DSRIP, short for Delivery System Reform Incentive Payment, is a Medicaid program that pays hospitals and other healthcare providers for improving patient outcomes rather than simply treating more patients. It operates through Section 1115 Medicaid waivers, which allow states to test new approaches to delivering care. The central idea: tie billions of dollars in funding to measurable results like fewer unnecessary hospital visits, better management of chronic disease, and a shift toward preventive care.
How DSRIP Changes the Way Providers Get Paid
Traditional Medicaid pays providers for each service they deliver. More visits, more procedures, more revenue. DSRIP flips that model by making payments contingent on hitting specific targets. Providers organize into groups called Performing Provider Systems (PPS), typically led by a hospital but including clinics, nursing homes, mental health centers, pharmacies, and home care agencies. These groups submit progress reports at least twice a year, and states calculate incentive payments based on what those reports show.
The payment structure shifts over time. In the early years, a larger share of funding is tied to process milestones: did you build the care coordination infrastructure, hire the right staff, implement the data systems? As the program matures, the weight shifts toward outcome milestones: did emergency room visits actually drop, did patients with diabetes get better blood sugar control? Some payments are simply “pay for reporting,” rewarding the act of tracking and submitting data. Others are true “pay for performance,” released only when providers hit specific clinical targets.
The Four Performance Domains
DSRIP programs generally organize their goals into four categories, each building on the last:
- Infrastructure development: Building the systems needed for coordinated care, such as shared electronic health records, data analytics platforms, and workforce training.
- System redesign: Changing how care is actually delivered, for example by embedding behavioral health services in primary care clinics or creating teams that follow up with patients after hospital discharge.
- Clinical outcomes: Measurable improvements in how well providers manage conditions like asthma, heart failure, and diabetes.
- Population health: Broader improvements across entire communities, such as lower rates of preventable hospitalizations or reductions in health disparities between racial groups.
As programs progress, the later domains carry more financial weight. Early on, you can earn payments by building the right infrastructure. By the final years, the money depends on whether patients are actually healthier.
Which States Have Used DSRIP
DSRIP programs have operated in California, Texas, Massachusetts, Kansas, New Jersey, and New York. The scale varies dramatically by state. New York allocated up to $6.42 billion, with the explicit goal of reducing avoidable hospital use by 25% over five years. Texas received up to $25 billion through its broader 1115 Medicaid waiver between 2018 and 2022, with DSRIP representing a major portion. From 2012 through October 2018, DSRIP paid Texas providers $13.7 billion, with $9.3 billion going to hospitals, $2.2 billion to community mental health centers, and $1.7 billion to physician practices.
These are not small experiments. DSRIP represents one of the largest investments the federal government has made in reshaping how Medicaid care gets delivered at the state level.
Who Qualifies for DSRIP Funding
DSRIP funding is rooted in the safety net. The providers who qualify are those serving large numbers of Medicaid patients and uninsured individuals. In New York, for instance, the lead entities in each Performing Provider System needed a safety net designation, verified through a formal review process by the Centers for Medicare and Medicaid Services (CMS). Eligible provider types included hospitals, clinics, nursing homes, home care agencies, mental health and substance use treatment providers, adult care facilities, pharmacies, and even foster care agencies.
The breadth of that list reflects DSRIP’s philosophy: reducing avoidable hospitalizations requires coordination across the full spectrum of care, not just what happens inside hospital walls. A patient with poorly managed schizophrenia who keeps ending up in the ER needs stable housing support, outpatient mental health care, and medication management, often from entirely different organizations. DSRIP incentivizes those organizations to work together.
What the Results Looked Like
New York’s interim evaluation offers the most detailed public picture of DSRIP outcomes. Six of eleven population health measures showed improvement after the program launched. New HIV diagnosis rates dropped 16.2% statewide. Racial disparities in HIV diagnoses narrowed significantly: the gap between Black and white New Yorkers shrank by 20.7%, and the gap between Hispanic and white New Yorkers fell by 14.2%. Disparities in premature death also narrowed modestly.
On the cost side, New York’s combined inpatient and emergency room spending came in below the target rate. Performance improved or held steady on 12 of 16 statewide measures, including potentially preventable hospital readmissions. Nearly 60% of project-specific and population-wide measures were met. By the third year of the demonstration, about 35% of managed care spending had moved into value-based payment contracts, a concrete marker of the shift away from fee-for-service.
These results are encouraging but incomplete. A 25% reduction in avoidable hospital use is an ambitious target, and interim evaluations capture progress mid-stream rather than final outcomes.
Where DSRIP Stands Now
Most DSRIP programs have ended or are winding down. CMS approved DSRIP as a one-time, time-limited program that could not be renewed. Texas saw its DSRIP funding decline from $3.1 billion annually in 2019 to $2.5 billion in 2021, ending entirely in September 2021. Massachusetts extended its program through March 2023 before closing it out.
The end of DSRIP does not mean the end of the ideas behind it. States are folding lessons from DSRIP into successor programs. Massachusetts, for example, continues its accountable care organization and flexible services programs under a new 2022 to 2027 demonstration waiver, using what it calls more sustainable funding mechanisms. The new Massachusetts demonstration focuses on advancing health equity, addressing social needs like housing and food access, and holding managed care organizations accountable to quality and equity performance metrics. New York similarly used DSRIP as a bridge toward broader value-based payment across its Medicaid system.
The core shift DSRIP set in motion, paying for outcomes rather than volume, connecting fragmented providers into coordinated systems, and measuring whether patients actually get healthier, continues to shape Medicaid policy even after the program’s formal funding has sunset.