Financing Innovation for Prevention Services in Washington State

April 3, 2015

by Melanie Maltry, Washington Department of Early Learning

At 16 years old, Stacy from Yakima was struggling with a heroin addiction when she learned she was pregnant. Determined that her baby’s childhood would be more stable than her own, she enrolled in Nurse-Family Partnership, an evidence-based home visiting program. With the support of her nurse home visitor, she accessed drug rehabilitation and prenatal healthcare services, and began eating well, exercising and attending a parent support group. Five months later, Stacy gave birth to a healthy baby boy and began breastfeeding.

Stacy is one of many compelling success stories made possible through Washington’s Home Visiting Services Account (HVSA), administered jointly through the Department of Early Learning (DEL) and Thrive Washington. HVSA matches public dollars with private funding to invest in programs that enhance child development and well-being, reduce child abuse and neglect, and promote school readiness. In its four years, HVSA has grown tremendously — increasing funding from about $350,000 to more than $10 million, growing the number of home visiting slots from 100 to more than 2,000, and expanding counties with services from four to 21.

But despite its rapid growth, fewer than 15 percent of eligible families in Washington are currently able to access these services. DEL, Thrive and the state’s many other home visiting stakeholders are eager to expand these life-changing services to more families — and are exploring an innovative new financing mechanism, Pay for Success, to do so.

An Experimental Model for Philanthropy

Pay for Success, also known as social impact bonds, leverages the resources of the private sector to provide upfront capital investments to scale and sustain social services. Since 2012, states and cities have begun using this approach, imported from the United Kingdom, to grow prevention programs ranging from universal preschools to job training for ex-offenders. The upfront investments, primarily from foundations and financial institutions, are reimbursed through the cost savings of the interventions if the programs are successful in meeting specific outcomes. Although Pay for Success is not a proven model yet because the contracts are long term, the movement is gaining strong bipartisan support for its potential to increase return on taxpayer dollars while improving the quality of services.

This innovative financing model may be coming to Washington next. Last month, the Department of Early Learning and Thrive were awarded grants to explore using a Pay for Success model to scale Washington’s home visiting programs. The funds, provided by the Corporation for National and Community Service’s Social Innovation Fund, are designed to “strengthen and diversify the pipeline of governments and nonprofit organizations that are prepared to engage in PFS projects, assess the potential of PFS to address a variety of social issues relating to diverse populations in diverse geographic contexts, and attract capital to high-performing institutions seeking to strengthen, grow, and sustain effective solutions for challenges facing low-income communities."

DEL, Thrive and other project partners will work with Third Sector Capital and the Institute for Child Success to examine the cost savings generated through home visiting services across multiple health and school readiness outcomes; explore readiness and support among philanthropists, private investors, and legislators; and develop viable scaling models. Philanthropy Northwest and Mission Investors Exchange expressed support in DEL’s application by way of dedicated staff time to exploring the feasibility for such projects in this region.

“Philanthropists have played critical roles in Pay for Success projects nationally and internationally," said Melanie Audette, acting managing director of Mission Investors Exchange. "We are pleased to see exploratory efforts here at home in the Pacific Northwest with foundations taking a lead in fostering partnerships among stakeholders, cultivating understanding of Pay for Success among funders and providing innovative and early stage capital for these projects."

Invitation for Community Participation

DEL and Thrive’s Pay for Success home visiting project has already received initial support from the Thomas V. Giddens Jr. Foundation and Foundation for Healthy Generations and has extended invitations to a number of other Washington foundations to serve on the Pay for Success Advisory Committee.

“The flexibility that foundations have allows us to be catalysts for jump starting new initiatives like Pay for Success," said Paul Cavanaugh, director of the Giddens Foundation. "We often can act as a connector among service providers, government and private investors.”

“Healthy Gen is supporting this opportunity for learning how we can apply innovative financing mechanisms to preventive health strategies," explained Melanie Gillespie, executive director of Foundation for Healthy Generations. "I think we have a long way to go before we reach the key issue of understanding how to fully recapture direct savings that prevention efforts generate so that they can be used in turn to produce more prevention work. Until we accomplish that, we will remain under resourced as a nation in prevention work. I am hopeful that in Washington state we have a genuine opportunity to start unpacking these issues and possibly create some solutions.”

DEL and Thrive look forward to engaging our vibrant and forward-thinking philanthropic sector in the feasibility study and in educational and outreach efforts as we continue to advance this work to ensure more children and families have access to services they need not only to succeed but to thrive.

Melanie Maltry is a home visiting finance and sustainability specialist at the Washington Department of Early Learning. She can be reached at melanie.maltry@del.wa.gov.