Government News
State Medicaid Officials Open to P4P Plans
Psychiatric News
Volume 41 Number 24 page 11-28

An understanding that pay-for-performance (P4P) initiatives are not a" magic bullet" to reduce costs and improve quality and the realization that patients with mental illness may be successfully treated in managed care settings were among recent conclusions arrived at by state Medicaid officials.

Several of these officials discussed their experiences with P4P and managed care programs during a November conference of the National Association of State Medicaid Directors in Washington, D.C.

P4P programs provide payment incentives to physicians based on performance measures instead of the quantity of care. Officials from several state Medicaid programs that have begun to use P4P measures said that approach is only one tool among many to improve quality.

Early assessments of the New York Medicaid program's P4P demonstration projects, for example, have found quality improvements, but it remains unclear how much those improvements were driven by the P4P measures, according to Foster Gesten, M.D., medical director of the Office of Managed Care for the New York State Department of Health.

"We hope that these demonstrations can help us create a more durable model," Gesten said about the P4P impact on price and quality.

Gesten noted that P4P alone "is not transformative," and funds also are needed for efforts that include upgraded health-information technology and disease-management programs.

Many physicians have raised concerns about P4P programs, in part, over the validity of the performance measures they use and the source of performance-based pay increases in the tight budget environment affecting most aspects of health care (see page 6).


Gesten credited the "overwhelmingly" positive response of physicians to the New York program, which used $20 million in quality incentives, to the program's use of noncontroversial measures developed with input from physicians over several years. These measures included regular screenings for breast cancer and cervical cancer, dilated-eye exams in diabetes care, and heightened focus on controlling high blood pressure.

The program did not face the strong opposition some P4P plans do" because it didn't come out of thin air," Gesten said, since measures had shown their effectiveness long before the P4P program began.

David Kelley, M.D., chief medical officer in the Office of Medical Assistance Programs in the Pennsylvania Department of Public Welfare, also said his state Medicaid program designed its P4P initiatives to gain the highest level of physician support possible. To that end, the three P4P pilot programs implemented in the last two years avoided relative scales and scoring that publicly compared outcomes for physicians' patients. They also provided timely financial rewards to physicians and avoided penalizing them when patients were noncompliant with treatment.

The programs were designed with financial rewards for all participating physicians in the first year and stricter performance standards in subsequent years. Another hallmark of the Pennsylvania approach was the use of clear rewards for tasks performed, such as additional $40 payments for each" high-risk" patient treated and an appeals process for physicians.

"We chose simple widgets to avoid controversy," kelley said." You either did something or you didn't do something."


The Pennsylvania program sought to increase disease management through steps that included, for example, rewarding physicians who submitted chroniccare feedback forms to program administrators. The forms tracked the ways in which participating physicians treated chronic-care patients. Kelly credited this approach with the early indications that chronic health conditions have improved in patients of participating physicians. Clinicians have not been universally supportive of the methodology used to develop the program, and they remain split over whether Medicaid should improve quality through performance rewards or benchmarks, Kelley said.

Mike Leavitt, secretary of Health and Human Services, told attendees that the federal government is committed to moving public and private health care systems toward making health care quality and pricing information publicly available. Before President Bush leaves office, Leavitt said, price and quality information for a "limited number of procedures and conditions" will be available to the public, and in 10 years that same information will be "ubiquitous."


Although the most effective design for a P4P program remains unclear, Medicaid officials said that managed care programs have been the entities most aggressively pursuing cost-control efforts.

The impact of managed care Medicaid programs on beneficiaries with mental illness and other chronic health conditions also was discussed by state health officials. They acknowledged that Medicaid's growing use of managed care for patients with chronic health conditions (Medicaid has long used managed care for patients with acute conditions) has been controversial and that it requires a special approach when mental illness is involved.

The New York and Ohio Medicaid programs have carveouts for mental health care that largely exempt mental health care beneficiaries from the programs' standard managed care requirements. The Wisconsin program opted to allow enrollment for all beneficiaries with "chronic mental illness," although a small number of mental health services provided by counties were carved out and exempted from managed care.

"We worked with advocates to put safeguards in place, and it has been pretty successful because of that," said Angie Dombrowicki, director of the Wisconsin Bureau of Managed Health Care Programs, about special measures, such as ensuring that beneficiaries with mental illness have access to the same medicines they were prescribed before entering Medicaid managed care.

Early measures tracking the efficacy of managed care for enrollees with mental illness and other chronic health conditions have found improved health overall and "great improvement in some conditions, such as diabetes," she said. The Medicaid chronic health care program—launched in 2004—was designed to improve overall patient health through the use of "case managers" to improve access to needed medical care and educate consumers about their illness.

New York and Ohio also are planning to move beneficiaries with mental illness from fee-for-service programs into their managed care approach. Ohio officials have developed implementation plans to avoid disruptions in the drug regimens of enrollees with serious mental illness, said Jon Barley, Ph.D., Ohio Bureau Chief of Managed Health Care. One aspect of the Ohio managed care plan would ensure that no prior authorization is needed for prescriptions of atypical antipsychotic medications.

In New York the huge treatment costs for Medicaid beneficiaries with serious and persistent mental illness have made their inclusion in the state's managed care program inevitable, said Karen Kalaijian, director of Program Implementation in the New York Health Department.

More information on the conference is posted at<www.nasmd.org/conf/conf.htm>.

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