Key Themes From Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States

Introduced originally in California and followed by Texas, Massachusetts, New Jersey, Kansas and New York, “Delivery System Reform Incentive Payment” or DSRIP programs are a key feature of the dynamic and evolving Medicaid delivery system reform landscape.  DSRIP initiatives are part of broader Section 1115 Waivers and provide states with significant funding that can be used to support hospitals and other providers in changing how they provide care to Medicaid beneficiaries.  Originally, DSRIP initiatives were more narrowly focused on funding for safety net hospitals, specifically maintaining supplemental payments for safety-net hospitals.  Reflecting a growing emphasis at the Centers for Medicare & Medicaid Services (CMS) to strengthen accountability for Medicaid waiver dollars, a defining feature of these waivers is that they require providers – and, recently, states – to meet benchmarks as a condition of receiving Medicaid funds.

This analysis provides an early look at the impact of DSRIP waivers on Medicaid payment and delivery systems.  Building on an earlier brief that provides an overview of the DSRIP waivers, it relies on interviews with stakeholders to identify emerging trends and themes.  It is based on interviews conducted with state officials, providers and advocates in three states that have adopted the Medicaid expansion (California, Massachusetts, and New York) and one state that has not adopted the expansion (Texas).  While each of the four programs is different, a number of major themes emerged across the four states that highlight the opportunities and challenges with DSRIP:

DSRIP initiatives are promoting collaboration, supporting innovation, and bringing renewed attention to social services.  DSRIP initiatives are sparking new collaboration among providers, such as urban teaching hospitals and rural health care providers or primary care and mental health providers.  With the funds that they make available, providers are pursuing innovative approaches to improving care that they have been considering for years.  In addition, DSRIP waivers are increasing the focus on the role that social services play in the health of Medicaid beneficiaries, including stable housing, jobs, transportation, food, and other “non-medical” resources.  At the same time, providers are struggling with the scope and complexity of the organizational, financial and cultural change needed to implement DSRIP initiatives in some states.

It is critical but challenging to design appropriate DSRIP measures. With significant federal funding on the line in DSRIP waivers, it is vital to design measures that capture whether providers are using DSRIP funds to improve care for beneficiaries.  The effort is complicated by the vast number of DSRIP projects in some states, as well as by the inherent tension between providers wanting the flexibility to design projects that address community-specific needs (as allowed in the initial waiver approved in California) versus the need for some standardization of projects and metrics (more like the recently approved waiver in New York).  States and other stakeholders also face many of the classic issues that confront most measurement efforts, including the burden that it can impose on providers to gather and report standardized data, the risk that measures will over-incentivize providers to focus too heavily on specialized activities or populations, and that providers will employ problematic strategies to meet performance benchmarks.

DSRIP’s role in broader delivery system reform and relationship to Medicaid managed care remains unclear.  A major issue in all four states is how DSRIP fits into other efforts to transform the Medicaid delivery system.  In particular, DSRIP waivers often share many of the same goals as Medicaid managed care programs – slowing the rate of growth in spending, improving care and offering greater accountability.  DSRIP offers providers – rather than health plans – the opportunity to change the way that they provide care, but, even so, the relative roles of DSRIP-funded provider networks and managed care plans remains unclear in many instances.  New York reported the most progress in articulating the relative roles as a result of the work it has done on planning (required in the waiver) to ensure that managed care companies work more over time with the provider networks established by the DSRIP waiver.

The financing structure behind DSRIP waivers can dramatically affect how they are implemented. States typically rely on contributions from state and local public hospitals to finance their share of DSRIP payments.  Not surprisingly, this has an effect on the role that providers are expected to play in DSRIP.  For example, California currently reserves its DSRIP funds for the state’s 21 public hospital systems because they finance the non-federal share of DSRIP payments, as well as of some of the state’s other Medicaid spending.  In Texas, large public hospitals finance the bulk of the state’s share of DSRIP expenses, but, a number of other public entities including community-based mental health centers also contribute and some stakeholders believe it has increased their influence over DSRIP implementation.

The complexity and rapid pace of DSRIP implementation poses challenges to providers, advocates, and state officials. It often takes an extended period – two years for New York – to negotiate a DSRIP waiver with CMS, and once approval is secured, states typically want to implement rapidly to jump start delivery system reform and allow providers to begin earning DSRIP payments.  At the same time, the work is complex, often requiring providers to build relationships with new partners and make fundamental changes in their organizational culture and approach to the delivery of care.  The complexity and pace of change creates challenges for all stakeholders, but has proven particularly challenging for consumer advocates. They generally are enthusiastic about the role that DSRIP can play in improving care for Medicaid beneficiaries, but, already have numerous ACA issues to address and limited resources.  As a result, they struggle to keep track of and actively participate in DSRIP implementation.

Looking ahead, DSRIP waivers are becoming an increasingly important tool for driving Medicaid delivery system reform in states that have approved waivers.  However, there are a number of questions about the future of these waivers, such as concerns about the sustainability of projects implemented using DSRIP funds and the extent to which CMS will allow or even encourage other states to pursue DSRIP plans in the future and how states’ decisions on Medicaid expansion may affect future DSRIP waiver awards.

Issue Brief

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