Alliance of Community Health Plans Issues Principles For Medicare “Payment-For-Performance” Legislation

WASHINGTON, D.C. – The Alliance of Community Health Plans (ACHP) today issued four principles for policies that encourage health care quality improvement by paying plans and providers in Medicare based on their performance.

The principles, which will be used to further develop U.S. Senator Max Baucus’s (D-MT) new payment-for-performance legislation, address key questions pertaining to the eligibility, incentives, measures, and financing of a payment-for-performance system in Medicare:

  1. A payment-for-performance system should eventually apply to all providers in Medicare.  It should begin with all Medicare Advantage plans, including HMOs and PPOs.
  2. The system should base incentives on standards of excellence and improvement.
  1. In the long term, measures to evaluate both fee-for-service Medicare and Medicare Advantage plans should be developed.  In the short term, incentives should be based on existing measures and should emphasize clinical effectiveness indicators.
  2. The system should be financed with a new, dedicated stream of funding in order to assure sustainable, successful implementation.

“I applaud Senator Baucus for his leadership and look forward to working with him on this important issue, ” said Jack Ebeler, president and CEO of ACHP.  “We hope this legislation furthers the pay-for-performance debate in Congress.”

ACHP will work with Senator Baucus and other congressional leaders to develop elements of the legislation that are important to payment for quality and consistent with its principles.  These include starting the effort with Medicare Advantage plans, including incentives for both performance and performance improvement, and using existing performance measures and Institute of Medicine (IOM) and MedPAC recommendations to develop new measures.

ACHP is seeking revisions to the bill’s financing and eligibility provisions.  Performance improvement requires a new, dedicated stream of funding to encourage and support health care plans and providers to be successful and sustainable.  A system that withholds payments to health plans and providers to finance itself is an inappropriate appropriate mechanism to promote the substantial changes in care that patients deserve.

Payment-for-performance legislation should also phase in comparable pay-for-performance approaches across all of Medicare, according to ACHP.  It is appropriate to start the program with Medicare Advantage plans, because they have a history of reporting and accountability for performance that does not exist in the rest of health care.

“Our principles are grounded in years of collective experience in quality improvement,” Ebeler continued.  “ACHP health plans and provider organizations subject themselves to intense scrutiny and publicly report measures of quality.  We look forward to leveraging our experience to deliver a system that betters health care for all patients.”

ACHP’s principles come at a time of increased, bipartisan interest in pay-for-performance proposals and growing recognition that stronger measures are needed to encourage investment in quality improvement.  MedPAC has recommended that Medicare incorporate payment-for-performance incentives.

As part of the Medicare Modernization Act of 2003 (MMA), the IOM will evaluate leading performance measures used in the public and private sectors and offer policy options for creating a payment-for-performance system in Medicare.

Senator Baucus’ legislation is not the first proposal to address health care quality improvement.  In 2003, Representative Jennifer Dunn (R-WA) introduced H.R. 2033, the Medicare Equity and Access Act, which included the IOM performance measures evaluation.  This provision was incorporated into the final version of the MMA.

ACHP believes that paying plans and providers for-performance in Medicare will stimulate quality improvement efforts by private payers across the health care system. 

ACHP’s “Four Principles for ‘Payment-for-Performance’ in Medicare” and a summary of the payment-for-performance section of the Baucus legislation are available at or by
e-mail request to

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The Alliance of Community Health Plans (ACHP) brings together a select group of innovative, not-for-profit or provider-sponsored health plans and provider organizations focused on improving health care quality in the United States.  ACHP offers member plans a forum for learning, innovation and advocacy that allows them to promote the highest standards of health care quality and health improvement in their communities and nationally.  Additional information is available at

ACHP Members:

Capital Health Plan (Tallahassee, Florida); Fallon Community Health Plan (Worcester, Massachusetts); Group Health Cooperative of South Central Wisconsin (Madison, Wisconsin); Group Health Cooperative (Seattle, Washington); Health Alliance Plan (Detroit, Michigan); HIP Health Plan of New York (New York, New York); HealthPartners (Minneapolis, Minnesota); Kaiser Foundation Health Plans and The Permanente Federation (Oakland, California and multi-state); M·Plan (Indianapolis, Indiana); UCare Minnesota (Minneapolis, Minnesota); Excellus-Univera Healthcare (Buffalo, New York); UPMC Health Plan (Pittsburgh, PA)