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Physician Pay-for-Performance in Medicaid: A Guide for States

Physician Pay-for-Performance in Medicaid: A Guide for States, developed by the Center for Health Care Strategies (CHCS), offers actionable steps to help states design and implement physician-level pay-for-performance strategies. The guide describes practical lessons from a variety of Medicaid, commercial, and Medicare pay-for-performance programs—and outlines 10 financial, and six non-financial, models of physician rewards that states can consider in the design of such programs for physicians who participate in Medicaid.

The Issue: Over the past several years, pay-for-performance programs have emerged as a promising strategy to improve the quality and cost-effectiveness of care for Medicaid and State Children's Health Insurance Program members. State purchasers and managed care plans across the country are using both physician reimbursement and non-monetary rewards to achieve these goals. Representing a total covered population of about 47 million Americans, Medicaid programs have an opportunity to play a leadership role in testing the viability of physician-level pay-for-performance strategies to improve health care quality for low-income, racially diverse, and chronically ill individuals.

Target Audience: State Medicaid agencies

The Intervention: During the summer of 2006, CHCS conducted a 50-state survey, funded by The Commonwealth Fund and the Robert Wood Johnson Foundation, to identify innovative practices in the reimbursement of high-quality health care in the public sector. Based on the survey's most promising responses, CHCS and Bailit Health Purchasing conducted 12 interviews with Medicaid agency officials from across the country, representatives from the Centers for Medicare and Medicaid Services, and other experts in health care financing. They also reviewed recent findings on various pay-for-performance initiatives in the public and private sectors.

This resulting guide for states offers lessons to help in the development of successful Medicaid pay-for-performance strategies at the physician level. The guide is designed to help state Medicaid agencies address the following questions:

  1. What is pay-for-performance?
  2. How does a state get started designing a physician pay-for-performance program?
  3. What are the different incentive models?
  4. Which incentives are best suited to the target audience?
  5. What performance measures and data should be used?
  6. What are the best ways to engage physicians?
  7. How does a budget-conscious state finance a Medicaid physician pay-for-performance initiative?
  8. What regulatory issues are unique to Medicaid physician pay-for-performance initiatives?
  9. What can states learn from Medicare's experience with its physician pay-for-performance demonstration?
  10. What can states learn from leading commercial-sector pay-for-performance initiatives for physicians?

The guide delves into the issues each of these questions. For example, it offers detailed information about choosing between financial incentives and non-financial incentives, such as public reporting, recognition, technical support, and new member referrals. The guide describes approaches already undertaken by certain states, such as Massachusetts, which makes public profiles of large provider practices. It also offers information and guidance on selecting performance measures and collection dates, how best to engage physicians in the design of the incentive programs, and more.

For More Information: The complete guide is available on the Center for Health Care Strategies Web site at

April 2007