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Quality requirements under Medicaid managed care

Section 1932 of the Social Security Act (the Act) and implementing regulations at 42 CFR 438 set out the quality assessment and performance improvement requirements for states that contract with Medicaid managed care organizations (MCOs). These requirements include having a managed care quality strategy, a quality assessment and performance improvement program, and provisions for external quality review (EQR), and accreditation reporting. The Act also requires states to report on data collected from the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey for CHIP.

Quality strategy

States are required to have a quality strategy for assessing and improving the quality of health care and services furnished by MCOs (§ 1932(c)(1) of the Act). Detailed requirements for the state quality strategy can be found in regulation and in subregulatory guidance.

States operating Medicaid managed care programs under any authority must have a written quality strategy that includes, at a minimum, the following components:

  • the state’s standards for access to care, structure and operations, and quality measurement and improvement;
  • procedures for regularly monitoring and evaluating plan compliance with state standards;
  • national performance measures identified and developed by the Centers for Medicare & Medicaid Services (CMS);
  • arrangements for external independent reviews of quality outcomes and access to services;
  • intermediate sanctions for plans;
  • a state information system that supports operation and review of the state’s quality strategy
  • state-defined network adequacy and availability of services standards for managed care;
  • measurable goals and objectives for continuous quality improvement, taking into account population health status;
  • performance targets, performance measures, quality measures, and performance outcomes that will be measured and reported;
  • performance improvement projects and other interventions proposed to improve access, quality, or timeliness of care;
  • description of the state’s care transition policy;
  • description of the state’s plan to address health care disparities; and
  • mechanisms to identify persons who need long term services and supports or persons with special health care needs (42 CFR 438.340).

States must make the quality strategy available for public comment and obtain input from the its medical care advisory committee, beneficiaries, and other stakeholders before submitting the draft strategy to CMS for review. States must also conduct an evaluation of the effectiveness of the quality strategy and update the strategy as needed, but no less than once every three years. The quality strategy must also be made available online to the public.

Quality assessment and performance improvement program

States must require managed care plans including managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), prepaid ambulatory health plans (PAHPs), and primary care case management (PCCM) entities to establish and implement an ongoing and comprehensive quality assessment and performance improvement (QAPI) program. QAPIs must include:

  • performance improvement projects designed to achieve significant and sustained improvement in health outcome and enrollee satisfaction;
  • collection and submission of performance measurement data;
  • mechanisms to detect under- and over-utilization; and
  • mechanisms to assess quality and appropriateness of care for beneficiaries with special health needs (42 CFR 438.330(b)).

Managed care plans providing long-term services and supports (LTSS) must also include mechanisms to assess the quality and appropriateness of care for beneficiaries using LTSS and participate in state efforts to prevent, detect, and remediate critical incidents for home and community-based services (HCBS) waiver programs.

States must also annually review the effectiveness of each managed care entity’s QAPI program.

Performance improvement projects

As part of a comprehensive quality assessment and performance improvement program, states must require managed care plans to implement performance improvement projects (PIPs). The purpose of these projects is to achieve significant improvement in measurement of quality performance with objective indicators, as well as to generally sustain this improvement over time (42 CFR 438.330).

States must require MCOs, PIHPs, and PAHPs to conduct clinical and nonclinical PIPs to examine access to and quality of care. PIPs must include four key elements:

  • performance measurement;
  • implementation of interventions;
  • evaluation of the interventions’ impact using the performance measures; and
  • activities to increase/sustain improvement (42 CFR 438.330(d)).

PIPs vary state to state and within states among managed care plans with respect focus areas, specific topics, and interventions. CMS, states, or MCOs may determine what topics PIPs address. CMS may mandate nationwide topics that states must require plans to implement, as well as the performance metrics used to evaluate the topic (42 CFR 438.330). Some states also mandate one or more specific PIP priority areas (e.g., pediatric preventive dental visits) that managed care plans must address while other states identify broader areas of focus (e.g., oral health care) allowing managed care plans to select the specific topic. Some states permit managed care plans to select the focus areas and topics.

For each PIP topic, managed care plans design interventions or improvement strategies and select appropriate outcome metrics to measure performance. For example, managed care plans may measure beneficiary health outcomes or beneficiary satisfaction, using performance measures such as HEDIS, CAHPS, the core sets, or measures customized to individual state and plan needs. Plans may also target PIPs to a specified region or beneficiary population. States also may determine the PIP timeline.

States must require plans to report on the status and results of each PIP. States must contract with external quality review organizations to validate the design and effectiveness of PIPs project. This reporting and review process must be completed at least annually, but some states have more frequent or extensive reporting standards.

External quality review

States are also required conduct an annual external independent review of the quality of and access to services under each managed care contract (§ 1932(c)(1) of the Act). States must contract with an external quality review organization (EQRO), which is an independent entity that meets specific requirements described in regulation, to analyze and evaluate information on the quality, timeliness, and access to care a plan furnishes to Medicaid beneficiaries (§ 1932(c)(2) of the Act).

States are specifically required to have an EQRO:

  • validate MCO performance improvement projects;
  • validate MCO performance measures or performance measures calculated by the state;
  • review MCO compliance with federal regulations regarding availability of services, capacity, coordination and continuity of care, coverage and authorization of services, provider selection, confidentiality, grievance and appeal systems, subcontractor oversight, practice guidelines, health information systems, and quality assessment and performance improvement requirements; and
  • validate MCO network adequacy.

States may also have an EQRO conduct the following optional activities :

  • validate encounter data reported by MCOs;
  • administer or validate beneficiary or provider surveys;
  • calculate additional performance measures;
  • conduct additional performance improvement projects;
  • conduct quality studies that focus on a particular aspect of clinical or nonclinical services; and
  • assist with developing quality ratings for MCOs.

The EQRO must provide a detailed technical report that summarizes findings on access and quality of care, including a description of the data obtained, conclusions drawn from the data, an assessment of each MCO’s strengths and weaknesses for the quality, timeliness, and access to health care services furnished to Medicaid beneficiaries, an assessment of the degree to which each MCO addressed any recommendations for quality improvement made during the previous review, and recommendations for improving the quality of health care services furnished by each MCO, including how the state can target goals and objectives in the quality strategy. The report should also provide comparative information about all MCOs. The reports must be made available online.


States must require that managed care programs report if they have received accreditation from a private independent accrediting entity and if they are accredited, provide the state the most recent accreditation review (42 CFR 438.332). Additionally, states must display accreditation statuses and relevant information such as the name of the accrediting entity and accreditation level on the state website, to be updated at least annually (42 CFR 438.332).