Payment Approaches and Cost of the Patientcentered Medical Home

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Payment Approaches and Cost of the
Patient-centered Medical Home
Agenda Item II

• Robert A. Berenson, M.D.
• PCPCC Meeting
• 16 July 2008, Washington, D.C.

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Contract with the Commonwealth Fund and ACP to

• Identify additional resources (incremental costs)
  needed to support PCMH adoption
• Compare and contrast various payment approaches
  to supporting PCMH activities
• Site visit practices to assess feasibility and
  likely approaches to PCMH adoption
• Identify some best practices in practices
  visited that might be exportable to others

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Project Team

• Urban Institute Robert Berenson and Steve
  Zuckerman
• Medical Group Management Association Terry
  Hammons and Dave Gans
• Social and Scientific Systems Katie Merrell
• ACP Will Underwood and Shari Erickson

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Key Factors in Designing Payments and Estimating
Costs

• Medical home definition
• Assessment of how practices meet definition
  scoring strategy
• Covered population
• Inclusion of risk adjustment?
• Payment for existing services (EM and other)?
• Other payers policies

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Our Method

• Practice-level approach aims to identify
  aggregate cost differences associated with
  different levels of MH with some assessment of
  activities producing cost variations
• In contrast, existing cost estimates calculate
  unit costs for specific medical home attributes
  use a micro-costing, building block approach

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Practice Level Estimate Approach

• Relates practice expenses to scores on the NCQA
  PCMH recognition tool
• Practice expense data from MGMA Cost Survey and
  ACP Practice Management Check-up Tool ask for
  comparable information
• Accounts for practice size, ownership, and
  service volume

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Data Collection

• Recruit practices that have already submitted
  data to the MGMA or ACP for other purposes
  (non-random, but imposes low practice burden and
  higher likely response rate)
• Each participant practice completes the NCQA PCMH
  recognition tool
• Obtain supplemental practice data on IT expenses,
  service and patient volume

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Medical Home Costing Methods

• Rank practices by PCMH scores (roughly by Level
  or Tier) within subgroups of practices
• - 1-3 MDs, physician-owned 4-15 MDs,
  physician-owned 4-15 MDs, hospital-owned
• Express practice expenses on a per unit of
  volume basis
• RVUs, physician patient care hour, physician
• Differences in expenses per volume across PCMH
  score groups will be an estimate of the
  incremental costs of becoming a medical home
• Would decompose incremental costs by type of
  practice expense (e.g. labor, HIT)

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Strengths and Limitations of Our Approach

• Strengths
• Minimizes assumptions about the MH production
  function
• Reflects actual practices use of lumpy
  resources
• Method easily expandable to larger population of
  practices, with greater confidence in findings

• Limitations
• Insufficient number of practices for refined
  statistical analyses
• Unknown population heterogeneity of key measures
• Costs reflect multiple payers policies and
  payment levels attribution challenge

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We Will Also Describe Other Approaches

• The RUC approach being used for CMS demo
  essentially reduces 25 PCMH capabilities to
  specific additional physician work requirements
  and a few practice expense and PLI components
  (consistent with RUC methodology)
• Assigns RVUs to these specific added cost items
  mostly MD time (work) associated with EM
  activity, cost of a nurse coordinator, prices for
  equipment expansion, esp. server-based EMR at
  Tier 3.
• Case mix and other assumptions from one large
  multi-specialty clinic

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Costing the New Model of Family Medicine
Approach The Lewin Group

• Features w/direct effects
• Open access scheduling
• On-line appointments
• EMR
• Group visits
• E-consults
• Care management
• Web-based info
• Team approach
• Medical protocol software
• Outcomes analysis

• Practice outcomes
• Training costs
• Service volume
• RVU per service
• MD time per service
• Clinical staff time per service
• Office expense
• Administrative staff
• Malpractice premiums

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NMFM Effect on Practice Compensation

• Attempts to assess both costs and impact on
  revenues of MH elements not a discrete estimate
  of costs
• If family physicians receive a NMFM fee of 10
  per pt/year, there would be minimal drop in
  annual compensation and 18 fewer hours worked
• If physicians maintain hours, compensation could
  increase 40.

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There Are a Range of Estimates or Actual Payment
Fees of the MH
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There Are Also Numerous Payment Options

• FFS with discrete new codes for important MH
  activities
• FFS with P4P for quality and/or cost performance
• FFS with higher payment levels to facilitate
  cross-subsidized activities
• Regular FFS with PPPM MH fee, perhaps with P4P
  the commonly discussed approach
• Reduced FFS with enhanced PPPM fee

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Payment Options (cont.)

• Enhanced PPPM with no FFS improved capitation
  to include robust risk adjustment, actuarial
  adjustment for enhanced activities P4P (see
  Goroll et al -- JGIM)
• Enhanced payment for condition continuum of the
  levels of financial risk (Goldfield et al --JACM)