The market for medical home (PCMH) contracts is still evolving, leaving providers with questions on everything from "do we need to be accredited?" to "what types of incentive models are we likely to be offered—if any?"
This post provides a rundown on the current market for PCMH contracts, answers to frequently asked contracting questions, and access to the Medical Home Project’s medical home contracting resources guide.
Market divided on formal PCMH accreditation
One of the Medical Home Project's most frequently asked questions is, “Should we pursue accreditation?” According to our 2011 survey, many sites do, but even more do not. Only 39% of self-identified medical homes report having any kind of formal accreditation (usually NCQA).
Programs typically choose to forgo recognition for one of two reasons. Most often, it is because there are no contracting opportunities available in the market—making the work and expense of accreditation seem not worthwhile.
Alternatively, even when contracting opportunities are available, the payer might not require accreditation as a condition of participation because the contracts have provider-side risk built into them. In other words, while accreditation is one way for a health plan to ensure that a given practice is not receiving extra payment without being a “real” medical home, they can also ensure results by making the incremental value of a contract largely contingent on performance against quality and/or utilization measures linked to medical home functionality.
Among the programs that have chosen to pursue recognition, it is often because a local payer or multi-payer pilot requires it—but not always. We frequently hear from members of the Medical Home Project that seek to meet the NCQA recognition standards without a payer requiring or incentivizing the designation because they provide a helpful roadmap for PCMH transformation. Also, following a recognized model tends to cut down on unproductive internal debate over the design or goals of the model. Finally, the recognition itself can act as an urgency lever and a tangible interim achievement for the teams doing the work of transformation.
Virtually all major health plans operate at least one medical home pilot
The second most frequent question we receive on PCMH contracting is, “How likely it will be to find payer support for the medical home?” The answer is complicated, but it begins with good news: Most health plans are currently offering pilots that reimburse providers for medical home functionality and/or meeting medical home goals.
At a corporate level, most health plans are on record saying that the model has promise for reducing cost and raising quality. Industry group America’s Health Insurance Plans (AHIP) endorsed and released their own version of "patient-centered medical home" principles in 2008, saying, “A patient-centered medical home can provide patients with more personalized and coordinated health care."
In recent years, evidence for the efficacy of medical home models has been accumulating, to the point where insurer WellPoint recently announced it will spend an estimated $1B or more on new supports for primary care physicians, including an approximately 10% overall fee increase along with incentives that could raise a PCP's revenue for those patients by 50% (source: Weaver, C and Matthews, A.W. "An RX? Pay More to Family Doctors", The Wall Street Journal," January 27, 2012). WellPoint's executive vice president, Dr. Harlan Levine, drew a direct line between the medical home model's capacity for achieving savings and this new investment, saying, "our medical home pilots have proven to make a meaningful difference in patient quality, outcomes, and cost. Some of our pilotshave experienced an 18% decrease in acute inpatient admissions and a 15% decrease in total ER visits." (Source: WellPoint. "WellPoint Launches Innovative Reimbursement Initiative, Partnering with Primary Care Physicians to Improve Quality and Reduce Medical Costs," press release, January 27, 2012).
More than just paying the bills
Health plans may be preparing to support the medical home, but it seems that many will not be content to simply offer increased reimbursement for recognized PCMH sites. Instead, many plans have ambitions to play a robust, ongoing role in the design and delivery of medical home services. This would help ensure that the health plan's contributions become a key part of the overall value proposition (to employers) of any future medical home network or product.
Because health plans are still figuring out their role, the provider-facing medical home support formulas they are testing are surprisingly complex and often include both financial and operational components.
Financial support mechanisms usually combine three common building blocks: fee schedule enhancements, per-member-per-month payments for care management, and primary care pay-for-performance. (Total value across contracts varies wildly.)
Operational support approaches range from hands-off to hands-on, with some plans going so far as to manage care teams or embed plan-employed care managers in practices. Some plans have also entered into IT partnerships that invite or require providers to use payer-sponsored care management information services and tools as part of the medical home contract.
“PCP-as-quarterback” incentives to reduce health care spend
Because many health plans are bullish on the concept of PCPs acting as a critical inflection point in the health care value chain, medical home contract models are evolving toward rewarding primary care practices for reductions in total spending for patients continuum-wide.
Under this approach, PCPs are incentivized for doing things that help reduce avoidable hospitalization, ED, and specialty-care use. This is essentially a primary care-centric version of an accountable care organization/shared-savings contract model with a health system.
The “PCP-as-quarterback” concept is controversial among hospitals and health systems, in part because it doesn't reflect system-wide work to improve quality, coordinate care, and reduce cost. Health systems are concerned about their financial viability in a fee-for-service (FFS) environment if acute- and specialty-care services are successfully reduced but incentives and support are only directed to primary care.
Employers also looking to primary care for efficiencies
Health plans are not the only payers that see the PCMH model as an opportunity to inflect utilization continuum-wide. We see an increasing number of self-insured employers that are aware of the medical home model and may be looking to wade into direct-contracting with providers (or third-party vendors) for PCMH services.
In many cases, these programs are viewed specifically as an investment aimed at reducing total benefit spending while also raising care quality and workforce productivity. This view of the PCMH is not in conflict with provider or health plan ideas of the medical home. But employers tend to be more explicitly and clearly focused on understanding how a given medical home program will advance total heath care utilization goals in the short- to medium-term—which is important for providers to keep in mind when entering into contracting talks with those organizations.
Pilots, pilots everywhere—but contracts still in short supply
Accounts of all the payer-PCMH activity may come as a surprise to some, because the majority of providers that are transforming to medical homes are doing so without opportunities for direct contractual support in hand. This is partly because pilots might not be available to providers across all regions, even though a given health plan (or employer) may be operating multiple pilots.
In all, our numbers suggest that less than half of active medical homes today receive direct payer support. According to the Medical Home Project’s 2011 Primary Care/Medical Home Benchmarking Initiative, 50% of active medical home sites receive medical home-specific incentives. This rate is probably an overstatement because many qualitative responses indicated that any kind of primary care pay-for-performance incentive was considered a “medical home incentive.”
Outside of pilot or established-program regions, providers have a hit-or-miss success rate when proactively approaching payers to propose programs for PCMH support.
Promising outlook for practice-level economics (even without contracts)
Even without contracts in place, many PCMH sites are moving forward, counting on capturing the fee-for-service upside of the model now, while actively working toward a different contracting environment in the future.
This can be a realistic goal for practices as long as they can achieve PCMH functionality, not (just) recognition. For example, practices must dedicate FTEs to risk-segmenting patients and proactively reaching out to patients with chronic conditions. Even under FFS contracts, these activities improve overall productivity, raise average complexity per case, and enable greater capture of any quality-related incentives already in place.
System-level PCMH economics still a challenge
Practice-level PCMH ROI is the most straightforward provider business case under conventional contracts. Looking at medical home investments from the viewpoint of affliated health systems (including specialty and acute care) is a far trickier piece of the puzzle, since PCMH activities are designed to reduce certain types of downstream utilization.
Nationwide, we see health systems taking a few key steps to ensure immediate-term financial sustainability, including:
- Focusing on growth strategies ranging from increasing PCP panel size to entering narrow networks to backfill specialty and hospital volumes
- Steering self-insured employees and families to PCMHs to capture cost reduction/quality improvement benefits
- Targeting Medicaid/uninsured populations for early rollout of PCMH services
- Building joint-negotiating capacity through clinically integrated PHOs
- Negotiating aligned incentives across the full continuum of care—for example, implementing performance incentives for avoiding preventable hospitalizations that offset decreased volume
Taking a long-term view, most observers agree that a transformed primary care network is essential for any health system looking to take on population-level risk in the future. Therefore, systems investing in the PCMH model even though accountable care incentives may not be available at the system level yet are using the shorter-term steps as a bridge to navigate the transition period between current and future contracting incentives.