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New York’s Delivery System Reform Incentive Payment (DSRIP) demonstration, authorized by a Medicaid section 1115 waiver, is an ambitious and complex effort to transform the health care delivery system, reduce cost growth, and improve care outcomes for Medicaid beneficiaries and uninsured individuals. The demonstration involves thousands of health care providers and social service organizations and explicitly ties payment to outcomes. After the third year in its six-year demonstration period, the state has made significant progress toward its goals, while facing ongoing challenges in shifting the locus of health care delivery from expensive inpatient settings to primary and preventive care in the community. New York has found that safety net providers are at varying levels of readiness for value-based payment and delivery system change, suggesting that helping these providers prepare for the transition requires an agile, staged approach to ramping up performance expectations. Other states pursuing delivery system reforms can learn from New York’s experience.