Kaiser Family Foundation: Overview of Delivery System Reform Incentive Payment Waivers

The Kaiser Family Foundation has published this issue brief that provides an overview of Medicaid Delivery System Reform Incentive Payment (DSRIP) waivers.  DSRIP initiatives are part of broader Medicaid Section 1115 waiver programs and provide states with significant funding that can be used to support hospitals and other providers in changing how they provide care to Medicaid beneficiaries.  Originally, DSRIP initiatives were more narrowly focused on funding for safety net hospitals and often grew out of negotiations between states and HHS over the appropriate way to finance hospital care.  Now, however, they increasingly are being used to promote a far more sweeping set of payment and delivery system reforms.  DSRIP initiatives have been implemented in California, Texas, Massachusetts, New Jersey, Kansas, and New York.

Under DSRIP initiatives, funds to Medicaid providers are tied to meeting performance metrics.  To obtain DSRIP funds, eligible entities (hospitals, and other providers, including provider coalitions) must meet certain milestones or metrics.  While the exact structure and requirements of each DSRIP initiative differ, there is a focus on meeting process type metrics in the early years of the waiver, such as system redesign or infrastructure development, and then meeting more outcome based metrics in later years, such as clinical health or population based improvements.  In support of these milestones and metrics, the DSRIP waivers impose robust data collection and reporting requirements on providers.

Funding for DSRIP initiatives varies across states, but can be significant.  However, DSRIP funding is part of broader Section 1115 waiver programs that are required to be budget neutral for federal spending.  California, New York, and Texas each received several billion dollars for their DSRIP initiatives over a five-year period while Kansas, Massachusetts and New Jersey have smaller programs and will receive substantially less.  In concept, states will undertake initiatives expected to save Medicaid funds and then use expected savings for new investments in delivery system reform.

The details of the DSRIP waivers continues to evolve, which increasingly include more accountability and involve a broader set of providers.  For example, the New York DSRIP waiver approved at the end of 2013 includes funding for a broad set of providers, a more specific set of metrics and projects, and new requirements for the state to meet statewide goals as a condition of continuing to receive DSRIP funding, in addition to requirements for providers to meet specific metrics to access funding.

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