DEPARTMENT OF HEALTH & HUMAN SERVICES  
Centers for Medicare & Medicaid Services  
7500 Security Boulevard, Mail Stop S2-26-12  
Baltimore, Maryland 21244-1850  
  
Centers for Medicaid and State Operations  
  
April 25, 2007               SMD # 07-005  
  
Dear State Medicaid Director:  
  
I am writing to highlight and stress the importance of your States opportunity for participation 
in the national Value-Driven Health Care (VHC) efforts and a new national Medicaid Quality 
Improvement Program (MQIP) goal.  As described below, these efforts complement one 
another through a significant overlap in activities.    
  
Value-Driven Health Care 
  
As you probably are aware, the four cornerstones of VHC include:  
  
.  Interoperable Health Information Technology  supporting the development and use 
of health information technology that meets health data and interoperability standards 
recognized by the U.S. Department of Health and Human Services Secretary when 
implementing, acquiring, upgrading or contracting for health information technology 
systems and products.  Interoperability promises to enable the exchange of clinical data 
and to create greater efficiency in health care delivery by reducing redundancy and 
enabling the collection and sharing of data to measure and improve the quality of care. 
.  Transparency of Quality Information  promoting the use of national consensus-based 
standardized quality measures for public reporting purposes; supporting the development 
of new standardized measures; and participating in regional public-private collaborative 
Value Exchanges, Better Quality Information for Medicare Beneficiaries (BQI) pilots, or 
other recognized collaboratives to establish and support uniform measuring or reporting 
of quality information to promote provider performance improvement.  At the present 
time, the measures most fully developed are adopted by the AQA [formerly known as the 
Ambulatory Quality Alliance], a multi-stakeholder group focused on physician quality 
measures, Hospital Quality Alliance (HQA), other recognized Alliances and those 
endorsed by the National Quality Forum (NQF).  
.  Transparency of Price Information - promoting use of price measures for public 
reporting purposes where appropriate and working with regional collaboratives where 
possible; supporting the development of standardized measures and methods for price 
measurement, including episodic pricing methodologies; and, presenting such data in 
tandem with quality data to the maximum extent possible.  
.  Incentives for High-Value Health Care  adopting one or more of four strategies:  (a) 
encouraging beneficiaries to use providers with the highest quality and the lowest cost;   Page 2  State Medicaid Director 
 
(b) offering providers incentives and rewards for delivering high-value care; (c) 
providing beneficiaries with incentives for prevention and wellness and for self-
management of chronic illness; or (d) offering consumer-directed health plan 
products.   
Additional information regarding Value-Driven Health Care and Value Exchanges can be found 
at http://www.hhs.gov/transparency .  
 
Many States are well on the way to supporting these cornerstones as they are consistent with the 
direction of the Medicaid Information Technology Architecture (MITA) efforts and the Medicaid 
and State Childrens Health Insurance Program (SCHIP) Quality Strategy1 initially released by 
  
the Centers for Medicare & Medicaid Services (CMS) in 2005.  Enclosed you will find a list of 
States that are considered supportive of the VHC Initiative by virtue of their MITA and Quality 
Strategy activities.2  
  
The enclosed list of States was developed using data collected from a number of sources on State 
quality and transparency activities.  States included in the enclosed list are using at least one of 
the AQA measures in addition to participating in at least one other activity related to VHC such 
as value-based purchasing, public reporting of data, or participation in regional collaboratives.  
Please note that support for this effort does not indicate that you have all four of the 
cornerstones in place.  Rather, your support is indicative of your agreement, in principle, 
with the four cornerstones, and that your State has taken actions toward reporting national 
quality measures, working with collaboratives, or participating in other activities listed in 
the Medicaid and SCHIP Quality Strategy.3
  
Also included are two charts that detail the various State activities related to the CMS Medicaid 
and SCHIP Quality Strategy.  I am sure there are activities in some States of which we are not 
yet aware; therefore, please review the enclosures and inform us of any additions or deletions as 
soon as possible.    
  
Additionally, please let us know if you would like your State added to or removed from the list 
by contacting your regional office representative or Jean Moody-Williams, Director of Quality, 
Evaluation and Health Outcomes by May 1, 2007.  Please e-mail your questions, additions, or 
deletions to the enclosed list of States at jean.moodywilliams@cms.hhs.gov , or call her directly 
at 410-786-8110.  We will add your State even if you have not begun to collect the indicated  
                                                 
1
The Quality Strategy encouraged States to move toward measuring quality using nationally recognized standards of 
care, implementing value-based purchasing programs, using health IT effectively, and collaborating with others to 
improve care.  We have reviewed data on a number of States that are engaged in some, or all of these activities, and 
we consider these States to be supportive of the VHC Initiative.  
 
2 Please refer to Enclosure A entitled Preliminary List of States Supporting Value-Driven Health Care by Virtue of 
their Medicaid Information Technology Architecture (MITA) and the Medicaid and SCHIP Quality Strategy 
Activities. 
 
3 Technical assistance will be provided over the course of the upcoming months to help States move closer to 
reaching the cornerstones with the ultimate goal of full participation in VHC.  Page 3  State Medicaid Directors 
 
performance measures or implemented the referenced quality activities but plan to do so in the 
future.   
We are eager to have your support for improvement of our healthcare system through the four 
cornerstones.    
  
Medicaid Quality Improvement Program (MQIP)  
 
Furthermore, a Federal Government Performance Results Act goal was established this year that 
involves partnering with States to improve quality through the MQIP.  The four cornerstones of 
VHC can help move us towards reaching this goal.  The goal is comprised of two elements:  (1) a 
short term goal to demonstrate quality improvement in a targeted number of States, and (2) a 
longer term goal of developing a National Medicaid Quality Framework.   
  
To accomplish the short term goal, CMS will work with the States on several activities including 
but not limited to:  
.  Developing State business plans for utilizing MITA to support transparency, quality 
improvement and health information exchange;  
 
.  Promoting collaboration in regional quality improvement networks;  
 
.  Advancing activities related to clinical performance measurement and evidenced-based 
quality improvement activities by working with State Medicaid Medical Directors;  
 
.  Obtaining data from States related to promising practices in areas related to quality 
improvement and VHC;  
 
.  Reviewing all State Quality Strategies and External Quality Review Reports required by 
42 CFR 438, Subpart D, and providing technical assistance and feedback to States for 
consideration during the next period of revision;  
 
.  Reviewing and providing feedback on State program evaluation plans and reports as 
required in the Terms and Conditions for Demonstrations that are provided at the time 
of demonstration approval;  
 
.  Tracking and analyzing performance measurement reporting in Medicaid through 
publicly reported data bases, State reports, and other available data sources;   
 
.  Evaluating Transformation Grant activities that support VHC; and  
 
.  Tracking and analyzing quality improvement strategies for Home and Community-Based 
Services electronically as a result of the new Web-based application.  
 
To address the longer term MQIP goal, CMS will begin the process of developing a National 
Medicaid Quality Framework designed to highlight overarching principles of quality in   Page 4  State Medicaid Directors 
 
Medicaid.  This will be a collaborative process in which States and other interested stakeholders 
will be invited to assist in the drafting of the framework.   
  
We look forward to working with you over the course of the next several months on all of these 
activities.    
  
Sincerely,   
/s/   
Dennis G. Smith  
Director  
  
Attachments  
  
cc:  
  
CMS Regional Administrators  
  
CMS Associate Regional Administrators for Medicaid and State Operations  
  
State SCHIP Directors  
  
Martha Roherty 
Director, Health Policy Unit, American Public Human Services Association  
  
Joy Wilson  
Director, Health Committee, National Conference of State Legislatures  
  
Matt Salo  
Director of Health Legislation, National Governors Association  
  
Jacalyn Bryan Carden  
Director of Policy and Programs, Association of State and Territorial Health Officials  
  
Christie Raniszewski Herrera, Director, Health and Human Services Task Force  
American Legislative Exchange Council  
 
Debra Miller  
Director for Health Policy, Council of State Governments  
  
Andrew Croshaw  
Senior Executive Advisor, Secretarial Initiatives, Office of the Secretary