States Encouraging Value-Based Payment: Lessons From CMS’s State Innovation Models Initiative

Policy Points:

• Six states received $250 million under the federal State Innovation Models (SIM) Initiative Round 1 to increase the proportion of care delivered under value-based payment (VBP) models aligned across multiple payers.
• Multipayer alignment around a common VBP model occurred within the context of state regulatory and purchasing policies and in states with few commercial payers, not through engaging many stakeholders to act voluntarily.
• States that made targeted infrastructure investments in performance data and electronic hospital event notifications, and offered grants and technical assistance to providers, produced delivery system changes to enhance care coordination even where VBP models were not multipayer.

Context: In 2013, six states (Arkansas, Massachusetts, Maine, Minnesota, Oregon, and Vermont) received $250 million in Round 1 State Innovation Models (SIM) awards to test how regulatory, policy, purchasing, and other levers available to state governments could transform their health care system by implementing value-based payment (VBP) models that shift away from fee-for-service toward payment based on quality and cost.

Methods: We gathered and analyzed qualitative data on states’ implementation of their SIM Initiatives between 2014 and 2018, including interviews with state officials and other stakeholders; consumer and provider focus groups; and review of relevant state-produced documents.

Findings: State policymakers leveraged existing state law, new policy development, and federal SIM Initiative funds to implement new VBP models in Medicaid. States’ investments promoted electronic health information going from hospitals to primary care providers and collaboration across care team members within practices to enhance care coordination. Multipayer alignment occurred where there were few commercial insurers in a state, or where a state law or state contracting compelled commercial insurer participation. Challenges to health system change included commercial payer reluctance to coordinate on VBP models, cost and policy barriers to establishing bidirectional data exchange among all providers, preexisting quality measurement requirements across payers that impede total alignment of measures, providers’ perception of their limited ability to influence patients’ behavior that puts them at financial risk, and consumer concerns with changes in care delivery.

Conclusions: The SIM Initiative’s test of the power of state governments to shape health care policy demonstrated that strong state regulatory and purchasing policy levers make a difference in multipayer alignment around VBP models. In contrast, targeted financial investments in health information technology, data analytics, technical assistance, and workforce development are more effective than policy alone in encouraging care delivery change beyond that which VBP model participation might manifest.

Keywords: State Innovation Models Initiative, health care reform, state government, Medicaid, value-based payment, performance-based payment models, care coordination, health information technology, team-based care.