Higher Medicare pay earmarked for practices in medical home trial

Washington -- Medicare, using its upcoming medical home demonstration project, is preparing to pay participating primary care physicians for the extra work required to manage the care of chronically ill patients. Now an AMA-convened panel has outlined how those additional payments might work.

The law mandating the pilot program required the Centers for Medicare & Medicaid Services to consult the American Medical Association/Specialty Society RVS Update Committee, or RUC, for advice on how to structure payment. The panel on April 29 sent its proposal to the agency. The RUC regularly provides advice to CMS on how to value Medicare services, and the agency often concurs.

The three-year project will operate in up to eight states or regions within states. It is expected to begin paying for medical home activities in January 2010 after recruiting roughly 50 practices per location early next year, according to a CMS official. The goal is to see whether paying more up front for targeted, continuous and coordinated patient-centered care for chronically ill beneficiaries will save Medicare money over time.

If CMS were to take the advice of the committee, physicians would receive a monthly payment for each beneficiary they enroll in the project -- in addition to any regular pay for Medicare services. The program would pay extra monthly amounts to offset the increased costs of additional nurse case managers, liability insurance and electronic medical record systems. Total medical home compensation per physician would run in the thousands of dollars per month.

By paying doctors to work with case managers to coordinate a targeted plan of care for each chronically ill patient, CMS hopes to save money by reducing the amount of complex services and hospitalizations that those beneficiaries will require.

The participating practices will have an incentive to bring down costs. No Medicare payments or medical home fees will be at risk if the effort proves more costly, but 80% of any savings Medicare realizes will go back to the practices as a bonus.

CMS, however, should look at more than dollar amounts when determining how well the medical home project worked, RUC Chair William L. Rich III, MD, wrote in a letter accompanying the pay recommendations.

"The RUC strongly encourages the agency to collect clinical, as well as fiscal, endpoints to measure the success of this demonstration project," he stated. Cost savings may not be immediately apparent during the three-year span.

CMS plans to take a broad look at how quality improved after the demonstration is complete, the agency official said. But the primary focus is to be at least cost neutral and to see whether the concept can save money. "This is not a clinical trial," he said. "We are not testing the theory of medical homes being the next best thing."

Medical home veterans

The demonstration is Medicare's first crack at using the medical home concept, but some of the up to 2,000 primary care physicians who will get to participate likely will have experience with it. Numerous private sector initiatives have launched, driven in part by strong advocacy for this care model by primary care physicians' organizations such as the American College of Physicians and the American Assn. of Family Physicians.

A practice that already serves as a medical home or has resources in place to become one will be a natural fit for the Medicare project, said Terry McGeeney, MD, president and CEO of TransforMED, a practice redesign initiative sponsored by the AAFP. TransforMED recently completed a two-year pilot that tested a patient-centered medical home model in 36 family practices across the nation. Preliminary results demonstrated that patient satisfaction and practice economics improved when the model was implemented.

The next logical step is to adjust the system to pay for medical home activities, then see if the effort can save money, Dr. McGeeney said. "Given the numbers from RUC, I would strongly encourage physicians in those eight states to seriously look at it. This is something that they're [eventually] going to have to do anyway, so they might as well get in on the ground floor and get some real money for it."

Primary care physicians from all types of practices in the chosen states should consider applying for this demonstration, said Don Klitgaard, MD, a family physician and medical director of the Myrtue Medical Center in Harlan, Iowa. His center participated in the TransforMED pilot, and he is convinced the effort improved care and saved money.

While moving to a truly patient-centered medical home is the right thing to do, it can be difficult for doctors conditioned in the old way of running a practice, Dr. Klitgaard said. "We're not built to change. Status quo is a lot easier than change."