THE URBAN INSTITUTE

Payment Approaches and Cost of the Patient-centered Medical Home

Robert A. Berenson, M.D.

PCPCC Meeting

16 July 2008, Washington, D.C.

Agenda Item: II

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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 (E&M 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 E&M 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

Population Cost/ Payment

Adjustments

Deloitte Chronically ill adults

$150 PMPM None known

Ambulatory Intensive Care Unit

Chronically ill adults

$54 PMPM Clinical quality incentives

CCNC Medicaid $2.50 PMPM each to PCP and the CCN

None known

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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)