New Change Expands Size of Pie Available for SDOH Investments
May 15 · 5 min read
An explainer on why a new change proposed in the New York State VBP Roadmap matters for future investment & financing of SDOH. The takeaway: big opportunity for SDOH solution providers.
Big news in one tiny line of New York State’s updated VBP roadmap released yesterday — the State is proposing to change how health care pays for social determinants of health strategies.
Let’s break it down to understand the huge implications of this seemingly tiny change:
The Medicaid program in New York State provides a wide range of health care services for New Yorkers — primarily by providing health insurance to low-income individuals, families, children, and disabled individuals. More than 6.6 million New Yorkers are served by the program at a total cost of over $60 billion.
These 6.6 million lives aren’t directly managed by the Medicaid program itself; NYS Medicaid uses managed care organizations to manage the cost, utilization, and quality of the services that Medicaid members are entitled to. In exchange for this work, managed care organizations (MCOs) accept a set payment (or “rate”). MCOs in turn spend the dollars they receive to pay for the health care services that those in their care use.
At a high level, the flow of dollars & care currently looks like this:
Dollars flow from Medicaid to MCOs to providers such as clinics, hospitals, doctors to provide the care that the end user experiences. [Source: HSG]
As the move to value based payment continues to accelerate, MCOs are incentivized to engage with non-traditional partners to help them address the social determinants of health, as they are well-positioned to deliver social care services (housing, employment, early childhood interventions, food & nutrition, etc.) that impact the health outcomes of their patients. Remember that 40% of the factors that influence health are socioeconomic, not health care related.
Quick example: If a homeless diabetic patient is unable to keep their insulin refrigerated due to lack of stable housing & ends up admitted to the hospital, that could cost their MCO $10,000 for the service. At $500 a month, that same $10,000 could have purchased 20 months of stable housing (rent).
(Numbers are illustratory only.)
Current State: How MCOs Invest in Social Determinant Strategies / Interventions
Today, MCOs who want to invest in SDOH interventions to improve patient outcomes and reduce cost are limited in their ability to invest.
Let’s go back to how the dollars flow: the rate payment moves from the Medicaid program to the MCOs. A fixed amount of these dollars are captured by the MCO as administrative costs, meant to pay for the costs of running the MCO services. This administrative piece of the rate is capped and cannot exceed a specific dollar amount. The remaining dollars must be used to pay for medical services.
Today, the cost of a SDOH intervention must come out of the MCO’s administrative portion of the rate — a substantially smaller portion of the total rate, even when the SDOH strategy brings down total medical spending. This limits how much investment the MCO can make into a SDOH strategy and the number of strategies they can invest in. It also forces an MCO to weigh SDOH investments against other investments such as their care management teams, patient call centers, etc. instead of doing all they can to bring down costs & improve health.
Proposed Future State: SDOH Strategy Spending as Part of Medical Costs
The exciting change being proposed by NYS Dept. of Health would allow expenses for SDOH strategies being implemented in value based arrangements to be included in the “medical” portion of the rate. This does a number of things:
- Allows MCOs more flexibility in the type, number, and size of SDOH investments
- Increase the total dollars available for SDOH interventions
- Allows the real cost of care for patients to become more visible, removing the hidden cost of SDOH strategies from the administrative portion, enabling future rate setting to take these costs into consideration
- Sends a clear signal that social determinants are not above and beyond or nice-to-dos in health care, they are health care.
The New York State Medicaid Program has been at the cutting edge of addressing the social determinants of health for many years now — including contracting requirements for MCOs to partner with community based organizations, holding SDOH innovation competitions, and establishing a bureau of the Social Determinants of Health within the department. This latest development is a clear signal that investments in SDOH strategies will only continue to grow & this new investment strategy could unlock many more resources than ever before.
Think of it this way: instead of fighting over a small piece of pie for SDOH investment, this change would open up the whole pie.
Future state scenario where more health care dollars are available for SDOH investment [Source: HSG]
This new language is out for comment to the public until Tuesday, May 28th. If you want to share your comments, give the Department of Health a shout email@example.com by 5pm on Tuesday, May 28th, 2019.
Find a copy of the redline version HERE.
Are you a provider of SDOH strategies or interventions that needs help finding your way in this new VBP world? Or maybe you’re an MCO or provider looking to find SDOH strategies. Drop me a line and let’s find a way to work together:firstname.lastname@example.org