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Description of treatment. Multisystemic therapy is an intensive, home-based intervention for chronic, violent, or substance abusing juvenile offenders between the ages of 12 and 17. Trained therapists work with the youth and his or her family in a home, school, or community setting, with an emphasis on addressing the causes of delinquency. Service duration averages 60 hours of contact over four months, with each MST therapist working in a team of four therapists and carrying a caseload of four to six families

Effectiveness of treatment. One of the best academic studies of this treatment was in the population of youth who committed sexual crimes. The 89% of participants who completed the study had 83% fewer arrests for sexual crimes and 70% fewer arrests for other crimes than did the control group. (Source: http://www.ncbi.nlm.nih.gov/pubmed/19170451.)

Cost of treatment. According to the famous WSIPP cost-benefit analysis of various treatments, the marginal cost of MST is $4246. (Marginal cost is the cost of serving an additional person, so it is usually lower than the average cost, which is the total cost of treatment of the population divided by the number of persons treated.) Therefore the total cost of serving this population is at least $721,820.

Return on investment. The Essex press release mentions that MST is 4x as pricey as residential care. Using marginal cost, that means if the SIB moves 90 kids out of the residential care system, it will save Essex $1.52 million. The maximum savings (if it avoids 170) is $2.88 million. If we use 2x marginal cost for the estimate, the target savings is $3m and the maximum is $5.76m.

Other estimates: According to NSPCC, residential care costs 1,500 pounds/kid/week ($2300/week, or $118,000/year), while cost of treatment is 8,000 pounds/family. This puts target savings at $10.6 million, and maximum savings of placing all 170 kids of $20 million, assuming only 1 year of foster care avoided. Note, however, that these numbers are different from the 4:1 cost-to-treatment ratio mentioned in the Essex County release.

Direct vs. strategic budgetary costs. NSPCC mentions savings accruing to Essex in several ways: “In theory, over time, as the number of preventable family breakdowns are reduced, fewer children would enter the care system, leading to “cashable” savings for the Council, such as through the closure of a residential care home.” This is a stretch goal for most interventions. The first savings accruing from a SIB is a direct budgetary reduction in marginal cost: if you place a kid out of residential care, you no longer have to house and feed that kid, reducing government cost. The second savings comes as you successfully place enough kids to close down an entire home — or to avoid building a new one to meet expected rise in residential care population.

Control group. According to the Essex press release, the residential care population dropped by 5% from 1630 to 1535 last year. If we expect the same population decrease this year, that means we should expect 89 kids to leave residential care without any additional intervention. The Essex social impact bond takes 170 of the 1535 for treatment and will try to move 90 out of residential care. The cynic might say that the bond’s work is easy because if it picks well, it might capture the 89 who would have otherwise left residential care anyway, as predicted by the trend. The optimist might say that the bond’s work is hard, because it tries to get a 50% reduction in a population that has historically seen a 5% reduction. In either case, the control group should account for the trend in residential care numbers in the county.

Partners. Essex worked with Social Finance UK to develop this social impact bond.

Timeline. An earlier document had the following timeline for Essex:

• Sept 2011 – start implementing the SIB 
• Sept 2012 – interim outcomes review 
• March 2013 – final outcomes review 

Some remaining questions.

• Services:  What services and service providers will be chosen for this SIB?   What is the full range of services that Essex delivers to its population of 1,535, and what effect do those services have on the population?
• Funders: Will the funders for this intervention differ from those that funded Peterborough?
• Savings:  How much of the savings will Essex pass on to the service provider? 
• Evaluation:  How will the 170 kids be selected from the population of 1,535?  How will Essex attribute efforts to the treatment? Will the remainder of the population be used as a control group, or will the control be constructed in a more scientific way?

Sources.

• Essex press release
• WSIPP
• Borduin CM, Schaeffer CM, Heiblum N., A randomized clinical trial of multisystemic therapy with juvenile sexual offenders: effects on youth social ecology and criminal activity, J Consult Clin Psychol. 2009 Feb;77(1):26-37.

The way SIBs worked in Peterborough, UK, government shared savings that were generated by a social intervention – in that case, avoiding a costly incarceration – with the service provider that delivered that intervention.  For SIBs to work here, a social service providers could be tasked with moving elderly couples out of family homes.  Each moved couple would generate financial return if the affordable rent on their now-vacant house (80% of market rent, as the article says), exceeded the cost of housing them elsewhere plus the cost moving them, plus the cost of operations for this social service provider.  This financial return could be split with the provider – and the social impact bond scheme could work.

The government could, however, go it alone and keep all the savings to itself.  The only reason to use social impact bonds here, in my mind, is if the government thinks that financially-incentivized providers could do a drastically better job at moving elderly couples (while adhering to social and ethical standards), or could do the job just as well but have the capacity to act on a much larger scale.  If the government can get the same efficiency and scale, then perhaps social impact bonds are not the right approach here.

Here’s the op-ed piece.  Here’s the gist:

We attend a strange school where a systemic culture of abuse exists under a college president who has the power and experience to change what can only be described as a public health crisis of the utmost importance: the endemic culture of physical and psychological abuse that occupies the heart of Dartmouth’s Greek community. President Jim Yong Kim’s sterling credentials in public health are fundamentally at odds with the pervasive hazing, substance abuse and sexual assault culture that dominates campus social life.
I was a member of a fraternity that asked pledges, in order to become a brother, to: swim in a kiddie pool full of vomit, urine, fecal matter, semen and rotten food products; eat omelets made of vomit; chug cups of vinegar, which in one case caused a pledge to vomit blood; drink beers poured down fellow pledges’ ass cracks; and vomit on other pledges, among other abuses. Certainly, pledges could have refused these orders. However, under extreme peer pressure and the desire to “be a brother,” most acquiesced. While not every pledge is asked to do these things, many are. The specific tasks vary year to year, but these are things I’ve witnessed as a member of the fraternity.

And here is Dartblog, a blog that focuses on events related to Dartmouth, writing about the op-ed piece and posting an earlier version of it.

Today, in keeping with that October 21^st commitment, we are pleased to announce that the Department of Justice and the Department of Labor will support Pay for Success pilots through 2012 funding competitions. The Department of Justice plans to give priority funding consideration in 2012 Second Chance Act grant solicitations to highly qualified applicants who incorporate a Pay for Success model in their program design. The Department of Labor will also launch Pay for Success funding opportunities through the Workforce Innovation Fund by early spring, making up to $20 million available for programs that focus on employment and training outcomes. Federal agencies will be releasing more information on these, and potentially other, opportunities in the coming weeks and months.

More here: http://www.whitehouse.gov/blog/2012/01/24/pay-success-new-results-oriented-federal-commitment-underserved-americans

Entrepreneurship in the Private and Social Sectors, a class taught jointly between HBS and HKS, a class for which I’m a teaching assistant. Taught by Richard Cavanagh and Robert Higgins.  This class was taught at HKS, and has taken on new form as a joint offering across the river.

Social Impact Investing: Field Course at HBS, taught by Michael Chu.  In this field course, students select and advise a social enterprise that has received, or has the potential to obtain, funding from impact investors.

Social Innovation Lab: Field Course at HBS, taught by Allen Grossman and Dutch Leonard.

The above courses are taught at Harvard’s new i-Lab.  The Innovation Lab is Harvard’s most recent attempt to introduce cross-disciplinary curricular and extracurricular offerings.  The idea, as I have heard it, is that students from across disciplines can better tackle the world’s problems, which never respect disciplinary boundaries.

New Frontiers in Philanthropy, Social Enterprise and Impact Investing at HKS, taught by David Wood and James Bildner.  David takes a policy perspective on impact investing, thinking about how government should react to the trend.

Social Entrepreneurship at HLS, taught by Suzanne McKechnie Klahr.  Suzanne has taught this class at Stanford and is visiting Harvard Law School this winter as she teaches Harvard Law’s first entrepreneurship class.

Social Entrepreneurship and Global Innovation, at the College, taught by Gordon Bloom.  Gordon taught this class at Stanford, Princeton, and at the Kennedy school, and now teaches it to undergraduates in the Yard.

Social Impact Bonds: Lessons from the field
Stanford Social Innovation Review
By Michael Belinsky
January 12, 2012

And Massachusetts released two requests for proposals regarding pay-for-success contracts, in juvenile youth recidivism and chronic homelessness.  The state press release is here:

http://www.mass.gov/anf/press-releases/ma-first-to-pursue-pay-for-success-contracts.html