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White Paper: The Business Case for PCMH

Milliman, the world’s largest providers of actuarial services, provides the first comprehensive look at the business implications for earning PCMH Recognition.

Research shows NCQA Patient-Centered Medical Home Recognition supports the Triple Aim: Improved quality, reduced costs and a better patient experience. But organizations considering NCQA Recognition also consider the business impact from investing in PCMH. There was no concrete guidance on how practices should calculate return on investment (ROI) for PCMH implementation … until now.

NCQA engaged Milliman, the world’s largest providers of actuarial services to develop a white paper. This paper provides guidance around business considerations for NCQA PCMH Recognition, including analysis of a hypothetical practice and a pro forma decision-makers can use to help weigh PCMH investment.


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Background

Practices that implement the PCMH model need to effectively plan for how the implementation of PCMH impacts them financially. This white paper addresses the question: What are the operational and financial considerations for becoming a PCMH-Recognized entity from the perspective of a primary care practice?

Overview

The NCQA PCMH model provides a well-vetted and respected foundation for the organization and transformation of primary care.

  • Among the potential benefits of PCMH Recognition are:
    • Increased utilization of primary care.
    • Improved quality.
    • Improved effectiveness of care and patient outcomes.
    • Increased revenue.
    • Demonstrated readiness to be successful in value-based contracts.
  • Costs of PCMH Recognition may include:
    • New systems, structures and processes.
    • Staff needed to support transformation to and delivery of advanced primary care.

Modeling a Hypothetical Practice

To identify the potential business impact of PCMH, Milliman modeled the impact NCQA PCMH Recognition would have on revenue and costs at a hypothetical practice with 10 primary care clinicians and 20,000 unique commercial members.

  • They concluded that the revenue impact of PCMH Recognition for that hypothetical practice was between a 2% to 20% increase in revenue (dependent on payment models).
  • In all payment models, revenue increases for a hypothetical practice outpaced costs, resulting in a positive ROI.

The model used was in a hypothetical practice only, and actual costs and revenues may vary depending on actual practice characteristics.

Developing a Pro Forma

Ultimately, when a practice evaluates whether to seek NCQA Recognition, leadership must determine whether the revenue potential outweighs the investment costs for PCMH. But revenue should not be the only consideration. There are other motivations for PCMH Recognition, such as the need for investment in quality improvement, creating or streamlining processes or procedures to help reduce staff burnout and create standardization within a system, or operating in a competitive landscape where quality markers can provide a competitive advantage.

Developing a business case requires developing a pro forma, carefully considering payment arrangements and other operational and administrative benefits or costs and maintenance.

This pro forma should include, but is not limited to:

  • Defined way to calculate labor costs (incremental or costing method).
  • Payer mix and payment models, including payment amounts, payment units, and conditions on which payments are made.
  • Potential changes in revenue resulting from increased primary care utilization, including increased preventative care and screenings, reduced no shows and more efficient use of care that results in more strategic deployment of primary care services.
  • Projected revenue streams associated with each payment arrangement.
  • Projected operational or administrative costs or savings.

To see a detailed explanation of what to include in your pro forma, download the white paper.

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