Pay for Performance (Risk-based Managed Care)

A state client spends in excess of $1 billion annually on capitation payments to multiple Medicaid managed care organizations (MCOs). As rate negotiations and the end of the contract term approached, the state saw an opportunity to hold its MCO partners accountable for the health outcomes they generate for members and focus them on state health priorities – improved preventive care for adults and children, behavioral health outcomes, chronic disease management, and pre-natal/post-partum care. Several contract changes were needed to account for rebasing rates and restructuring the pharmacy benefit. The state asked Ikaso to help develop negotiations strategies and facilitate the negotiations.

Our Approach

Ikaso managed the project team, which included state policy team members, human services executives, actuaries, budget forecasters, and stakeholders, to run contract negotiations with the MCOs. The result was a performance-based payment system to reward vendors for strong performance on a robust suite of HEDIS and other accountability standards, to prevent "backsliding" in areas that were already strong, and to work toward goals specific to this particular client. Over the course of several months, we provided project oversight and procurement expertise, facilitating critical contract processes under tight timeframes.

Project Results

  • Contracts incorporated diverse stakeholder feedback and goals
  • Payment aligned with state health priorities
  • Performance-based capitation withholds released for meeting performance goals
  • Bonus funds for selected measures, including appropriate medication for use and prescribing patterns, prenatal, and post-partum care
  • Money tied to timely and complete data submissions