Fiscal Fitness: How States Cope
Survey: More states getting into P4P
More than half of state Medicaid programs now operate one or more pay-for-performance (P4P) programs and nearly 85% expect to be doing so within the next five years. That's one of the key findings of a Commonwealth Fund survey of state Medicaid programs focusing specifically on P4P. The report by Kathryn Kuhmerker, a former New York State Medicaid director who now heads The Kuhmerker Consulting Group, and Thomas Hartman, vice president for health care quality improvement for IPRO, a New York State health care quality assessment and improvement organization, outlines the most common measures and incentives, discusses evaluation and reporting approaches, and provides detailed descriptions of each of the P4P programs.
The authors note that Medicaid is not a new entrant into the field of P4P, since almost half of all existing programs are more than 5 years old. A similar percentage of programs began within the last two years, and more than 70% of planned new programs are expected to start within the next two years.
Some 70% of existing Medicaid P4P programs operate in managed care or primary care case management (PCCM) environments, focusing on health care for children, adolescents, and women. While planned programs still focus on managed care and PCCM providers, the report says, they appear to shift their emphasis to environments in which quality and cost issues related to chronic disease management can be better targeted. Rewards for providing primary care continue to be a component in the vast majority of Medicaid P4P programs.
Trends noted by the authors in planned new programs include:
- Nine Medicaid programs are joining with other payers, employers, consumers, and providers in statewide and regional P4P and quality improvement efforts. Thus, the Oregon Health Care Quality Corp., involving state government, health plans, medical groups, insurers, purchasers, and consumers, is working to incorporate standardized performance measures into their P4P activities. Several Medicaid directors in other states have expressed an interest and willingness to join such efforts.
- Health information technology is a focus of numerous Medicaid P4P programs. Several Medicaid programs pay for "participation," rather than "performance," in an effort to encourage providers to adopt electronic health records, electronic prescribing, and other technologies.
- Several Medicaid directors expressed concern to the researchers that P4P activities might impinge on beneficiaries' access to care by causing providers to leave the Medicaid program or limit the number of Medicaid beneficiaries served in their practices. That concern shapes some of the approaches taken in P4P programs, particularly in states with large rural or sparsely populated areas. Thus, South Carolina offers increased reimbursement to providers who agree to establish a medical home for Medicaid beneficiaries.
- The vast majority of Medicaid directors reported that their priority in operating P4P programs is to improve quality of care rather than to reduce costs. Some states target specific aspects of care, such as overuse of emergency department services. Maine's Physician Incentive Program ties 30% of a performance bonus to emergency department utilization measures.
- Few state Medicaid programs have conducted formal evaluations of their programs, a lack that the authors cite as a key problem needing to be addressed.
The survey results indicate that measures (performance standards) and incentives (ways in which states reward providers for good performance) used in state Medicaid programs vary widely. Some programs cover as few as one or two measures, while others have 10 or more. While the complexity and number of incentives used in programs also vary, although not as substantially as measures, the authors still found several commonalities and trends, such as:
- Medicaid directors said they select measures for their P4P programs that they believe are best suited to address their specific improvement goals, making sure measures are scientifically sound, feasible to collect, and regularly reviewed and updated.
- Five types of measures were identified in state Medicaid P4P programs: HEDIS and HEDIS-like measures; structural measures; cost/efficiency measures; measures based on patient experiences; and measures based on medical records. The most commonly used measures are HEDIS and HEDIS-like measures, followed by structural measures.
- The most common assessment methodologies in existing programs are attainment of a specified level of performance and degree of improvement. In an effort to address shortcomings seen in each of these separate approaches, more than 40% of new programs are planning to include assessment methodologies that combine attainment and improvement goals for the same measures. Thus, to ensure that a basic level of attainment is reached, Nevada established a bottom level for performance, beneath which no incentive payment is provided, and Massachusetts is considering using incentives to reward attainment of specified levels of performance as well as improvement.
- The study identified six types of incentives: bonuses, differential reimbursement rates or fees, penalties, auto-assignment of beneficiaries to a plan provider, withholds, and grants. Most Medicaid directors said that bonuses and differential reimbursement are the most effective incentive types, and the types of incentives planned for new programs are consistent with that assessment. In existing programs, penalties are the second most common type of incentive. Medicaid directors told the researchers that penalties are the least effective incentive and 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 P4P demonstration projects, while Pennsylvania allows hospitals to compete for grants to support quality-related improvements.
- Many P4P programs included nonfinancial incentives in addition to financial incentives. The most common is public reporting of performance.
- Some states are directly emphasizing physician performance—both primary care and specialist care—in their P4P programs. Primary care case management programs in Alabama, Louisiana, and Pennsylvania provide incentives directly to participating providers.
Medicaid directors told the authors they are concerned about potential unintended consequences of P4P programs. In particular, they fear that providers might steer beneficiaries with complicated conditions away from their practices; providers might decide to leave Medicaid if the wrong kinds of incentives (primarily penalties) were included, and mandatory participation in P4P might result in providers leaving the program.
The authors say Medicaid directors and their staffs generally report positive feedback on their P4P programs and believe that the overall quality of care being provided is improving, although they have mixed opinions about cost savings resulting from the program.
Challenges in moving forward
As state governments and other stakeholders move forward with P4P activities, they say, several challenges will need to be addressed. The growing trend toward collaboration among health care purchasers and other stakeholders may present competing priorities. Medicaid programs, they say, 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. Health information technology expansion will provide opportunities for more precise and comprehensive measurement and more efficient data collection, making it easier to satisfy demands of all stakeholders.
But they say 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, it is difficult to do in any environment. However, they say, Medicaid programs operate in a public setting. To the extent that Medicaid directors believe that P4P 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 investments that states are making in these programs.
Mr. Hartman tells State Health Watch that states are often hampered by a lack of funding for evaluation of programs. "Most Medicaid officials want to provide services," he says, and use their available funds for that purpose.
"Officials want to get their programs up and running," Ms. Kuhmerker says. "There's usually no money for evaluation. And it's hard to design an evaluation that has real validity. So many people move in and out of the programs, and it's hard to know what to use as a control group and what to measure."
CMS should emphasize evaluation
She says an emphasis on evaluation by the Centers for Medicare & Medicaid Services would be helpful, as would a demand by state legislators for evaluation.
"There hasn't been a lot of rigid evaluation generally," she says. "Most managed care programs do the same thing because it's not clear how you evaluate a holistic change in the kinds of care provided. It's hard to know what causes the change. It's very hard to assess the overall effect on health care."
Ms. Kuhmerker says she hopes states will learn from the survey some of the trends for new programs that are really important, such as working with other providers and stakeholders. The multi-payer model is most likely to affect provider behavior, she says. Also, anything to make P4P less fragmented would be advantageous.
The big issue for including information technology, she says, is to get information to and from providers and to payers so the providers can be rewarded. P4P has the greatest impact, she says, when information moves back and forth quickly and rewards are closely tied to activity.
Managed care is the usual starting place for P4P, according to Ms. Kuhmerker, but that's generally where the more healthy people are, and they're not the ones responsible for significant Medicaid expenditures. Medicaid spends most of its money on chronic care and behavioral health, and that's where P4P needs to move, she says.
Good next steps, Mr. Hartman tells SHW, would be for more Medicaid collaboration with other payers, and a greater and better use of information technology in data collection and analysis. Ms. Kuhmerker also spoke of the need for greater collaboration and says it will be important to get into outcomes, although how to get there still isn't clear.
The report is available from the Commonwealth Fund on-line at www.commonwealthfund.org/publications/publications_show.htm?doc_id=472891. E-mail Ms. Kuhmerker at [email protected] or telephone (518) 372-9051.
More than half of state Medicaid programs now operate one or more pay-for-performance (P4P) programs and nearly 85% expect to be doing so within the next five years.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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