Value-Based Care

Health care experts see fee-for-service payment models to incentivize volume of services and not necessarily to promote their quality. The current health care quality strategy is moving away from evaluating and compensating health care providers based on the volume of services delivered, to that based on the value of care they provide. Consequently, the state's contract with Medicaid managed care organizations (MCOs) and dental maintenance organizations (DMOs) requires these entities to develop alternative payment models (APMs) between them and their health care providers to encourage innovation, quality improvement and efficiency. The goal is to focus on quality of care and not on volume, within a value-based care (VBC) and associated value-based payment (VBP) system.


Since 2012, the Health and Human Services Commission (HHSC) has required that each MCO and DMO submit an annual report on its APM contracts and activities with their providers for HHSC information and planning purposes. HHSC instituted a meaningful change for calendar year (CY) 2017, when it added to the managed care contracts two types of APM targets that MCOs and DMOs must meet every year. Starting with CY 2018, 25% of the MCO’s and DMO’s payments to providers must be APMs, increasing to 50% by 2021, for each MCO by program type (STAR, STAR+PLUS, STAR Health, STAR Kids and CHIP), and DMO by main programs (Medicaid and CHIP), with certain exceptions. A portion of these APMs is required to include downside financial risk for providers, starting with 10% of MCO payments and 2% for DMO payments in 2018 and increasing to 25% and 10%, respectively, by 2021, with certain exceptions.

HHSC also included contractual requirements that the MCOs and DMOs resource their VBP activities, by establishing and maintaining data-sharing processes with providers, developing Provider Performance Reports and dedicating resources to evaluating the impact of APMs on utilization, quality and cost.

HHSC uses the nationally recognized Healthcare Payment Learning and Action Network (HCP LAN) APM Framework (PDF) to guide this effort and to align definitions. This framework describes a range of APM concepts, encompassing varying degrees of risk on providers.

MCO Requirement for Value-Based Contracting

The provision related to APMs for providers is outlined in the HHSC’s Uniform Managed Care Contract (PDF), Section "MCO Alternative Payment Models with Providers." The MCOs are required to submit annual reports to HHSC, outlining past and proposed APMs that use quality measures to improve health outcomes and reduce inappropriate utilization of services, using the reporting tool provided in the Uniform Managed Care Manual, Chapter 8-10, Value-Based Contracting Data Collection Tool (Excel). The reports must indicate the incentive payments made to all medical providers, facilities and any other types of providers of quality care.

Starting in 2014, HHSC released annual summaries of the value-based contracting arrangements submitted by the MCOs. In 2016, these summaries showed the types of APMs each Medicaid/CHIP MCO had in place with providers in a state fiscal year, including the quality measures employed to develop the respective payment models. Beginning in 2017, the summaries indicated the volumes of APMs by calendar year and added information for DMOs. Below are the summaries for calendar years 2018 through 2021. Previous year’s summaries (2016 and 2017) are available by request. Please email HPCS UMCC Provisions to request a summary.

Value-Based Care Initiatives

Value-Based Enrollment

Government Code Section 533.00511 directed HHSC to create an incentive program to automatically enroll a greater percentage of recipients who did not actively choose a managed care plan into a plan based on:

  • The quality of care provided through the MCO offering that managed care plan;
  • The organization's ability to provide services efficiently and effectively, taking into consideration the acuity of populations primarily served by the organization;
  • The organization's performance with respect to exceeding, or failing to achieve, appropriate outcome and process measures developed by the commission, including measures based on potentially preventable events.

When an individual enrolls in Medicaid, selects an MCO using MCO report cards and other information sent to the individual. If a Medicaid client does not select a health plan, HHSC uses a default assignment methodology to enroll the client in an MCO. Beginning in the state fiscal year 2021, HHSC began incorporating measures of quality and efficiency into this auto-assignment process. Under the new value-based enrollment, plans that perform better on key risk-adjusted cost and quality measures and have higher member satisfaction, receive a greater share of these enrollments. Measures included in value-based enrollment align with the state’s Managed Care Quality Strategy and the dimensions of the Triple Aim framework developed by the Institute for Healthcare Improvement.

Value-Based Payment and Quality Improvement Advisory Committee

The Value-Based Payment and Quality Improvement Advisory Committee (also known as The Quality Committee) provides a forum to promote public-private, multi-stakeholder collaboration in support of quality improvement and value-based payment initiatives for Medicaid, other publicly funded health services and the wider health care system.

Texas Healthcare Learning Collaborative Data Portal

The Texas Healthcare Learning Collaborative (THLC) portal serves as a public reporting platform, contract oversight tool and a tool for Medicaid and CHIP MCO quality improvement efforts. The portal is used by HHSC, MCOs, providers, and the public to obtain up-to-date MCO and hospital performance data on key quality of care measures, including potentially preventable events (PPEs), Healthcare Effectiveness Data and Information Set (HEDIS®), and other quality of care information. These data may serve as a valuable tool for providers to engage MCOs on value-based contracting.

More information on the THLC portal along with a user guide and Tableau-ready file formats on the Quality Data and Reports webpage.

Delivery System Reform Incentive Payment (DSRIP) Program and Value-Based Payment Roadmap

The Delivery System Reform Incentive Payment (DSRIP) program is a section of the Texas Healthcare Transformation and Quality Improvement Medicaid 1115 Demonstration (Waiver) that was awarded by the Centers for Medicare & Medicaid Services (CMS) in 2012. The Waiver benefited Texans and the Texas healthcare delivery system by allowing the healthcare providers earn incentive payments for achieving selected outcomes. DSRIP participating providers work to enhance quality of health care within the health systems, access to services, cost-effectiveness and the health status of Texans served by it. When CMS renewed the Waiver in December 2017, it authorized DSRIP funding through Sept. 30, 2021 with a Waiver end date of September 2022.

As part of the renewal, HHSC was asked to develop a Transition Plan that would establish specific strategies and interventions to achieve sustainable and effective delivery system reform beyond DSRIP funded period. Several of the milestones advanced in the Transition Plan, included an update of the Texas Value-Based Payment Roadmap (PDF), an outline of Alternative Payment Models in Texas Medicaid (PDF), and an Assessment of Financial Incentives for Alternative Payment Models (PDF). These sections incorporated strategies to sustain key DSRIP initiative areas, including data sharing and transparency among HHSC, health plans and providers to promote VBP.

Health Information Exchange (HIE) Connectivity Project

The Texas Medicaid HIE Connectivity Project, a key part of the Health Information Technology (Health IT) Strategic Plan (PDF), will increase the adoption and use of HIEs by providing connectivity and infrastructure within the state’s Medicaid system and HIETexas. This project will allow for Texas healthcare providers to exchange clinical data electronically to increase interoperability, which will improve the coordination and quality of care for Medicaid clients throughout the state.



Email HPCS UMCC Provisions for more information.