Payment Approaches and Cost of the Patient-centered Medical Home

1. Agenda Item: II Payment Approaches and Cost of the Patient-centered Medical Home Robert A. Berenson, M.D. PCPCC Meeting 16 July 2008, Washington, D.C.

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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)

9. 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 Strengths and Limitations of Our Approach

10. 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

11. 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 Costing the “New Model of Family Medicine”: Approach – The Lewin Group

12. 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%.

13. There Are a Range of Estimates or Actual Payment Fees of the MH

14. 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

15. 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)