Medicaid and CHIP Risk-Based Managed Care in 20 States. Experiences Over the Past Decade and Lessons for the Future.. Performance Improvement Programs.


The BBA requires that states develop performance improvement programs, but this broad requirement permits states to choose the topics and methods for their programs.Performance goals are set by the state and passed on to the plans, usually as contractual requirements. A state may collaborate with its plans in defining topics and methods and some have established a quality improvement collaborative for this purpose. For example, in Virginia the collaborative includes both plans and the medical society.

Many states have taken their performance improvement programs one step further, by providing financial incentives to achieve a defined target. For example, 12 study states have established at least one pay-for-performance program, whereby a state provides financial incentives for improved HEDIS quality measures (see Table 8). Usually the incentive is a small portion of the capitation rate (most typically reported to be 1 percent or less, although one state offered up to 5 percent) as a bonus (or withhold). In most programs, that amount is initially withheld from the capitation rate and awarded retrospectively to those plans that reach a predetermined threshold. In addition to these financial incentives, another important reward that can be used is auto-assignment of new enrollees to plans with the highest scores.

Table 8: Pay for Performance for Medicaid HEDIS Measures in Study States
State Timeliness of Prenatal Care Childhood Immunizations Well-Child Visits Breast Cancer Screening Cervical Cancer Screening HbA1c Screening Type of Incentive Offered

Source: Review of state documents and interviews with state officials.

Note: Other study states do not have Medicaid HEDIS-based pay-for-performance programs.

Maryland X X Withhold/Bonus
Massachusetts Pay-for-performance but not for these measures. Withhold/Bonus
Michigan X X X X X X Withhold/Bonus
Minnesota Pay-for-performance but not for these measures. Withhold
New Mexico X X X X X Withhold
New York X X X Bonus
Ohio Pay-for-performance but not for these measures. Bonus
Pennsylvania X X X Bonus
Rhode Island X X X   X X Bonus
Tennessee X X X Withhold/Bonus
Texas Pay-for-performance but not for these measures. Bonus
Wisconsin X X Withhold/Bonus

Choosing the correct quality measures for rewarding good performance is challenging. States must be strategic in choosing measures, because both health plans and providers are likely to be focused on those aspects of their performance that are most closely monitored and assessed, particularly if they are provided incentive payments based on the metrics. Because of concern that plans and providers may respond to the incentives by neglecting quality of care in non-incentivized areas, some states rotate the measures included in the pay-for-performance program on a regular basis.

What we’ve found is that if we said it was immunization, mammography, cervical cancer screening, the plans focus on those specific areas and nothing else, so that they could get the quality incentive. (State Official)

As with other aspects of quality monitoring, the table illustrates wide variety across states in the measures they focus on, and whether they use only bonuses, or both withholds and bonuses, in their programs. For example, five states use both withholds and bonuses, while two use only withholds and five use only bonuses.

In addition to these HEDIS-based pay-for-performance programs, states use pay-for-performance programs to reward a variety of other quality-related functions. Examples include payments (or withholds) for high-quality encounter data, reporting timely information, statewide coverage by the plan, broad provider networks, electronic prescribing, use of safety-net providers in health plan networks, use of electronic medical records, lower emergency room usage, and lower medically preventable hospital admissions or readmissions.

Because such programs involve winners and losers, implementing pay-for-performance is potentially controversial. Two states mentioned having a pay-for-performance program that was eliminated for political reasons, and one state has been unable to secure legislative approval for a proposed pay-for-performance program.

Some health plans have adopted pay-for-performance for their providers, since the plan itself relies on the performance of providers in achieving the state’s quality goals. These are often based on the HEDIS data, though some plans also look at provider credentials, member satisfaction, and emergency room visits. One health plan noted that it offers an incentive for doctors to open their offices after hours so that people are not using the emergency room unnecessarily. The plans also use non-financial incentives for their providers.

The best doctors are recognized in the local paper. We give them a gift and have a dinner to recognize them. The providers really like it, and it helps our relationship with them, too. (Plan Representative)

Changing beneficiary behavior is also critical to achieving certain targets such as improving preventive care use and reducing emergency room use. For this reason, some plans offer incentives to their enrollees as well as their providers.

I firmly believe that if you can get the patient to participate in their own health care then you go a long way to managing things. (Plan Representative)

Because the delivery of medicine is both pieces—the doctor can only do so much without the member, and the member can only do so much without the doctor. (Plan Representative)

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