Medicaid P4P Quality

P4P in Medicaid

Does Medicaid use pay-for-performance (P4P) for providers?  If so, how does it work?  And does it affect quality and cost?

These are the questions of interest to Rosenthal et al. (2015) in their study of P4P programs in Alabama, Minnesota, and Pennsylvania.  Although all three focus on physicians, the Alabama program is a medical homestructural incentive and shared savings model; Minnesota rewards intermediate health outcomes in two different ways for fee-for-service and managed care; and Pennsylvania rewards collaboration with disease management and management of chronically ill patients based on process measures of quality.  I describe each of the programs below.


The Pennsylvania Office of Medical Assistance Programs (OMAP) purchases services through contracts with managed care organizations, an enhanced PCCM [primary care case management] vendor and under a traditional, fee-for-service system for nearly 1.8 million Pennsylvania residents…In Pennsylvania, managed care is mandatory in urban counties where HMOs serving Medicaid are relatively plentiful and voluntary where there are few HMOs…Since 2000, OMAP has published a report card that compares Medicaid HealthChoices managed care plans on HEDIS and CAHPS results…

Payment incentives in Pennsylvania are at the physician level and focus on two separate goals support of chronic disease management and optimal chronic care (see Table 1). Providers have a variety of incentives to enroll patients in disease management. There are also incentives for delivering optimal treatment, measured by HEDIS process of care measures: beta blockers for patients with CHF, aspirin for patients with diabetes and CAD, a controller medication for patients with asthma, and LDL for patients with diabetes.

In this program, practitioners receive a variety of payments include a one-time $200 payment to support the program, $30 to provide patient contact information to the PCCM vendor, $40 to identify candidates for disease management, and $60 for completing a chronic care feedback form and care plan. Physicians are also rewarded for varies HEDIS measures such as beta blockers for CHF, aspirin for diabetes and CAD, a controller medication for asthma, LDL for diabetes.

Beginning in July of 2006, Minnesota’s Department of Human Services worked with private employers to customize the Bridges to Excellence (BTE) Diabetes Care link for the managed care population. Payments based on these quality measures were incorporated in 2007. Although BTE is a program, the BTE program
BTE in Minnesota, however, is a customized program that utilizes existing Minnesota-based infrastructure. The main performance measure for the BTE program is a composite measure of 5 diabetes metrics: these include 1) HbA1c ≤7.0%; (2) blood pressure <130/80 mmHg; (3) LDL < 100 mg/dl; (4) daily aspirin use for patients aged 41–75; and (5) avoidance of tobacco. Patients have to meet all 5 criteria in order for Minnesota Medicaid to consider that they have received optimal diabetes care. Providers receive $100 for every patient who reaches this benchmark.

Starting in 2005, Alabama began paying providers a fee to serve as patient’s medical home and also enacted a shared savings program. Providers in the program could keep 50% of any savings generated by primary care physicians activity along three dimensions: (i) generic medication use, (ii) emergency department utilization, and (iii) number of office visits. In addition, providers are evaluated based on a measure of efficiency which is actual charges compared to expected charges based on their patient’s demographics and health status.

Shared savings are allocated based on how physicians score on the performance and efficiency metrics relative to their peers. Physicians ranking in the lowest quartile overall are ineligible for shared savings payments.

Using a difference-in-difference structure that compares each of these states to a nearby state without P4P, the authors find the following:

In Pennsylvania, there was a statistically significant reduction of 88 ambulatory visits per 1,000 enrollee months compared with Florida. In Minnesota, there was a significant decrease of 7.2 hospital admissions per thousand enrollee months compared with Wisconsin. In Alabama, where incentives were not paid out until the end of a 2-year waiver period, there was a decline of 1.6 hospital admissions per thousand member months, and an increase of 59 ambulatory visits per 1,000 enrollees compared with Georgia. No significant quality improvements in intervention relative to control states.

To summarize, no improvements in quality were found but there was mixed evidence of reduced hospital use.


Why is Medicaid a unique setting relative to patients that are insured by Medicare or commercial organizations?  This article gives three key reasons:

  1. Patients are more likely to be poor and have below average health status
  2. There is a significant amount of turnover in insurance coverage;  20% 40% of Medicaid beneficiaries fail to reenroll the following year (Merrill and Rosenbach 2006)

  3. Medicaid reimbursement rates are typically much lower than Medicare or commercially insured causing issues related to access.  Further, “among physicians who have at least one Medicaid patient, about 60 percent derive less than 20 percent of their practice revenue from Medicaid patients.”


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