Manatt on Medicaid: New Analysis of Delivery System Reform Incentive Payment (DSRIP) Waivers—Early Results and Issues to Watch

Authors: Jocelyn Guyer, Director | Naomi Shine, Analyst | Robin Rudowitz, Associate Director, Kaiser Family Foundation’s Commission on Medicaid and the Uninsured | Alexandra Gates, Policy Analyst, Kaiser Family Foundation’s Commission on Medicaid and the Uninsured

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.

In light of the importance of DSRIP initiatives, Manatt recently undertook an analysis with the Kaiser Commission on Medicaid and the Uninsured to assess how they are working in four states, titled “Key Themes From Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States.” Building on an earlier brief that provides an overview of the DSRIP waivers, the authors conducted intensive interviews with 16 key stakeholders—state officials, providers, and advocates—to identify emerging trends and themes in three states that have expanded Medicaid (California, Massachusetts, and New York) and one state that has not (Texas). As appears in the Executive Summary, the key findings of the analysis are:

Key Findings

• DSRIP initiatives are promoting collaboration, supporting innovation, and bringing renewed attention to social services. DSRIP initiatives are sparking new collaborations among providers, such as urban teaching hospitals and rural healthcare 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 “nonmedical” 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 overincentivize providers to focus too heavily on specialized activities or populations, and the risk that providers will employ problematic strategies to meet performance benchmarks.
• DSRIP’s role in broader delivery system reform and its 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 remain 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 nonfederal 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 pose 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 create challenges for all stakeholders, but have 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

The early results indicate that DSRIP waivers are driving important changes in the relationships among providers and the way that they provide care. On the other hand, there are a number of open questions about the future of DSRIP waivers, including the fundamental issue of whether CMS will allow more states to use DSRIP waivers as a tool for delivery system reform. If it does, CMS, states and other stakeholders will continue to face questions about how to track and evaluate the impact of DSRIP waivers; how to integrate them with Medicaid managed care and other delivery system reform efforts; how to ensure their long-term sustainability; and how to ensure that consumer advocates have the resources with which to track and respond to DSRIP developments.