CMCS Informational Bulletin: State Directed Payment Quality Evaluations
September 10, 2025
Due to the significant number of state directed payments (SDPs) across the country and escalating rise in annual SDP spending, the Centers for Medicare & Medicaid Services (CMS) recently released guidance that states with existing SDPs, and those considering adding an SDP, should be aware of. CMS notes “…all funds for SDPs should drive access and higher quality of care resulting in tangible, sustainable improvements in health outcomes and health for Medicaid beneficiaries.”
To further this goal, three key elements are now required as part of the SDP preprint process.
- States must describe how the SDP directly links to goals and objectives in the state’s Quality Strategy.
- States must submit an evaluation plan with measure data that defines the baseline year, baseline statistics, and a target level of performance.
- For an SDP with at least two rating periods, states must submit evaluation results at the time of preprint submission, or at a minimum an interim evaluation if data is not finalized.
CMS has prepared a template that states have the option to utilize to support evaluation findings. This template not only includes a table for reporting metric results but also includes prompts to assist states share information such as the covered population, evaluation methodology, data limitations, and impact analysis. Importantly, CMS requires states describe any plans to address declining performance, if applicable.
This guidance builds on the Medicaid and Children’s Health Insurance Program (CHIP) Managed Care Access, Finance, and Quality final rule which was published in the Federal Register on May 10, 2024. The final rule updated Quality and Evaluation processes (§ 438.6(c)(2)(ii)(C), (c)(2)(ii)(D), (c)(2)(ii)(F), (c)(2)(iv), (c)(2)(v) and (c)(7). Our original client alert discussing changes to provisions specific to state-directed payment (SDP) arrangements can be found here. We anticipate additional clarifications may occur in an upcoming proposed rule.
Myers and Stauffer
Purpose driven. Exclusive focus. Government programs.
Myers and Stauffer assists our government health care clients develop and implement state directed payment programs for various provider types, as well as ensure oversight of managed care health plans and compliance. Myers and Stauffer also assists states design their Quality Strategy, implement measures to incentivize high-value care, and craft effective dashboards to monitor quality and access in real time.
