This article describes a methodology developed by the New York State Department of Health to analyze health plan performance data using two benchmarks: comparison to peers and comparison to historic results. It explains how that analysis is used to target quality improvement. Through this process the department effectively partners with health plans to foster improvement by identifying problems and barriers, encouraging health plans to set performance goals, and then working with health plans to design action plans to address the barriers. This model can be replicated for use by other states or other entities charged with monitoring quality improvement in managed care.