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Jul 14, 2015

Where Are the States Going on Payment and Delivery Reform? Tracking SIM Grant Developments

Believing that states are productive incubators of innovation, the Center for Medicare & Medicaid Innovation (CMMI) launched a State Innovation Model (SIM) grant program in 2013 to encourage state-by-state testing of innovative payment and delivery models.

To date, 38 awardees (34 states, three territories, and the District of Columbia) have received SIM grants totaling almost $1 billion. States can apply for either Model Design Awards, which provide funding as the state works to develop its State Health Care Innovation Plan (SHIP), or Model Test Awards, which help states implement their SHIP and begin to test their model. In Round One (2013), CMMI awarded over $285 million to six Model Test and 16 Model Design states (see Round One SIM Grant Awards). Then in Round Two (2014) CMMI awarded over $665 million to 11 Model Test and 21 Model Design states (see Round Two SIM Grant Awards).1  

With so much money out the door, two questions remain: What are the 17 Model Test Award states doing with their SIM grant dollars, and how do those developments fit in with the broader goal of transitioning healthcare payments along the spectrum from volume to value?

What kinds of payment and delivery innovations are states pursuing?

Because the impetus for the SIM grant program was to broadly constrain the rising costs of healthcare while improving—or at least maintaining—the health of the covered population, the participating states had many options for implementing payment and delivery reforms.

Considering first the payment innovations, states were relatively concentrated in their tactics. Of the nine approaches we tracked across the SHIPs, only five were pursued by at least two-thirds of the states (see Payment and Delivery Reforms in the SHIPs). Of course, each state employed multiple innovations. 

Of note is the spectrum of accountability underlying these payment reforms. Toward the lower end are upside-only shared savings programs, in which providers stand to benefit from reduced costs but have no responsibility for overspending. Conversely, two-sided risk and global payments based on capitation fall toward the higher end of the accountability spectrum and hold providers responsible for total cost of care against a global budget. The variation in states’ choices demonstrates diverse levels of comfort with transitioning risk to providers and the different stages in the process of payment reform.

With regard to the delivery innovations, the states concurrently pursued more options. Of the eight approaches we tracked across the SHIPs, at least two-thirds of the states pursued seven (see Payment and Delivery Reforms in the SHIPs). 

Unlike the menu of payment innovations, SIM states tended to take a more comprehensive approach to care delivery reform, implementing a wide array of delivery innovations in the hopes of providing better care to beneficiaries. For example, a SHIP may emphasize encouraging providers to enter a patient-centered medical home (PCMH) model and improve health information technology functioning and focus on chronic disease care management all at the same time. 

Because the goal of the SIM grant program is to control costs and improve quality in the Medicare, Medicaid, and Children’s Health Insurance Program populations, some states leveraged existing innovation models for further development. For example, Minnesota’s Medicaid accountable care organizations and Maine’s health homes have both surfaced in other Model Test states’ SHIPs, along with the Medicare BPCI initiative, to achieve spending and quality goals in the Medicaid population.2 

Do SIM grant states reflect the movement along the spectrum from volume to value?

These SIM Model Tests cover limited patient populations, but they send a significant message about the future of payment and delivery reform. Including all the awards given out over Rounds One and Two—both Model Test and Model Design—over half of all US states, representing 61% of the population, have committed to exploring innovative ways to pay for and deliver healthcare. Although models vary along provider acceptance of accountability and risk, they also allow for greater autonomy, flexibility, and control over medical management. With respect to care delivery, the focus in SIM grant states on managing patients through a locus of care—be it the PCMH or the “quarterback” in an episode-based model—should improve health outcomes over time. 

Given the secretary’s authority to expand and broadly implement any of these programs that are able to lower costs and improve health, state-by-state success can lay the groundwork for future reforms. Although some CMMI demonstrations will yield national solutions, SIM grant experiments will likely influence some degree of regional variation in future payment and delivery models. Tracking these state-based experiments will provide insight into the potentially diverse payment and delivery future that lies ahead. 

1.  http://innovation.cms.gov/initiatives/state-innovations/

2.  http://kff.org/medicaid/fact-sheet/the-state-innovation-models-sim-program-an-overview/

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