Health Reform WK-EDGE Medical homes change primary care, but reimbursement questions remain
Tuesday, May 3, 2016

Medical homes change primary care, but reimbursement questions remain

By Kayla R. Bryant, J.D.

Patient centered medical homes (PCMHs) attempt to give patients a care base, promoting coordination and communication between a primary care provider and various specialists to ensure that care is uniform and that each patient’s particular goals are met. While the PCMH model has been granted an alternative payment model (APM) designation, there are doubts about the model’s ability to save health care costs while maximizing patient communication. This Strategic Perspective will explore the implementation of medical homes and assess the success, viability, and sustainability of the PCMH model.

Alternative payment models

Although APMs preceded the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10), by evolving from private sector initiatives as well as provisions of the Patient Protection and Affordable Care Act (ACA)  (P.L. 111-148), MACRA serves as a “broader push toward value and quality,” by creating quality payment program. MACRA gained notoriety for ending the Sustainable Growth Rate (SGR) formula (see Ding dong, the SGR is dead!, April 15, 2015), but it also replaces what CMS refers to as “a patchwork system of Medicare reporting programs” with a new, flexible system linking quality to payments. APMs provide different options for physician payments: lump-sum incentives, higher annual payments, accountable care organizations (ACOs), PCMHs, and bundled payment models. Those that participate in APMs will receive bonuses and higher increases in Medicare payments each year, and are exempt from certain quality reporting requirements that can result in penalties.

The Center for Healthcare Quality and Payment Reform (CHQPR) noted that MACRA defines APM requirements in broad terms, allowing for increased innovation in payment reform that still qualifies for the benefits of APM classification. The Proposed rule would create two types of APMs: advanced and other payer advanced (see Physician reporting streamlined, less burdensome under flexible Quality Payment Program, April 28, 2016). Both have similar requirements, although other payer advanced APMs include models specific to Medicaid. To qualify as either type, an APM would require participants to use certified electronic health record (EHR) technology, provide payment for services based on comparable quality measures used in other performance programs (described in “CMS Quality Measure Development Plan: Supporting the Transition to the Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APMs),” issued on May 2, 2016), and be either a medical home model under section 1115A of the Social Security Act or bear more than a nominal amount of risk for monetary losses.

How do medical homes differ from other APMs? The PCMH model definition is evolving, but PCMHs, established by section 3502 of the ACA, are generally primary care-focused practices that work to coordinate all of a patient’s care needs, from prevention and wellness to treatment of acute conditions and management of chronic illnesses. They use a combination of payment sources to fund the additional coordination and patient-centered activities that set them apart from traditional primary care practices.

Under CMS’ Proposed rule, publishing in the Federal Register on May 9, 2016, a PCMH will be recognized as an APM if it meets one of the following:

  • It is a nationally recognized, accredited PCMH. Nationally recognized models must offer evidence of implementation by a large number of organizations.
  • It is a Medicaid medical home model.
  • It is a medical home model. Medical home models must, at minimum, include practices that offer primary care services, offer planned care coordination, patient access and care continuity, patient and caregiver arrangement, and shared decision-making.

CMS seeks comment on its proposal for recognizing PCMH practices.

In contrast to PCMHs, ACOs were established by section 3022 of the ACA are formed by provider groups that are willing to take on an additional amount of financial risk in order to prove that they can keep care quality high while saving money. ACOs share in the financial savings or losses they generate for the Medicare program. Physicians are encouraged to offer better value care through the promise of financial incentives and run the risk of reduced payments if they fail to meet standards. Bundled payment models, established by ACA section 3023, include a financial arrangement in which providers are paid for an entire “episode” of care, like the treatment of one illness of an overall course of treatment. These payments encourage physicians to provide more efficient care with only the services necessary, as they are not rewarded for the volume of services provided.

While APMs and other programs attempt to place the burden of providing cost-effective, quality care on the provider by changing the way payments are made, rewarding value instead of volume, the PCMH model seeks to change the way providers actually deliver care. In an interview with Wolters Kluwer, Carole Lambert, the Vice President of Practice Optimization for the Cooperative of American Physicians, Inc., indicated that PCMHs are an important care model, as “it is the integration and coordination of care the holds the most promise for achieving the Triple Aim” of improved patient experience, improved population health, and lowered costs of care.

Striving for patient-centeredness.  Providing one central place for the coordination of care is one goal of a PCMH. The Institute of Medicine (IoM) began focusing on the idea of patient-centered care in 2001 as one of the six necessary components of changing the way health care is delivered in the U.S. in the 21st century. The IoM believes that patients should be able to participate in the care decision-making process and ensure that care is tailored to their specific needs. This view of patient-centeredness includes compassion, empathy, and consideration of the patient’s needs, values, and even preferences. When shifting toward patient centered care, the following considerations are often raised: encouraging patients and their loved ones to ask questions, not rushing the patient, follow-up, and providing a collaborative environment (see Patient-centered care: Changing the way health care is delivered, February 26, 2014).

Although some may think that this type of care is ideal and offered as standard practice, the push for patient-centeredness shows that providers may not currently allow patients a high level of input into their care, or at least the opportunity to clearly understand treatments and options. Despite the decades-long discussion of the importance of patient-centered care, providers have not made such a practice a priority. The IoM noted that even in 1998, 27 percent of women and 15 percent of men who used the internet accessed health information online at least weekly. It emphasized that patients were already bringing information to physicians about treatment options. Another study revealed that around the same time, people were frustrated about the abruptness of discharge without additional information about follow-up care and medication monitoring, and had difficulty obtaining the information they sought from providers. The push for patient-centeredness, even in the 1990s, emphasized customization of patient contact according to each person’s unique desire for input in decision-making, manner of communication, and desire to understand.  The PCMH model is reigniting the idea of patient-centered care by prioritizing each patient’s unique needs and desires regarding how their care is delivered and making them and their loved ones part of the decision-making process.

Is a new payment model needed?

Due to some of the limitations under the fee-for-service (FFS) payment model, providing some of the enhanced care delivery services that encompass a true medical home may require a new payment model. In its annual review of evidence on medical homes for 2014-2015, the Patient-Centered Primary Care Collaborative (PCPCC) emphasized that under FFS, providers are not reimbursed for the type of care coordination that PCMH offers, such as taking time to communicate with a patient’s specialists, integrating behavioral health, connecting with other organizations, and email communications. The CHQPR also noted that APMs are important in order to reward physicians for providing high-value services that could reduce spending elsewhere. FFS arrangements also fail to provide payment (or provide inadequate payment) for services such as responding to a patient’s phone call, short-term emergency department discharge planning, proactive outreach to high-risk patients, and time spent in a decision-making process with patients and family members when various treatment options are available. The CHQPR believes that for an APM to succeed in its mission, it must be properly designed to benefit small physician and specialty practices and allow these physicians to focus on the aspects of cost and quality they are able to influence.

Reimbursement. Some believe that becoming a PCMH is an important way to boost reimbursement as well as appearing more attractive to ACOs, which may provide more resources, incentives, and higher reimbursement for primary care physicians striving to meet their patients’ needs. Physician’s Practice interviewed the CEO of a practice-management consulting firm, who indicated that eventually, non-PCMH practices may be subject to reimbursement cuts. She recommended moving forward with the process of becoming recognized as a medical home as soon as possible, because ACOs might be more inclined to approach practices with the PCMH designation. Practices following the PCMH model are already implementing many of the strategies used by ACOs, increasing their chances of success as part of an ACO, as both models emphasize integration and high levels of coordination and care management.

Advantages of PCMHs

The PCPCC conducted an evidentiary review of the medical home model, which included 17 peer-reviewed studies. The review emphasized that access to medical homes reduces usage of emergency departments, hospitalizations, and hospital readmissions, which lowers cost of care. The report noted that an estimated 30 percent of total health care spending is related to misuse of resources, but those dollars are not misspent on primary care. Even though 55 percent of medical office visits are in primary care settings, only a small percentage of health costs come from primary care (4 to 7 percent of all health dollars).

The collaborative, in its annual review, found “substantial progress” in moving toward value based reimbursement models over the last couple of years. It noted that various types of practices were beginning to receive payments tied to performance metrics in addition to FFS payments, identifying this as a new era of combining both care delivery reform with payment reform. APMs that provide additional payments for these services are in a position to support a practice’s transition to a medical home, especially smaller practices that need the funding. Lambert noted that the PCMH model can be supported by a variety of different payment structures, and believed that payment structure is a “puzzle” that a practice should assemble before establishing itself as a medical home.

The collaborative felt that primary care is an excellent place “to help repair and optimize our broken care delivery system.” However, the report noted that the definition and certification requirements for PCMHs are subject to variability. Although PCMHs have similar goals and attributes, some may operate differently in practice. The collaborative believes that measures should be aligned to allow better analysis of the model and that criterion such as quality of care metrics, access to services, and satisfaction of both patient and providers should be included in rating measures.

Implementation issues. Several challenges in becoming a PCMH were identified. Practices with many high-cost, high-need patients must have access to adequate and predictable payment amounts. Interoperable electronic health records (EHR) systems are a must, as the PCMH is responsible for communicating with many different providers. Other health information technology (IT) tools are necessary, such as population health management, telehealth for those in rural areas, and mobile apps for connecting with patients. In addition, the practices must handle interactions with multiple payers. This results in a high cost of sustaining the PCMH model—studies have shown that it costs over $100,000 per physician each year. If one can get started on the road to becoming a PCMH model at all, a Journal of General Internal Medicine study calculated costs to be about $9,800 per clinician as well as $8 per patient.

According to a study in the Annals of Internal Medicine, establishing a PCMH out of a primary care practice requires “significant restructuring.” However, even in the study’s extensive search, researchers found little information about financial models for PCMHs. In addition, five controlled trials of PCMH interventions did not find a significant effect on the utilization of inpatient services, failing to result in the health care savings that some hoped PCMHs would bring.

C. Frederick Geilfuss, partner at Foley & Lardner, told Wolters Kluwer that some PCMH models receive a per patient per month (PPPM) fee in addition to an FFS payment, which reimburses them for the patient oversight that is thought to reduce utilization of other services, as well as additional incentive payments for meeting targets. He also noted that CMS’ newly proposed Comprehensive Primary Care Plus model incorporates PCMH characteristics, and proposes providing a PPPM fee as high as $100 for complex needs patients. Geilfuss believes that the model can be successful and even more sustainable than other APMs, but that the savings will present on a long-term basis.

PCMH commitment to care. The basis of primary care is sometimes referred to as the four pillars, or four Cs: care coordination, continuity, first contact, and comprehensiveness. A Health Affairs blog post opined that the PCMH model’s emphasis on care coordination had a negative impact on the other pillars. When interviewed about the four Cs, physicians indicated a low level of commitment to the duties other than coordination. Only 29 percent of responding physicians indicated that they were set up to ensure contact and care on an after-hours basis, despite clear evidence showing that primary care access provides better patient outcomes and reduces emergency room use. Even PCMHs have low expectations for after-hours care and seeing patients on an urgent basis, and no expectations for engaging with emergency room physicians. This extends to little or no expectation for a primary care provider to interact with hospitalized patients in a PCMH setting, even though continuity of care would ideally result in the primary care provider participating in plan of care a plan of care or even acting as the patient’s advocate if necessary.

Care comprehensiveness has declined as well, despite evidence that primary care meeting many patient needs results in lowered health care spending. Physicians are less inclined to provide prevention and wellness care, as well as managing of acute and chronic conditions, including multiple co-existing conditions. Physician referrals increased dramatically between 1999 and 2009, from 41 million to 105 million each year. The Health Affairs blog agreed with the PCPCC report on the matter of inadequate PCMH assessment tools, finding that comprehensive care is largely ignored. Overall, the blog expressed worries that the PCMH model was adopting some potentially positive aspects of care delivery enhancement at the detriment of established methods that result in “good medicine.”  

Achieving behavioral health goals. A recent report from the Commonwealth Fund suggested that medical homes may provide an answer to a looming problem: integration of behavioral health care. Nearly 20 percent of U.S. adults are reported to have a mental illness. Almost half seeking treatments for a mental illness do so under primary care. In an attempt to increase access to mental health services, agencies are attempting to better integrate the two. The Commonwealth Fund notes that non-elderly adults with insurance and a mental health issue are more likely than those without mental health diagnoses to report issues with care coordination: duplicate tests, records unavailable at an appointment, and/or conflicting information from providers. They also indicate greater access issues due to cost of care. The authors believe that providing patients with a medical home that better integrates behavioral health care may be the answer for these coordination problems.


As one of many reform models, medical homes may be somewhat lost in the shuffle. Primary care reform is necessary, and a patient-centered approach has long been identified as a necessary part of health care evolution. If the PCMH model continues to evolve to become a more balanced example of achieving the four pillars of primary care and properly reimburses providers for their coordination efforts, it may emerge as a long-term solution to a set of problems that have not yet been adequately addressed.

The CMS Proposed rule implementing MACRA and setting forth its plan for APMs is set to publish in the Federal Register on May 9, 2016.Stay tuned to Health Reform WK-EDGE in the coming weeks for continued coverage of this topic, including commentary from industry experts.

Attorneys: C. Frederick Geilfuss (Foley & Lardner)

Companies: Cooperative of American Physicians, Inc.

MainStory: StrategicPerspectives NewsFeed AccountableCareNews AccessNews AgencyNews PreventiveCareNews ProviderPaymentNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Health Reform WK-EDGE

Health Reform WK-EDGE: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health reform legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More