Quality in Managed Long-Term Services and Supports Programs. I. Quality-Related Financial Incentives, Penalties and Withholds


States have opportunity in designing their payment structures to reward MCOs for quality care/outcomes and to dis-incentivize them for performance below acceptable thresholds. In our interviews with states as well as in reviewing MCO contracts and other supporting information on state websites, we identified multiple examples of states using monetary incentives, penalties or withholdsto support quality-related program expectations and goals.

Five programs offer quality-related incentives (Michigan, Minnesota, Tennessee, Texas, and Wisconsin), two issue monetary penalties (Minnesota, Tennessee) and four impose quality-related withholds (Minnesota, Pennsylvania, Tennessee, Texas). Monetary incentives are offered for:

  • Transitioning members from institutional settings to community (Wisconsin, Tennessee).

  • Increasing number of members with self-determination arrangements (Michigan).

  • Improvement in number of consumers engaged in meaningful employment (Michigan).

  • Improvement in number of consumers in private residence (Michigan).

  • Improvement in number of consumers discharged from detoxification unit and seen for follow-up within seven days (Michigan).

  • Superior clinical quality, service delivery, access to care and/or member satisfaction (Texas).

  • Reductions in inpatient hospital costs (Texas).

  • Optimal chronic disease care (limited to diabetes care, coronary/vascular disease care) (Minnesota).

In Michigan penalties can be levied for patterns of non-compliance, poor performance on a performance indicator standard, substantial inappropriate denial of services, and substantial or repeated health and safety violations. Tennessee is a strong advocate for assessing liquidated damages and its MCO contracts include detailed tables of amounts per infraction for "transgressions or omissions" ranging from threats to the smooth and efficient operation of the program to actions/inactions that result in threat to the member. Penalties can range from $100 per day to $10,000 per month depending on the breach.

Withholds of MCO payments are a tool used by Pennsylvania, Tennessee, and Texas to encourage delivery of good quality of care and services. Minnesota uses withholds for promoting MCO compliance with completing and submitting care plan audits and health risk screenings/assessments.

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