New York state, at Gov. Andrew Cuomo’s direction, continues to implement the most dramatic health-care reform of any state in the country. The state’s reform initiatives directly affect the 25 percent of New Yorkers (6 million citizens) who are eligible for Medicaid. 

Beginning with the 79 recommendations of the Cuomo-appointed Medicaid Redesign Team (MRT) in 2011, the state Department of Health has been on an ambitious Medicaid-reform track to try to control the more than $50 billion of annual New York state (NYS) Medicaid expenditures. In March 2014, the state negotiated an agreement with the federal Centers for Medicare and Medicaid Services that requires transformation of the NYS Medicaid program from a fee-for-service (or FFS) to a value / performance-based reimbursement system, commonly referred to as pay-for-performance (P4P). Most health-care experts acknowledge that a transformation of this magnitude should take up to 10 years. New York continues to focus on a 3-5 year implementation plan, with 2015 representing a key transition point toward satisfying the transformational objectives. 

As you know, we can’t do anything in health care without creating a few more acronyms. The Delivery System Reform Incentive Payment Program (DSRIP) serves as the umbrella description for the process of Medicaid reform. Under the DSRIP agreement between the state and federal governments, NYS can receive up to $8.5 billion of performance incentive payments ($6.5 billion for non-governmental service providers). The primary objectives of the DSRIP implementation over the next five years are as follows:

– Reduce/Eliminate avoidable hospital emergency room visits by 25 percent

– Reduce avoidable hospital in-patient admissions by 25 percent

– Reduce hospital readmissions by 25 percent

Reducing hospital utilization is the same objective that spawned the implementation of managed-care insurance plans some 40 years ago, following the federal Health Maintenance Organization (HMO) Act of 1973. Managed care for the employed population covered by HMOs essentially failed in its objective, which has led us to the proliferation of consumer-directed health plans, employer self-insurance, and medical cost shifting from employers to employees. 

The stated goals of the DSRIP initiative are addressing a monumental challenge. The foundation structure of DSRIP is dependent upon the success of Performing Provider Systems (PPS). A PPS is a coalition of regional health and human-service providers linked to a lead hospital/health system. 

The stated goals of DSRIP are:

– Promote community-based collaboration among health and human-service providers working in concert with the PPS lead health-care systems. 

– Improve clinical performance, quality, and service outcomes to achieve primary P4P objectives.

– The $6.5 billion of DSRIP performance incentives will require a 25 percent reduction in “avoidable hospital use” over the next five years (i.e., primarily ER visits and hospital admissions/readmissions)

The success of the DSRIP initiative will be dependent upon the unprecedented cooperation and collaboration of hundreds of health and human-service providers in each of the 11 PPS regions of the state.

Last August, 88 applications were submitted for consideration and state approval to form PPS organizations. After approving 42 of the applications, coupled with consolidation of certain applicants, we now have 25 PPS organizations being formed in response to the DSRIP initiative. Each of these 25 fledgling PPSs generally involves hundreds of community-based network providers who will have to learn quickly to “play in the sandbox” together. 

The DSRIP design structure identified more than 35 project initiatives for the PPS entities to address in their recently submitted Project Plan Applications (December 2014), in the following areas:

– Health-care system transformation projects

– Clinical-improvement projects emphasizing care coordination

– “Population Health” focused on a preventive-care agenda

The entire DSRIP initiative is proceeding at a break-neck pace. For example, the PPS Project Plan initiatives submitted in December require each PPS to select up to 10 initiatives from the 35 identified by the DSRIP team, These applications are being evaluated in the first quarter of 2015 with approval of project plans and grant awards in April. 

As a taxpayer, it is hard to argue with the concept and stated objectives of the DSRIP initiative. The timing and coordination of Project Plan implementation, along with provider collaboration, will be a critical component of success. For many health and human-service providers, these project initiatives represent a seismic restructuring of the service-delivery system which has been carefully developed by NYS over the past 50 years since the enactment of Medicaid and Medicare legislation in 1965. 

As a nonprofit board and/or management team member, the DSRIP PPS initiative will require timely evaluation and decision-making processes. Organizations that serve one or more of the high-cost vulnerable populations will be most significantly affected:

– Elderly — nursing-home residents/home-care services

– Mental health — Community-based integration coupled with case management to avoid hospital utilization

– Substance abuse — Rehabilitation intoxication in community-based program sites

– Intellectual/developmentally disabled — provide services in the least-costly, community-integrated location emphasizing independence and self-sufficiency

– At-risk youth — increased use of foster care in the home while diverting services away from institutional-based services

Services to these vulnerable populations will require effective strategic positioning of your organization to achieve success in this transformational restructuring of Medicaid service delivery.         

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Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. Contact him at garchibald@bonadio.com