Payment Should Align with Patient-Centered Care: NCQA Responds to Annals of Family Medicine PCMH Costs Study

September 14, 2015 · Michael S. Barr, MD

Magill et al make a vital contribution to the understanding of what it takes to sustain high-performing, patient-centered medical homes. How the authors estimate costs is novel, constructive and opens the door to further research calculating the total value—net costs compared to net benefits—of advanced PCMH care.

The per-patient-per-month (PPPM) cost of $3.85 to $4.83 is the key figure to emerge from the study, and should be compared to baseline primary care costs, total cost to operate a practice pre/post implementation of the PCMH model, and to costs of alternative models. Future research that integrates the authors’ cost methodology with assessments of operational, quality and economic advantages of PCMH would be most illuminating, as would further differentiation of truly incremental costs versus shifting team-based responsibilities among existing personnel.

Above all, the authors show that fee for service is incompatible with PCMH. Their research is a reminder that payment reform is a prerequisite to deriving full value from the medical home model.

A Vital Contribution
It is important to appreciate the pioneering way this study applies what is essentially activity-based accounting to the study of medical homes. The authors worked backwards: from activities, to the time it takes to complete those activities, to the staff who perform them.

Some activities required new staff and therefore were associated with the incremental costs of salary and benefits. In other cases, existing personnel were able to shift responsibilities to perform the recommended tasks and therefore did not result in new costs to the practice. However, by associating time with activities and the hourly cost for the people who perform them, the authors have created a way to calculate each activity’s value. That innovation alone is an important contribution to the literature.

Toward Net Assessment
Using the authors’ activity-based accounting, future research should compare how incremental PPPM costs compare to benefits of the medical home model.

The prospect of paying an extra $3.85 to $4.83 per-patient-per-month for responsive, high quality care typical of top-level medical homes in this study is probably attractive to payers. Some studies of the PCMH model have found benefits to the payers well in excess of $4. Other studies have documented quality, staff satisfaction and patient retention advantages.

The PPPM figures the authors calculated are also probably attractive to employers, whose productivity gains and reduction in missed work when their employees use medical homes’ after-hours access certainly exceed $4 PPPM.

Considering incremental costs of the medical home raises the question of whether alternative care models would cost less. For patients who would otherwise resort to emergency room visits if they did not have the care access and responsiveness of their PCMH, the answer is probably no.

Again, future research is needed to consider incremental costs of PCMH against its advantages. This study is an important step in that direction.

The Need for Payment Reform

Ultimately, this study affirms that trying to make PCMH work in a fee-for-service environment is impractical and unsustainable.

Payment needs to align with patient-centered care so that reimbursement supports the high-value and high-quality care that we all want. By deconstructing what high-performing medical home practices do, Magill et al show the very activities that payment reform should support.

By showing that PMCH and fee-for-service are at cross purposes, the authors have helped the PCMH model. And by pointing out how the fee-for-service environment is at odds with high-level PCMH care, this study should motivate all who are interested in the PCMH model’s ability to deliver on the triple aim to support payment reform.

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