Patient-Centered Medical Home is fee-for-service alternative

September 20, 2012

A series of new reports from Health Affairs examines new innovations in replacing fee-for-service payment models.

Health Affairs-supported in part by grants from WellPoint Inc., the WellPoint Foundation, and the California HealthCare Foundation-has issued new reports on payment reform in the U.S. healthcare system. Through a series of profiles, the research explores the shift away from fee-for-service medicine and new innovations for delivering better care at lower costs.

One profile, titled “Early results show WellPoint’s Patient-Centered Medical Home [PCMH] pilots have met some goals for costs, utilization, and quality,”examines new programs in Colorado, New Hampshire, and New York. The Colorado and New Hampshire pilots paid physicians based on services provided and distributed monthly care management payments for comprehensive services that supported patient needs. Physicians who met various quality targets also were eligible for pay-for-performance bonuses in those programs. In the New York pilot, an enhanced fee-for-service initiative was implemented that provided physicians with reimbursements in addition to their standard fee-for-service payments to encourage quality improvement measures.

The results of the Colorado pilot showed an 18% overall decrease in acute patient admissions since its launch in 2009 compared with an 18% increase in the control group. Results also indicated a 15% decrease in emergency department admissions compared with a 4% increase in the control group, plus improvement across all measures for diabetes care. Patient satisfaction was high, with 95% of survey respondents reporting the care setting was well-organized and efficient and 97% saying they would recommend it to friends and family. Another 90% said it was easy to speak to a physician when they called their medical home practice.

Costs also declined in the New Hampshire pilot while increasing in the comparable control groups, and costs for health plan participants increased 5% in the PCMH, compared with 12% in traditional practices.

In the New York pilot, enrollees in PCMHs showed better adherence with preventive healthcare guidelines and lower costs than did patients in the control practices. For each pilot program, rates of inappropriate use of antibiotics for pediatric patients dropped as well, according to the study.

Another profile, titled “Horizon’s Patient-Centered Medical Home program shows practices need much more than payment changes to transform,” examines 35 practices ranging in size that participated in a medical home program with New Jersey’s Horizon Healthcare Services. The goal was to increase the medical home physicians’ accountability for providing the appropriate level of services.

The study revealed that the PCMH model can be useful for reform when the incentives within a delivery system increase accountability and improve coordination and management of patient care by strengthening the role of primary care providers. Horizon focused on creating incentives to increase PCP accountability but also provided intensive assistance in transforming traditional practices into PCMHs. They determined the best approach was to include a monthly care coordination fee combined with current fee-for-service payments, as well as nonmonetary resources for practices.

“It is critical that we find a sustainable payment and care model that can support the additional personnel and infrastructure required to successfully deliver effective and efficient care within the medical home,” the report concludes.

In the report titled “Michigan’s Physician Group Incentive Program offers a regional model for incremental ‘fee for value’ payment reform,” Blue Cross Blue Shield of Michigan worked with providers across the state to develop a new fee-for-value physician incentive program in 2004. The system was based on the number of quality and utilization measures physicians adopted, and they received payments for implementing a range of PCMH capabilities.

Altogether, the program generated reimbursement increases of 40% or more for practices from Blue Cross Blue Shield, as well an estimated $155 million in lower medical costs in 2011 for Blue Cross Blue Shield of Michigan members.

The incentives in the program were made in addition to payments made based on the professional fee schedule and were funded through an amount equal to a set percentage of all Blue Cross Blue Shield of Michigan payments to healthcare professionals. The percentage began at 0.5% of payments in 2005 and increased to 4.7% in 2012, with a total annual pool of $110 million.

The survey notes that after several years of participation in the program, most physicians were “energized and motivated to improve their practice and the health of their patients.” In additional interviews from a mix of practices, physician organizations, payers, and purchasers, “nearly every respondent expressed the view that the program is successfully improving primary care and health outcomes in the state of Michigan,” the study notes.

The 5,700 primary care providers in the incentive program-95% of the total provider group-are implementing PCMH capabilities and modernizing their healthcare delivery systems by delivering services such as 24-hour phone access to a clinical decision-maker.

“The Physician Group Incentive Program represents the kind of experimentation that we hope Medicare delivery and payment reform will encourage, not hinder," the report notes. “Through … the move from volume-focused fee-for-service payment to fee-for-value payment, we are transforming the payer into a catalyst for change, the provider into an empowered change agent, and the patient into an active partner in his or her healthcare.”

Health Affairs is a peer-reviewed journal published by Project HOPE.