Within both private and public insurance programs, there are trends in strategies that attempt to optimize health outcomes while containing costs. Private sector initiatives dominate; however, many of these same strategies have been implemented within Medicaid managed care and SCHIP programs in various ways.

Pay for Performance

The new shift to a consumer-driven focus, the increasing availability of quality performance data, and a renewed focus on achieving measurable quality improvement have spurred a renewed focus on using financial incentives to reward providers delivering higher quality care. Incentive arrangements target a mix of process and structural measures, with a smaller role for patient satisfaction measures. One study identified 37 pay-for-performance initiatives nationally. Current initiatives are varied in focus, ranging from programs centered around process measures, such as the Health Plan Employer Data and Information Set diabetes or mammogram screening, to patient experience measures, clinical outcome measures, such as complications or mortality, or structural measures, such as the Leapfrog measures for hospitals or information systems to track chronically ill patients. The three largest pay-for-performance initiatives are the Integrated Healthcare Association (IHA) initiative, the Bridges to Excellence program, and the Leapfrog Group. IHA includes seven large plans that represent 60% of the California market. Bridges to Excellence is a multilateral effort that is backed by group of large employers to offer financial incentives for physicians to improve health-care quality in several target markets (ie, Boston, Cincinnati/Louisville, and Albany/ Schenectady). IHA and Bridges to Excellence are part of the $8.8 million Rewarding Results program, which is jointly funded by The Robert Wood Johnson Foundation and the California Healthcare Foundation, with additional funding from the Commonwealth Fund. The Leapfrog Group is focused on improving patient safety by encouraging participating employers to reward hospitals that implement three selected safety measures (ie, computer physician order entry, evidence-based hospital referral, and ICU physician staffing).

There is some evidence that such incentives are affecting provider performance, Anthem Blue Cross and Blue Shield in New Hampshire, for example, which represents > 40% of the New Hampshire market, provided tiered financial incentives to providers (eg, those ranking in the top 25% of the network for a specific quality measure) based on performance for a number of Health Plan Employer Data and Information Set quality measures. Bonus payments to individual physicians ranged from $1,183 to > $15,000. Significant improvements in quality performance were realized. Immunization rates nearly tripled in 1 year, from 21% in 1991 to 58.5% in 2000, although a systematic study of the impact of pay for performance on health outcomes has yet to be conducted.

disease managementPlans are also beginning to use patient incentives, particularly within employer-sponsored health plans. Since 1996, the percentage of companies offering consumers financial incentive/disincentive programs increased from 34 to 42%. By 2004, 10% of companies provided incentives for at-risk individuals to participate in condition-management programs or to comply with recommended therapies, with a heavy focus on prescription drugs.

Disease Management

Another major strategy to improve the quality of care while controlling costs has been disease-management (DM) programs. In the 1990s, DM programs emerged as a population-based approach. In population-based programs,

“practitioners accept responsibility for the health outcomes and utilization of all members of a targeted group [such as health plan enrollees with a triggering diagnosis]

and not just individuals who seek treatment during a given period to identify persons at risk, to intervene with specific programs of care, and to measure clinical and other outcomes, particularly for patients with chronic conditions in which patient self-management plays a large role.

The most popular consumer incentive is reduced or waived copayments for mail-order prescriptions (17%). Other popular approaches include reducing costs for drugs to treat targeted conditions (8%), supporting upfront incentives for high-risk employees (4%), and supporting lower annual premiums to participants (4%). In 2005, of the 83% of companies that used DM programs, 30% of these companies offered incentives to encourage employee participation in wellness programs. DM or care-management programs have also begun to proliferate among Medicaid programs. In FY 2005, the number of states that developed new or expanded DM programs totaled 26. For FY 2006, 25 states reported plans to either pilot a new program or expand existing pro-grams.

Many states have chosen pharmaceutical management as their population-based DM focus due to the dramatic increases in prescription drug costs. Others have entered into multiple-disease arrangements with DM organizations. Such programs are largely driven by guaranteed costs savings, with perhaps 20% of financial incentives tied to clinical indicators. States are still experimenting in search of optimal models. North Carolina, for example, started with adding a targeted asthma initiative and later added diabetes on to its primary care case management program, paying primary care physicians an additional increment for disease management.

This program reported success in terms of both clinical indicators and cost.

The Virginia Health Outcomes Partnership, which provided training to physicians in the Medicaid primary care case management program to better manage asthma care saved the state > $659 per physician trained; nevertheless, the state opted to shift to an outsourced population-based DM model that focused on pharmaceutical management because it was simpler and cheaper to administer.
Electronic health recordInformation Technology and Electronic Health Records

Attention to and investment in information technology (IT) and electronic health records (EHRs) has been increasing in the past few years in both the public and private sectors. For example, Kaiser Permanente committed $1.8 billion to the implementation of its EHR system in 2003. The Veterans Health Administration Computerized Patient Record System was released in 1997 and is now used at > 1,300 sites, while the Department of Defense Composite Health Care System II project, to be implemented at 100 hospitals and 500 clinics, is scheduled for completion by 2006. To date, Medicaid programs have not been central players in the IT phenomenon, although some states are becoming more involved in IT initiatives. A national survey of physician organizations found clinical IT most strongly associated with the use of care-management strategies. An asthma-specific initiative, which followed Medicaid-insured children with asthma in 85 practice sites in five health plans across three states, found IT systems to be the single most deficient area among all processes of care for asthma.

A recent study of health IT adoption among community health centers found that health centers serving the greatest number of poor and uninsured were significantly less likely to have an electronic medical record. Given the importance of health IT capacity in effectively managing patient care, slower health IT adoption among providers that serve disproportionately low-income and minority patients may exacerbate health disparities.


Dr. Douglas Goldberg, MD is a Cardiology Specialist in Mineola, NY. He is affiliated with medical facilities Nyu Winthrop Hospital and Mercy Medical Center.