Is the New York Healthcare Community Ready for Rebalancing Under Delivery System Reform Incentive Payment (DSRIP)? (Part One)

In 2011, New York State set out to fundamentally transform its Medicaid program. To develop a path towards achieving its so-called “Triple Aim” of delivering better care, better health and lower costs, the State established its Medicaid Redesign Team (MRT). Fast forward two years, and the State was on the verge of delivering its promise: in December 2013, it submitted the NY State Health Innovation Plan (SHIP) to the Centers for Medicare and Medicaid Innovation (CMMI) as its five-year road map to achieve the Triple Aim.

Fast forward again, and the Triple Aim is now within reach. In a move aimed at transforming New York State’s healthcare delivery system, the Centers for Medicare and Medicaid Services have agreed to provide $8 billion to the State through a five-year 1115 Partnership Medicaid Waiver (the “Waiver”). Essentially, these Section 1115 Waivers give states flexibility to design and improve their Medicaid and CHIP programs, and this new program will reinvest federal savings already produced by the State’s Medicaid Redesign Team initiatives into a series of delivery system reforms.

The Waiver funds will be implemented primarily through the Delivery System Reform Incentive Payment (DSRIP) Program. Ultimately, the goal of the DSRIP program is to reduce avoidable hospital use by rebalancing the delivery system through the reduction of preventable emergency room visits, readmissions and avoidable hospitalization.

To help implement transformational programs and expand community-based services, the DSRIP initiative is encouraging providers across care delivery networks to work closely together to apply for the DSRIP funds. The DSRIP initiative acts as an unprecedented catalyst for conversations across the spectrum of providers—including hospitals, behavioral health and substance abuse, primary care networks and long-term care. The application process for providers stresses innovation through collaboration—all in an effort to improve patient outcomes and access, as well as drive down the total cost of care. It also stresses that new provider coalitions must be formal and establish clear business relationships. Presumably, this will help create sustainable models of care that involve a comprehensive group of providers.

DSRIP Funding Breakdown

DSRIP funds will be distributed to two key groups: public providers and safety net providers. Out of the $8 billion in reinvestment, $500 million will be funneled to an Interim Insurance Fund to ensure the short term sustainability of Medicaid safety net providers; $1.08 billion will be used for other Medicaid Redesign purposes, including health home development and investment in long-term care and behavioral health services; and the remaining $6.42 billion will be allocated to the DSRIP program. A bulk of the DSRIP funding is expected to be funneled directly to the NYC Health and Hospitals Corporation (HHC), which is currently facing significant financial pressures. Another group expected to receive a substantial portion of the funds are the State’s public hospitals including county providers in Nassau, Westchester and Erie, as well as those operated by the State University of New York (SUNY Upstate, Downstate, and Stony Brook).

The remainder of the funds will be distributed to safety net providers. The term safety net has been debated over the past few months, as interested provider groups have urged the State to expand the definition to ensure certain providers—primarily those in regions outside of the southern region of the State—be included in the definition. However, with Governor Cuomo’s announcement that New York had finalized the terms and conditions with the federal government on April 14, the definition was established per the terms below.

A hospital participant must be either a public hospital, critical access hospital or sole community hospital in addition to meeting the following criteria:
  • At least 35 percent of outpatient volume must be associated with Medicaid, uninsured and dual eligibles (those eligible for both Medicaid and Medicare)
  • At least 30 percent of inpatient volume must be associated with Medicaid, the uninsured or dual eligibles
  • The hospital must serve at least 30 percent of all Medicaid, uninsured and dual eligible members in the county or community
  • Community based/non-hospital providers must have at least 35 percent of all patient volume associated with Medicaid, the uninsured and dual eligibles
With these parameters in mind, the State did leave room for some exceptions to these requirements on a case by case basis, should it be in the best interest of the Medicaid population. Non-qualifying providers could receive only a very limited percentage of the overall dollars.

Most safety net providers are expected to submit applications in some form, as hospitals in partnership with social service community-based providers, as well as large social service provider networks. Presumably, the applications will be tied to a hospital, since a primary goal of the DSRIP dollars—reducing hospital admissions—targets the hospital setting. Keep in mind that the provider community may look substantially different in five years depending on which organizations are awarded funds from the outset.

When it comes to actually applying for funds, providers also face considerable risk. To secure funding, providers must successfully meet chosen program requirements under a pay for performance model. Providers run the risk of not receiving incentive payments if they fail to meet their annual milestones, regardless of their initial investments into the program. The ability to develop, measure and report on outcome metrics will become a key component of this program at the provider and State level.

DSRIP Program Requirements

To receive funding, the State mandates the implementation of a minimum of five projects within the following three categories: 1) System Transformation Projects, 2) Clinical Improvement Projects and 3) Population-Wide Projects.

Projects must consist of programs from the established DSRIP program menu and should address the unmet needs in a population. Providers can also choose to submit projects that are unique or “off-menu.” In other words, these projects are not part of the pre-defined specified programs, so organizations will have to present justification for the “off-menu” program by showing that their proposed project could not be accommodated within the existing list of programs.

Stay tuned to the Nonprofit Standard blog. In part two of the article next week, we will explore the various ways in which the DSRIP program may impact the New York State healthcare system.

Patrick Pilch, CPA is Managing Director with BDO Consulting and member of the Healthcare practice at BDO USA. Cortney Marcin is Manager with BDO Consulting. Arthur Webb is a BDO Senior Fellow. They can be reached at, and, respectively.