Introduction to and Overview of Delivery System Reform Incentive Payment or DSRIP Programs

Introduction to and Overview of Delivery System Reform Incentive Payment or DSRIP Programs The Antitrust in Health Care Program Co-Sponsored by the American Health Lawyers Association, the ABA Section of Antitrust Law and the ABA Section of Health Law May 13, 2016 Christine L. White 1 Delivery System Redesign Incentive Payment ( DSRIP ) programs allow states to use federal Medicaid matching funds to make incentive payments to providers who participate in delivery system reform initiatives, including infrastructure development, system redesign, clinical outcome improvements and population-focused improvements for Medicaid and uninsured populations. Six states have active DSRIP programs. California s DSRIP received federal approval in 2010, followed by Massachusetts in 2011, Texas in 2012, Kansas in 2013, and New Jersey and New York in 2014. Four other states New Mexico, Oregon, Alabama and Illinois have recently been approved or are seeking federal approval for their DSRIP programs. The investment in these programs has been substantial, with more than $32 billion in federal and state funding commitments to date. 2 Comprehensive evaluation data for DSRIP programs is not yet available. Yet, future health care policies, including those relating to coverage and care, may be informed by the successes, or lack of success, realized by DSRIP programs. To promote increased knowledge and understanding about these demonstration projects, the following outline provides a general introduction to, and overview of, DSRIP programs. I. Introduction to and Overview of DSRIP Programs A. DSRIP programs are state-sponsored, federally-approved Medicaid demonstration or pilot projects under Section 1115 of the Social Security Act. DSRIP programs allow states to use federal Medicaid dollars to make incentive-based payments to providers who pursue delivery system reform initiatives while simultaneously expanding Medicaid managed care. 3 B. There is no set criterion or standard definition for DSRIP programs. As a result, establishing DSRIP programs requires extensive state and federal cooperation and collaboration. 1 Christine White is Vice President, Legal Affairs, Northwell Health, Inc. Any opinions reflected in this document are solely those of the author and may or may not reflect the opinions of Northwell Health, Inc. 2 The federal government alone has allocated approximately $17.5 billion to DSRIP programs. State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment (DSRIP) Pools, Schoenberg, Heider, Rosenthal, Schwartz and Kaye, National Academy for State Health Policy, on behalf of the Medicaid and CHIP Payment and Access Commission (March 2015) at p. 15. 3 Id. 1

C. As Section 1115 Waiver demonstration projects, DSRIP programs generally share certain overarching goals and funding sources, and have common programmatic phases. II. DSRIP Programs are State-Sponsored, Federally-Approved Medicaid Demonstration Projects A. DSRIP programs are state sponsored demonstration projects that have been approved by the U.S. Department of Health and Human Services to receive federal Medicaid funding pursuant to Section 1115 of the Social Security Act, which authorizes the Secretary of Health and Human Services to waive certain statutory and regulatory Medicaid requirements (each, a Section 1115 Waiver ). 4 B. Medicaid, established under Title XIX of the Social Security Act, is a government safety net program which provides free or low-cost medical and health related services to low-income individuals and families through direct payment to health care providers. 5 1. Annual Medicaid spending was approximately $500 billion in 2014. 6 Medicaid accounts for approximately 16 percent of national health care spending. 7 a. Medicaid currently provides health care coverage to more than 70 million people located in 50 states, the District of Columbia and six U.S. territories (each a State ). 8 It currently is the largest payer for births, mental health services and long-term care. 9 2. Medicaid requires extensive federal and state cooperation and funding. a. The federal government funds up to approximately 50 percent of the cost of each State s Medicaid program (with less affluent States receiving more funding than more affluent States). 10 It also provides States with interpretive guidance to use in applying statutory and regulatory requirements, technical assistance including tools and data, and other resources. b. Each State must fund approximately 50 percent of its Medicaid program and, subject to federal and state laws, regulations and guidelines, establish eligibility standards; determine the type, amount, duration, and scope of covered services; 4 Section 1115 of the Social Security Act, codified, as amended, at 42 U.S.C. 1309, 1315, 1396 1396d). 5 See, Medicaid 101, Medicaid and CHIP Payment and Access Commission, available at https://www.macpac.gov/medicaid-101/; http://medicaiddirectors.org/key-issues/medicaid-financing/. 6 Medicaid Demonstrations, Approval Criteria and Documentation: Need to Show How Spending Furthers Medicaid Objective, Government Accountability Office, GAO-15-239 (publicly released May 13, 2015), available at http://www.gao.gov/assets/670/669581.pdf. 7 Id. 8 http://medicaiddirectors.org/key-issues/medicaid-financing/. Specifically, Puerto Rico, Guam, the Northern Mariana Islands, American Samoa and the Virgin Islands participate in Medicaid. 9 http://medicaiddirectors.org/key-issues/medicaid-financing/. 10 https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-andreports/nationalhealthexpenddata/nhe-fact-sheet.html. 2

set reimbursement rates and methodologies (e.g., fee for service or managed care); and administer its program. i. The State must cover certain mandatory populations and benefits, such as low-income children and pregnant women and inpatient and outpatient hospital services. ii. The State has the option to cover additional categories of individuals and benefits, such as children with higher family incomes, and home- and community-based services. iii. As a result, each State s Medicaid program is somewhat unique in terms of eligibility, benefits coverage, funding and reimbursement methodology. 3. Many States are confronting unsustainable Medicaid program costs. Some States are pursuing managed care arrangements as a means of improving care and reducing costs. Currently, more than approximately one-half of Medicaid beneficiaries receive their health care through managed care organizations. a. As a State shifts to managed care contracting, it may face challenges in maintaining traditional sources of supplemental federal funding for its safety net providers because federal regulations require managed care rates to account for the full cost of services under a managed care contract. 11 C. Section 1115 Waivers provide States with the ability to test new Medicaid approaches, including experimental, pilot or demonstration projects such as DSRIP programs that are consistent with the overall goals and objectives of the Medicaid program, without jeopardizing their federal funding. 12 1. Medicaid s program objectives may be met where a demonstration will: increase and strengthen overall coverage of low-income individuals; increase access to, stabilize and strengthen providers and provider networks available to serve Medicaid and lowincome populations; improve health outcomes for Medicaid and other low-income populations; or increase the efficiency and quality of care for Medicaid and other low-income populations through initiatives to transform service delivery networks. 13 2. A Section 1115 Waiver may be granted where a proposed project will be budget neutral such that the anticipated project expenditures will not exceed the anticipated federal spending without the waiver. 14 A State may receive federal Medicaid 11 Medicaid Moving Forward, Julia Paradise, published by The Henry J. Kaiser Family Foundation (2015), available at http://kff.org/health-reform/issue-brief/medicaid-moving-forward/. 12 1115(a)(2)(A). 13 https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/section-1115- demonstrations.html. 14 https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/section-1115- demonstrations.html; https://www.medicaid.gov/medicaid-chip-program-information/bytopics/waivers/1115/downloads/1115-transparency-rtc.pdf. 3

matching funds for amounts up to the estimated without waiver baseline level and may spend those funds on activities that otherwise would not be eligible for matching federal funds. Additionally, if a State s actual spending comes in below the without waiver baseline level, it may be allowed to bank those savings and potentially use them to finance future Section 1115 Waiver activities. 3. Section 1115 Waivers typically are approved for an initial five-year period. States commonly request and receive additional 3-year extensions, although shorter or longer periods also may be approved. 15 During this time, the Centers for Medicare & Medicaid Services ( CMS ) must monitor and evaluate the impact of the demonstration including on access, quality of care and costs on the beneficiaries, providers, health plans and the State. 16 D. State sponsorship of Section 1115 Waivers for DSRIP programs has increased since the enactment of the Affordable Care Act ( ACA ) in 2010. 1. ACA established the Centers for Medicare and Medicaid Innovation ( CMMI ) within CMS and provided $10 billion per year through FY2019 to test, evaluate and expand different service delivery and payment models to slow cost growth while preserving or enhancing quality of care. 17 III. 2. ACA provides 100 percent federal financing for the first three years of Medicaid expansion, after which federal funding gradually decreases to 90 percent. Each State may choose whether or not to expand its Medicaid program. However, enhanced federal funding is available only to States that cover all newly eligible adults (i.e., through 138 percent of the federal poverty level). 3. While many States have adopted the Medicaid expansion, some States have sought a Section 1115 Waiver in order to implement the expansion in ways that allow for changes in typically, expansion of benefits, cost sharing and service delivery systems without jeopardizing matching federal funding. Establishing a DSRIP Program Requires Extensive State and Federal Cooperation and Collaboration A. CMS has not issued specific criteria or a standard definition for DSRIP programs although these programs must satisfy the requirements for a Section 1115 Waiver. B. The Section 1115 Waiver process requires extensive cooperation and coordination between the State and the federal government throughout the waiver application process and the duration of the DSRIP program. Once the State has designed a demonstration tailored to 15 https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/section-1115- demonstrations.html. 16 https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/demo-evaluationreports.html. 17 Section 1115A of the Social Security Act, as added by section 3021(a) of the ACA, P.L. 111-148; see also https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/section-1115- demonstrations.html; Testimony of Professor Sidney D. Watson Saint Louis School of Law, University Center for Health Law Studies House Interim Committee on Medicaid Transformation (September 25, 2013), available at https://www.slu.edu/documents/law/centers/health%20law/medicaid/watsontestimonywaivers.pdf. 4

address its specific Medicaid program needs and applied for a waiver, it must: 1. negotiate with CMS the special terms and conditions of the requested waiver addressing the key design elements of the program including the particulars of the proposed DSRIP s funding, timeframe, types and number of eligible providers and metrics, 18 2. develop and submit for CMS review and approval a protocol or master plan setting forth implementation details, such as a methodology for distributing funds, specific project metrics, reporting requirements and an implementation timeline, 3. participate in and cooperate with federal oversight activities, including federal review and monitoring of implementation progress as well as evaluations of the demonstration s impact in terms of access, quality of care and costs on beneficiaries, providers and health plans. 19 C. Each of the DSRIP programs approved to date is highly customized in terms of its goals, federal and State funding, timeframe, number and type of projects, number and type of participating providers and metrics. 20 1. For example, the total funding and the distribution methodologies (i.e., for allocating the DSRIP funding across providers, demonstration years and projects) varies considerably by State. Some States have consistent funding each program year, while others have ascending amounts to shift priority to a pay-for-performance financing model and emphasize the increasing importance of achieving program goals in the later years. 21 D. The details of DSRIP programs must be gleaned from various State and federal documents, including the federal waiver approval or special terms and conditions documents, the State s DSRIP program plans and applications, protocols and annual reports. 22 IV. As Section 1115 Waiver Demonstration Projects, DSRIP Programs Generally Share Certain Overarching Goals and Funding Sources, and Have Common Programmatic Phases A. Most DSRIP programs are designed to make incentive payments available to providers who pursue specific delivery system reform initiatives, including infrastructure development, system redesign, clinical outcome improvements and population focused improvements for 18 Id. 19 https://www.medicaid.gov/medicaid-chip-program-information/by-topics/waivers/1115/demo-evaluationreports.html. 20 Id. 21 Id. at p. 17. 22 Id. 5

Medicaid and uninsured populations. 1. Certain DSRIP programs focus on transforming particular hospital systems. a. For example, the California, Kansas, Massachusetts, and New Jersey DSRIPs focus on hospital system transformation, including building infrastructure and programs that improve operations in and across inpatient and outpatient settings. i. Under California's DSRIP each participating public hospital is implementing 15 care-delivery reform projects, with an average of 217 milestones per system over five years. b. These DSRIPs include relatively small numbers of participating providers ranging from 50 in New Jersey to two in Kansas most of which are public hospitals and health systems and other safety net hospitals. 23 2. Other DSRIP programs seek to achieve regional health care transformation, including by creating regional collaboratives responsible for regional planning, aligning providers to address local gaps in care (including behavioral health care, access to primary care, and chronic care management and helping patients with complex needs navigate the health care system), and performing data aggregation and reporting functions. a. Texas DSRIP involves 20 regional health care partnerships ( RHPs ) across the State. 24 These RHPs are performing a total of 1,500 projects. b. New York s DSRIP involves 25 performing provider systems ( PPSs ) across the State, with each PPS performing no less than five and no more than eleven projects. c. These DSRIP programs typically are led by major public hospitals or other safety net hospitals, but also include multiple types of non-hospital providers, community-based organizations, local health departments, community health centers and other providers. B. DSRIP programs typically include four key programmatic phases: program planning, project implementation, reporting and results. 25 1. During the program planning phase, providers generally must perform community health needs assessments, select particular DSRIP project plans from the State s menu of potential projects, and submit proposed projects plans to the State and CMS for approval. a. Many DSRIP programs focus on planning for and achieving process-oriented infrastructure and system redesign measures in the early years and then require more outcome measures in later years. 26 23 Id. at p. 15. 24 Id. 25 Id. at pp. 9-10. 26 http://www.chcf.org/~/media/media%20library%20files/pdf/pdf%20d/pdf%20dsripreviewfinal040920 15.pdf. 6

27 b. Infrastructure projects may include building new clinics, hiring new staff, training workforce and developing disease registries. c. System redesign projects may include redesigning primary care models and expanding medical homes and chronic care models, integrating physical and behavioral health care and improving care transitions from inpatient to ambulatory care settings. 2. Project implementation generally includes infrastructure development and redesign of care processes. a. For more recent DSRIP programs, some or all of the first demonstration year is devoted to planning and project development. Providers can earn incentive dollars for meeting planning milestones associated with the creation of infrastructure as well as process and outcome metrics and milestones. b. Outcome-based measures that may be required in the later years include clinical care and population focused improvements that are tied to measurable outcomes and metrics to address patient care, safety and improvements in overall health. 3. Most DSRIP programs require both the participating providers and the sponsoring State to perform extensive data collection and reporting. a. Reporting templates must be designed by the State and approved by CMS. b. Participating providers typically must submit semi-annual reports detailing their progress in meeting specified metrics or milestones as well as annual reports with narrative descriptions of progress made, lessons learned and challenges faced. i. For example, the evaluation metrics for one Texas DSRIP project involving a specialty hospital s expansion of access to gastrointestinal services by 1,800 patients per year involves 20 different metrics over five years. 27 A second project involves building at least three mobile clinics, hiring nine staff members and realizing 4,800 patient visits. This project requires periodic reporting on 21 project-specific quality measures and improvement goals, such as those associated with improving diabetes control and reducing preventable visits. 28 c. The State also must provide regular and extensive reporting to CMS to demonstrate that it is complying with the terms and conditions of its waiver and satisfying the budget neutrality requirement. i. For example, New York s DSRIP requires extensive reporting and ongoing formal monitoring in addition to CMS standard Section http://www.chcf.org/~/media/media%20library%20files/pdf/pdf%20d/pdf%20dsripreviewfinal040920 15.pdf. 28 Delivery System Reform Incentive Payments (DSRIP) Programs, Ben Finder and Robert Nelb, Medicaid and CHIP Payment and Access Commission (March 24, 2015), at p. 7. 7

1115 waiver oversight including detailed semi-annual reporting on project achievement, quarterly State monitoring reports on provider progress and challenges, and interim and summary evaluations conducted by an independent evaluator. d. Some DSRIP programs also include mid-demonstration assessments to allow the State and CMS to adjust the program s metrics and measures. i. For example, New York must show that its total Medicaid spending, including expenditures for inpatient and emergency department services, are at or below target trend rates. The State s federal funding may be reduced if the State fails to hold per capita Medicaid spending to target levels, to demonstrate that providers have satisfied a majority of their project goals, and to show progress toward the goal of integrating DSRIP initiatives into Medicaid managed care. e. States and CMS have reported that they have hired or redeployed staff or contractors to accomplish DSRIP program reporting and administration. 29 i. For example, Texas Health & Human Services Commission dedicated an additional thirteen full-time employee equivalents to support the administration of DSRIP. 30 4. Comprehensive evaluation data and results reporting is required of all DSRIPs but is not yet available. C. All DSRIPs provide performance-based incentive programs. 1. DSRIPs are not grant programs, and most do not require the incentive payments to be spent in a particular way. 31 Incentive payment amounts are not tied to the actual cost of achieving care improvements, and are not considered patient care revenue. 32 2. Most DSRIP programs dedicate funding for: planning and detailing DSRIP project plans; performance of pre-approved delivery system reform projects and associated metrics of improvement or implementation milestones; reporting on standard metrics; and results or demonstrated improvement on standard quality metrics of outcomes. 33 a. Most DSRIP programs require participating providers to meet process or outcome measures to qualify for funding. 29 State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment (DSRIP) Pools, Schoenberg, Heider, Rosenthal, Schwartz and Kaye, National Academy for State Health Policy, on behalf of the Medicaid and CHIP Payment and Access Commission (March 2015), at p. 19. 30 Id. at p. 32. 31 State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment (DSRIP) Pools, Schoenberg, Heider, Rosenthal, Schwartz and Kaye, National Academy for State Health Policy, on behalf of the Medicaid and CHIP Payment and Access Commission (March 2015), at p. 18. 32 Id. 33 Id. at pp. 17-18. 8

b. Generally, as payments shift away from implementation activities towards demonstrating improved health outcomes, it becomes increasingly difficult for providers to earn incentive payments. D. All DSRIP programs are subject to continuing federal oversight. 1. HHS can withdraw federal funding for a Section 1115 Waiver under certain circumstances, including if the agency determines that the demonstration no longer promotes the objectives of the Medicaid program. 2. Funding for a DSRIP program may be contingent upon the State s and the participating providers attainment of particular metrics. a. New York is at risk and could lose DSRIP funding if it fails to achieve specific metrics associated with statewide performance on avoidable hospital use, project metrics, meeting target trend rates for reducing the growth of total State Medicaid spending and implementing value-based purchasing arrangements in managed care. New York s DSRIP funding peaks in the middle of the program, which is intended to promote sustainability of reforms post-waiver. Depending on the year, five to fifty-five percent of a provider s annual DSRIP allocation is based on meeting preventable hospitalization milestones tied to the goal of reducing all preventable hospitalizations by 25 percent. This is in addition to meeting process and outcome measures. V. Comprehensive evaluation data and results are not yet available for DSRIP Projects. A. States with more mature DSRIPs report that significant improvements in care have been achieved for low-income (Medicaid and uninsured) patients and that most likely these improvements would not have been achieved at comparable scale, speed, and success without the impetus of earning the accompanying DSRIP funding. 34 B. Texas and California have identified specific and tangible benefits realized by Medicaid and uninsured patients as a result of their DSRIP programs. 1. Public hospitals participating in California s DSRIP have reported: an average 35.9 percent decrease in their Central Line-Associated Bloodstream Infection rate per site in Acute Care Units and an average decrease of 59.7 percent in the ICU; assignment of more than 500,000 patients to a medical home and/or primary care provider; and entry of over one million patients into disease registries for care management purposes. 35 34 State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment (DSRIP) Pools, Schoenberg, Heider, Rosenthal, Schwartz and Kaye, National Academy for State Health Policy, on behalf of the Medicaid and CHIP Payment and Access Commission (March 2015), at p. 33. 35 See Aggregate Public Hospital System Annual Report on California s 1115 Medicaid Waiver s Delivery System Reform Incentive Program, Demonstration Year 7, California Health Care Safety Net Institute (2013), available at http://www.dhcs.ca.gov/documents/dsrip%20 DY%207%20Aggregate%20Pub%20Hosp%20System%20 Annual%20Report.pdf. 9

2. California also has reported that, under its DSRIP, the State s Department of Health Care Services appointed its first-ever medical director to oversee quality in Medicaid. 36 Additionally, all of its participating hospitals reportedly have reduced wait times, reduced health care-associated infections and improved their interactions with patients. 3. Texas interim evaluation found increased collaboration among providers on activities that improved access to care and services provided to disadvantaged populations. 37 Texas providers report that they are providing services that previously were not funded by the State s Medicaid program and that patient care has improved as a result. 38 * * * 36 Id. at p. 32. 37 Evaluation of the Texas Healthcare Transformation and Quality Improvement Program: 1115(a) Medicaid Demonstration Waiver, Monica L. Wendel and Liza M. Creel, presented at the Texas Statewide Learning Collaborative Summit (September 10, 2014), available at https://www.hhsc.state. tx.us/1115-docs/dsripsummit/waiverevaluation.pdf. 38 State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment (DSRIP) Pools, Schoenberg, Heider, Rosenthal, Schwartz and Kaye, National Academy for State Health Policy, on behalf of the Medicaid and CHIP Payment and Access Commission (March 2015), at p. 33. 10