Promise and peril in Medicaid redesign

In one of the nation’s largest and most ambitious Medicaid reorganizations, New York health systems have an opportunity to try new models of acute and preventive care, albeit not without some risks.

After gradually paring back the growth rate of New York’s $54 billion Medicaid program through a number of reforms, Governor Andrew Cuomo sought and finally received a waiver from the Centers for Medicare & Medicaid Services to invest $8 billion in a larger redesign over the next five years, using money from what is estimated to be $17 billion in federal-share savings.

The Delivery System Reform Incentive Payment (or DSRIP) program is targeting as its main goal unnecessary hospitalizations, aiming to reduce avoidable admissions by 25 percent. More broadly, it’s trying to ensure that Medicaid beneficiaries can access integrated medical and behavioral health services across primary care practitioners, community-based organizations, home health visits, specialists and hospitals, through “a single system of effective care management.”

And all that under what is in New York state a global spending cap, a reimbursement system some federal regulators think could eventually become the norm across Medicaid.

Disruptive innovation?

Disruptive as it may be for some, the DSRIP program has a lot of potential to bring beneficial innovations to the delivery and payment of care for New York’s approximately 5 million Medicaid beneficiaries, but there are still some hurdles, said Valerie Grey, executive vice president of policy at the Healthcare Association of New York State.

The state is “moving in the right direction. But it’s going to be a challenging time, too. We need to pay as much attention to the implementation of the idea as to the idea itself,” Grey said. “It’s a very complex program.”

The waiver permits the state to devote $6.42 billion for the DSRIP program, which will offer grants to groups of safety net providers testing new models, along with $1 billion for investments in health home, IT and workforce development, and $500 million in temporary support for struggling safety net hospitals. (The state has separately allocated $1.2 billion for a provider capital support program spread out over the next 7 years.)

The bulk of the waiver funding, the $6.4 billion for DSRIP, may have the most potential for seeding innovation. Participating providers applying for grants — in groups, as single organizations are barred from applying — will choose from 25 different initiatives or propose their own to try new models of primary and hospital care, prevention and chronic disease management and community-based outreach and co-location.

Grey, a former assistant health commissioner and government affairs VP at UnitedHealth Group’s AmeriChoice, expects providers will try to craft a variety of new strategies based on models of patient-centered medical homes, medical villages and community support, “where basically you downsize some of the institutional capacity and move it towards the community-based care.” Another viable option may be expanding the use of telemedicine, from rural Upstate communities to the boroughs of New York City.

Surmounting obstacles

Right now, across the state, there are varying levels of population health, “outside-the-four-walls” and integrated delivery strategies emerging, but scaling those and creating new ones specifically for Medicaid will come with challenges.

For one thing, some of the health systems may not have adequate capital to make investments in new technology, community-based clinics, co-located offerings (something especially needed for behavioral health) or new partnerships. New York hospitals have some of the lowest operating margins in the country, usually ranking third from the bottom, Grey said. 

For another, there may be some policy hurdles to integration. To make the DSRIP program work most effectively, the Healthcare Association of New York State is hoping the state will consider several regulatory reforms and improvements, such as streamlining or waiving the certificate of need process, corporate practice of medicine, scope of practice and workforce flexibility.

“I used to think about it as an experimental process, but now I think about it as the creation of networks across the state that will get paid for keeping people healthy,” Grey said of the DSRIP program.

New York regulators are finalizing the waiver with CMS, and will begin accepting applications from providers in October, with the awards slated to be made in January.