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Michigan Value-Based Purchasing and Pay for Success

A new LISC white paper, in collaboration with the Center for Health & Research Transformation, Harbor Road Advisory and National Kidney Foundation of Michigan, provides tools to address social determinants of health (SDOH) leveraging Pay for Success (PFS) and value-based purchasing arrangements in Michigan. The paper includes findings from interviews with managed care organizations on their viewpoints and concerns on leveraging the PFS framework, highlights from a convening of key Michigan health sector stakeholders and guidance on sustainable funding solutions that could create potential paths forward.

Tools to Expand Diabetes Prevention Program and Address Social Determinants of Health


The Local Initiatives Support Corporation (LISC) and the National Kidney Foundation of Michigan (NKFM), under the auspices of the Social Innovation Fund, a program of the Corporation for National and Community Service, have partnered to test ways to expand the availability of the Diabetes Prevention Program (DPP) in low-income communities of six counties in Michigan. DPP is a non-medical, lifestyle intervention program demonstrated in controlled tests to prevent or delay the onset of diabetes more effectively than medical interventions.

LISC and NKFM have designed a Pay for Success (PFS) model in which private and philanthropic investors can pay for prediabetic patients with Medicaid insurance coverage to participate in DPP. Upon achievement of program milestones (i.e., “success”), as defined by patient participation in the program and weight loss after participation, the private and philanthropic investors would be reimbursed by Medicaid managed care organizations (MCOs) providing coverage for the patients. The MCOs, in turn, could expect a healthier clientele, leading to reduced medical expenses and creating a return on their payment to the investors.

  • Although DPP is now a reimbursable expense under Medicare, it is not directly reimbursable under Medicaid in most states, including Michigan. Within a PFS framework, however, it appears to fit within the value-based purchasing (VBP) arrangements encouraged under Michigan Medicaid’s master contract with MCOs. The LISC and NKFM effort, therefore, is motivated by the:
  • growing prevalence of type 2 diabetes, particularly in minority and low-income communities;
  • DPP’s demonstrated success in countering the onset of the disease;
  • DPP’s attendant health and financial benefits; and
  • potential for a sustainable program under the PFS/VBP contracting model.

To date, the PFS initiative has not been adopted by any MCOs in Michigan. To better understand barriers seen by MCOs to adopting the DPP program within a PFS framework, LISC and NKFM retained the University of Michigan’s Center for Health and Research Transformation (CHRT) to interview MCO executives. CHRT’s findings of the MCOs’ viewpoints and concerns are detailed below in Section III of this report.

To find a path forward, we brought many of the participants in this effort together for a full-day convening in East Lansing. The highlight of this convening was the stated interest of Robert Gordon, the Director of Michigan’s Department of Health and Human Services (MDHHS), in supporting the expanded implementation of DPP and other proven prevention interventions. Support from the leader of MDHHS creates clear possibilities, and Section V of this paper includes brief descriptions of some sustainable funding solutions, of which PFS is just one. In this white paper, we describe the LISC/NKFM initiative, including:

  • background on the prevalence of diabetes;
  • strategies to counter its growth, including a PFS/VBP payment mechanism;
  • MCO concerns learned in the CHRT interviews;
  • lessons from the convening; and
  • sustainable funding solutions that could create potential paths forward. In addition to PFS, these include direct Medicaid funding as a covered benefit, state appropriations, and the concept of a local health-outcomes trust with pooled resources designed to overcome the barriers of siloed interests.

Download White Paper [+]... 

In addition to the report, CHRT conducted interviews of Medicaid beneficiaries who participated in the National Kidney Foundation of Michigan’s Diabetes Prevention Program. To learn more about their perspectives, click here.