Effects of New Funding Models for Patient-Centered Medical Homes on Primary Care Practice Finances and Services: Results of a Microsimulation Model

Sanjay Basu; Russell S Phillips; Zirui Song; Bruce E Landon; Asaf Bitton

doi:10.1370/afm.1960

Effects of New Funding Models for Patient-Centered Medical Homes on Primary Care Practice Finances and Services: Results of a Microsimulation Model

Ann Fam Med. 2016 Sep;14(5):404-14. doi: 10.1370/afm.1960.

Authors

Sanjay Basu¹, Russell S Phillips², Zirui Song³, Bruce E Landon⁴, Asaf Bitton⁵

Affiliations

¹ Department of Medicine, Stanford University, Stanford, California Center for Primary Care, Harvard Medical School, Boston, Massachusetts basus@stanford.edu.
² Center for Primary Care, Harvard Medical School, Boston, Massachusetts Division of General Medicine and Primary Care, Beth Israel Deaconess Medical Center, Boston, Massachusetts.
³ Center for Primary Care, Harvard Medical School, Boston, Massachusetts Department of Medicine, Massachusetts General Hospital, Boston, Massachusetts.
⁴ Center for Primary Care, Harvard Medical School, Boston, Massachusetts Division of General Medicine and Primary Care, Beth Israel Deaconess Medical Center, Boston, Massachusetts Department of Health Care Policy, Harvard Medical School, Boston, Massachusetts.
⁵ Center for Primary Care, Harvard Medical School, Boston, Massachusetts Department of Health Care Policy, Harvard Medical School, Boston, Massachusetts Division of General Medicine, Brigham and Women's Hospital, Boston, Massachusetts Ariadne Labs, Brigham and Women's Hospital, and Harvard T.H. Chan School of Public Health, Boston, Massachusetts.

Abstract

Purpose: We assess the financial implications for primary care practices of participating in patient-centered medical home (PCMH) funding initiatives.

Methods: We estimated practices' changes in net revenue under 3 PCMH funding initiatives: increased fee-for-service (FFS) payments, traditional FFS with additional per-member-per-month (PMPM) payments, or traditional FFS with PMPM and pay-for-performance (P4P) payments. Net revenue estimates were based on a validated microsimulation model utilizing national practice surveys. Simulated practices reflecting the national range of practice size, location, and patient population were examined under several potential changes in clinical services: investments in patient tracking, communications, and quality improvement; increased support staff; altered visit templates to accommodate longer visits, telephone visits or electronic visits; and extended service delivery hours.

Results: Under the status quo of traditional FFS payments, clinics operate near their maximum estimated possible net revenue levels, suggesting they respond strongly to existing financial incentives. Practices gained substantial additional net annual revenue per full-time physician under PMPM or PMPM plus P4P payments ($113,300 per year, 95% CI, $28,500 to $198,200) but not under increased FFS payments (-$53,500, 95% CI, -$69,700 to -$37,200), after accounting for costs of meeting PCMH funding requirements. Expanding services beyond minimum required levels decreased net revenue, because traditional FFS revenues decreased.

Conclusions: PCMH funding through PMPM payments could substantially improve practice finances but will not offer sufficient financial incentives to expand services beyond minimum requirements for PCMH funding.

Keywords: capitation fee; fee-for-service plans; models; patient-centered care; primary health care; theoretical.

MeSH terms

Costs and Cost Analysis
Fee-for-Service Plans*
Humans
Patient-Centered Care / economics*
Physicians
Primary Health Care / economics*
Quality Improvement
Reimbursement, Incentive*
United States