Cover: Leveraging Shared Savings to Promote High-Quality, Cost-Effective Higher Education

Leveraging Shared Savings to Promote High-Quality, Cost-Effective Higher Education

Published Oct 22, 2015

by Trey Miller, Van L. Davis

Download eBook for Free

FormatFile SizeNotes
PDF file 1.1 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

This Perspective examines the way in which the dominant funding model in higher education, based on semester credit hours (SCHs), can promote cost inefficiencies. We propose a new approach — the Shared Savings Model (SSM) — that provides an alternative incentive structure for providers of higher education. The SSM leverages the fact that when institutions increase productivity, they also create considerable savings. While the traditional SCH-based model returns all of these savings back to taxpayers and students, leaving little incentive for institutions to produce them, the SSM promotes productivity-enhancing activities and processes by quantifying the cost savings from increased productivity and returning a portion back to the institutions that generate them. Institutions may find the SSM more palatable than traditional outcomes based funding approaches because it operates in conjunction with the SCH-based model, can preserve current SCH-based funding rates, and is voluntary for institutions. We lay out a framework for the model and offer recommendations for implementation, including approaches to increase productivity and considerations for ensuring quality, to guide institutions interested in pursuing funding innovations.

The research described in this report was conducted by RAND Education.

This commentary is part of the RAND expert insight series. RAND Expert Insights present perspectives on timely policy issues. All RAND Expert Insights undergo peer review to ensure high standards for quality and objectivity.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.