Case Study E – Green State Performance Based Contracting
In 1998, the Green State Health Department (GSHD) and the Local Health Departments
(LHD) in the state analyzed the existing contracting system. The GSHD noted a myriad
of problems with the traditional contracting system that were not conducive to carrying
out public health’s assurance function including the categorical program functions being
carried out in isolation from each other, and the lack of partnership and coordination with
non-public providers. From an administrative standpoint, the contract volume was high
and the Request for Proposal process was extremely time-consuming. Contracts were
based on process rather than on outcome; there was no penalty for nonperformance and
no reward for success.
From the LHD perspective, the GSHD contracted programs not based on the local needs
assessments, but upon what the GSHD dictates. Hence, there was no negotiation of
priorities between the GSHD and the LHD. Additionally, the contracting process was not
only cumbersome but the cash flow was frequently a problem because of the cost-based
reimbursement.
Based on the above findings, the GSHD initiated a system for the implementation and
management of performance based contracting between the state and local health
agencies. The GSHD did not ask the legislature, the executive branch or federal agencies
for permission to initiate the system. They consider the proper management of state and
federal funds as part of their fiduciary responsibilities. The following are the details of
the innovative performance based contracting system.
The GSHD contracts primarily with LHD; they no longer contract for services with nonpublic providers unless the LHD is not qualified to provide services or choose not to
provide the services. The LHD choose their level of involvement. The LHD that do not
have the capacity to provide all services directly are encouraged to subcontract with nonpublic providers, to form multi-LHD consortia, and to form a variety of local partnerships
to achieve overall contract objectives.
The LHD must meet minimum requirements before they can receive funds. Funding
allocations to LHD are based on demographic and epidemiological need factors, not on
how well they can write proposals. The contract between the GSHD and the LHD is
negotiated by the regional offices, and is based upon a “Quasi Market Setting”. The
GSHD is the “buyer” and the LHD is the “supplier”. Each party is free to not make a
“deal”.
Multiple state and federal programs that impact the same population (immunization,
maternal and child health, reproductive health, childhood lead prevention, preventive
health, women’s health and tobacco) are treated as a single aggregate contract. Boundary
statements are defined for each program to simply state, what can be funded.
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Since there is a movement toward funding changes in health status (i.e. outcomes) and
away from funding activities (i.e. process), program quality criteria were established as
preconditions for program participation. These include:
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Assessment and surveillance
Delivery of public health services
Record keeping
Information, education and outreach
Coordination with related programs
Referral network
Provision of guidance to staff
Financial management practices
Data collection, analysis and reporting
Specific outcome objectives are negotiated between the region and the LHD, but final
approval is required by the GSHD. The Risk Profile determines the portion of the funds
that will be recouped if the objective is not attained by the end of the contract year. This
is negotiated taking into account the complexity and the innovation of the objective.
Then a web-based Contract Information Management Systems (CIMS) is used to
negotiate and, subsequently, to write the contract.
Additional components of the performance based contracting system:
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Flexibility is given to the LHD to move funds within the contract across
program boundaries to achieve negotiated program outcomes.
LHD are not required to make monthly expenditure reports.
Cash flow management is stabilized through 1/12th total funds monthly
payment across all programs; it is not based upon the prior month’s
expenditures.
Year end audits focus on health-related outcomes, not fiscal accounting.
Each contract objective is “mapped” to Federal 2010 objectives, GSHD
priorities, core public health services and core functions.
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Case Study E - Discussion Questions
This case study describes a state health department’s effort to improve the contracting
system between the state health department and the local health departments. It includes
aspects of performance management in order to accomplish this end. The following
questions focus on performance management issues involved in quality improvement
efforts.
1. Identify the target of this performance management application. Whose or what’s
performance is being improved? Describe what the performance accomplishment
is in this case study.
2. Which of the four components of performance management are evident in this
case study? Which are not?
 Does this case study demonstrate the use of performance standards?
How?
 Does this case study demonstrate the use of performance measurement?
How?
 Does this case study demonstrate the use of reporting performance? How?
 Does this case study demonstrate the use of quality improvement? How?
3. Which specific performance management components in this case study could be
enhanced? How?
4. Review the system prior to the performance based contract implementation what
elements of performance management did or did not exist previously?
5. Have you been (or are you now) involved in an effort to improve the contracting
system between your state health department and your local health department? If
so, which components of comprehensive performance management were in
place? What suggestions do you have for improving that effort?
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Case Study E - Discussion Questions: Facilitator’s Notes
This case study describes a state health department’s effort to improve the contracting
system between the state health department and the local health departments. It includes
aspects of performance management in order to accomplish this end. The following
questions focus on performance management issues involved in quality improvement
efforts.
1. Identify the target of this performance management application. Whose or what’s
performance is being improved? Describe what the performance accomplishment
is in this case study.
Answers/Discussion points:
 This case study focuses on improving the contracting system
between the Green State Health Department and the Local
Health Departments by creating performance based contracts
which focus on outcomes rather than process.
2. Which of the four components of performance management are evident in this
case study? Which are not?
Answers/Discussion points:
 All four components were used in the case study. A
performance management system is the continuous use of all
the above practices so that they are integrated into an agency’s
core operations. Performance management can be carried out at
multiple levels, including the program, organization,
community, and state levels. However it is applied, the
performance management cycle is a tool to improve health,
increase efficiency, and create other benefits and value for
society.
b. Does this case study demonstrate the use of performance standards?
How?
Answers/Discussion points:
 Performance standards include identifying relevant standards,
selecting indicators, setting goals and targets and
communicating expectations. Performance standards are
objective standards or guidelines that are used to assess an
organization’s performance. They may be set on national, state
or scientific guidelines or be based on the public’s or leader’s
expectations.
 In this case study, the standards are the GSHD minimum
requirements in order for LHD to receive funding. Additionally,
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each contract objective is “mapped” to Federal 2010 objectives,
GSHD priorities, core public health services and core functions.
Note: For additional questions refer to Section II: Performance Standards of
the Performance Management Self-Assessment Tool.
c. Does this case study demonstrate the use of performance measurement?
How?
Answers/Discussion points:
 Performance measurement is the refining of indicators and
defining measure. Performance measures are quantitative
measures of capacities, processes, or outcomes relevant to the
assessment of a performance indicator. It also includes
developing a data system which can collect the data based on the
measures.
 The program quality criteria are used as the major source of
performance measures.
 The risk profile is used as the data collection system. The risk
profile determines the portion of the funds that will be recouped
if the objective is not attained by the end of the contract year.
Note: For additional questions refer to Section III: Performance Measurement
of the Performance Management Self-Assessment Tool.
d. Does this case study demonstrate the use of reporting performance? How?
Answers/Discussion points:
 The reporting of performance component includes analyzing
data, feeding data back to managers, staff, policy makers, and
constituent, and developing a regular reporting cycle.
 The data from the risk profile is analyzed using the Contract
Information Management System to write the contract. There is
a year end audit focusing on the health related outcomes. A
regular reporting cycle was established.
Note: For additional questions refer to Section IV: Reporting of Progress of
the Performance Management Self-Assessment Tool.
e. Does this case study demonstrate the use of quality improvement? How?
Answers/Discussion points:
 Quality improvement process relies on the use of data for
decisions to improve policies, programs and outcomes, then
manage those changes and create a learning organization.
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Based on the data from the risk profile new contracts were
established based on outcomes not processes.
Funds will be recouped if objectives are not attained by the end
of the contract year.
Cash flow management is stabilized through 1/12th total funds
monthly payment across all programs.
Year end audits are based on outcomes not processes.
Note: For additional questions refer to Section V: Quality Improvement
Process of the Performance Management Self-Assessment Tool.
3. Which specific performance management components in this case study could be
enhanced? How?
Answers/Discussion points:
 Performance Measures – Expand on the data collection
 Reporting of progress – Have the LHD prepare monthly
expenditure reports for the GSHD.
Additional Questions to Discuss:
 Is there a set specific performance standards, targets, or
goals? How do you determine these standards? Is there
benchmark against similar state organizations or use
national, state, or scientific guidelines?
 Is there a way to measure the capacity, process, or
outcomes of established performance standards and
targets? What tools do you use to assist in these efforts?
 Is there documentation or reporting of progress? Is this
information regularly available to managers, staff, and
others?
 Is there a quality improvement process? What do you do
with the information gathered in the progress report or
document? Is there a process to manage changes in
policies, programs, or infrastructure that are based on
performance standards, measurements, and reports?
[The questions below build on the ability to identify performance management
concepts and component in this case study and ask course participants to relate this
case study to their own experience. It may not be possible to address these issues in
case study discussions if time is limited.]
4. Review the system prior to the performance based contract implementation what
elements of performance management did or did not exist previously?
Answers/Discussion points:
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There was no negotiation of priorities between the state and
local health department. Additionally, the programs contracted
were not based on the local needs assessments but upon what
the state dictated. Hence, there was a lack of performance
standards.
The contract was based on process rather than on outcome, and
the process itself was cumbersome, lacking any quality
improvement effort.
5. Have you been (or are you now) involved in an effort to improve the contracting
system between your state health department and your local health department? If
so, which components of comprehensive performance management were in
place? What suggestions do you have for improving that effort?
Answers/Discussion points:
 Use the Performance Management Self-Assessment Tool to help
identify all the components of the system that should be applied.
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