On Tuesday, January 9, 2024, the Centers for Medicare & Medicaid Services (“CMS”) approved a request from New York State (“NYS”) to amend its Medicaid section 1115(a) demonstration (the “Demonstration Amendment”),[1] which will allow for important expansion of the NYS Medicaid program, including:

  • increased investment in infrastructure and expanded coverage for health-related social needs (“HRSN”) services,
  • incentive programs for safety net hospitals and providers in geographies with longstanding records of health disparities, and
  • integrated primary care or behavioral health services focusing on high-risk enrollees (e.g., children, pregnant and postpartum individuals, chronically homeless, and individuals with substance use disorders).

The Demonstration Amendment is available here in the form provided by CMS and the NYS Department of Health (“DOH”). This post highlights certain key initiatives that may impact the healthcare landscape in NYS in the near future.

  1. HRSN Initiatives:
    • In the interest of increasing the accessibility and quality of care to address HRSN, the Demonstration Amendment seeks to improve integration between primary care providers and community-based organizations. CMS approved $500 million in infrastructure spending for NYS to establish social care networks (“SCNs”) to provide HRSN screening and referral services to Medicaid beneficiaries that are targeted populations for HRSN services. Another $3.173 billion will be made available to cover qualified services provided to address HRSN, which includes the potential for individuals with high-risk pregnancies to receive coverage for nutrition interventions during their pregnancy and for two months postpartum.
    • As described in the Demonstration Amendment, “HRSN services will be provided through a combination of the fee-for-service and managed care delivery systems, with case management and referral services administered through SCNs in each region of the state.” CMS indicates in the Demonstration Amendment that, effective in April 2024, HRSN benefits will be put into action through non-risk arrangements in managed care, with the intent to integrate such benefits in full risk managed care programs by March 2027.
  2. HERO Initiatives:
    • The Demonstration Amendment also provides for the establishment of a health equity regional organization (“HERO”), which CMS describes as a “contracted statewide entity designed to develop regionally-focused approaches to reduce health disparities, advance quality and health equity for overall populations, and support the delivery of HRSN services.” The HERO will work in conjunction with SCNs and take part in data analytics, needs assessments, and engagement sessions covering targeted populations. A budget of $125 million has been authorized for HERO use in advancements toward health equity and value-based arrangements throughout the state.
  3. Medicaid Hospital Global Budget Initiative
    • CMS authorized up to $2.2 billion to be allocated to a Medicaid Hospital Global Budget Initiative (the “Hospital Initiative”) supporting a subset of safety net hospitals seeking to transition from fee-for-service reimbursement models to value-based programs focusing on health equity. Financial support from the Hospital Initiative is limited to select hospitals based on criteria established by the Demonstration Amendment. Additionally, in order to receive any incentive payments under the Hospital Initiative, a participating hospital must submit an application to participate in the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) model, which will set global budgets for participating hospitals based on the applicable hospital’s historical revenue and geographic rates.[2]
  4. Workforce Initiatives
    • As a response to lingering workforce issues that are impacting NYS (among other geographies), CMS authorized up to $694 million to support workforce recruitment and retention over a three-year period. The funding targets increased availability of healthcare providers that serve Medicaid beneficiaries and other at-risk or historically under-supported populations in NYS.
    • The workforce support includes a student loan repayment program, which will be available to certain professionals in specialties experiencing workforce shortages (e.g., psychiatrists, with an emphasis on child/adolescent psychiatrists, primary care physicians, dentistry, nurse practitioners, and pediatric clinical nurse specialists) in varying amounts determined by specialty for those who make “a four-year full-time work commitment to a practice panel that includes at least 30 percent Medicaid and/or uninsured members.”

In a press release issued by CMS, HHS Secretary Xavier Becerra called the Demonstration Amendment “an essential step for advancing health equity in our nation,” and Secretary Becerra “encourage[s] all states to join New York in taking advantage of this opportunity.”[3] The CMS press release emphasizes a cross-sector approach to addressing HRSN and other health equity issues, including a call-back to HHS’s November 2023 Call to Action to address HRSN across the nation.[4] The press release reiterates the HHS stance that “no one sector can do this work alone.”

If you have any questions or would like to discuss the Demonstration Amendment or the impact it may have on your organization or the healthcare industry, please do not hesitate to reach out to a member of Sheppard Mullin’s Healthcare team.


[1] As described on Medicaid.gov, “Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental, pilot, or demonstration projects that are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program.”

[2] States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model (CMS)

[3] CMS Approves New York’s Groundbreaking Section 1115 Demonstration Amendment to Improve Primary Care, Behavioral Health, and Health Equity | CMS

[4] HHS Call to Action: Addressing Health-Related Social Needs in Communities Across the Nation | ASPE