Building a Performance-based Payment System

Before designing and implementing a pay-for-performance system, examine the associated planning, financial, and legal issues. Assign a Change Team (with representatives from treatment services, financial contracting, legal services, and data management) to explore these issues. The state of Maine took this approach in implementing its pay-for-performance system. Take a look at the Maine OSA Change Project Form .

Ask the following questions at the start of the process of planning a pay-for-performance system:

• Did you involve contracting and financial staff?
• What is the planned start date for the pay-for-performance system?
• What type of incentives will be implemented?
• How will the targets be set?
• What type of feedback reports will be given to providers? How often?

When deciding how to pay for the incentives, you need to consider:

• Will you pay for the incentives with a contractual set-aside?
• Will you pay for the incentives through existing grant funding?
• What is your plan for ongoing financial set-asides to pay for the incentives?

When making legal and binding changes to contracts, you need to consider:

• How do they get settled?
• How often are the rewards or penalties administered?
• Who does monitoring and who informs providers of penalties?
• Did you seek approval of the contract changes through legal?

Further Reading

• Designing the System
• Soliciting Provider Buy-in
• Creating a Strong Data Infrastructure
• Setting Meaningful Improvement Targets
• Financing the System
• Offering Training to Providers
• Designing Feedback Reports