As states throughout the nation work to change how health care is delivered and paid for, New York is undertaking its largest effort yet to transform the state’s Medicaid health care delivery and payment system through the Delivery System Reform Incentive Payment (DSRIP) program.
One of six states in the United States to implement a DSRIP initiative, New York has a program designed to move its delivery system from a place that’s fragmented and overly focused on inpatient care in hospitals toward an integrated system that proactively focuses on patients and the community. Organizations and agencies are working together to address the same goals and to care for each patient.
Should be a piece of cake, right?
Of course, with so many major, complex changes happening so quickly, there have been some challenges. Providers are looking for information, and there have been a lot of questions. So to help keep the lines of communication open, the Health Foundation for Western and Central New York has held large educational meetings where regional providers could learn about DSRIP, as well as smaller facilitated meetings with organizations to help them develop a collaborative approach and maximize the potential for impact.
Most recently, on October 6, we hosted an event to have New York State Medicaid Director Jason Helgerson update the western New York region on the state of Medicaid redesign, DSRIP, and Medicaid payment reform, including value-based payments.
Helgerson began his presentation by giving the audience of health and human service providers a brief history lesson on how the state’s Medicaid program got to where it is today.
New York has come a long way since it created a Medicaid Redesign Team in 2010. The state has invested in care coordination for high-risk and high-cost patients through the Medicaid Health Homes program. New York has been able to tackle some social determinants of health, such as housing and transportation. Medicaid Redesign initiatives have reduced costs, bringing Medicaid spending per beneficiary back to 2003 levels. In fact, New York State is no longer first in the nation in Medicaid spending—that title is now held by California. But we still spend $59 billion each year to cover approximately 6 million people, according to the New York State Department of Health. That’s one-third of the entire state budget.
Despite any improvements, we still have a delivery system that does not meet the needs of the present, much less the needs of the future. We need to create a system that is much more sustainable.
So, part of the Medicaid Redesign Team’s plan was to obtain a waiver from the federal government that would allow New York to reinvest savings generated by the Medicaid Redesign Team back into the state’s health care delivery system.
In 2014 the state got that waiver. New York could reinvest $8 billion of the $17.1 billion in federal savings generated by Medicaid reforms. Nearly all of that money—that is, $7 billion—is designated for DSRIP.
Over five years, twenty-five performing provider systems will receive funding for targeted health projects to drive change. A performing provider system is made up of regionally collaborating providers that will implement DSRIP projects over the five-year period and beyond. Each of these systems must include enough providers to form an entire continuum of care. This includes hospitals, primary care providers, health homes, clinics, behavioral health providers, home care agencies, and community-based organizations.
The goal? Reduce avoidable hospital readmissions by 25 percent.
But transforming the delivery system can only happen if the payment system is transformed as well.
Many of the state’s problems are rooted in how it pays for services. Under the fee-for-service model, avoidable hospital readmissions are financially rewarded more than successfully transitioning a patient to integrated home care is.
The new goal is to pay for value, not volume. That means moving to value-based payments. If it’s done well, providers’ profit margins go up when the value of care delivered increases. But health outcomes are going to matter.
By the fifth year of DSRIP, all Medicaid managed care organizations in New York must transition to value-based payment systems for at least 80 to 90 percent of their provider payments. If these goals aren’t met, federal funding to New York for DSRIP will be significantly reduced.
Moving to value-based payments is not a small change—it requires organizations to fundamentally change their business model.
There isn’t just one path toward value-based payments, Helgerson said, so he walked the audience through three different examples of value-based contracting options for providers.
To achieve meaningful results through value-based payments, though, providers will have to take on some risk. So, in addition to choosing which integrated services to focus on, managed care organizations and performing provider systems can choose from three different levels of value-based payments, each with different levels of potential risk and reward.
But it’s up to providers to enter into these contracts with managed care organizations. So it’s not about what the state does, it’s about what the performing provider systems decide to do with this opportunity, Helgerson said. More and more providers are already moving toward value-based care, so he encouraged the audience to not wait too long to figure out how to proceed.
As performing provider systems begin work on their projects to reduce avoidable hospitalizations and move toward value-based payments, we at the foundation will continue to convene health and human service providers in western and central New York to share information and support collaboration.
It takes the combined efforts of many stakeholders, including providers, policy makers, nonprofit organizations, and the community at large to create lasting results that improve health and health care, and philanthropy can play an important role in achieving these improvements.
Editor’s Note:
Related resources from Health Affairs journal:
“An Examination Of Medicaid Delivery System Reform Incentive Payment Initiatives Under Way In Six States,” by Michael K. Gusmano of the Hastings Center and Frank J. Thompson of Rutgers University, Health Affairs, July 2015.
“Desperately Seeking Savings: States Shift More Medicaid Enrollees To Managed Care,” by John K. Iglehart, Health Affairs, September 2011. Iglehart is founding editor of the journal.
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