Medical Homes Part III: The True Cost

As the Patient Centered Medical Homes (PCMHs) train charges forward along with implementation of the Affordable Care Act, dollars are taken directly out of our health care system to certify providers in a method with no proven benefit (see Medical Homes Part II: The Depressing Data). And, while there is a marked shortage of primary care providers nationwide, funds that could be used toward providing the direct provision of, or access to, health care are instead devoted to accreditation, surveys and assessments.

As we saw in Medical Homes Part I: The Reality vs. The Hype, estimates show that 27,500 clinicians and 5,700 clinics have already been certified. The cost of certification, which involves purchasing survey tools, consultations and site visits, vary but are conservatively $550 per clinician and between $275-$2,200 per site. Nationwide, those costs for accreditation translate into $15.125 million to certify clinicians and $8.55 million for sites (using an estimated $1,500/site and not including the jump in participants from 7/13-1/14).

Companies providing the accreditation are reaping the benefits. The Foundation Center shows that the Accreditation Association for Ambulatory Health Care (one of several certifying organizations) had a jump in revenue in one year (2011-2012) from $14 million to $16.9 million, just in the category of "program service revenue." The National Committee for Quality Assurance, a major player in this field, has IRS 990s that show an increase from $17.2 million to $26.6 million in just two years. Their program service revenue alone in 2012 was $42.2 million. 

Health systems are among the major players in the PCMH bureaucracy, but it can be difficult to find accurate pricing on their accreditation costs. Deep discounts are given to multi-site applicants who use complex multi-site calculator tools to try to estimate total cost. For safety net systems, accreditation is generally paid for with taxpayer funds as part of the cost of business.

In addition to the initial certification costs, there’s the spending associated with certification maintenance. PCMHs in New York receive supplemental reimbursement for all Medicaid patients, but only if they meet certain criteria and are certified by the National Committee for Quality Assurance's program. A glance over what’s required leads one to believe that at least one staff member must be dedicated to compliance with all the compiling and reporting of these PCMH requirements. That person represents a dollar amount lost to the actual delivery of care. The cost of a full-time compliance position is substantial, but it is an amount missing from almost every overview or evaluation of PCMH programs.

When those operating costs are included, the price of being a PCMH becomes shockingly expensive, and represents a huge drain on our already struggling primary care system. The Commonwealth Fund's summary of the operating costs of federally funded PCMH shows that the more regulatory PCMH rules are met, in general, the higher the operating cost. "A 10-point higher overall PCMH score was associated with a $2.26, or 4.6 percent, higher operating cost per patient per month," which translates to "$508,207 annually for the average clinic in the study." That amount could pay for 5 direct care nurses, or two full time primary care doctors, every year.

Even more sobering was the cost per physician time -- the two subscales of "ability to track patients" and "capacity to perform quality measurement and improvement" were associated with an additional $27,300 per FTE physician. And remember these were PCMHs funded by federal taxpayer dollars. If we extrapolate these numbers to the 27,500 clinicians currently certified nationwide, that would translate into close to a billion dollars ($912 million) diverted away from the provision of primary care and into an unproven bureaucracy. When it comes to PCMHs, there are large economies of scale that are not available to individual clinics, or solo practitioners, representing yet another force pushing consolidation in our health care market, resulting in the rapid loss of solo practitioners and small group practices. This loss disproportionately impacts rural areas that are already struggling to recruit and keep primary providers. At its most basic, a federally-promoted bureaucratic program like PCMH that is supposed to support and elevate primary care should not be the kind of program that is harder and more expensive for lone providers in tenuously-served geographic areas.

In fact, improving access and communication, both of which rely on more available staff time, were the only facets of PCMHs that the Commonwealth study found could result in lower operating costs. But these savings weren't nearly enough to offset the total operating costs of certifying as PCMHs as a whole.

And that study's total operating costs don't even come close to what New York's Medicaid program paid. Between 2010 and 2012, New York spent nearly $400 million from a pot of money devoted to the health care of New York's poorest, and often most medically fragile and disabled patients - to implement this certification bureaucracy. New York's supplemental payments for PCMHs cap out at a max of $7 per patient per month for Medicaid Managed Care, and $28 per year for fee-for-service Medicaid. What may seem like paltry dollar amounts per person, add up to many millions upon millions of taxpayer dollars for the state -- over $83 million paid as supplements to PCMH primary care providers in 2012 alone.

Looked at another way, using the data from the Commonwealth study's ratio, that $7 per patient per month translates into $102,741 per physician FTE - enough, roughly, to pay for an additional half-time clinician every single year. Not included in that calculation is the lump sum $250 million that was allocated to 63 hospitals and residency programs to "transform" their primary care residency training programs.

The process to become a PCMH is also so onerous that, even with this much money on the table, only 34% of New York Medicaid clinicians were willing to participate. Over just three years, the dollar amounts for this bureaucracy keep rising: while participation in the PCMH program leveled off after the first year (reaching the peak of 34% of the total possible participants with 2%-5% increases quarter to quarter), in contrast, incentive money spent each year increased by roughly double the rate. There is no discussion in the final report as to why this is happening.

There is also notably no discussion of what the cost of implementing the bureaucracy might be if 100% of providers participated. One can estimate, however. Based on the numbers provided, if the rate of incentive-money-spent miraculously held steady, and 100% of providers decided to participate (13,120 total providers), and there were no increased enrollment of Medicaid patients through expanded ACA programs, the total cost of taxpayer money is still an impressive annual $244,499,000 surcharge to our safety net system.

It's hard to say exactly what this vast amount of money is buying for patients. But you may ask, even if there's no clear benefit now, isn't funneling some more money into primary care going to help our system? Can't this program, in some way, help the lone primary provider?

Any savings realized through PCMHs will likely go to big systems. In addition to the economies of scale that PCMH accreditation and maintenance processes afford large health systems (making the initial "buy-in" and on-going bureaucratic support relatively cheap), the increase in operating costs for their primary care element are believed to be offset by the overall savings to a large health system. As the Commonwealth study points out, "A 2010 study of an integrated delivery system using PCMHs found savings of $18 per patient per month from reduced hospitalization and emergency department use. Yet under most delivery models, such downstream savings would accrue to health care payers, not physician practices."

Furthermore, as Clinician Resources states, the PCMH model "does not offer monetary incentives for providers to work collaboratively and to optimize health outcomes. Additionally, most primary care practices do not have financial arrangements that would enable them to share in savings resulting from decreased hospitalizations and ED visits." The New York experience didn't even find potential savings to health payers. New York Medicaid hospitalization rates, including for preventable hospitalizations, appear to have gone up for patients in PCMHs, compared to those not in PCMHs.

But what about the private sector? Is the problem finding cost savings with Medicaid PCMHs purely because of the complexity of providing primary care to safety net patients? Group Health Cooperative, an often-mentioned program for demonstrating the "potential" of PCMHs, states in its 2009 comparison studies of adults within their own system, that "at 12 months, there were no significant differences in overall costs." Even in 2012, when analyzing PCMHs' impact on their patients who are seniors, they state "at 1 and 2 years, the PCMH and control clinics did not differ significantly in overall costs."

The data on the much-lauded PCMH approach, a cornerstone of ACA, shows that it is expensive, onerously bureaucratic, a drain on health care resources, especially for primary care providers, and a distraction from health care delivery. And, if cost savings ultimately materialize, they are likely to go to large health systems, and not to sustaining, much less expanding, primary care. 

If journalists want to examine how PCMHs in their area being implemented, here are some key questions:

1) How many primary care clinics serve your community? What is your state's Medicaid approach to PCMHs?

2) How many local clinics have been certified as PCMHs?

3) How much did it cost the clinics to get certified?

4) What role did consultants play in the process?

5) Who is the on-going compliance-reporting person at a clinic or system? How much is their salary?

6) What do providers think of the PCMH-certifying experience?

7) Who has refused to get certification, and why?

8) How much local, state, and federal tax dollars are devoted to PCMHs in your area?

9) How much money will be recouped? From where are these projected savings coming? Is there any data to support the idea that savings will accrue?

10) Are patients any happier?

11) Is there any data that health outcomes have improved?

The image by José Goulão via Flickr has been edited.