Annals Study Pinpoints Costs of Sustaining PCMH

Payers Must Do More Than Cover Costs of Model, Say Researchers

October 21, 2015 02:42 pm David Mitchell Denver –

David Ehrenberger, M.D., of Louisville, Colo., (far left) and Michael Magill, M.D., of Salt Lake City (second from left) talk with physicians about the patient-centered medical home (PCMH). Ehrenberger and Magill presented research on the costs of sustaining the PCMH this month at the AAFP Family Medicine Experience in Denver.

By now, many family physicians who have an interest in the patient-centered medical home (PCMH) -- whether they are advocates or critics -- have likely heard about a study( published in the September-October edition of the Annals of Family Medicine that examines the costs of sustaining a PCMH.

What you might not have heard is what the authors think about their study and what family physicians should do with the information.

Two of the authors, Michael Magill, M.D., and David Ehrenberger, M.D., discussed their research during a presentation this month at the AAFP Family Medicine Experience here.

"It has 95 percent of the content of our presentation, but (the study) misses the whole point of the presentation, quite frankly, because it talks about facts but doesn't put it in context of the landscape of primary care in the United States, which is the most important takeaway," said Ehrenberger, chief medical officer of Avista Adventist Hospital in Louisville, Colo., and chief medical officer for the Integrated Physician Network.

Ehrenberger and Magill provided that context in their presentation. Specifically, they said payers must do a better job of valuing the model.

Story Highlights
  • A recent study in the Annals of Family Medicine found that the unique costs associated with sustaining a patient-centered medical home are more than $100,000 per full-time clinician per year.
  • The study's authors said the combination of increased fee-for-service payments created by offering extended hours, chronic care management fees from Medicare and per-member, per-month payments likely would come close to covering the increased costs.
  • However, the authors said per-member, per-month payments should be higher to reflect the value and cost savings delivered by the model.

"We live in times of paradox," Ehrenbeger said. "There are 10 years of data that support the effectiveness of the medical home. Clearly, in many ways, the medical home epitomizes the right thing to do in primary care. On the other side, we're seeing loss of favor of the medical home construct amongst some family physicians."

Numerous studies have found that the PCMH can improve quality while lowering costs, and researchers also have studied the cost of implementing the model. But Magill and Ehrenberger found data lacking on how much it costs to sustain a PCMH, and that was the goal of their research, which was funded by a grant from the Agency for Healthcare Research and Quality.

"The reason for this study is to identify our practice costs so that we can then turn to payers and identify the value for which they are paying," said Magill, professor and chair of the Department of Family and Preventive Medicine at the University of Utah School of Medicine, Salt Lake City, and executive medical director of the University of Utah Health Plans, Murray.

Researchers looked at 20 practices in Colorado and Utah that differed by level of PCMH recognition, payer mix and ownership. Using the National Committee for Quality Assurance standards as a baseline, they identified features that were unique to the medical home -- such as open-access scheduling, extended hours and the availability of patient portals -- and quantified the costs of each item.

"We focused on resources and systems that are not found in traditional high-performing primary care practices that are optimized for the fee-for-service world," Ehrenberger said.

What they found was that the costs, including staff time, to provide PCMH services were more than $100,000 per full-time clinician (e.g., physicians and nurse practitioners) per year. To be clear, these were the costs of sustaining the features of the medical home model, not the initial investment in practice transformation or achieving PCMH recognition.

"It knocked my socks off," Ehrenberger said. "It took about a year and a half to get this data together and crunch the numbers. We got $100,000 per clinical FTE (full-time equivalent), and we couldn't believe it so we ran numbers again, and sure enough -- $100,000 per FTE clinician."

The biggest cost came from planning and managing care -- which includes things such as previsit planning, identifying high-risk patients and medication reconciliation -- at an average of $35,248 per clinician per year. Magill said that element of the PCMH had the biggest price tag because it required the most staff time.

Enhancing access was next at $28,076, followed by tracking and coordinating care ($14,663), measuring and improving performance ($10,994), providing self-care support and community resources ($10,172), and identifying and managing populations ($5,688).

Given that PCMHs improve care for patients -- ultimately reducing costs to payers -- while taking on the burden of additional costs, those practices should reap greater financial benefits, Magill contended.

The combination of increased fee-for-service payments created by offering extended hours, chronic care management fees from Medicare and per-member, per-month payments likely would "generate somewhere in the range of our true costs," he said.

But should the hard work of practice transformation and adopting PCMH functions end in a break-even proposition for practices?

The study found that the Utah practices' per-patient, per-month costs of carrying out the PCMH functions studied were an average of $3.85, while the Colorado practices averaged $4.83 -- costs similar to the per-member, per-month payments practices are being paid in some national demonstration projects, said Magill.

According to Ehrenberger, payers can, and should, do better.

"Four dollars doesn't cut it," he said. "It probably should be $6 or $8."

Magill said previous studies have shown that the PCMH can reduce per-member costs by $50 a month or more. He said the gap between the $50 in savings and $4 payments is the shared savings over which primary care physicians should be negotiating with payers.

"We are looking at costs to the practice," said Magill. "This is not the same thing as value to those who write the checks. It would be very inappropriate for us to say simply that insurance companies should reimburse our actual expenses. What they should pay for is the value generated.

"This is a really important point -- that we negotiate for value, not for our costs."

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