Majority of State Medicaid Programs Moving to
Pay-For-Performance
Study shows 85% of states may link reimbursement
with performance within five years
April 12, 2007 - In the first published nationwide
survey of state Medicaid programs on "pay-for-performance" practices,
more than half of all programs state that they provide financial
incentives to health care providers for better quality care. Almost 85
percent of states plan to have pay-for-performance programs within five
years. Researchers also found that most current programs focus on
women's, children's and adolescents' health issues.
The study is published today by The Commonwealth
Fund, a private foundation which says it is "working toward a high-performance health
system." Authors are from IPRO, a not-for-profit quality evaluation and
improvement organization, and The Kuhmerker Consulting Group, LLC, a
health care consulting firm.
(See
Executive Summary below this news report.)
"Medicaid is a major source of funding of health
care in every state and, therefore, has a significant influence on the
health care system," said Thomas Hartman, Vice President for Health Care
Quality Improvement for IPRO and co-author of the study. "But each state
operates its program independently of the others. We thought it would be
helpful to provide a detailed snapshot of what is taking place around
the nation so that state officials have solid information on which to
base decisions about pay-for-performance."
Hartman and co-author Kathryn Kuhmerker, President
of the Kuhmerker Group and former Medicaid Director for New York State,
found several trends. Nine Medicaid programs (Arizona, Kansas, Maine,
Minnesota, New Hampshire, New York, Oregon, Vermont, and Washington) are
joining in statewide and regional pay-for-performance and quality
improvement efforts, and others are considering entering into such
collaborations. Health information technology is a focus of numerous
Medicaid pay-for-performance programs (Alabama, Alaska, Arizona,
Massachusetts, Minnesota, New York, Pennsylvania, and Utah). In these
programs, providers are given incentives to adopt electronic health
records and electronic prescribing, often in conjunction with the
collaborative efforts described above.
Access to care is a continuing concern of state
Medicaid directors, and that concern is reflected in the approaches they
take in this area. An overwhelming majority of Medicaid directors state
that their pay-for-performance priority is on improving quality, not on
reducing cost.
"Medicaid is not a new entrant into the field of
pay-for-performance," according to Kuhmerker. "We learned that almost
half of all programs, in fact, are more than five years old." More than
70 percent of planned new programs are expected to start in the next two
years.
"The effort to link health care spending and
quality is a growing phenomenon in the health care industry," said Karen
Davis, President of The Commonwealth Fund. "Both quality and efficiency
are key components of a high performance health system, and it is
encouraging to see the states rewarding provider efforts in these
areas."
The study found that 70 percent of existing
Medicaid pay-for-performance programs operate in managed care or primary
care case management (PCCM) environments, with a focus on preventive
health services and children's, adolescents' and women's health issues.
"New programs are still focused mainly on managed
care and PCCM providers," Kuhmerker said, "but appear to be shifting
their emphasis to the quality and cost issues related to chronic
diseases like asthma and diabetes."
Hartman and Kuhmerker gathered information through
a written survey sent to all state Medicaid directors, conducted
follow-up interviews with the directors and their staffs, and reviewed a
range of documents and Web-based resources on the programs. The study
focused on programs that provide financial rewards for quality,
efficiency and other program attributes. The study was conducted from
May through October 2006.
"Very few states have conducted formal evaluations
of their pay-for-performance programs, but most Medicaid officials
believe that the overall quality of care being provided is improving as
a result of these programs," said Hartman. "More research clearly needs
to be done to assess the effects of pay-for-performance on the quality
of care provided to Medicaid recipients."
Historically, revenue generation in the health care
system has been related to the quantity—rather than the quality or
effectiveness—of work performed. In some instances, revenue can be
generated when additional procedures are needed to correct previous
errors or omissions. Pay-for-performance is an approach to reimbursing
health care providers that is designed to alter this practice.
As costs escalate rapidly, large purchasers of
health care services—employers, health plans, and government
programs—are embracing the pay-for-performance movement in an effort to
improve the quality of health care and link health care spending to
quality so that limited financial resources can be used more
effectively.
Pay-for-Performance in State Medicaid Programs:
A Survey of State Medicaid Directors and Programs
Overview
Many health care purchasers are trying to link health
care spending to quality and efficiency through pay-for-performance
(P4P) programs. This report examines the current and planned P4P
activities of state Medicaid programs, based on a survey and follow-up
interviews with state Medicaid directors and their staffs as well as
review of related documents. The authors found that more than half of
states currently operate one or more pay-for-performance programs and
nearly 85 percent expect to do so within the next five years. Health
information technology is an important component of programs now in
development. The report outlines the most common measures and
incentives, discusses evaluation and reporting approaches, and provides
detailed descriptions of each of the pay-for-performance programs. The
findings should inform state governments and other stakeholders that are
considering modifying or adopting pay-for-performance strategies.
Executive Summary
A growing number of employers, health plans, and
government programs are seeking to link their health care spending to
quality care through pay-for-performance (P4P) activities. The Medicaid
program is no exception: over the past several years, the number of
state Medicaid pay-for-performance programs has dramatically increased,
and all indications are that new programs and approaches will continue
to be added.
This report examines the existing and planned
pay-for-performance activities of state Medicaid programs. It should
inform state governments and other stakeholders that are considering
modifying existing programs, implementing new ones, or coordinating
their efforts. It focuses on programs that provide financial rewards not
only for quality, but also for efficiency and other attributes.
The report is based on findings of a survey of all state
Medicaid directors, follow-up interviews with Medicaid directors and
their staffs, and review of documents received from the interviewees and
on state Web sites. The study was conducted from mid-May through
mid-October 2006, and reflects information that was current at the time.
Key Trends
·
As of July 1, 2006, more than half of all
state Medicaid programs were operating one or more pay-for-performance
programs. Within the next five years, if all current plans to start new
programs are realized, nearly 85 percent of states will be operating
Medicaid pay-for-performance programs.
·
Medicaid is not a new entrant to the field
of pay-for-performance: almost half of all existing programs are more
than five years old. A similar percentage of programs began operations
within the past two years. More than 70 percent of planned new programs
are expected to start within the next two years.
·
Seventy percent of existing Medicaid
pay-for-performance programs operate in managed care or primary care
case management (PCCM) environments, focusing on health care for
children, adolescents, and women. While planned programs are still
focused on managed care and PCCM providers, they appear to be shifting
their emphasis to environments in which quality and cost issues related
to chronic disease management can be better targeted. Rewarding the
provision of primary care continues to be a component in the vast
majority of Medicaid pay-for-performance programs.
·
There are several noteworthy trends in
planned new programs:
o
Nine Medicaid programs are joining with
other payers, employers, consumers, and providers in statewide and
regional pay-for-performance and quality improvement efforts. For
example, the Oregon Health Care Quality Corporation, involving state
government, health plans, medical groups, insurers, purchasers,
providers, and consumers, is working to incorporate standardized
performance measures into their P4P activities. Several Medicaid
directors in other states expressed an interest and willingness to join
such efforts. The common principles and requirements emerging from these
efforts should improve P4P programs around the nation by promoting
consistency and stability. However, this movement toward the use of
community and national standards may pose a significant challenge to
some states, where many of the performance measures used are unique to
the Medicaid program and its concerns.
o
Health information technology (HIT) is a
focus of numerous Medicaid pay-for-performance programs. Several
Medicaid programs are "paying for participation," rather than
"performance," in an effort to encourage providers to adopt electronic
health records, electronic prescribing, and other technologies. For
example, Alabama is offering reimbursement increases tied to provider
participation in a program using technology to improve monitoring of
patients with chronic diseases. HIT also has the potential to reduce
data collection costs in P4P programs, which should allow P4P programs
to expand into less-traditional venues.
o
Several Medicaid directors were concerned
that P4P activities might impinge upon beneficiaries' access to care by
causing providers to leave the Medicaid program or limit the number of
Medicaid beneficiaries served in their practices. This concern is
shaping some of the approaches taken in pay-for-performance programs,
particularly in states with large rural or sparsely populated areas. For
example, South Carolina is offering increased reimbursement to providers
who agree to establish a medical home for Medicaid beneficiaries.
o
The vast majority of Medicaid directors
reported that their priority in operating pay-for-performance programs
is to improve quality of care rather than reduce costs. Some states are
targeting specific aspects of care, such as the overuse of emergency
department services. Maine's Physician Incentive Program ties 30 percent
of a performance bonus to emergency department utilization measures.
o
Few state Medicaid programs have conducted
formal evaluations of their programs.
Measures and Incentives
Measures (the performance standards) and incentives (the ways in which
states reward providers for good performance) used in state Medicaid
programs vary widely. Some programs include as few as one or two
measures, while others include 10 or more. The complexity and number of
incentives used in programs also vary, though not as substantially.
Nonetheless, there are several commonalities and trends:
·
Medicaid directors reported that they
select measures for their pay-for-performance programs that they feel
are best suited to address their specific improvement goals. It is
important to them that measures are scientifically sound, feasible to
collect, and regularly reviewed and updated.
·
This study characterized the measures used
in state Medicaid pay-for-performance programs into five types: Health
Plan Employer Data and Information Set (HEDIS) and HEDIS-like measures;
structural measures; cost/efficiency measures; measures based on patient
experiences; and measures based on medical records. Using this
categorization, the most commonly used measures in existing programs are
HEDIS and HEDIS-like measures, followed by structural measures. Few
programs use measures based on medical records, or review medical
records in conjunction with other types of measures.
·
The most common assessment methodologies in
existing programs are attainment of a specified level of performance and
degree of improvement. This continues to be the case with planned
programs. Yet, in an effort to address shortcomings in each of these
separate approaches, more than 40 percent of new programs are planning
to include assessment methodologies that combine attainment and
improvement goals for the same measures. To ensure a basic level of
attainment is reached, Nevada established a bottom level of performance,
beneath which no incentive payment is provided. Massachusetts is
considering using incentives to reward attainment of specified levels of
performance as well as improvement.
·
This study characterized incentives into
six types: bonuses; differential reimbursement rates or fees; penalties;
auto-assignment of beneficiaries to a plan or provider; withholds; and
grants.
While not technically a financial incentive, auto-assignment is included
as a pay-for-performance incentive because it drives market share and,
therefore, compensation. Most Medicaid directors said that bonuses and
differential reimbursement are the most effective types of incentives,
and the types of incentives planned for new programs are consistent with
this assessment.
In existing programs, penalties are the second most common type of
incentive. Medicaid directors thought that penalties were the least
effective incentive and, in fact, could be detrimental to a
pay-for-performance program. Only two new programs are currently
planning to include penalties.
·
A few states are offering grants rather
than performance-based pay. New York is offering five grants for
pay-for-performance demonstration projects, while Pennsylvania allows
hospitals to compete for grants to support quality-related investments.
·
Many pay-for-performance programs include
non-financial incentives in addition to financial incentives. The most
common of these is public reporting of performance.
·
Some states are directly emphasizing
physician performance—both primary care providers and specialists—in
their pay-for-performance programs. Primary care case management
programs in several states, among them Alabama, Louisiana, and
Pennsylvania, provide incentives directly to participating providers.
·
Medicaid directors raised concerns about
the potential unintended consequences of pay-for-performance programs.
In particular, they feared that: providers might steer beneficiaries
with complicated conditions away from their practices; providers might
decide to leave the Medicaid program if the wrong kinds of incentives
(primarily penalties) were included; and mandatory participation in
pay-for-performance might, in and of itself, result in providers leaving
the program.
Conclusions
Medicaid directors and their staffs generally report positive feedback
on their pay-for-performance programs and believe that the overall
quality of care being provided is improving, although they have mixed
opinions about cost savings resulting from the programs.
Directors are considering changing some of the measures,
incentives, and even the data collection strategies to improve their
existing programs and to shape planned programs. Overall, they believe
that pay-for-performance is adding to their repertoire of tools to
improve the care provided to their Medicaid populations.
As state governments and other stakeholders move forward
with pay-for-performance activities, several challenges will need to be
addressed. For example, the growing trend toward collaboration among
health care purchasers and other stakeholders may present competing
priorities. Medicaid programs will need to consider the particular needs
in their own states—including ensuring access to care, promoting
high-quality prenatal and postpartum care, and addressing the needs of
beneficiaries with chronic conditions—as well as broader community and
national standards. The expansion of HIT will provide opportunities for
more precise and comprehensive measurement and more efficient data
collection, making it easier to satisfy the demands of all stakeholders.
Ultimately, the biggest challenge facing both state
Medicaid P4P programs, and those operated under other auspices, is to
determine their effectiveness. Given that individuals change providers
and may lose coverage altogether, and that standards of care change over
time, this is difficult to do in any environment. However, Medicaid
programs operate in a public setting. To the extent that Medicaid
directors believe that pay-for-performance is improving care and
reducing inappropriate spending, it is important that quantifiable and
reliable results are available to demonstrate the value of continuing
the financial investment that states are making in these programs.
Citation
K. Kuhmerker and T. Hartman, Pay-for-Performance in State
Medicaid Programs: A Survey of State Medicaid Directors and Programs,
The Commonwealth Fund, April 2007
>>
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