Editor’s Note: Increasingly, a number of states are using Medicaid waivers, referred to as Delivery System Reform Incentive Payment or DSRIP waivers, to transform the way they provide care to Medicaid beneficiaries. Authorized under Section 1115 of the Social Security Act, these initiatives are generally part of broader reform waivers and allow a state to make payments to eligible providers supporting the state’s Medicaid delivery system reform agenda.

In a new issue brief for the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured, Manatt Health takes 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 DSRIP waivers, it relies on interviews with stakeholders to identify emerging trends and themes. Manatt conducted interviews with state officials, providers and advocates in three states that have adopted Medicaid expansion (California, Massachusetts and New York) and one state that has not (Texas). While each of the four programs is different, major themes emerged across all four states that highlight DSRIP’s challenges and opportunities. A summary of key findings and insights appears below. Click here to download a free copy of the full brief.

Introduced originally in California and followed by Texas, Massachusetts, New Jersey, Kansas and New York, 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. Funds can be used to strengthen the infrastructure needed for delivery reform, promote new and innovative partnerships among healthcare providers, and build stronger connections between providers and social services agencies.

Originally, DSRIP initiatives were more narrowly focused on maintaining supplemental funding for safety net hospitals. Today, DSRIP waivers are spurring major changes in relationships among providers. They are allowing providers to launch new initiatives aimed at improving care and reducing costs, as well as fostering a stronger focus on the social service needs of Medicaid beneficiaries. Reflecting a growing emphasis at the Centers for Medicare and Medicaid Services (CMS) on strengthening accountability for Medicaid waiver dollars, a defining feature of DSRIP waivers is that they require providers—and recently states—to meet benchmarks as a condition of receiving Medicaid funds.

With DSRIP implementation moving at a rapid pace, stakeholders, including consumer advocates, are finding they are hard-pressed to keep up with tracking and responding to the DSRIP-driven changes that are fundamentally transforming the way care is delivered to Medicaid beneficiaries. Looking ahead, as DSRIP implementation continues and waivers come up for renewal, there will be an increasing focus on the need to ensure long-term sustainability of the DSRIP improvements, including in states, such as Texas, where the challenge may be even greater, given the decision not to expand Medicaid.

Common Themes Across All Four States

While DSRIP waivers vary based on how long they have been in effect; specific goals and objectives; eligible providers, projects and organizations; and financing, a number of common themes and early “lessons learned” have emerged from our stakeholder interviews in all four states: California, Massachusetts, New York and Texas:

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 healthcare providers or primary care and mental health providers. With the funds DSRIP programs make available, providers are pursuing innovative approaches to improving care. In addition, DSRIP waivers are increasing the focus on the role that social services—including stable housing, jobs, transportation, food and other nonmedical resources—play in the health of Medicaid beneficiaries. 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, it is vital to design DSRIP 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 and those seeking standardization of projects and metrics. States and other stakeholders also face many of the classic issues that confront most measurement efforts, including the burden they can impose on providers to gather and report standardized data. There is also the risk that measures will overincentivize providers to focus too heavily on specialized activities and populations and 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 remain 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 they provide care, but, even so, the relative roles of DSRIP-funded provider networks and managed care plans remain unclear in many instances.

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 payments. For example, California currently reserves its DSRIP funds for the state’s 21 public hospital systems, because they finance the nonfederal share of DSRIP payment, as well as some of the state’s other Medicaid spending. In Texas, large public hospitals finance the bulk of the state’s share of DSRIP expenses. A number of other public entities, however, 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. 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 difficult for consumer advocates. Consumer advocates generally are enthusiastic about the role that DSRIP can play in improving care for Medicaid beneficiaries, but they already have numerous ACA issues to address with limited resources. As a result, they struggle to keep track of and actively participate in DSRIP implementation.

Conclusion

Based on the four states investigated for this analysis, it is clear that DSRIP waivers are becoming an increasingly important tool for driving Medicaid delivery reform. They have spurred major change, often surprising even the state officials who designed them in the extent to which they have broken down silos among providers and unleashed new initiatives.