Designed by New York State to seek a federal waiver for the expenditure of Medicaid funds, the Delivery System Reform Incentive Program (DSRIP) will allocate 6.42 billion dollars to health care providers in New York State to undertake system reform, clinical projects, and population health management. DSRIP seeks to reduce avoidable hospital readmissions by 25% and fundamentally restructure the state’s health care delivery system, with implications for all health care providers.
Successful DSRIP applications will require the effective participation of providers from across the continuum of care to meet DSRIP goals. DSRIP funds will be distributed among participating providers according to state criteria and the distribution methodology developed by each Performing Provider System (PPS). Providers identified as safety net providers based on the percent of Medicaid, uninsured, and dual eligible patients they serve will be the primary recipients of DSRIP funds. However, other health care providers can receive funding, and more importantly, can participate in the PPS entities forming around the State to implement DSRIP.
Providers have much at stake in their DSRIP arrangements. In addition to financial incentives and funding tied to participation, DSRIP programs must be designed for the five-year duration of the program and, ultimately, will provide the platform for integrated delivery systems across the State.
On December 16, 2014, organizations leading each PPS must submit detailed applications to the New York State Department of Health (DOH) specifying selected projects, governance, financial, clinical, and other elements of their DSRIP plans. Although acute care institutions are the leads of many PPSs, a broad array of other health care providers will be integral to PPS entities in each region—physician practices, health homes, Federally Qualified Health Centers, clinics, behavioral and mental health providers, home care, hospice, long-term care providers, social service agencies, and non-lead hospitals, among others. As the mid-November deadline for PPS lead applicants to submit final partner lists to DOH approaches, health care providers should assess their participation, prepare for negotiations about their obligations and funding allocation, and enhance their capacity to carry out PPS projects.
Choosing a PPS. In some regions, a sole PPS will be formed. In other regions, providers may be able to choose between two PPS entities or participate in more than one. As they consider these options, providers should weigh the demands of participating in multiple PPS organizations and the complexity of attributing patients to multiple PPS entities. Providers should also evaluate potential PPS lead organizations, assessing each organization’s financial strength, available capital, and PPS leadership. The PPS’ ability to meet its selected process measures and DOH project metrics as well as the capacity to reduce preventable hospital admissions will be central to PPS success over the life of the project.
Each PPS lead organization will generate an agreement that specifies the rights and obligations of partners and other participating organizations. These agreements are likely to have substantial financial, operational, and clinical implications for participating providers.
Governance. DSRIP applications must include a detailed description of project governance. DOH has encouraged shared governance, with centralized control of DSRIP projects. Each PPS must establish a Project Advisory Committee (PAC) to advise the PPS about project plans and implementation. PACs must include a managerial representative of PPS partners with more than 50 employees as well as a representative of non-union or unionized employees.1 PPS partner organizations with fewer than 50 employees have the option to select an organizational representative to participate in the PAC. PPS governance must therefore balance the demands of strong centralized governance, broad representation from partner organizations, and leadership in operations, finance, quality, and information systems necessary for PPS success.
Governance plans must also specify how the PPS will develop from an affiliated group of providers into an integrated delivery system, and address how the PPS will manage poor performing partners, including progressive sanctions. It will be important for providers to understand the PPS corporate and governing structure, how governance will evolve to form an integrated delivery system, and their rights to participation and information about PPS financial and clinical outcomes.
Financial Costs and Terms. All PPS entities must establish a joint budget among partner organizations, and a plan that specifies the methodology for distributing funds, consistent with federal and state fraud and abuse laws and Internal Revenue Service requirements for exempt organizations. Depending on how it is structured, some PPS entities may require a capital contribution from participating partners. Another financial consideration for providers is the cost of meeting PPS process and quality goals. Health care providers should understand the requirements participation will impose, and assess the changes in their operations, quality programs, data collection, and information technology capacity required to satisfy those obligations.
Workforce Strategy. In addition to meeting the requirements noted above for employee representation on PAC governance, DSRIP applicants must develop a comprehensive workforce strategy tied to quality performance assessment and improvement. Specifically, DSRIP applications must address the workforce implications of PPS project goals, including employment levels, wages and benefits, and a plan for how workers will be trained and deployed to meet patients’ needs to the maximum extent possible under current state law and regulations.
Relief From Antitrust Enforcement: Certificates of Public Advantage. On August 27, 2014, DOH published proposed regulations governing Certificates of Public Advantage (COPA) to enable collaboration between providers and other parties that might otherwise have a potential anticompetitive effect. The regulations would permit health care providers and other parties to enter into cooperative agreements and file an application for DOH approval to gain immunity from enforcement of federal antitrust laws and private claims under state antitrust law. As proposed, cooperative arrangements can cover a broad range of conduct, including the sharing, allocation, or referral of patients, information technology resources, and data as well as implementation of payment mechanisms and clinical integration activities. DOH will issue COPAs, after consultation with the New York State Attorney General’s Office and the Public Health and Health Planning Council.
Affiliation Agreements. PPS entities must select projects from three categories: system transformation, clinical improvement, and population health. Specific projects may require affiliation agreements among PPS participants covering issues such as clinical protocols, care coordination, transfer agreements, and data sharing. Each project has an "index score" which determines, among other variables, the maximum level of DSRIP funding available to the PPS.
Quality Improvement, Data Reporting, and HIPAA Compliance. DSRIP programs require an unprecedented degree of clinical coordination among providers across the continuum of care. As required by DOH, PPS entities must collect quality metrics in a uniform and valid fashion across all partners in the PPS and must have a plan for data sharing. Contractual agreements with the PPS are likely to specify the data reporting and sharing requirements that apply to participants. Health care providers should assess the implications of the PPS’s plan for data reporting and use in relation to their information technology infrastructure and quality improvement program. All data sharing must comply with the privacy and security requirements of HIPAA and state privacy laws.
Medical Staff Bylaws. Participation in a PPS may require providers to amend their medical staff bylaws to align with the bylaws of other PPS entities or PPS goals. In particular, providers with bylaws based on a traditional notion of quality assurance focused primarily on retrospective review of adverse events should consider revisions that recognize medical staff obligations to participate in quality reporting, quality improvement, and training. These changes would also benefit health care providers as they seek to participate in other new forms of care delivery, such as accountable care organizations.
Credentialing. Some PPS organizations at the outset or over time may require certain procedures and standards as part of medical staff credentialing. In some cases, PPS entities may require partners to meet Joint Commission standards or transition to a centralized credentialing process.
Physician Contracts. As with medical staff bylaws, PPS participation may require revisions to Medical Director and affiliated and staff physician contracts to incorporate the performance goals and quality reporting established by the PPS. In addition, it may be advantageous for providers to offer physicians incentives aligned with PPS quality goals likely to determine funding allocation under DSRIP. Increasingly, provider reimbursement will be tied to quality performance through policies set by Medicare and Medicaid as well as private payers. Incentives to physicians and other professionals, including incentives to reduce hospital admission, must be scrutinized carefully to assure compliance with federal and state fraud and abuse laws.
Building Capacity to Attain DSRIP Success. Cutting across the complexity of the menu choices for DSRIP projects, the core goal of DSRIP is reducing preventable hospital admissions and readmissions by 25%. Health care providers should acquire or enhance their capacity to analyze their referral pattern to hospitals, and implement interventions to reduce preventable admissions.
Studies have shown that certain conditions, such as mental health conditions and diabetes, account for a high number of preventable hospital admissions. In addition, weakness in policies to seek, record, and rely on advance directives and family decisions about end-of-life care also contribute to preventable admissions. Health care providers should evaluate their transfer practices with other providers as well as policies and implementation of New York’s health care proxy law, Family Health Care Decisions Act, and the law on nonhospital do-not-resuscitate orders.
Conclusion. By design, DSRIP will have a profound impact on the health care system in New York State, restructuring reimbursement, care delivery models, and delivery systems across the State. While health care providers face time and other pressures to settle PPS participation, given the lasting impact of the arrangements, they should seek to understand, negotiate, and prepare for PPS participation as an enduring part of their future.
For further information, contact Tracy E. Miller at (646) 253-2308 or tmiller@bsk.com. Bond is holding a Health Care Seminar "DSRIP - An Overview and Legal Implications for Non-Lead Providers" on October 8, 2014. Further information is available here.
1 Partner organizations with over 50 employees that are unionized must designate a union representative to participate in the PAC; for partner organizations that are not unionized, employees must develop a process to elect a non-managerial employee. Employees from organizations with fewer than 50 employees have the option of designating a PAC representative. PPS proposed entities that submitted a Design Grant Application Process with over 20 partner organizations had the option of proposing an alternate PAC committee structure that would allow for a "leaner" committee, as long as all key parties within the PPS would be represented.
