Pay for Success Contracting Reducing Recidivism in Pennsylvania

Pennsylvania’s recent efforts to make payments to the private operators of the state’s dozens of community corrections centers dependent on their performance at reducing recidivism appear to be yielding some promising early results, and could prompt other states to consider similar approaches.

The Pennsylvania Department of Corrections (PDOC) announced earlier this week an overall 11.3% reduction in recidivism across its 42 contracted community corrections centers between July 2014 and June 2015, marking the second consecutive year of decline.

These early results appear to validate the state’s revamping of the contract model in 2013. In February of that year, former Gov. Tom Corbett’s administration announced plans to cancel all of the state’s existing community corrections contracts and rebid them on a performance basis, with providers evaluated on—and paid according to—their performance at reducing the recidivism levels of the populations they manage.

The goal of the initiative was to improve the ability of the contracted halfway houses to successfully transition parolees back into society. Prior to the contracting shift, approximately 60 percent of parolees were re-arrested after release from contracted halfway houses.

Under the new contract regime, the state may cancel a contract if a private halfway house operator’s recidivism rate increases over two consecutive year-long periods. Conversely, contractors can receive bonuses if recidivism rates decline past a certain threshold.

For the latest year, six of the 42 contracted halfway houses (14%) qualified for a 1% increase in the per diem rate paid per client as an incentive bonus, while one center was placed into warning status for exceeding the baseline recidivism level.

“The results are very encouraging and shows that our performance-based contracting continues to work to reduce recidivism, improve our community corrections system and increase public safety,” Corrections Secretary John Wetzel said in a press release.

This is not the PDOC’s only foray into “pay for success” contracting. In December 2013, the agency awarded a five-year mental health services contract that was updated to significantly enhance performance expectations. The contract contains financial incentives to reduce the number of misconducts for mentally ill offenders, the number of inmates recommitted to prison mental health units, and the number of recommitments to prison residential treatment units. Conversely, the contractor will face financial penalties if it fails to achieve targeted baseline results for those same metrics. Also, the contractor will be required to monitor and maintain or exceed an established baseline medication compliance rate.

The “pay for success” model is also seeing experimentation overseas. For instance, the U.K. has piloted similar recidivism-based, pay-for-success contract models for prison operations in recent years.

All of these moves toward performance-based contracting are pioneering steps toward a version 2.0 approach that puts rehabilitation and recidivism reduction at the front and center of the correctional contracting model. Policymakers and corrections administrators across the nation who are watching these moves closely might consider ways to import similar concepts into their jurisdictions as they explore new and innovative ways to tackle persistent recidivism and improve public safety.

Leonard Gilroy is director of government reform at Reason Foundation and is the editor of the Privatization & Government Reform Newsletter, available here.