Report: early lessons from Medicaid payment incentive waivers

CMS has granted seven state Medicaid programs the opportunity to conduct Delivery System Reform Incentive Payment (DSRIP) demonstration waivers. So far, there are preliminary results from four states, and the Kaiser Foundation has examined the lessons learned from their demonstrations.

Three of the states, California, Massachusetts, and New York, expanded Medicaid under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), while the fourth, Texas, did not. California’s waiver was approved for the period from 2010 to 2015, and the state currently is seeking renewal. The Massachusetts and Texas waivers were initially approved in 2011; Massachusetts’ three- year Delivery System Transformation Initiative (DSTI) was renewed in 2014 for a second three-year term. Texas is currently considering its options for extension of its waiver. New York’s waiver was approved to begin in 2015 after lengthy negotiations.

Changes to CMS process

CMS’ stance concerning terms and conditions has become more strict, at least partly in alignment with the agency’s general move to increase transparency and accountability with respect to the funding of demonstration projects generally. California’s waiver granted the state’s public hospitals leeway to determine their own projects, though they were required to meet defined metrics; the Massachusetts waiver allowed internal work groups to define the metrics for the projects they developed.

In New York, the waiver involves the creation of Performing Provider Systems (PPS), including hospitals and community-based health care providers. Each PPS must choose five of 44 possible projects. Not only must each PPS meet defined benchmarks, but the state as a whole must meet accountability measures and risks losing funding if it does not.

New collaboration and focus

The waivers have been instrumental in developing relationships among hospitals and other providers, such as community clinics and community mental health centers. To some extent this has helped to “break down the traditional silos” between providers. In Texas, urban teaching hospitals have begun to work with rural health care providers so that seriously ill patients can receive care in their communities rather than traveling. Texas providers also have tried innovations to improve care. One project involved training paramedics to visit with “frequent fliers” to help them fill prescriptions and meet other needs in order to reduce emergency room usage.

Change is hard, planning needed

Kaiser analysts found that the state agencies and stakeholders had difficulty coming up with measures that were quantifiable and appropriate to local needs. Providers who had not previously worked together closely had to do so. Sometimes providers were competing for Medicare and private pay patients but were expected to cooperate in treating Medicaid patients. In addition, small providers found the detailed recordkeeping and reporting required for the demonstrations to be burdensome. When projects were developed by local and regional hospitals, the protocols and benchmarks were not always consistent, making it difficult to measure the effectiveness of the program as a whole. Participants also felt tremendous pressure to implement complex changes right away.

Money talks

Much of the impetus for states to participate came from the need to preserve or maximize diminishing federal funding. The providers who could bring money to the table had a great deal of influence on how the projects were designed and implemented. For example, in Texas, the community mental health centers had funds to contribute. As a result, there was a greater focus on behavioral health care than there would have been without it. In New York, where the programs created incentives for hospitals to contact with PPS entities, some were concerned that finances, not the patients’ needs, would dictate patient referrals.

Sustainability concerns

The DSRIP funding has been replacing other payments to hospitals, so that the providers do not view them as temporary. Yet, the demonstrations are not intended to be permanent redesigns. CMS is reportedly urging states to plan for the expiration of the demonstration funding. The goals of the incentive programs overlap a great deal with those of Medicaid managed care, but only in New York has the demonstration linked DSRIP payments to managed care. The terms of its demonstration that 90 percent of managed care payments to providers must be made with value-based methodologies. In Texas, the coverage gap created by the choice not to expand Medicaid has limited the prospects for actual reform of the delivery system. It is unclear whether Texas or any other state will be granted a renewal or a new waiver without expanding Medicaid.