Access to physician services in Texas Medicaid has long presented challenges for health systems, physician groups, and the communities they serve. Reimbursement rates that trail commercial payers, difficulty attracting and retaining specialists, and the financial burden of participating in managed care programs have historically made Medicaid service delivery a complex proposition for many provider organizations. In response, Texas Health and Human Services Commission established a direct payment program designed to bridge those gaps, with advanced payments for professional services, while advancing quality and population health goals: the Texas Incentives for Physicians and Professional Services program, commonly known as TIPPS.
For healthcare organizations operating in Texas, understanding the program’s mechanics, eligibility requirements, and compensation implications is becoming increasingly important.
What Is TIPPS & Who Is Eligible?
TIPPS is a Texas Medicaid directed payment program that provides enhanced payments to certain physician groups delivering healthcare services to members enrolled in STAR, STAR+PLUS, and STAR Kids Medicaid managed care programs. The program launched in state fiscal year (SFY) 2022, with the first program period beginning September 1, 2021. The Centers for Medicare & Medicaid Services (CMS) issued its initial approval for the SFY 2023 program on March 25, 2022. Now in its fifth year, SFY 2026 represents a significant structural evolution for TIPPS, particularly with the introduction of Component 2 as a pay-for-performance scorecard model and a realignment of program funding allocations across all three components.
The program’s goals align with the Texas Managed Care Quality Strategy, targeting four broad outcomes: improved access to physicians, expanded provider participation in Medicaid, better specialty coverage, and measurable improvements in health outcomes.
To participate and maximize funding, physician groups must report quality data, track performance measures, meet achievement targets, and complete annual program reporting requirements.
Eligible participants fall into three categories for SFY 2026:
- Physician groups owned or operated by a health-related institution (HRI) named in Section 63.002 of the Texas Education Code
- Physician groups contracted with, owned, or operated by a hospital receiving the indirect medical education add-on (IME), for which the hospital is assigned or retains billing rights for the physician group
- Other physician groups that are not HRI or IME physician groups but are managed care organization (MCO) network physician groups
How TIPPS Payments Are Structured
The SFY 2026 TIPPS model distributes program value across three components, each with a distinct focus and allocation. These allocations reflect a meaningful departure from prior program years, in which Component 1 represented 65% of total program value and Component 2—which, prior to SFY 2026, functioned as a uniform rate enhancement rather than a performance-based model.
- Component 1 (55% of total program value): A certain percentage increase paid for professional services, specific to the provider group, at the time of claim adjudication, with measures focused on primary care access. Only HRI and IME physician groups are eligible to participate in Component 1.
- Component 2 (35% of total program value): A pay-for-performance (P4P) model tied to achieving quality measures and paid through a scorecard system. Component 2 was absent entirely from the SFY 2025 program before being introduced in SFY 2026 in its current P4P form. If a physician group does not meet Component 2 performance requirements, its unearned funds are redistributed to other groups in the same Service Delivery Area (SDA) within the same class, creating a competitive dynamic that has real revenue implications for participating organizations. Only HRI and IME physician groups are eligible to participate in Component 2.
- Component 3 (10% of total program value): A certain increase for certain outpatient services specific to the provider group, with a focus on maternal health, behavioral health, and non-medical drivers of health. Component 3 applies specifically to evaluation and management (E/M) CPT® codes 99202–99215 and, unlike Components 1 and 2, is open to all eligible TIPPS physician groups, including those that do not qualify as HRI or IME organizations.
How TIPPS Has Evolved: From Access to Accountability
TIPPS serves as a transition from the Network Access Improvement Program (NAIP) and the Delivery System Reform Incentive Payment (DSRIP) program, replacing an older supplemental funding structure with a more accountable, performance-oriented model. When TIPPS launched, the program’s primary emphasis was supporting physician groups that treat Medicaid patients and transitioning providers away from older funding mechanisms.
Preserving access to care for Medicaid populations by increasing provider payments was the priority.
SFY 2026 represents a meaningful shift. The program now places far greater emphasis on measurable performance and strategic statewide health priorities. Rather than simply increasing provider payments, TIPPS now aims to reward providers who can demonstrate results. The reintroduction of Component 2 as a true P4P model, after it was removed entirely in SFY 2025, indicates that performance accountability is now a structural requirement rather than an add-on. Reporting requirements have expanded considerably, and participation now requires active engagement with quality tracking, not just claims submission.
The SFY 2026 program places particular focus on:
- Primary care access
- Chronic disease management
- Maternal health
- Behavioral health services
- Use of health information and data reporting
- Addressing non-medical drivers of health
The evolution from a volume-support model to a value-based accountability framework has direct implications for how physician groups plan and structure their operations, and how organizations establish FMV compensation for the providers receiving payments from TIPPs.
FMV Implications for Physician Compensation
As TIPPS payments become a more consistent and predictable component of physician group revenue, they may create meaningful changes in traditional financial benchmarks. Unlike traditional reimbursement increases tied directly to patient volume or physician productivity, TIPPS payments can increase professional collections without a corresponding increase in wRVUs or patient volume. For example, a physician generating 5,000 wRVUs annually may experience a significant increase in collections because of TIPPS-related payments, even though the physician’s productivity remains unchanged. This dynamic can affect the metrics commonly used to evaluate physician compensation, including collections per wRVU, compensation-to-collections ratios, and historical benchmarking analyses that were developed using pre-TIPPS revenue levels. Additionally, benchmarking analyses may require greater consideration of TIPPS-related revenue when evaluating compensation structures and physician productivity, particularly in organizations with significant Medicaid patient populations.
From an FMV perspective, TIPPS highlights the evolving role of value-based incentives in physician compensation models. By incorporating payments tied to quality performance, care delivery outcomes, and Medicaid participation, TIPPS encourages organizations to develop compensation models that balance productivity with value-based performance. As a result, FMV analyses involving TIPPS-participating organizations may need to consider traditional clinical productivity measures and the legitimate activities required to achieve quality objectives, including care coordination, population health management, and quality improvement efforts.
Organizations should ensure TIPPS-supported incentive compensation is tied to clearly defined, commercially reasonable services and supported by a consistent methodology for allocating and distributing related funds.
Organizations should also evaluate how TIPPS-related revenue is incorporated into physician compensation arrangements under applicable regulatory frameworks, like Stark Law and commercial reasonableness considerations. Because TIPPS payments are supplemental Medicaid payments related to quality performance, reporting requirements, and other care delivery initiatives, organizations should maintain clear documentation supporting how these funds are allocated and incorporated into compensation models. This documentation should demonstrate that compensation reflects legitimate physician services and performance-related activities rather than functioning as a pass-through of supplemental Medicaid funding without a corresponding service basis.
Aligning Compensation with TIPPS
Ultimately, TIPPS represents a broader shift toward value-based reimbursement models, where physician contributions may extend beyond traditional measures of volume and productivity. As these programs continue to evolve, FMV methodologies may need to adapt to appropriately evaluate compensation arrangements that incorporate both clinical performance and quality-driven initiatives.
As TIPPS continues to mature and performance expectations increase, now is the time for Texas physician groups and health systems to evaluate how the program intersects with existing compensation structures and FMV documentation.
As TIPPS evolves, your compensation strategy should evolve with it. Connect with VMG Health to ensure your compensation arrangements are structured, documented, and defensible.
