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Value-based payment

State Medicaid programs are increasingly implementing a variety of value-based payment (VBP) models that aim to drive system change towards greater efficiency and improved health outcomes. In contrast to traditional fee-for-service payment models that are based on the volume of care provided, value-based payment models reward providers based on achievement of quality goals and, in some cases, cost savings. Although states have long had the authority to implement many types of value-based payment models in Medicaid, their use has increased in recent years as a result of new options for states created through the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) and a desire to align with the efforts of other payers. MACPAC has been working to better understand use of these value-based payment models through a variety of research projects.

Advanced Payment Models

MACPAC has been tracking the progress of several states that implemented various approaches (e.g., shared savings, episode-based payments, and global budgeting) aimed at improving quality of care and reducing costs. Case studies provide additional detail on programs in four states that we studied (Arkansas, Minnesota, Oregon, and Pennsylvania) and a report describes the key themes related to state Medicaid payment and delivery system reforms across seven states (Arkansas, Connecticut, Maryland, Minnesota, Oklahoma, Oregon, and Pennsylvania).

MACPAC has also examined state efforts to promote the use of VBP methods through Medicaid managed care.  Some states require managed care organizations (MCOs) to use specific payment models while other states set VBP targets and are less prescriptive. To better understand how these strategies are working in practice, we conducted structured interviews with state officials, MCOs, and other stakeholders in five states (Minnesota, New Mexico, New York, Ohio, and South Carolina) and detailed the study’s findings in a contractor report.

Delivery System Reform Incentive Payments (DSRIP)

DSRIPs are a type of Medicaid supplemental payment approved under Section 1115 waiver authority that support provider-led efforts to change the delivery of care, improve quality of care, and promote population health. Thirteen states have implemented DSRIP or DSRIP-like programs, and as of June 2017, $48.6 billion in state and federal funds have been approved to support these efforts. Incentive payments are tied to the achievement of specific planning, implementation, reporting, and health outcome milestones and have enabled providers to invest in a variety of infrastructure and care redesign projects.

MACPAC examined several state DSRIP programs in detail. In 2015, the Commission found that DSRIP programs have the potential to drive value and improve health outcomes in Medicaid but could benefit from more clarity and consistency in federal guidance. These findings are included in a chapter on DSRIP programs in the March 2015 report to Congress.

MACPAC examined changes in DSRIP policy in 2017, and found several differences between early DSRIP programs (those approved prior to 2014) and more recent programs. For example, more recent DSRIP programs focused increasingly on delivery system reform goals rather than preserving supplement payments, and featured statewide performance milestones and more standardized monitoring and evaluation requirements. These findings were summarized in a March 2018 issue brief. MACPAC also published a report that examines the evolution of DSRIP, its alignment with other initiatives, its financing and sustainability, and Medicaid’s role in delivery system transformation.

Accountable Care Organizations

Safety-net providers are increasingly forming accountable care organizations (ACOs): groups of doctors, hospitals, and other health care providers who come together voluntarily to provide coordinated high-quality care to their patients. While there have been extensive ACO demonstrations in Medicare, limited information exists about how these ACOs function within Medicaid. In 2014 and 2015, MACPAC conducted a series of site visits to safety-net ACOs to better understand the conditions that drove their formation, their strategies to improve the quality of health care, and the challenges they face.

A summary report on the site visits notes that providers believe adopting this new payment model is necessary for long-term sustainability but face significant challenges, including limited resources to address the poverty and illness that people with Medicaid face. Hospital-based ACOs also must reconcile their financial need to keep hospital beds full but at the same time reduce readmissions and emergency room visits as a measure of quality of care.