New York seeks federal waiver to reinvest health care dollars

New York Governor Andrew Cuomo has announced that he is seeking a federal waiver through the Center for Medicare and Medicaid Services (CMS) to reinvest money saved from current health care reforms into more upgrades and cost savings measures for the state’s health care system. The state is seeking to reinvest $10 billion in savings generated by the Medicaid Redesign Team (MRT) reforms to implement the rest of the team’s action plan.

MRT initiatives are projected to save $34.3 billion over the next five years – divided between the State and federal government. As part of the waiver process, the state is required by CMS to mount a significant public engagement effort including several public forums, topic-specific webinars, and Medicaid member focus groups.

So far, the MRT has worked in two phases. Phase 1 provided a blueprint for lowering Medicaid spending in State fiscal year 2011-12 by $2.3 billion. Phase 1 was completed in February 2011 when the MRT submitted an initial report in line with the Governor’s Medicaid spending target contained in his 2011-2012 budget. Phase 2 will implement the remaining action items and address any challenges that came out of the work in Phase 1.

The waiver request follows an April announcement covered by CivSource from several state health care groups launching a new initiative to make New York a health IT hub. That program will choose 12 emerging health IT companies and provide seed money as well as professional development in order to help them grow their business and foster development in that sector of the local economy.

The Governor hopes that the MRT work will also serve as a national model. “We have already taken the first steps to transform our state’s health care system, including cutting costs to taxpayers and improving the quality of care,” Governor Cuomo said. “The Medicaid Redesign Team has led the charge, and this waiver will allow New York State to fully implement the groundbreaking MRT action plan to permanently restructure our health care system and make New York a national model.”

The moves in New York may be well positioned to capitalize on broader shifts happening within the health care industry. Two surveys from Forbes Insights this week show that health care providers are shifting to a value-based purchasing model and that physicians are coming to terms with new fee transparency requirements – both factors are referenced in the state’s MRT action plan as means of cost control.

Value based purchasing shifts health care reimbursement models away from fee-for-service models which is how physicians have historically been paid. The new model removes the incentive for physicians to take a volume based approach to health care which typically provides a greater profit in the fee-for-service model.

The change will also place a greater emphasis on upgrades to health IT systems. Nearly half of respondents said system integration across all applications (49%) and health information exchange (47%) among their top IT spending priorities for VBP over the next three years.

New investments will also have to go into fee compliance reporting technology, according to another Forbes Insights survey which examined how physicians and life sciences companies are responding to the Physician Payment Sunshine Act (PPSA). Under PPSA, manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid or the Children’s Health Insurance Program will be required to annually report certain payments or transfers of value provided to physicians or teaching hospitals, known as covered recipients, to the Secretary of Health and Human Services.

“Perhaps the most important consideration for the life sciences industry is that the PPSA provides an opportunity to evaluate spending allocations for health care provider relationships,” said Pete Mooney, Global Life Sciences and Health Care Industry Leader, Deloitte – sponsor of the Forbes Insights survey. “Disclosure may allow companies to reduce negative perceptions around interactions, and it may also provide an opportunity to improve overall operational efficiency, thereby reducing costs.”

The first reporting deadline for the Act comes up next year and so far, physicians are on board – 54% of the physicians surveyed are in favor of making a searchable database of all physician-industry relationships available to the public as long as patients understand how to interpret the data.

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