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Welcome to Health Care in Policy and in Practice, the health policy update from America’s Essential Hospitals. I am Matt Buechner. America’s Essential Hospitals has released a new policy brief on delivery system transformation. This new brief – Medicaid Incentive Programs: Extending the Reach of Health Care Transformation – gives an overview of one framework through which states and essential providers, along with the Centers for Medicare & Medicaid Services, are transforming care. This brief is a follow-up to our March 2013 brief that took an initial look at waiver-based Medicaid incentive programs. Today, we will discuss incentive programs and how they are being used to make sustainable and long-lasting changes to how health care is provided across the United States.

The passage of the Affordable Care Act kick-started an industry movement to find new ways to make care more coordinated, efficient, and patient-focused. Providers are working together to find ways to improve patient health outcomes in the most cost-effective manner. As the industry moves forward with these efforts in new, innovative ways, providers who serve low-income populations can sometimes struggle to keep up. Many of these hospitals see more complex patients who are on Medicaid or are uninsured. The payment rates that providers receive through Medicaid are often much lower than from private insurers. As a result, these providers are less able to implement new models of care, despite the benefits that come with innovation.

This is why waiver-based Medicaid incentive programs are important. They give essential providers the ability to not only implement innovations, but drive change. These programs offer resources to providers, in addition to the payments they receive for services they provide, to implement changes in the delivery of health care. Providers work with their state and CMS to set milestones that they have to meet for the projects that they’re working on. If the providers meet these milestones, they can than receive the agreed upon additional resources.

These programs are budget-neutral and really prioritize projects that can produce sustainable and systemic changes. Projects have included expanding the reach of primary and specialty care services through the hiring of more staff, redesigning space, keeping facilities open for longer hours, as well as enhancing an organization’s information technology infrastructure. Waiver programs also encourage investment in tracking and improving population health, including looking at all of the factors that may impact a patient’s well-being. To meet these goals, providers have implemented disease management registries to track chronic diseases and needed patient interventions, as well as electronic health records to help identify high risk patients. Because of the expense of these systems, without help, essential providers may find implementation of the infrastructure, needed for innovative delivery models, challenging. The idea, though, is that by helping providers implement the building blocks, or foundation for long-term change, patients will receive better care for years to come.

The first state to be approved for a waiver-based Medicaid incentive program was California. Their program, called the Delivery System Reform Incentive Program, or often just called DSRIP, was approved in late 2010. Other states have since created similar programs, including Massachusetts, Texas, Kansas, New Jersey, New Mexico, and New York. You’ll likely hear Massachusetts’ program referred to as DSTI, or Delivery System Transformation Initiatives, and New Mexico’s program as the Hospital Quality Improvement Incentive program, or HQII.

The early stages of California’s DSRIP focused on developing the infrastructure and building blocks for long term success. Projects focused on quality reporting and data analysis, so that providers can see what works best to improve the quality of care. This will help save money, while also benefiting patients and the broader community.

Massachusetts, with its DSTI, incentivize hospitals to build capacity, as the state transitions to a value-based purchasing payment model. Hospitals are creating and implementing plans to integrate and coordinate care, as well as develop strong, patient-centered medical homes.

Texas, meanwhile has developed a regional model, within their state. They have created regional health care partnerships, or RHPs, to advance regional health care goals. Each of the RHPs must perform community needs assessments and hospital plans must address the issues found in these regional assessments.

Other states are using their DSRIP projects to support state policy priorities. For example, Kansas is addressing barriers to achieving statewide priorities from their Healthy Kansas initiative. New Jersey, meanwhile is combating and reducing chronic illness with its DSRIP program, to help achieve its Healthy New Jersey 2020 goals. Specifically, New Jersey hospitals will work on pre-approved projects based on improving care delivery around eight chronic diseases, including asthma, HIV/AIDS, substance abuse, and obesity.

More states are looking to roll out programs in the coming years and some are even in the process of finalizing plans with CMS.

The DSRIP model has great promise for producing effective transformations to how health care is delivered in the United States, but as states move forward with their plans, it is important to keep a few things in mind:

  • First, implementing the data and infrastructure – the foundation of delivery innovation – is costly, both in time and in money.
  • Additionally, the selection of specific program milestones is critical for achieving success within the programs. If milestones are tied to metrics that the hospital already tracks, the hospital will be able to use the information to make decisions about what is best for the patients.
  • Finally, it’s important that hospitals and providers have access to appropriate levels of payment for the care that they provide. They need to be able to cover the costs of the care they provide, as well as pay for the innovations that will help them be more cost-effective over the long-term. Ensuring that DSRIP incentives are funds in addition to money that the hospital receives for services that they provide, is vital.

Thus far, participation in the DSRIP is showing real benefits for hospitals and patients in California, and we expect the same for additional states, once their programs mature. As one member organization in California noted in their DSRIP Annual Report,

[Our] participation in DSRIP has resulted in a fundamental and revolutionary change in our approach to quality management. The discipline that was established by our participation in DSRIP…has enabled us to substantially reorganize our quality efforts.”

Medicaid waiver-based incentive programs could prove to be a critical tool in the provision of high quality, cost-effective health care for all Americans. For more information on waiver-based Medicaid incentive programs, check out America’s Essential Hospitals June 2014 policy brief, Medicaid Incentive Programs: Extending the Reach of Health Care Transformation. For other health policy news and information on topics we discussed today, please visit the Action tab or search bar on the America’s Essential Hospitals homepage at www.essentialhospitals.org. Thank you for listening to today’s edition of Health Care in Policy & in Practice. I’m Matt Buechner, join us next month for another health policy update.