Manatt on Health: Medicaid Edition

By Deborah Bachrach | William S. Bernstein | Mindy Lipson | Jared Augenstein

Manatt on Medicaid: Observations from New York's DSRIP Implementation

Editor's note: Medicaid is the largest healthcare payer in virtually every state. States are increasingly leveraging that position to drive payment and delivery system reform efforts. One powerful tool to enable transformation is Medicaid's Delivery System Reform Incentive Payment (DSRIP) program. New York is implementing the largest and most ambitious program to date, a five-year, $8.25 billion effort aimed at improving the way care is paid for and delivered to Medicaid beneficiaries and ultimately all State residents. Informed by interviews with federal and State officials, national healthcare thought leaders and New York stakeholders involved in on-the-ground implementation, Manatt Health has produced a new report for The Commonwealth Fund focusing on New York's DSRIP implementation progress and lessons learned for other states and policymakers. To download the full report, click here.


With the implementation of the Affordable Care Act, Medicaid has become the largest insurer in the United States, covering almost 25 percent of all Americans. States are increasingly leveraging Medicaid's purchasing power to drive payment and delivery system reform efforts. One powerful tool to enable transformation is Medicaid's Delivery System Reform Incentive Payment (DSRIP) program. In April 2014, New York began implementing its DSRIP, an $8.25 billion effort aimed at improving the way care is paid for and delivered to Medicaid beneficiaries and ultimately all State residents.

The goal of New York's DSRIP program is to "reduce avoidable hospital use by 25 percent through transforming the New York State healthcare system into a financially viable, high performing system." At the outset, New York required Medicaid providers and community-based organizations to form integrated delivery networks, referred to as Performing Provider Systems (PPSs), as a condition of receiving DSRIP funding. These PPSs are led by a safety-net provider, most frequently a hospital. Today 25 PPSs are implementing a range of projects to build care management and population health management infrastructure, enhance disease management programs for targeted chronic conditions, and improve population health. Payment reform is also a central component of the New York DSRIP program. To ensure that its investments in delivery reforms are sustained in the long term, New York is requiring that by the end of the five-year DSRIP waiver at least 80 percent of payments between Medicaid managed care plans and providers use value-based methodologies.

Centers for Medicare and Medicaid Services (CMS) officials have been clear that New York's waiver is a new baseline for states pursuing DSRIP initiatives. This fact and the magnitude of change contemplated in New York have grabbed the attention of Medicaid stakeholders across the country.

In a new report prepared for The Commonwealth Fund, summarized below, Manatt Health examines New York's experience implementing its DSRIP waiver.

1. Organization, Governance and Market Transformation

One issue facing states is determining the entities to be entrusted with and held accountable for achieving the quality and cost-saving goals associated with Medicaid transformation. To implement a DSRIP program, a state must define "lead entities" eligible to lead the transformation and distribute funds. Lead entities play a central role in shaping transformation, including bringing together provider organizations and CBOs, establishing the parameters of these new partnerships and setting priorities. In New York, lead entities were defined as major public hospitals and other safety-net providers. As part of the DSRIP application process, lead entity applicants were required to demonstrate financial viability, as well as the ability to build a PPS by bringing together providers and CBOs to implement DSRIP projects and enter into value-based contracting arrangements with Medicaid managed care plans.

Early observations and lessons learned include:

  • DSRIP is a change agent for Medicaid providers. DSRIP is stimulating the integration of traditionally siloed services, investment in hot spotting populations requiring the greatest support, re-engineering of care management processes, and development of IT and analytics infrastructure to measure and improve performance.
  • The long-term role of PPSs is uncertain. There is no consensus on how DSRIP PPSs will evolve, but the prevailing view is that most will not survive in their current forms.

2. Care Models and Social Determinants of Health

Delivery system transformation requires providers to fundamentally change their approach to meeting the health needs of the patients and communities they serve. At the heart of the transformation agenda is a shift away from focusing exclusively on treating the sick to working proactively to keep a community healthy. Efforts to date make clear that transformation is complex and requires a shift from inpatient to outpatient care, the development of clinically integrated provider networks, changes in the healthcare workforce, implementation of team-based care models, and partnerships between providers and social services organizations.

New York required PPSs to select from 44 projects or models of care delivery. New York's 44 projects fall into three areas: 1) care management and population health management infrastructure, 2) clinical programs, and 3) population health projects. For each project, the State prescribed a general approach and process and outcomes metrics but allowed PPSs to customize their particular care models. To ensure projects are implemented according to the State's vision, New York requires each PPS to achieve "project progress milestones"—process metrics that assess whether a PPS is adhering to DSRIP requirements. The project progress milestones are distinct from pay-for-reporting and pay-for-performance metrics, which, over time, represent an increasing share of payments to PPSs.

New York also emphasizes the impact that delivery system transformation will have on the healthcare workforce. PPSs are held accountable for meeting milestones related to the hiring, retraining and deployment of their healthcare workforce and adhering to a workforce strategy budget.

Early observations and lessons learned include:

  • DSRIP is generating investment in community-based care initiatives. Investments include technical assistance to primary care partners to achieve 2014 Level 3 patient-centered medical home (PCMH) recognition, embedded care management services in primary care settings, expansion of community-based asthma programs and colocation of behavioral health and primary care services.
  • Sustainability of PPS investments in new care models is unclear. While PPSs envision that their investments in primary care, care management and population health will endure post-DSRIP through value-based payment arrangements, it is unclear how this will work in practice. The State, PPSs and Medicaid managed care organizations (MCOs) will need to work together to identify ways to create sustainable programs.
  • Lack of focus on social determinants of health. While PPSs are making substantial investments in strengthening their primary care and care management infrastructures, many stakeholders are concerned PPSs are not making similar investments in interventions addressing the social determinants of health.

3. Data Sharing and Analytics

Successful implementation of new care models and value-based payment structures requires that providers have access to clinical, administrative and financial data that allows targeted identification of at-risk patients and better coordination of care. New York is taking several approaches to ensure that clinical and claims data are available and used to improve care delivery. New York has committed to building the Medicaid Analytics Performance Platform (MAPP), housing performance dashboards that will act as a data warehouse and serve as an electronic care planning tool for the State's Health Home population.1 New York also committed to share Medicaid claims information with PPSs, and some PPSs are working directly with health plans to access plans' claim feeds.

In addition, the State is using DSRIP as a lever to promote clinical data exchange among providers. For example, one of the performance requirements for DSRIP is that eligible providers in a PPS be connected to a regional health information organization (RHIO) that is part of the State Health Information of New York (SHIN-NY) by the end of March 2018.

Early observations and lessons learned include:

  • Access to data is critical. Under DSRIP, the State has recognized the importance of timely access to claims and clinical data to allow providers to better identify at-risk patients and improve quality of care. Though this goal is critical to success, providers note that privacy requirements under State laws impede data access.
  • Analytic approaches are in an early stage of development. Most stakeholders are skeptical that MAPP or information exchange through the SHIN-NY will help them achieve their DSRIP goals, and consequently are investing in their own IT and population health capabilities.

4. Measurement and Accountability

Any state undertaking large-scale delivery system reform must have clear short- and long-term goals and the capacity to assess performance against those goals. New York's DSRIP program has a multilevel accountability structure and substantial reporting requirements. Organizations participating in DSRIP must report to their PPS, the PPS must report to the State, and the State must report to CMS.

The State is required to report to CMS on four types of milestones: delivery system improvement, performance on DSRIP project and population-wide goals, Medicaid spending growth targets, and the transition from fee-for-service to value-based payment arrangements. By the final year of DSRIP, $175.6 million of approximately $1 billion in expected DSRIP expenditures are at risk if the State does not achieve certain milestones.

Early observations and lessons learned include:

  • Complex reporting requirements may hamper implementation efforts. Providers observed that the number of process metrics the PPSs are required to report creates a heavy administrative burden, taking focus away from project implementation.

5. Value-Based Payment (VBP) Arrangements and Sustainability

Value-based payment reforms are a key ingredient for motivating and sustaining provider-led initiatives to improve healthcare service delivery. As part of its DSRIP initiative, New York developed and CMS approved a "VBP roadmap," outlining a five-year plan for comprehensive payment reform in New York Medicaid. The VBP roadmap provides options for MCO and provider contracting structures to share the savings and risk generated through implementing new care models and population health management capabilities. New York views its approach to VBP as aligned with Medicare reforms, including the shift to Next-Generation ACOs, the Bundled Payments for Care Improvement Initiative, and Comprehensive Care for Joint Replacement Payment Model.

Early observations and lessons learned include:

  • The ultimate relationship between PPSs and MCOs is unclear. The State has established a general framework governing contractual relationships between MCOs and providers but defers to MCOs and providers to determine the precise form of those relationships within established guardrails.
  • VBP requirements may incentivize provider consolidation. It is also unclear whether providers that join a PPS to participate in DSRIP also will be willing to participate with the same group of providers in joint managed care contracting arrangements after DSRIP ends.
  • Will social services be supported in VBP relationships? While provider entities taking on risk will want their patients to receive social service interventions, the role these providers will play in funding those interventions has yet to be determined.
  • Payment levels matter. To the extent that bundled or global capitation payment is developed based on historical fee-for-service rates that may themselves be too low, the bundle will be insufficient to cover required clinical services, much less investments in care coordination and social services.


Changing how the State pays for services and how providers deliver care is at the heart of New York's efforts to redesign Medicaid. Given the enormity and complexity of this effort, it is hardly surprising that it is a messy process and there is a diversity of perspectives on what is and is not working, as well as what requires re-envisioning. Extraordinary resources—financial and human—are being devoted in an effort to dramatically improve New York's healthcare delivery system. The result will resonate beyond Medicaid and New York, to be watched and studied by all.

1New York's Health Home program provides care management services to Medicaid beneficiaries with HIV/AIDS, serious mental illness, or multiple chronic conditions.



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