Systems Transformation in Progress: Promise and Pitfalls

A couple of months ago I attended a conference in Albany in order to learn of the latest developments in the state’s movement toward a “value based” healthcare delivery system. Monica Oss, Chief Executive Officer of Open Minds, a publication that explores the intricacies of behavioral healthcare, was on hand to deliver the keynote address and to field questions concerning transformational initiatives presently unfolding throughout the country. When asked what, if anything, is unique about New York’s approach to behavioral healthcare reform she offered a succinct assessment that validated the anxieties many of us have carried for some time. “New York,” she said, “is trying to do everything at once.” Whereas other states have adopted more incremental approaches to reforming their publicly-funded healthcare systems, the Empire State has embarked on an ambitious (some might suggest grandiose) plan through numerous concurrent initiatives that can easily confound the most studious policy wonks. To understand these initiatives, their current status and potential to effect meaningful improvements for behavioral health service recipients one must heed the counsel of W. Mark Felt, special agent for the F.B.I during the Nixon Administration. Acting as “Deep Throat,” perhaps the most celebrated informant in our nation’s history, he offered investigative reporters Bob Woodward and Carl Bernstein the leads they needed to expose criminality within the White House. “Follow the money,” he said. We should do the same.

When Governor Cuomo took office in 2011 he inherited the most expensive Medicaid program in the nation. At $53 billion per year it constituted the largest item in the state budget. Despite expenditures at twice the national per recipient average this program produced mediocre results by many measures. New York ranked 50th in potentially preventable hospital readmissions and only slightly better in other key performance indicators (New York State Department of Health, 2011). Reform of a grand and transformational nature was clearly in order. The Governor appointed a Medicaid Redesign Team (MRT) to conduct a comprehensive review of the program and to offer recommendations that would achieve the vaunted Triple Aim of healthcare reform. That is, they should produce better outcomes for individuals, improved health for the overall population and a reduction in costs essential to ensure the long-term viability of the program. Many of the transformational initiatives presently underway originated in the MRT and were borne of the noble intent to bend the cost curve and promote the welfare of service recipients. The simultaneous integration of these initiatives within the current landscape of healthcare services requires an attention to innumerable complexities and consequences (both intended and unintended) that would leave Rube Goldberg in awe. Nevertheless, these initiatives contain some overlapping themes and objectives through which we can acquire a better understanding of their potential to effect lasting change.

Our healthcare financing systems have relied heavily on “fee-for-service” (FFS) approaches that reimburse providers for services delivered irrespective of the quality or outcomes of their interventions. Although commercial insurance providers have imposed a variety of cost containment measures designed to curtail runaway spending, our publicly-funded insurance programs (Medicaid and Medicare, in particular) have been largely exempt from these measures. Medicaid and Medicare recipients have been free to see providers of their choosing and to receive services of whatever frequency, scope or duration their providers deem necessary. It is unsurprising such a system should incentivize “volume” over “value” and produce an unsustainable increase in expenditures. Healthcare accounts for 17.8% of our Gross National Product, more than twice that of other industrialized nations, but we have enjoyed only modest returns on this sizable investment (Centers for Medicare and Medicaid Services, 2015). Herein lies the paradox of American healthcare of which New York is simply a microcosm. More money does not produce better results. The transformational initiatives described below have been adopted to address different dimensions of this fundamental paradox, and although they are in the incipient stages of implementation, we can render a preliminary appraisal of their progress.

Managed Care for All

A central recommendation of the MRT was the replacement of a FFS system with a coordinated approach that would effectively manage both service delivery and reimbursement for all Medicaid-funded services. This recommendation formed the basis of a “Waiver” NYS submitted to the Centers for Medicare and Medicaid services (CMS), the federal agency charged with oversight of the Medicaid program. (Inasmuch as Medicaid is administered jointly by the federal and state governments substantial changes within individual state plans require federal approval.) In its approval of our state’s Waiver the CMS authorized the administration of Medicaid-funded healthcare benefits (including behavioral health) by privately-operated Managed Care Organizations (MCOs) that would promote newfound efficiencies. MCOs would achieve their objectives via improved coordination of care (especially for recipients with chronic and complex service needs) and “capitated” (i.e., fixed) payments to service providers that would neutralize the moral hazard inherent in FFS models. More services would not produce more payments. This new paradigm should induce providers to deliver better outcomes with the same (or fewer) services and generate newfound efficiencies within the healthcare system. A “Value-Based” system would surely follow. Auspicious as this turn of events might seem, we cannot ignore certain challenges in implementation and the various unintended consequences of such an ambitious undertaking.

In October 2015, Medicaid-funded behavioral health benefits previously reimbursed on a FFS basis were included in Managed Care within the five boroughs of New York City. An expanded package of Home and Community Based Services (HCBS) became available to select service recipients shortly thereafter. A similar sequence unfolded in the “Rest of State” (ROS) in 2016, and as of this writing the majority of Medicaid-funded behavioral health benefits are administered by MCOs through contracts with their service providers. By some accounts this transition has not been as disruptive as many had feared, but it is far too premature to celebrate its success. Despite a rigorous qualification process through which MCOs were required to demonstrate their readiness to administer Medicaid-funded behavioral health benefits many of these organizations have experienced difficulty in properly processing provider claims during the transition. Similarly, provider organizations (many of which have operated in FFS environments exclusively and are unfamiliar with the intricacies of Managed Care) have often been slow to adopt the management infrastructures necessary to flourish in this new environment. Expertise in contract management, claims processing, utilization management and review, revenue cycle management and related subject matters is essential to successful partnerships with MCOs. Such expertise is well beyond the ken of many organizations, especially smaller community-based agencies that form the backbone of the delivery system for our most vulnerable citizens. It is therefore not surprising this transitional period has been marked by frequent denials of payment, most notably for “specialty” behavioral health services such as Assertive Community Treatment and Personalized Recovery Oriented Services (New York State Office of Mental Health, Division of Managed Care, 2016).

This poses an economic threat to providers that will loom ever larger as certain “protections” expire at the conclusion of a 24-month transitional period. MCOs are currently required to offer contracts to virtually all Medicaid-licensed service providers and to reimburse them at prevailing Medicaid reimbursement rates. These requirements will eventually cease and “free market” forces will then govern contract negotiations. The long-term fiscal and programmatic implications of these trends warrant great concern and casualties are unavoidable. Financially fragile organizations and others that cannot adapt to changing demands will surely falter, as might the vulnerable individuals they serve.

Movement to value-based delivery and reimbursement systems poses additional challenges for service providers, particularly within the realm of behavioral health which encompasses an exceedingly diverse array of symptom classifications, diagnostic criteria, treatment approaches and expected outcomes. The behavioral health community has failed to achieve a consensus on valid and acceptable outcome measures, and there is widespread concern such measures could inadvertently penalize providers who elect to treat recipients with chronic or complex conditions. These recipients face innumerable challenges that cannot be ameliorated by conventional medicine alone. The social isolation and intractable poverty that often accompany serious mental illness and substance use disorders require innovative interventions that attend to the social and physical determinants of health, and outcome measurements for this population must be calibrated accordingly. An emerging body of evidence suggests “healthcare” (as it is traditionally defined) accounts for approximately 10% of our health status and the balance may be attributed to other factors including social context, environmental influences and personal behavior, among others (Asch & Volpp, 2012). Herein lies a clue to the aforementioned paradox of American healthcare that must be acknowledged if transformational activities are to achieve their intended goals. Our nation’s exorbitant investment in healthcare has produced mediocre results because it fails to address the primacy of social determinants of health in the healthcare equation. According to 2009 data from the Organization for Economic Cooperation and Development (OECD) the U.S. spent $7,960 per person per year, whereas most other industrialized nations spent less than $4,000. Nevertheless, our nation lags far behind most others in key performance indicators of population health such as maternal mortality, life expectancy, low birth weight and infant mortality (Bradley & Taylor, 2013). This enigma is easily resolved when considered alongside our meager investment in social services relative to ten other “high income” countries (Squires & Anderson, 2015). Therefore, if transformational activities currently underway in New York are to achieve true value and approach the Triple Aim of healthcare reform they must consider both the constituent elements of “value” (i.e., health and social factors) and their influence on desired outcomes.

A Clinical Advisory Group (CAG) has been convened to establish appropriate outcome measures for the behavioral health service population, and its preliminary activities suggest it acknowledges the importance of social determinants in healthcare outcomes. The CAG has proposed to incorporate measures of recipients’ educational and employment status, residential stability and social integration in holistic determinations of “value” (NYS Department of Health, 2016). This promising development signals a commitment to address root causes of enduring health disparities, but it must be embraced by a broad cast of actors within our health and social service systems in order to achieve its intended aim. It must also align with other reform initiatives currently underway.

Delivery System Reform Incentive Payment (DSRIP) Program

This program frequently dominates policy discussions as there is little within our healthcare system that remains untouched by it. DSRIP, an ungainly acronym now deeply embedded in our lexicon, denotes a grand initiative that aims to accomplish nothing less than a 25% reduction in potentially preventable hospital readmissions and a replacement of institutional (i.e., hospital) services with community-based systems of care. These goals are surely laudable and consistent with principles of community reinvestment and person-centered, recovery-oriented care. They are also aligned with the recommendations of the “Olmstead Cabinet” convened by Governor Cuomo in 2012 to develop a comprehensive plan to support persons with disabilities in the least restrictive settings practicable. This Cabinet bore the name of the defendant in a landmark ruling of the U.S. Supreme Court (Olmstead v. L.C.) that effectively enshrined the right of individuals with disabilities to receive services in integrated settings (Report and Recommendations of the Olmstead Cabinet, 2013). In fact, a host of reforms unfolding within long-term, institutional and residential care settings bear the imprimatur of the Olmstead Cabinet and its proponents.

DSRIP is another product of the MRT Waiver described above and a central mechanism through which the state hopes to achieve the Triple Aim. Simply put, it was designed to promote changes in the existing delivery system by inducing providers to establish partnerships through which certain “projects” (and corresponding outcome measures) would be achieved. These projects are being implemented under the auspices of Performing Provider Systems (PPSs), networks of healthcare and community service providers that collaborate in pursuit of project goals developed in accordance with local and regional needs. Projects vary greatly in their nature and scope, but they share certain essential elements. All DSRIP projects must achieve at least one of three overarching goals related to systems transformation (e.g., replacement of institutional modes of care with community-based alternatives), clinical outcomes (e.g., integration of primary and behavioral healthcare) or population health (e.g., reduction or cessation of tobacco use). Moreover, many payments made to participating providers are indexed to certain performance or outcome measures. In this respect DSRIP constitutes another departure from the norm of FFS-based reimbursement schemes that compensate providers for their activities irrespective of the effects of these activities. Providers who collaborate in pursuit of DSRIP project goals do so at their own risk and incur financial penalties if they (or their partners) fail to achieve desired outcomes. These objectives hold great promise to replace antiquated FFS standards with value-based alternatives, but their fate rests largely on our collective will to dismantle an expansive infrastructure of institutional services on which our system has relied. This task would seem Herculean under even the best circumstances, but a fundamental flaw in the architecture of this program poses an additional obstacle that might prove insurmountable.

The surpassing complexity of DSRIP is apparent to the most casual observers of healthcare reform, so it is unsurprising that PPSs are generally led by entities that possess the capital and organizational resources necessary to coordinate projects and to meet myriad administrative demands associated with them. These entities include hospitals and healthcare networks – the same entities targeted for substantial reform by DSRIP initiatives – and they hold a disproportionate share of authority in the stewardship of program resources. They are charged to distribute funds to their community-based providers and, in doing so, to substantially alter the landscape of healthcare services and their roles therein. It might be naïve to expect such vested interests to dispose of said interests in exchange for incentive payments or the greater public good, and recent findings of the Independent Assessor (IA), an administrative body charged with oversight of the DSRIP program, confirms this. In its Mid-Point Assessment Report the IA determined a majority of PPS lead entities have neglected to effectively engage their community-based partners and to compensate them accordingly (Public Consulting Group, 2016). The systems transformation envisioned by the progenitors of DSRIP requires nothing less than full cooperation among a panoply of health and social service providers and a nimble redistribution of resources toward community-based interventions. The IA’s findings portend problems for the final years of this project lest significant midpoint corrections are made.

Promise Amidst Pitfalls

Notwithstanding the host of challenges inherent in any transformative enterprises, Managed Care, DSRIP and associated initiatives enjoy common elements and synergies with federal programs. As such, they are poised to achieve at least some of their aims and to effect incremental movement toward integrated, community-based, recovery-oriented and fiscally conscious systems of care. The recent enactment of the 21st Century Cures Act signifies a federal commitment to bolster our primary and behavioral healthcare infrastructures via investments in both traditional services and community-based alternatives. Similarly, renewed attention to provisions of the Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 has prompted payers and other key stakeholders to promote greater access to behavioral health services. Parity of access is not merely a matter of principle. It is integral to our management of a national epidemic of opiate abuse. In addition, criminal justice reform has found patronage on both sides of the political aisle, and any measures that institute community-based alternatives for nonviolent offenders will surely benefit individuals with behavioral health concerns who constitute a disproportionate share of inmate populations within our local jails and state prisons. Even the specter of a Trump Administration and its promise to repeal the Patient Protection and Affordable Care Act (i.e., “Obamacare”) should not be cause for despair. Transformative activities that pursue the Triple Aim are bound to find champions in all quarters, and New York boasts broad regulatory and advocacy resources that can erect a bulwark against regressive measures. Nevertheless, these resources must remain mobilized in a concerted and coordinated fashion if our system is to achieve a truly integrated, person-centered, recovery-oriented and value-driven result.

The author may be reached at (914) 428-5600 and at

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