N.Y. Medicaid Reform Program Provides Collaboration Model for Hospitals

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By Matthew Loughran

New York health-care providers are working together under a Medicaid waiver program that looks to improve care, reduce costs and potentially provide cover from federal antitrust laws.

Just how much the health of Medicaid beneficiaries will be improved and how much antitrust law protection the providers will enjoy remains to be seen. Early indications, however, support the conclusion that patients, providers and the state are satisfied that there is real clinical integration between providers that have contracted together to serve Medicaid managed care populations.

Clinical integration is an important component of the New York program, called the Medicaid Delivery System Reform Incentive Payment (DSRIP) program, because it is one recognized vehicle for providers to collaborate to provide care more efficiently and be able to jointly contract with payers without being charged with fixing prices in violation of federal antitrust laws.

The DSRIP is one of a group of Medicaid demonstration projects, operating across the country under what is known as a Medicaid waiver granted by federal regulators. Waivers allow states to create innovative ways to deliver higher quality and lower cost care to Medicaid-eligible patients and can include incentive-based payment systems designed to encourage providers to expand Medicaid managed care availability.

The Staten Island Performing Provider System (SIPPS), one organization formed under the DSRIP program, has been able to meet most of the project goals over its first two years, according to a midpoint assessment report created by the state department of health. It is also the only organization within the program that was afforded protection from federal antitrust enforcement under a certificate of public advantage (COPA) process included in the initial DSRIP program.

“On Staten Island we have about 130,000 Medicaid members, and about 50,000 uninsured,” Joseph Conte, SIPPS’s executive director told Bloomberg BNA. “We undertook a very comprehensive planning program and involved every partner in the community that we could find to help us shape and identify the most impactful projects under the DSRIP program,” he added.

New York’s DSRIP Program

The New York DSRIP program is a waiver demonstration program under Section 1115 of the Social Security Act. In creating the program, the state enlisted the support of 25 newly created organizations, designated “performing provider systems,” established with the express goal of reducing avoidable hospital use by 25 percent over five years while financially stabilizing the state’s Medicaid safety net.

Those performing provider systems are collaborative organizations formed by providers who serve the Medicaid-eligible community in their established areas. The Staten Island Performing Provider System was formed as a collaboration primarily between by Staten Island University Hospital and the Richmond University Medical Center.

The state budgeted approximately $8 billion for the program to be paid to the performing provider systems if they meet the goals of the particular projects that they chose to pursue. In the first six quarters of the program the performing provider systems have earned approximately $1.2 billion, or 99.4 percent, of the program funds that have been budgeted for that period.

The program, which began in April 2015, is scheduled to continue for five years, through April 2020. However, Conte pointed out that similar programs in other states have been extended beyond their initial funding cycles because they have met the goals of the program.

“California's DSRIP program has come up for renewal after the original five years was extended, Texas' application for an extension is still under CMS review and seems likely for renewal,” he said.

Working With Communities

Conte emphasized that the performing provider systems had to work directly within the affected communities to achieve the results mandated by the DSRIP program.

“In this program partnership development is much more mandatory,” he said. “For example, hospitals have to work with nursing homes, ambulatory providers like federally-qualified health centers and community-based organizations to create a wrap-around of services for whatever segment of the population that they are trying to reach.”

In particular, he pointed to his organization’s development of peer recovery specialists, dedicated employees whose purpose is to engage patients coming into hospitals in crisis because of opioid and substance abuse addiction.

“We knew that it was something that we had to really get creative and work very hard at in designing new programs to fight this problem,” he said. “Because transformation and innovation, not trying harder at the old programs that weren’t helping, was the key.”

According to Conte, this engagement is the basis for successfully providing care to larger portions of the community.

“Access is a function of trust, not bricks and mortar,” Conte said. “You have to get on the ground to develop those trusting relationships and then you will see people coming out of the shadows to get care.”

Conte said the DSRIP program’s move from traditional fee for service to a new value-based payment structure could also lead to less overutilization of hospitals and more cooperation between providers that could drive better outcomes.

“Even with the best of intentions, most hospitals in a fee for service world focus on the inpatient services because that’s what drives profitability,” he said. “Every organization tries to focus on population health because they have recognized a community need but the economics just aren’t there yet.”

According to Conte, the incentive-based payment structure of the DSRIP program changes that equation. “There really has been an incredible change that DSRIP has ushered in,” he said. “The cost of providing care per capita is down about 12 or 13 percent. The overall cost is up, but that is because of the expansion of eligible insured population under the Affordable Care Act, there are more individuals seeking care, which is really the ultimate test of value and a testament to the program.”

Certificate of Public Advantage Program

However, in order to realize many of the community engagement benefits of the DSRIP program, some practitioners say, hospitals and practitioners have to work together in a way that could be seen as violating federal antitrust laws.

“With value based purchasing starting to take hold, providers need to be able to control the risk and have visibility into the full continuum of care,” Lisl Dunlop the co-chair of the antitrust and competition practice group at Manatt, Phelps & Phillips LLP in New York, told Bloomberg BNA. “There is no point in a hospital offering to take on risk-based contracts such as full capitation arrangements with no control over or insight into services not offered by the hospital itself.”

Dunlop added that providers may seek protection from federal antitrust enforcement in such a scenario just to avoid the chilling effect of leaving themselves exposed to potential investigations and enforcement actions or even to private antitrust actions with triple damages exposure, even if they believed that their combinations and activities weren’t anticompetitive.

The DSRIP program in New York originally included a limited window during which the performing provider systems could apply for protection from federal antitrust enforcement by submitting themselves to active state supervision.

The protection comes in the form of a COPA, which signifies the state has granted its approval of a cooperative agreement between organizations that might otherwise be considered competitors. A COPA provides conditions that the department determines to be appropriate in order to ensure that the cooperative agreement and the activities conducted under it are consistent with state law.

“The view in favor of COPAs is that, while competition is important, it is not the only consideration,” Dunlop said. “In terms of other health-care policy goals, such as maintaining and expanding access to care and moving care to the most cost-effective setting reducing hospital admissions, coordination between actual and potential competitors may be highly desirable.”

Dunlop added that the COPA available to participants in the New York DSRIP program only insulates conduct in relation to Medicaid project plans, such as coordinating services for Medicaid lives or contracting with Medicaid managed care organizations or the state Medicaid agency, and would not extend to contracting with commercial insurers or the U.S. Department of Health and Human Services for Medicare coverage.

There is a separate procedure available for COPAs outside of the context of DSRIP, but no such COPAs have been granted to date.

In the New York DSRIP program, only three performing provider systems applied for COPA protection. Of those three, only the application submitted by SIPPS was approved for COPA protection.

According to its application for COPA protection, the two main hospitals that participate in SIPPS account for just over 85 percent of the Medicaid hospitalizations on Staten Island. Additionally, the application notes, Staten Island is a rather self-contained market, with most residents not leaving the island to seek care in any of the neighboring boroughs of New York City or in New Jersey.

However, Conte confirmed that his organization only operates on behalf of its members within the confines of the Medicaid DSRIP program and that the individual members were free to contract with all other payers on their own.

Competition Concerns

When the applications were pending before the department of health, the Federal Trade Commission, one of the main enforcers of federal antitrust law, sent a letter detailing its objections to the need for such protections.

“Because procompetitive health care collaborations already are permissible under the antitrust laws, the main effect of the COPA regulations is to immunize conduct that would not generate efficiencies and therefore would not pass muster under the antitrust laws,” the commission said in its letter opposing the COPA applications. It added that the applications “are likely to lead to increased health care costs and decreased access to health care services for New York consumers.”

However, the New York department of health disputed that characterization. “The state anticipates that a Certificate of Public Advantage has the potential to further facilitate a Performing Provider System’s ability to achieve its DSRIP objectives, supporting the overall ongoing implementation of DSRIP’s transformational efforts,” a department spokeswoman told Bloomberg BNA.

“My view of COPAs generally is that the impact is not to say antitrust policy does not apply,” Dunlop said. “It is rather to move focus of the inquiry to the state regulators and away from the FTC, allowing the state to take account of its stated health-care policy goals, and not only competition policy concerns.”

Conte compared the DSRIP COPA program to similar protections under the Medicare Shared Savings Program. “It is the perspective that the federal government found with the MSSP program, with organizations saying they didn’t want to take the risk to create an accountable care organization and then have the lawsuit come, so antitrust regulators responded from that by walking away from any per se exposure in that program,” he said.

Similarly, he said, the DSRIP program is a joint federal-state run program that is subject to even greater oversight from both federal and state regulators. So allowing hospitals who are joining performing provider systems to avoid antitrust scrutiny makes sense, he added.

The New York DSRIP program’s COPA authority expired on Dec. 31, 2016. At that time, only the Staten Island COPA application was approved. Another application was still pending but hadn’t yet been approved.

The state department of health told Bloomberg BNA that it has requested the state legislature to reopen its authority. If the legislature does so, the department said it will continue to consider that pending application and will accept any new applications from performing provider systems.

To contact the reporter on this story: Matthew Loughran in Washington at mloughran@bna.com

To contact the editor responsible for this story: Peyton M. Sturges at PSturges@bna.com

For More Information

The New York DSRIP program is detailed more fully at http://src.bna.com/nOv.

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