(a) The commission may allow a managed care organization participating in the child health plan program or Medicaid increased flexibility to implement quality initiatives in a managed care plan offered by the organization, including flexibility with respect to financial arrangements, to:
(1) achieve high-quality, cost-effective health care;
(2) increase the use of high-quality, cost-effective delivery models;
(3) reduce the incidence of unnecessary institutionalization and potentially preventable events; and
(4) in collaboration with physicians and other health care providers, increase the use of alternative payment systems, including shared savings models.
(b) The commission shall develop quality-of-care and cost-efficiency benchmarks, including benchmarks based on a managed care organization’s performance with respect to:
(1) reducing potentially preventable events; and
(2) containing the growth rate of health care costs.

(c) The commission may include in a contract between a managed care organization and the commission financial incentives that are based on the organization’s successful implementation of quality initiatives under Subsection (a) or success in achieving quality-of-care and cost-efficiency benchmarks under Subsection (b). The commission may implement the financial incentives only if implementing the incentives would be cost-effective.
(d) In awarding contracts to managed care organizations under the child health plan program and Medicaid, the commission shall, in addition to considerations under § 540.0204 of this code and § 62.155, Health and Safety Code, give preference to an organization that offers a managed care plan that:
(1) successfully implements quality initiatives under Subsection (a) as the commission determines based on data or other evidence the organization provides; or
(2) meets quality-of-care and cost-efficiency benchmarks under Subsection (b).

Text of section effective on April 01, 2025