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RAND: Patient-Centered Medical Home May Cost $147K Per Year

Patient-centered medical home (PCMH) transformation may be a prohibitively costly proposition for some smaller and independent practices, a new report suggests.

By Jennifer Bresnick

- Are the potential savings and patient care benefits of the patient-centered medical home (PCMH) worth the costs? 

Patient-centered medical home transformation

RAND Corporation is weighing in on the eternal debate over the benefits and drawbacks of implementing the innovative care framework with a new report that may spell not-so-great news for some smaller providers tight on liquid assets.

The patient-centered medical home has become a popular way to implement standardized population health management programs that often lead to measurable quality and patient access improvements. 

Based on a combination of EHR adoption, big data analytics techniques, care coordination strategies, and an emphasis on preventative care, the PCMH has helped many organizations produce measurable reductions in key quality measurement areas such as emergency department visits, preventable hospital readmissions, and chronic disease management.

Advocates of the PCMH, which include CMS and the Patient-Centered Primary Care Collaborative (PCPCC), have promoted the framework as a potential cost-cutting measure, too. 

READ MORE: Big Data Analytics Link Economic Wellness to Population Health

The PCMH helped to control spending in more than 60 percent of industry reports, PCPCC said in February of 2015, while 85 percent of studies found that the framework helped to decrease unnecessary utilization of expensive care options.

The PCMH figures prominently in the Merit-Based Incentive Payment System (MIPS), which aims to accelerate the nation’s shift to pay-for-performance reimbursement and financial bonuses based on quality achievements using the PCMH as one of the most promising foundations for systemic improvements.

But skeptics have pointed out the obvious drawback of overhauling the way healthcare organizations operate.  Becoming a successful PCMH requires change, and changes cost money.

Providers must have a firm grasp on EHR use and, more often than not, the purchase adoption of complementary patient management technologies.  Additional staff members, such as care coordinators or nurse practitioners and physician assistants, must draw salaries that some providers simply can’t afford.

The transformation process may take months – or even years – during which time providers could be pouring dollars down what seems like a black hole.  And even when an organization receives its official PCMH certification, it must demonstrate continuous improvement and apply for recertification on a regular basis, all of which demand staff hours that could keep the costs piling up.

READ MORE: NCQA Revamps Patient-Centered Medical Home to Ease Adoption

“For primary care practices, participating in a medical home demonstration requires substantial investments,” said Grant Martsolf, a policy researcher at RAND and lead author of the latest study, in a press release emailed to journalists. “These costs of transformation include both one-time startup costs and ongoing, every-year costs.”

The investments are significant, the report shows.  Based on data gathered from the Pennsylvania Chronic Care Initiative (PACCI), RAND pins the annual costs of PCMH transformation at anywhere between $83,829 and $346,603 a year.

Costs per clinician ranged from $18,585 to $93,856, while spending per patient could total anywhere between $8 and $136 per annum.

The median of these yearly costs was $147,573 per practice, $64,768 per clinician, and $30 per patient. 

The estimates are similar to a September 2015 study published in the Annals of Family Medicine, which found that staffing and care coordination requirements for the PCMH could cost providers an average of $8600 per month.

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“Our findings provide one of the best insights to date about the costs associated with medical home transformation,” said Martsolf. “These findings should help guide policymakers as they look for ways to encourage more medical practices to make this transition.”

More than 60 percent of spending was dedicated to care management activities, the report says.  Smaller and independent practices ended up spending more on their transformation efforts than larger providers or those affiliated with health systems.

“While there are financial incentives available to practices that make the shift, such investments might be especially challenging for small practices and those not associated with a larger health network, since they had higher transformation costs per clinician,” Martsolf said.

Martsolf suggests that “tailored subsidies from payers could help small and independent practices make these investments.”

However, small providers may also face challenges related to a lack of staff resources, pointed out Edward Bujold, MD, FAAFP, in an Annals of Family Medicine editorial in 2015.  The dual burdens of maintaining PCMH status and the constant pressures of attesting to the EHR Incentive Programs may be too much for some organizations to bear, he said.

While Bujold does acknowledge that the PCMH model helped his primary care practice cut preventable hospitalizations by 80 percent over five years, keeping current with his PCMH certifications has become a major impediment to his ability to form meaningful connections with his patients and devote all his attention to providing appropriate, individualized care.

“In the past year alone, my staff and I spent hundreds of hours studying for and taking exams, certifying for numerous programs, and updating then relearning our EHR to meet meaningful use requirements,” he wrote.

“This was time we could have spent in patient care or pursuing outside interests designed to nurture our physical and mental wellbeing—the fourth pillar of the Quadruple Aim: improving the health of populations, enhancing the patient experience, reducing the per capita cost of health care, and improving the work life of health care providers, including clinicians and staff.”

Time, or the lack thereof, is at the root of many complaints about emerging care strategies and other reform initiatives that require providers to invest extra hours in reporting, documentation, or workflow changes.

A previous RAND study found that federally-qualified health centers (FQHCs) participating in a CMS Innovation Center PCMH pilot completed their NCQA PCMH certifications at a slower rate than anticipated, even when given an $18 quarterly patient management fee for each of their eligible Medicare beneficiaries.

While CMS hoped to see 90 percent of its 493 participating FQHCs achieve Level III PCMH certification from the National Center for Quality Assurance (NCQA) by the end of the three-year project, only 55 percent of participants had done so.

FQHCs receiving the financial subsidy and CMS assistance were five times more likely to achieve PCMH status compared to similar FQHCs not enrolled in the program, but the shortfall indicates that even a modest external financial boost may not be enough to help some providers meet the high expectations involved in PCMH transformation.

Providers who wish to find success with the patient-centered medical home model may want to consider starting with some basic value-based reimbursement contracting to prepare them for the challenge of raising quality in pursuit of financial gains.

RAND notes that FQHCs that had previous experience with value-based reimbursement were more likely to achieve Level III PCMH certification in a timely manner, and had less need for technical assistance while doing so.

“Sites that participate in shared-savings demonstrations may benefit from additional resources gained from participating in these demonstrations, which facilitate achievement of Level III recognition,” the report stated. “In addition, the potential for shared savings may serve as a potent driving force behind these sites’ pursuit of Level III recognition.”

Organizations may also plan to seek advice from experienced PCMH experts and organizations that can provide information on keeping spending to a minimum while transforming a practice in an optimally efficient manner.  


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