Making Medical Homes Effective: Transitioning from Concept to Real-World Practice

Making Medical Homes Effective: Transitioning from Concept to Real-World Practice

HSC Policy Analysis No. 1 -- December 2008 -- Paul B. Ginsburg, Myles Maxfield, Ann S. O'Malley, Deborah Peikes, Hoangmai H. Pham

Widespread alarm about high and escalating costs, coupled with mounting evidence that the quality of American health care varies greatly, has placed healthcare reform near the top of the domestic policy agenda. Policy makers face growing pressure to overhaul provider payment structures to catalyze changes in how providers organize and deliver care.

In many communities, physician practices, hospitals, and other providers are poorly integrated in terms of culture, organizational structure, and financing. While independent arrangements may offer certain advantages, such as broader patient choice, the downside of independence is fragmentation -- across care settings, providers, and in clinical decision-making. Current payment systems, particularly fee-for-service models, reinforce siloed care delivery that rewards volume over quality. Fee-for-service reimbursement also provides minimal incentives for providers to invest in improving management of chronic illnesses, which account for a far greater share of healthcare expenditures than acute conditions.

Among the numerous proposals for reforming payment and delivery systems under discussion, the medical home model has built substantial momentum in both public and private sectors. The concept has been championed by primary care physician organizations. A broad array of insurers and payers -- including United HealthCare, Aetna, the Blue Cross Blue Shield Association, and state Medicaid programs -- are developing medical home initiatives. Congress has also mandated a medical home demonstration within fee-for-service Medicare.

Although definitions of the medical home vary and continue to evolve, at its core is a physician practice dedicated to organizing and coordinating care around patients' needs and priorities, communicating directly with patients and families, and integrating care across settings and practitioners. If enough practices become medical homes, a critical mass could be reached to transform the care delivery system -- providing accessible, continuous, coordinated, patient-centered care to high-need populations, especially patients with chronic conditions.

Some proponents attribute an even broader objective to the model -- improving care quality, reducing demand for expensive medical services, and generating savings for payers. Medical homes are expected to accomplish this by changing how physicians practice medicine.

Yet despite the enormous energy and resources poured into the medical home model, relatively little has been published about the transition from theoretical concept to practical application, particularly at scale. What would a successful medical home program look like? How should it be rolled out? Moving forward with medical home initiatives without analyses to ground their design and identify potential pitfalls and solutions risks producing ineffective programs that alienate patients and physicians. Such an outcome would jeopardize not only the resources invested by clinicians and payers in early initiatives, but also the long-term political viability of the model as a vehicle for broader healthcare reform.

The Center for Studying Health System Change (HSC) and Mathematica Policy Research (MPR) are uniquely positioned to address operational issues related to medical homes. Both organizations have conducted independent and collaborative research on medical homes, care coordination, payment policy, and care delivery organization. HSC and MPR researchers also have direct experience with public- and private-sector medical home initiatives, including leading the design of the Medicare medical home demonstration.

Drawing on these experiences, the authors identified four critical operational issues in implementing most medical home models that have the potential to determine a program's success or failure: (1) how to certify physician practices as medical homes; (2) how to link patients to their medical homes; (3) how to engage patients and other providers in care coordination with medical homes; and (4) how to compensate practices that serve as medical homes.

Certifying a Physician Practice as a Medical Home

By Ann S. O'Malley, Deborah Peikes and Paul B. Ginsburg

Finding an effective and efficient method to determine whether a physician practice has the capabilities to function as a medical home is a pressing challenge as public and private payers develop pilot programs to test whether additional compensation to medical homes can improve care quality and efficiency. Ensuring that a qualification instrument accurately captures the capabilities a practice requires to be a medical home can help practices focus on the most important activities for improving care. Most medical home initiatives draw on the joint principles of the patient-centered medical home developed by the primary care physician specialty societies, which outline the general attributes of a patient-centered medical home. These principles emphasize four key primary care elements -- accessibility, continuity, coordination, and comprehensiveness -- that evidence shows positively affect health outcomes, satisfaction, and costs. An ideal qualification instrument would ensure that medical homes are grounded in these critical primary care foundations.

Public and private payers are launching patient-centered medical home (PCMH) experiments as one strategy to enhance care quality and coordination, potentially lower costs, and boost financial support for primary care physicians. These experiments aim to test a medical home concept that underscores the central importance of primary care to an organized, patient-centered healthcare system. The model posits that primary care physicians' direct, trusted relationship with patients -- combined with their broad clinical training across body systems -- positions them to assess an individual's health needs and tailor a comprehensive approach to care across conditions, settings, and providers.

Not all primary care practices are set up to operate as a PCMH. This shortcoming partly results from inadequate financial support for activities such as care coordination, along with insufficient training on team-based practice. To remedy this, payers are testing additional payments to participating practices that can demonstrate medical home capabilities. Most current pilots and demonstrations require practices to "qualify" through an objective measurement tool, whose measures effectively serve as a blueprint for building medical home capabilities.

Most medical home demonstrations and pilots use the National Committee for Quality Assurance (NCQA) Physician Practice Connections-Patient Centered Medical Home tool (PPC-PCMH). The tool has notable strengths, including broad support from payers, specialty societies, and the National Quality Forum, and it allows flexibility in how practices meet certain requirements. However, the current PPC-PCMH may not be ideal for assessing medical home capabilities because it underemphasizes some defining primary care elements while overemphasizing factors not specific to a medical home. Notably, the tool places heavy weight on information technology capabilities -- 77 of the 166 measures relate to IT -- and requires extensive documentation around single-condition care, when a stronger focus on comprehensiveness and coordination across a patient's complex health needs would be more appropriate.

At this pivotal moment for the nation's fragile and underfunded primary care infrastructure, a medical home qualification tool that insufficiently emphasizes key primary care elements risks excluding practices that genuinely deliver patient-centered primary care while including those that do not. An overly demanding tool with heavy documentation requirements for structures that may not improve clinical outcomes could distract physicians from developing the practice capabilities that truly enhance patient care.

Linking Patients to Medical Homes

By Deborah Peikes, Hoangmai H. Pham, Ann S. O'Malley and Myles Maxfield

For medical homes to fulfill their promise of better care, payers must connect each eligible patient to a medical home practice in a way that ensures transparency, clinical validity, and fairness for physicians. Equally critical are adequate choice and awareness of the medical home model for patients, and operational feasibility for payers who must determine which practices qualify for enhanced compensation. The method used to assign, or attribute, patients to medical homes will ultimately shape how successfully these initiatives engage patients and physicians.

Physician practices functioning as medical homes need to know which patients they are responsible for so they can coordinate those patients' care. Clear identification enables practices to more accurately predict additional revenue from serving as a medical home, which in turn allows informed decisions about whether to pursue that role and what additional staff or infrastructure investments they can afford. Giving physicians some choice in which patients they form medical home relationships with -- rather than having this dictated by a payer -- further enhances physician engagement.

Payers can connect patients to physicians using four general approaches: claims-based algorithms, asking physicians to identify patients, asking patients to identify physicians, or hybrid combinations of these three. Each approach has different strengths and weaknesses across six important dimensions: patient choice, physician choice, ease for physician, ease for insurer, assignment accuracy, and encouraging patient understanding of medical home rights and responsibilities.

The most commonly employed approach relies on claims-based algorithms. While operationally efficient, this approach excludes physician and patient input, does not allow either party to select their preferred medical home relationship, and -- critically -- claims data can be inaccurate and may not reflect clinical realities. Because many patients see multiple physicians, algorithms cannot always identify the correct provider. A hybrid approach that combines elements of all three methods would best support medical home relationships while honoring existing patient-physician connections. Accurate and meaningful linkages between patients and medical home physicians are critical and require input from both parties.

The Information Exchange Challenge

By Myles Maxfield, Hoangmai H. Pham and Deborah Peikes

The ability of medical homes to improve quality and lower costs through better care coordination across providers, settings, and clinical conditions will be constrained without effective mechanisms for sharing clinical information with patients and providers outside the medical home. A formal agreement between the medical home and the patient spelling out each party's roles and responsibilities could facilitate information exchange. Sharing data with specialists may not be practical without electronic exchange capabilities or incentives for specialist participation.

Medical home initiatives typically pursue two overarching goals -- reducing costs and improving care quality. Cost reduction is expected to come from avoiding redundant or unnecessary tests, imaging, procedures, and medications, with these savings large enough to offset any additional spending on medical home services. The second goal of improving care quality involves maintaining comprehensive clinical information on the care patients receive from other providers, creating a sounder basis for diagnoses and treatment decisions.

Key challenges include the fact that many fee-for-service patients may resist placing all their clinical information with a single medical home provider, and some may view coordination efforts as reminiscent of restrictive managed care gatekeeping. On the specialist side, the primary challenge is the sheer number of other providers involved -- one study found that a typical primary care physician shares Medicare patients with 229 other physicians across 117 different practices. Without some form of electronic information exchange beyond fax machines, implementing information flows of this magnitude may not be practical for many practices.

Several approaches can help address these challenges: making the patient-medical home agreement as explicit and formal as possible; focusing on practices already participating in provider networks with electronic capabilities; requiring specialists to enter service agreements with medical homes as a condition of network participation; and leveraging other financial incentives to adopt electronic information systems. The medical home model can serve as a catalyst for increasing primary care physicians' responsibility and authority to coordinate patient care, as well as fostering greater patient self-management of medical conditions.

Compensating Medical Homes: A Calculated Risk

By Hoangmai H. Pham, Deborah Peikes and Paul B. Ginsburg

The renewed interest among policy makers in the medical home concept stems from goals of improving quality and reducing healthcare expenditures. Another driver of recent advocacy is the search for vehicles to increase financial support for primary care physicians, whose services are widely recognized as undercompensated in current fee-for-service payment systems. Moreover, existing fee-for-service systems typically do not reimburse important activities that primary care physicians perform, such as care coordination and patient education.

Payment approaches for medical homes under current fee-for-service systems essentially focus on additional reimbursement for services not currently covered. The fundamental challenge is that payers have limited data on what these uncovered services look like in current practice and what the ideal service array should be -- that is, services that reliably produce high-quality, efficient patient care. Most payers sponsoring demonstrations or pilots offer extra payment in the form of partial capitation -- a fixed per-patient, per-month or per-practice, per-year fee calculated prospectively.

Across public and private medical home initiatives, payers are more focused on paying for the processes medical homes engage in than on the outcomes of those processes. Payment levels range widely across programs -- from an expected $20,000 to $30,000 per practice per year in Vermont to $35,000 to $85,000 per full-time physician per year in Philadelphia. Fees in the Medicare demonstration could total $104,232 or $133,386 per year for a typical primary care physician.

The prevailing priority among most planned public- and private-sector initiatives is achieving budget neutrality. The hope is that potential savings from medical home services will offset additional payments to physician practices. But limited experience with medical homes means there is no certainty yet that added services will actually boost efficiency through lower costs and better quality. This uncertainty complicates setting payment levels that achieve spending neutrality while still covering the costs of activities payers expect medical homes to perform.

From a broader policy perspective, if the risk to the primary care infrastructure of inaction is as grave as consensus suggests, payers may need to take a comparable risk in response. At the moment, payers are far better positioned to absorb risk than physicians -- both in resources and in their potential to influence other providers' behavior. Budget neutrality may be a commendable long-term goal, but an unrealistic expectation at every stage of reform. In the long term, medical home payment approaches could serve as a model for transitioning chronic care reimbursement from fee-for-service to capitation, coupled with bonuses tied to system-wide cost savings and quality outcomes -- better aligning incentives for prevention, coordination, and quality improvement.

Sources and Further Reading

The following resources provide additional context on the medical home model, care coordination policy, and primary care payment reform discussed in this analysis:

NCQA Patient-Centered Medical Home Recognition Program -- The National Committee for Quality Assurance's standards and certification process for medical home practices referenced throughout this analysis.

CMS Comprehensive Primary Care Plus (CPC+) Model -- The Centers for Medicare & Medicaid Services' advanced primary care model, building on earlier Medicare medical home demonstrations discussed in this paper.

AHRQ: Understanding the Patient-Centered Medical Home -- The Agency for Healthcare Research and Quality's overview of the PCMH evidence base, including research on care coordination outcomes.

Commonwealth Fund: Patient-Centered, Coordinated Care -- Research from the Commonwealth Fund on how coordinated, patient-centered care models affect quality and spending.

Health Affairs: Primary Care Research and Policy -- Peer-reviewed research on primary care delivery models, payment reform, and the medical home concept published in Health Affairs.