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Update: Senate Approves Health Payment Reform

Medicaid and the Children’s Health Insurance Program could transition to a performance-based, rather than procedure-based, payment model, under bills the Senate unanimously passed today.

Medicaid and the Children’s Health Insurance Program could transition to a performance-based, rather than procedure-based, payment model, under bills the state Senate unanimously passed today. The bills, crafted by Lt. Gov. David Dewhurst and Sen. Jane Nelson, R-Flower Mound, would reward providers for healthy patient outcomes, rather than reimburse them solely for the number of procedures they perform.

"Our intent is to ensure … that the dollars we invest in Health and Human Services are achieving the results we want, which is healthy patients,” Nelson said.

SB 7 initiates the pay-for-performance revamp, creating carrots for providers who develop efficient and better quality care, and sticks for wasteful providers and patients. These penalties include reduced payments for patients readmitted for preventable diseases and co-payments for avoidable emergency room visits.

SB 8 sets up the Texas Institute of Health Care Quality and Efficiency — a 15-member board whose mission would be to establish statewide performance measures and investigate ways to link payments to improved patient outcome. One of the board’s initial tasks will be deciding the plausibility and cost of developing a centralized database to compare the cost of health care across all providers. 

“It contains many of the same objectives. … However, Senate Bill 8 is meant to accomplish these objectives across all types of health care, not just Medicaid and CHIP,” Nelson said.

That bill also gives the Health and Human Services Commission the authority to try out various performance-based payment models through pilot programs. One potential pilot program, which already has raised some antitrust concerns, would allow doctors and hospitals to collaborate to provide more comprehensive care. HHSC could use alternatives like bundled or quality-based payments to reimburse providers for collaborative care. 

Each collaborative would be required to pay the Texas Department of Insurance a fee to register, which the fiscal note states would cover the cost of hiring 13 new employees to develop regulations to ensure they don’t violate antitrust laws. 

"By taking a free-market approach, removing regulatory barriers and changing the way that doctors and hospitals are paid, we can improve the health of Texans while spending less on health care," Dewhurst said, in a statement. 

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