Performance Based Health Care Provider Payments

Performance-Based Health Care Provider Payments- Health Cost Containment

Updated March 2015

Cost Containment header

The following NCSL Issue brief has been distributed to legislators and legislative staff across the country.

Performance-Based Health Care Provider Payments- PDF File
Colorado Supplement: Performance-Based Health Care Provider PaymentsPDF File
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Cost Containment Strategy and Logic

Pay-for-performance is a system of payment that rewards health care plans and providers for achieving or exceeding preestablished benchmarks for quality of care, health results and/or efficiency. Pay-for-performance is most often used to encourage providers to follow recommended guidelines or meet treatment goals for high-cost conditions (e.g., heart disease) or preventive care (e.g., immunizations). A physician might, for example, receive a year-end $25 bonus for every 2-year-old on the physician’s panel if at least 80 percent have received recommended immunizations. A hospital may receive a performance payment for reducing the rate of avoidable hospital readmissions or ensuring that patients receive appropriate discharge medications. Performance awards can take many forms, including bonuses, enhanced fee schedules and more enrollees directed to high-performing providers and health plans.

Summary of Health Cost Containment and Efficiency Strategies - Brief #6- Performance-Based Health Care Provider Payments
State/Private Sector Examples  Strategy Description Target of Cost Containment Evidence of Effect on Costs
Maryland, Minnesota, Medicaid programs, Bridges to Excellence Payments to providers for
meeting preestablished health
status, efficiency and/or quality
benchmarks for a group of patients.
Providers not financially rewarded for providing efficient, effective preventive and chronic care.
Unnecessary care.
Research is limited and indicates some
improvements in quality of care but little effect on costs.

Additional Resources
  Pay for Performance logo

About this project

NCSL’s Health Cost Containment and Efficiency Series will describe two dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher. 

NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado.

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