter into two agreements, a Pay for Success Agreement and a Clinical Services Agreement. Under the Pay for Success Agreement, $2,000,000 from Measure A funds would be used to fund performance-based success payments and housing costs primarily in the form of tenant-based rental assistance. The Pay for Success Agreement describes the County’s obligations to allocate $2,000,000 in total success payments and relevant housing costs annually for six years for this project. All of the County’s obligations under this Agreement are contingent upon the County Board of Supervisors’ appropriation, on an annual basis, of the funds necessary for the continuation of this Agreement in any fiscal year.
The Clinical Services Agreement includes $871,782 in expenditures for case management, treatment and other supportive services for chronically homeless individuals. The Clinical Services Agreement includes approximately $435,000 in Medi-Cal revenues. In the second through sixth years of Project Welcome Home, the projected annual expenditures for the Clinical Services Agreement is $1,400,000, with approximately $700,000 in Medi-Cal revenues annually.
Both the Pay for Success Agreement and Clinical Services Agreement are new Agreements. Abode Services was selected to serve as the lead agency for Project Welcome Home through a formal competitive procurement process. A request for proposals was issued on April 21, 2014 and closed on June 20, 2014. On July 18, 2014, the County’s Chief Operating Officer accepted the evaluation committee’s recommendation to select Abode Services. A non-binding Memorandum of Understanding describing the County’s intention to allocate $2 million in success payments for six years for this project, along with the funds necessary to leverage Medi-Cal funding to offset program costs, was approved by the Board on October 21, 2014. On April 7, 2015, the Board of Supervisors approved an agreement with Abode Services to fund up to $252,723 in FY15 for the provision of services during a quarter long “ramp up” period, in preparation for the start of the full six-year project.
REASONS FOR RECOMMENDATION
A. Overview of Pay for Success
Pay for Success creates performance-based contracts between the County and providers of preventative, cost effective social services. Pay for Success contracts typically include a rigorous evaluation, which can objectively determine whether the Pay for Success service is achieving its intended social outcomes, and therefore whether “success payments” should be made by the government. This approach has the benefit of ensuring that public resources are only expended for demonstrated successful outcomes.
The contracts leverage philanthropic or impact investor dollars by providing up-front financing for service providers. Under Pay for Success, the County only pays after pre-determined results are achieved and validated by an independent evaluator, and funders (not taxpayers) bear the risk of non-performance. If a project meets its outcome goals and is reimbursed by government, funders may recover their capital with moderate interest returns or for reinvest in the program.
Governments across the country have begun to use Pay for Success to invest in preventive social services for vulnerable populations, seeking more effective and efficient ways to meet the needs of these populations. The County is the first governmental entity in California to initiate such a project.
B. Pay for Success in Santa Clara County
In early 2013, the Board of Supervisors directed Administration to explore initiation of one or more “Pay for Success” initiatives. Since that time, the County has developed two Pay for Success projects, the first of which is designed to reduce chronic homelessness in the County through the provision of housing and an array of supportive services: Project Welcome Home.
The goal of Project Welcome Home is to improve the quality of life for the subset of chronically homeless individuals who are the most frequent users of County services by stabilizing these individuals in permanent supportive housing or an alternative long-term housing situation. The project is also designed to bring efficiencies and economic benefits to the County’s system of care by decreasing use of emergency and inpatient hospital services and criminal justice involvement, while increasing use of outpatient medical and behavioral health services.
C. Selection of Abode Services to Operate Project Welcome Home
In April 2014, the County released an RFP to identify a Lead Agency with which it would enter into exclusive negotiations for the Pay for Success contract. Following execution of the Pay for Success Agreement, the Lead Agency would oversee all aspects of service delivery and would be ultimately responsible for delivering the desired successful outcomes. In August of 2014, the County selected Abode Services to fill this role and has spent the last ten months negotiating various aspects of the Pay for Success contract and related agreements.
Abode Services currently operates over 30 supportive housing programs that serve close to 1,000 households on any given night throughout the Bay Area, including 100 owned-and-operated units and more than 200 rented scattered-site units in Santa Clara County. The organization plays a central role in a number of large, multi-agency collaborations. The Evaluation Committee concluded Abode was uniquely well positioned to serve as the Lead Agency for many reasons, including its excellent track record in delivering highly-effective services to chronically homeless individuals, its ability to identify and secure affordable housing notwithstanding the very difficult housing market, its strong fiscal position, and its capacity to partner with the County in constructing a complex transaction with private funders.
D. Evaluation of Achievement of Success by UCSF
To measure whether Abode has achieved the successful outcomes triggering payment under the Pay for Success contract and to determine whether provision of permanent supportive housing does in fact significantly improve clients’ health and well-being while decreasing use of costly County services, the County has engaged two nationally recognized experts on evaluating services for the homeless from the University of California, San Francisco School of Medicine: Dr. Margot Kushel, M.D. and Dr. Maria Raven, M.D., M.P.H., M.Sc.
PAY FOR SUCCESS AND CLINICAL SERVICES AGREEMENTS
Before the Board are the two agreements that will allow the County to launch Project Welcome Home: (1) the Pay for Success contract under which Abode Services and “the Pay For Success Housing First Initiative” -- a business entity created and wholly controlled by Abode to facilitate this project -- will provide the housing and non-clinical services offered through Project Welcome Home and will be paid based on the success of the program, and (2) the Clinical Services Agreement under which Abode would provide the Medi-Cal reimbursable mental health services provided through Project Welcome Home, under a standard fee-for-service agreement with the County’s Behavioral Health Department through which the County will be able to leverage Medi-Cal funding.
Entering into these agreement and launching Project Welcome Home would benefit the County in several significant ways:
First, Project Welcome Home would reduce chronic homelessness in Santa Clara County. Over the course of the project’s six years, Abode would provide permanent housing and an array of supportive services to approximately 150-200 individuals experiencing chronic homelessness who are frequent users of County services, with 112 individuals or families served at any given time. For the project’s participants, permanent supportive housing will increase stability, improve health and support wellness and recovery from health and behavioral health conditions. In addition, since the program will prioritize services for some of the highest users of County services, Project Welcome Home would reduce disproportionate, inefficient and ineffective utilization of costly County services. While the project is not predicated on generating cashable savings to fully offset “success payments,” the project would afford the County the opportunity to direct its resources toward more effective, efficient service delivery for the target population, and to make substantial progress in solving the issue of homelessness.
Second, Project Welcome Home would be the first Pay for Success project in California. The recommended actions would enable the County to pilot new contracting and payment mechanisms. Since August 2014, Santa Clara County and Abode have worked diligently to develop a Pay for Success project in the area of Chronic Homelessness. Pay for Success is an innovative funding model that drives government resources toward social programs that prove effective at providing results to the people who need them most. Pay for Success expands available, upfront funding for nonprofit service providers and tracks the effectiveness of programs over time to ensure funding is directed toward programs that succeed in measurably improving the lives of people most in need. Using a Pay for Success model, the County would transfer service provider impact or performance risk to funders; if the project is not successful, the County would not be required to distribute success payments to repay funders for upfront funding. Success for this project would be based on the number of months of stable tenancy in permanent supportive housing.
The $2,000,000 annual allocation for the Pay for Success agreement, over the six-year term of the project, would be used to repay funders and Abode Services for the project’s upfront costs and provide a small premium commensurate with the risk they are taking. We fully expect this project to be successful but if it is not, the County’s annual payout will be less than the $2 million we are requesting annually. If the project’s target success rate is achieved, the funders would be repaid. The target success rate will ensure Abode has a strong incentive to exceed the level of success achieved under comparable to existing permanent supportive housing programs by:
· Housing individuals more quickly;
· Helping individuals maintain their housing for longer periods of time;
· Housing more individuals; and/or,
· Reducing total expenditures.
Third, the project would improve upon the supportive housing service delivery system in Santa Clara County. The project will employ a randomized control trial to evaluate how permanent supportive housing generates efficiencies and economic benefit for the County, which could inform future public policy and contracting decisions. The project pilots a sophisticated, multi-disciplinary service team that utilizes multiple funding sources and a variety of housing resources and types. Over the next six years, the County could use project’s experience to improve existing programs and increase funding mechanisms to cover the costs of services for chronically homeless persons. The County would also to determine whether County investments in permanent supportive housing can create cashable fiscal savings, increase revenues, or improved efficiency of services, and identify the extent to which savings are sufficient to pay for the programs themselves. Lastly, this project would allow the County to test and refine tools for identifying the highest-need and highest-cost members of the homeless population.
REQUEST FOR DELEGATION OF AUTHORITY
Along with the recommendation to approve the Pay for Success and Clinical Services agreements, Administration is seeking a limited delegation of authority to (1) amend and take any other necessary actions related to the Pay for Success Agreement and related Clinical Services Agreement during the term of those agreements, and (2) execute ancillary non-monetary agreements related to the project (e.g. the evaluation agreement with UCSF). The delegation is limited to amendments and related actions that do not increase the County’s financial obligation under the proposed agreements, and would allow Administration to make and memorialize minor programmatic changes to the project throughout its term.
The recommended actions would end homelessness and increase stability and improve health for children and youth who are a part of chronically homeless families that are enrolled in Project Welcome Home.
The recommended actions would end homelessness and increase stability and improve health for chronically homeless seniors who are enrolled in Project Welcome Home.
The project will pilot new funding mechanisms for service delivery. The County would use this opportunity to assess the most efficient and effective means of funding permanent supportive housing.
CONSEQUENCES OF NEGATIVE ACTION
The County would not be able to launch Project Welcome Home.
STEPS FOLLOWING APPROVAL
Please send copies of executed agreements to Don Casillas (Don.Casillas@hhs.sccgov.org) and notify Ky Le (Ky.Le@hhs.sccgov.org) and Greta Hansen (Greta.Hansen@cco.sccgov.org).