PCMH Profile

Research Calls for Setting Aside Budget Neutrality to Give Medical Home Model Chance to Work

February 17, 2009 04:30 pm Paula Haas

Hoangmai Pham, M.D., M.P.H., a general internist and senior health researcher at the Center for Studying Health System Change(www.hschange.org), or HSC, was on the design team for Medicare's patient-centered medical home, or PCMH, demonstration.

Pham also was lead author of the paper "Paying for Medical Homes: A Calculated Risk," which was part of an HSC policy perspective titled "Making Medical Homes Work: Moving From Concept to Practice(www.hschange.org).

In this AAFP News Now interview, Pham elaborates on the paper's sometimes contrarian suggestions.

Q: Why the words "calculated risk" in your paper's title?

A: Our thesis is that if payers and insurers want to launch the medical home model and let it play out on a large enough scale to see if it works, they might need to make that initial investment without necessarily trying to set payments expecting to fully recoup them later in savings. Payers and insurers, as difficult as it is for them to outlay money up front, are in a much better position to do so than primary care physicians, who are operating on very thin margins. In some multispecialty practices, primary care physicians are subsidized by specialist peers.

So to ask primary care physicians to make an investment without payers paying for it may be unrealistic. We suspect that some practices might have the capital to do it, but many won't be able to.

And if payers and insurers don't get enough primary care physicians to participate, they risk not having enough in the project to be meaningful in terms of changing care practices or enough to generate reliable analyses of the impact. I don't think we're conjecturing something that payers don't already recognize at some level. But the market context is sometimes forgotten.

Payers are used to having a lot of leverage over primary care physicians, and these physicians don't usually have negotiating leverage unless they're in a large group. Insurers also are understandably being pressured not to invest without a clear return on investment. But if the party you're trying to move is already under a lot of financial strain, adding to that pressure is less likely to work.

Q: Your paper notes that "there is so little experience with medical homes that, as yet, there is no certainty that additional services will actually increase efficiency through lower costs and/or improved quality." But the paper also suggests moving ahead with payment reform. Can you elaborate?

A: We don't have definitive evidence yet that the medical home model saves money, but this isn't necessarily a static model. One of the other theses of our paper is that these medical home experiments are tremendously valuable, but it's also possible to proceed with payment reform as the experiments go on. One example is how diagnosis-related groups or the resource-based relative value system, or RBRVS, was implemented -- there was a lot of tracking, and people wanted to collect data on how things were going, but these new systems were put in place before formal evaluations were done.

We might not get to that savings goal that everyone wants with this particular model of medical home, but the experiment is worth doing and adjusting over time.

Q: Your paper specifically suggests setting budget neutrality aside and increasing payments for all primary care physicians who achieve medical home capabilities, not just those in pilots -- then tracking physician performance and patient outcomes and adjusting the program as needed over time. Why do you suggest that approach? Is it politically possible?

A: That is one of the alternatives we describe. By doing so, insurers and payers would be signaling that, at least in the beginning, this won't be a zero-sum game, so specialists might not be as threatened about losing income. It's entirely possible that there will be a shifting of resources in the long term. But policymakers may not be prepared to confront that at this time. My impression is that a growing number of specialists recognize that the shift needs to happen. They need their primary care peers.

In the context of our paper, which was about the medical home model, we suggest increasing payments for all practices that qualify. But in other contexts, research by our organization and other organizations suggests that primary care needs urgent financial support. If medical homes are one vehicle for that, great, but others might be needed. We recognize two policy-related goals: urgent support for primary care and practice transformation. That second goal may take years, but primary care may not be able to wait that long.

That's another argument for not focusing on budget neutrality in the beginning. Payers don't have to throw out the standards for the medical home, but if they want more practices to qualify, they may need to help them with the investment.

Under current reimbursement models, many primary care physicians can't do their jobs the way they want to, and they can't access the capital needed to invest in the infrastructure to function as a medical home. A cardiology practice, for example, might be more able to access that capital because the services they provide are reimbursed at higher margins. It's an unintended consequence of the way data is inputted into the RBRVS (Resource-based Relative Value Scale). The cost of providing procedures tends to be overestimated, and the practice gets to keep the extra. That data gap widens as time goes by.

One feeds into the other. If you have a viable business model, you're more likely to convince a lender to lend to you. You also may have more capital on hand.

I think recent evidence about medical trainees avoiding primary care careers doesn't just reflect concerns about income. It also reflects what they observe about lifestyle, which includes issues like whether you have enough nurses and an electronic medical record. Many trainees would love to devote themselves to primary care, but they worry about a work life where they wouldn't have the resources to do their job well.