CMS Moves to Finalize Payment Levels for Medical Home Demonstration

CMS recently announced that, tentatively, it would pay physician practices participating in its upcoming medical home demonstration project a per-member, per-month management fee of $40 or more. In addition, participating practices would be eligible to receive a share of any cost savings the demonstration project might generate.

Under the plan, (5-page PDF; About PDFs) CMS would tentatively pay practices an overall per-member, per-month management fee of either $40.40 or $51.70, depending on a practice's level of medical home capability. The management fee would be adjusted up or down, depending on a patient's severity of illness. For example, for patients with a hierarchal condition code, or HCC, of less than 1.6, the management fee would be adjusted down to $27.12 or $35.48. For patients with an HCC score of 1.6 or greater, management fees would go up to $80.25 or $100.35.

"We have announced payment rates, but they are tentative because we are still going through the clearance process for the demonstration," said Sidney Trieger, director of the Division for Health Promotion and Disease Prevention in the Office of Research Development and Information at CMS.

CMS based the payment rates on recommendations made by the AMA/Specialty Society Relative Value Scale Update Committee, or RUC. HHS and the Office of Management and Budget still must approve the payment rates and the design of the demonstration project before it moves forward, said Trieger.

Congress created the three-year medical home demonstration project (3-page PDF; About PDFs) as part of the Tax Relief and Health Care Act of 2006. The project will be conducted in eight states and will involve about 400 practices, 2,000 physicians and 400,000 Medicare beneficiaries, according to CMS. The agency plans to announce the project demonstration sites by the end of year, said Trieger.

The demonstration project will require practices to qualify for one of two medical home tiers. To qualify as a Tier 1 medical home, a practice would have to meet 17 basic medical home capabilities, including use of a health assessment plan, use of integrated care plans, tracking of patient tests and provider follow-up, and providing medication reviews. Tier 2 medical homes would have to meet the 17 basic capabilities, as well as additional criteria, including the use of electronic health records.

CMS will accept applications for the demonstration project from January until March 2009 and will require practices chosen for the project to submit to a qualification process conducted by the National Committee on Quality Assurance, or NCQA. The agency will cover the cost of the NCQA review and designation of participating practices as medical homes. CMS will start paying participating practices the management fee in January 2010 and will continue payment through the end of 2012.

According to Trieger, CMS has hired an independent contractor to conduct a comprehensive evaluation of the project. "As part of the evaluation, we will look at the impact on both beneficiaries and providers," said Trieger. "We will determine if the demonstration resulted in savings for the Medicare program and whether the medical home has an impact on the quality of care provided to beneficiaries."