The NYS Department of Health (DOH) has proposed new guidelines for the provider contract submission and review process to reflect Value Based Payment arrangements pursuant to the New York State Value Based Payment (VBP) Roadmap (Roadmap) and the Regulatory Impact Subcommittee.

The Provider Contract Guidelines (PCG) set forth the process for managed care organizations (MCOs) to submit, and DOH to review and approve, provider contracts, including contracts between MCOs and independent practice associations (IPAs) and between IPAs and providers. The PCG contains both guidelines and mandatory provisions. With the transition to VBP, the DOH was tasked with amending the PCG to take into consideration how and by which State agency VBP provider contracts should be approved.

To provide the foundation for incorporating VBP and the Roadmap into the provider contract review process, the proposed DOH PCG establish a number of new definitions. And while there are numerous editorial and organizational changes to the PCG, by far the most significant change is the establishment of a new three-tier categorization system that replaces the previous five general categories of risk.

Tier 1 is called “File and Use” and establishes an abbreviated DOH review similar to the prior Level 1 30-day review previously utilized. This abbreviated review is not a program and financial review, like that employed in Tier 2 and Tier 3 (discussed below) and contracts qualify for Tier 1 in the limited circumstances of having low prepaid capitation and under $1,000,000 annual payments to the provider or, where payments to the provider are larger, limited amounts of the payments under the contract are at risk or the payments represent a small proportion of the provider overall Medicaid revenue. Additionally, any “off menu” arrangements from the VBP Roadmap that have not been DOH approved would disqualify a contract from Tier 1.

Tier 2 and Tier 3 categories of contracts are considered “Risk Sharing Arrangements” in the same way the prior Level 3, 4 and 5 categories were regulated. An important addition to this Section VI(B) of the PCG is a new requirement that IPAs submit not only regular financial statements to the MCO, but also documentation to demonstrate progress toward the VBP goals in the Roadmap, emphasizing the central role that the Roadmap plays in establishing the new PCG. For Tier 2 contracts, the Department of Financial Services (DFS) will not conduct a separate financial review unless DOH requests such a review. However, for all Tier 3 contracts, DFS is the agency designated to conduct the financial review and, while DOH may also conduct its own financial review, DOH is entitled to defer to the DFS approval following DFS financial review. This multi-agency review for Tier 3 includes a DOH programmatic review in parallel with the DFS financial review.

To qualify for Tier 2 and potentially avoid the multi-agency review a contract must have the same low prepaid capitation levels and total contract payments to a provider as in Tier 1, but the contract may have higher percentages of the contract payments at risk, represent a higher percentage of overall Medicaid revenue or be an “off menu” arrangement from the VBP Roadmap which DOH has not yet approved.

Tier 3 contracts are defined broadly and subject to significant DOH discretion. Any contract where the provider’s prepaid capitation payment is more than $250,000 is Tier 3. And DOH reserves the right to classify any other contract as Tier 3, presumably those that do not meet the Tier 1 or Tier 2 criteria, although such a limitation on DOH’s authority is not included in the text.

The proposed changes to the PCG do not amend any aspect of required DFS review when required by Regulation 164.

The proposed PCG is open for comments until June 30, 2016. DOH will review the comments and will finalize the PCG in the coming months. Importantly, the PCG, once finalized, will be prospective and apply to new contracts and amendments as of a date to be specified by DOH. Additionally, as expected, all contracts must be revised to comply by a certain date which currently is identified by DOH as a date in 2017.

We encourage interested parties to review the new contract review criteria and submit comments to DOH. Potential areas ripe for comment might include the scope of DOH discretion in defining arrangements as Tier 3 and the PCG implementation timeframes.