Simple, but targeted provider performance incentives can work in Medicaid, as evidenced by the successes of seven California health plans in the Local Initiative Rewarding Results (LIRR) project. This CHCS Brief outlines eight key considerations in implementing provider incentives in Medicaid managed care, drawn from the LIRR project, the largest health plan collaborative pay-for-performance effort to improve the health of babies and teens in Medicaid.

The Local Initiative Rewarding Results project was part of a three-year national initiative of The Robert Wood Johnson and California HealthCare Foundations to test whether financial performance incentives for providers can improve health care quality. The incentive program, which ran from 2002 through 2004 and is coordinated by the Center for Health Care Strategies, paid out $5 million and involved 3,300 physicians touching the lives of 350,000 babies, adolescents, and parents.