The Medicare Medical Home Demonstration (MMHD): Between a Rock and a Hard Place
Table of contents for Medicare's Medical Home Challenge
- The Medicare Medical Home Demonstration (MMHD): Between a Rock and a Hard Place
by Vince Kuraitis, Principal, Better Health Technologies
“Between a rock and a hard place.” Meaning: In difficulty, faced with a choice between two unsatisfactory options. The Phrase Finder
Before it has even started, the Medicare Medical Home Demonstration (MMHD) is in BIG trouble.
Congress passed legislation authorizing the MMHD in 2006. It is scheduled to begin in January 2010. The MMHD is Medicare’s major test of the Patient Centered Medical Home model being promoted by primary care physicians.
Between the time the MMHD was authorized and now, we’ve learned a lot about what works and what doesn’t work in Medicare care coordination programs. The MMHD is between a rock and a hard place — conflicted by two “must achieve” objectives that are diametrically opposed:
- As a political matter, the MMHD must save money
- As currently structured, the MMHD cannot save money
Let’s look at each half of the dilemma separately.
As A Political Matter, the MMHD Must Save Money
The “Thought Leader’s Corner” in the May 2009 issue of Medical Home News poses a provocative question:
Q: How important will it be for future Medical Home development to be able to show that the Medical Home model generates real, well documented cost savings?
Here are excerpts of how a spectrum of political and health system leaders answered the question:
Over time, it is very important for the Medical Home model to show real cost savings. In the short term, however, the Medical Home can suffer from unrealistic expectations.
George Chedraoui Healthcare Leader
Immediate Past President, Bridges to Excellence
IBM
Raleigh, NC
Quality and cost-effectiveness are the keys to a high-performing health system. Evidence suggests that a well-constructed Medical Home model is one way to achieve both. Comprehensive healthcare reform should include more use of the Medical Home – as well as other models that emphasize comprehensive, patient-centered care management – to improve patient quality and ease costs across the board.
Honorable Max Baucus
United State Senate
Washington, DC
The obvious answer to this broad question is “yes”.
Michael S. Cousins, PhD.
Vice President, Program Evaluation
CIGNA
Bloomfield, CT
How important? Imperative!
Nancy Johnson
Senior Policy Advisory
Baker, Donelson, Bearman, Caldwell & Berkowitz
Washington, DC
It will be pivotal.
Arnold Milstein, MD
National Health Care Thought Leader, Mercer
Medical Director, Pacific Business Group on Health
San Francisco, CA
It is critically important for the Medical Home to demonstrate real, well-documented savings.
Linda M. Magno, MPA
Director, Medicare Demonstrations Group, CMS
Baltimore, MD
What’s the conclusion? The MMHD will be a political non-starter unless it saves costs. However…
As Currently Structured, the MMHD CANNOT Save Costs
In March 2009, Randall Brown, Ph.D of Mathematica Policy Research, authored the landmark report The Promise of Care Coordination in Medicare. In short, this study examined what works and what doesn’t work in Medicare care coordination programs. “A decade of research and demonstrations has developed evidence regarding ‘care coordination’ interventions that are effective in achieving both improved beneficiary outcomes and reduced Medicare expenditures.” You can read a summary of the report here.
Brown comments on lessons learned from the Medicare Care Coordination Demonstration (MCCD):
A major challenge is that even the more successful MCCD programs have generated reductions in Medicare costs of no more than $100 to $120 per member per month (pmpm) over their full population served, and that amount is barely enough (or not enough) to cover the programs’ fees, leaving no net savings.
He briefly describes how care coordination fees are structured for the Medicare Medical Home Demonstration:
Criteria have been developing by which primary care practices can qualify to be “Medical Homes,” and a number of private insurers in addition to Medicare are launching demonstrations to test the feasibility of the concept. Medicare has specified two levels of qualification, a “basic Medical Home” and an “advanced Medical Home” and proposed fees of approximately $27 per participating beneficiary per month for “low risk” beneficiaries (defined by a Medicare HCC score of <1.6) and $80 for “high risk” beneficiaries (HCC greater than or equal to 1.6) for the basic (“tier 1”) Medical Home and $35 and $100, respectively, for beneficiaries in advanced (tier 2) Medical Homes.
The author notes the the MMHD will serve a broad range of Medicare beneficiaries:
At present, the criteria for beneficiary qualification will include 86 percent of all Medicare beneficiaries in fee-for-service Medicare, with the expectation that one-fourth of these patients will be in the high risk group.
He concludes that the MMHD beneficiary population is too broad to be cost effective:
Evidence from the MCCD suggests that if “Medical Homes” participating in the Medicare demonstration are expected to improve “care coordination” sufficiently to generate savings that equal or exceed the monthly fees paid, they are unlikely to be successful because the program is not limited to the beneficiary population for whom savings are likely to be achievable. That is, the Medical Home model, even if implemented well, is unlikely to generate any savings for the low risk cases. Savings for the high risk cases may be sufficient to cover the fees paid for that group, if the Medical Home model is as effective as the most effective programs in the MCCD program. Thus, we expect the Medical Home model to increase net costs to Medicare for the low risk cases, which comprise three-fourths of all expected eligibles, by approximately the full amount of the fees paid for them.
Evidence presented in this paper suggests that if “Medical Homes” participating in the Medicare demonstration are expected to generate savings that equal or exceed the monthly fees paid, they are unlikely to be successful because they will be serving too broad-based a population.
Brown’s conclusions fit my own experience and intuition. I’ve been a serious observer of Medicare’s efforts at care coordination over the past decade, and I also just don’t see how the MMHD can save money.
Conclusion
Let’s recap how the MMHD is between the rock and a hard place:
- Political reality dictates that the MMHD must save costs.
- As currently structured, the MMHD cannot achieve cost savings
- In any given year, only a small percentage of patients account for the vast majority of costs
- Lessons from previous Medicare disease/care management demonstrations has shown that effective care coordination interventions must be targeted at this population
- Medicare has structured the MMHD so that any patient with one or more chronic condition is eligible; this includes 86% of all Medicare patients.
- Physicians will be paid risk-adjusted care coordination fees for this entire population — the 86% of patients with one or more chronic condition.
- The MMHD cannot be cost effective achieve cost savings. [Updated 8/5. See Dr. Norman's comment and my response below.]
Is there any way out of this dilemma? Dr. Randy Williams addresses options in Part 2 of this series.
Disclosure: Vince Kuraitis is a consultant to Pharos Innovations.
Tags: Care coordination, Care management, CMS, Healthcare reform, Medical Home, Medicare
Vince: I appreciate your blog piece on the CMD Medical Home Demo and agree with most of your arguments about being between a rock and a hard place.
Many of us in the Health Management community have anticipated that Medical Home advocates/sponsors/participants would have to relearn the lessons from our industry all over – Pareto focus for engagement, targeted and proven interventions to close gaps in care, use of monitoring technology in high risk subpopulations, Rx adherence surveillance and intervention, collaboration with providers in an interoperable fashion, and supporting individuals to take care of themselves better by providing the requisite knowledge, behavioral skills, and motivation.
However, in your last bullet, I wonder if you are failing to differentiate between “cost-effective” and “cost saving”? As cost-effectiveness measures value per unit of cost, I don’t necessarily agree that the medical home model – and even potentially the MMHD – cannot be cost-effective.
If the goal of MMHD is more cost-effective care than status quo, the proposed demo design MIGHT be successful, albeit very challenging; if only cost savings matter and no credit for clinical quality is included, then I agree it will be very hard for Medical Homes as defined by CMS to generate net savings relative to a contemporaneous control group whose quality of care is arguably mediocre at best currently. Frankly, if all CMS wants to do is to preserve mediocre quality at lower cost, it doesn’t take a Medical Home to accomplish. Create a public plan, undersell private competition by ratcheting down provider and institutional reimbursement, skimp on coverage for prevention and other benefits with no or low ROI, and voila – you get net savings. I submit we don’t need a “Medicare Rationing Demo” to prove the concept.
You raise the important question of whether it makes sense to start a journey that has such a predictably disappointing outcome…
Please read my press release debunking the myth that North Carolina saved close to $300 million in its statewide medical home model, as Mercer claimed. It looks like instead of saving $300 million, the state spent an additional $400 million. The press release is http://dismgmt.com/nc_savings_not_plausible.php . It will be the subject of the Managed Healthcare Executive September editorial.
Gordon,
You’re right, and I’ve edited the conclusion of my post to reflect your thinking.
There is a critical but subtle difference between “cost saving” and “cost effectiveness”.
Vince
Vince et al,
Interesting topic. I recently had the opportunity to interview Dr. Trescott, Dir. of Medical Director of Primary Care at Group Health in Seattle regarding their “primary care re-design” pilot at their Factoria clinic. I learned a couple of things that bear consideration relative to your discussion regarding “medical homes.”
When I asked Dr. Trescott her biggest “ah ha” from the pilot, she responded that it was the annualized $2 million dollars in savings projected just from a reduction in staff turn-over (physician and non-physician). It costs $225,000 just to recruit 1 physician. The reason? Physicians and staff were so excited about the quality and style of practice at Factoria that Group Health has a waiting list of primary care physicians who wanted to practice the same kind of medicine. Where are these cost savings factored into Mercer’s or Mathematica’s reports?
According to Dr. Trescott, with the introduction of pre-visit planning, e.g., using medical assistants to call patients before their visit, Factoria saw an increase in patient visits among patients that historically did not visit their Group Health doctor. In other words patients were being meaningfully “activated” to do something positive regarding their health. Imagine all the pre-diabetics and pre-hypertensive patients (future risks) that are being identified with the goal of preventing disease progression. What is the cost savings associated with active and real disease prevention?
Finally there is the issue of patient participation. As I understand it, participation in most health plan sponsored disease management programs is 15% to 30% of eligible members, e.g., members at risk. In a primary care practice better equipped to mange a population’s health using patient registries and EMRs, disease management becomes health management and one could reasonably expect to see the 100% of diabetics, asthmatics, etc. being managed by their physician – no opt-in or out-out required. Using my simple logic, doesn’t this mean that the number of “patients needed to be treated” in order to achieve savings (associated with significant cost drivers) will be more likely to occur in practices across the US resulting in more saving?
My point is that the primary care re-design and medical home initiatives is about much more than disease management. Saving Family Medicine is just one of the goals. Any cost or savings analysis of primary care-redesign and medical home will seemingly require a new set of metrics that more accurately represents the range of cost savings and health promotion that places like Group Health and others are claiming to achieve. This isn’t just about disease management anymore.
Steve, Thanks for your comment, and let me respond on several different levels.
First, I am and continue to be a big supporter of the Medical Home model and primary care. The spirit of my post is not to knock the Medical Home model, but to point out the elephant in the room with the Medicare demo and to get us talking about it.
Second, you’re spot on in raising the issue of indirect cost savings around the medical home, and the GHC example is relevant and shows the magnitude.
Third, however, your example of GHC would apply to integrated delivery systems, but not to most health care environments in the U.S. From the standpoint of Medicare and most health plans, the savings of indirect costs is an externality — the benefit does not accrue to Medicare and the plan.
Fourth, I agree with your point that the medical home should be primarily about saving primary care. My take here is the the doctors have unnecessariliy painted themselves into a corner by also taking on the question of cost savings around the PCMH. These really are two separate issues, and probably the subject of an entirely separate blog post.
V
Hi vince — I was at the White House round table when 7 PCMH pilots were discussed and it does seem promising. Mind you these were not following the PCMH pilot model of CMS for sure and who knows now wither they will run .
But the pilots show some of the early evidenced of what we have been seeing in Denmark now 10 years down the road. A move from 155 acute care hospitals down to 25. Better up stream care lower downstream cost is the Danish experience. Some of the PCMH pilots in the USA are publish already Health Affairs Sept 2008, some come up Managed Care next month and NEJM in the next few months. This is very early data I was impressed that in NC for example they saw a decrease in hospital care for asthmatics of 13%. In PA a decrease of 20% in hospitalization do to better care coordination. Again the early kind of data we saw in Denmark when we did this there.
Here is the conversation at the White House — http://www.youtube.com/watch?v=A13HvRWNTJQ
Paul Grundy, MD, MPH
Director, Healthcare Transformation IBM
President, Patient-Centered Primary Care Collaborative
As many of you may know Chad Bolt at Hopkins has a contract with CMS for the PCMH pilot (yes they one that has not started yet). Well his own PCMH pilot 1st year results are out and show some early promised.
Results: After adjustment for baseline characteristics, Guided Care patients experienced, on average, 24% fewer hospital days , 37% fewer skilled nursing facility days 15% fewer emergency department visits, and 29% fewer home healthcare episodes Based on current Medicare payment rates and GC costs, these differences in utilization represent an annual net savings of $1364 per patient. .
Conclusions: Initial introduction of GC into primary care practices may be associated with less use of expensive health services and a net savings in healthcare costs among older patients with several chronic health conditions. Final results from the remaining 2 years of this ongoing study will be published in 2011.
Here is the current issue of Managed Care with the full report.
http://www.ajmc.com/issue/managed-care/2009/2009-08-vol15-n8/AJMC_09aug_Leff_555to559
Paul Grundy, MD, MPH
Director, Healthcare Transformation IBM
President, Patient-Centered Primary Care Collaborative
Paul, I’m flattered you took the time to comment. Thanks.
I have been and continue to be a BIG supporter of the medical home and of the need to revive primary care.
As currently structured, the MMHD will not help the cause of advancing the medical home. That’s the elephant in the room that we need to acknowledge and address.
V
Vince – Thank you for this great topic. However, while your point that if the MMHD was going to try to save its upfront costs (pbpm) it CANNOT do so by targeting the entire 86% of eligible medicare beneficiaries is true, it is also irrelevant.
What CMS has said is that the scope of eligibility and the pbpm rate setting ultimately delivers a pot of money to a practice which it can use within the broad structure of the MH to improve care and reduce costs. It would not change the total upfront cost target that a practice would have to beat if eligibility were to be halved and the payment were doubled.
The way we have calculated it, if a MH practice can prevent 15 hospitalizations, most likely by focusing on the 20% of patients at the most risk, it can save the pbpm upfront.
Now, an unanswered question is on the measures OTHER than cost that might be assessed on the full 86% of beneficiaries “participating” in the MH will there be a problem? Will the expectations of those full 86% be so high that practices inevitably miss allocate resources on the care of low risk people with relatively little to gain in costs or quality?
Tiering the level of intensity of MH services, managing expectations, communicating about population level outcomes to individual people – these will be challenges, but not insurmountable ones.
Chris,
Can you please share your math…that seems to be a sticking point. I think Brown of Mathematica did very good job in explaining their math and rationale.
You make assumption that “if a MH practice can prevent 15 hospitalizations” — this is a BIG assumption.
Finally, MMHD is not comparable to medical home demos to date by states and health plans. MMHD care coordination fees are much larger — blended average of about $50 per patient per month for Tier 2 medical home.
This is very generous compared to typical health plan/state range of $3-8 PPPM.
…which is exactly why MMHD is in trouble — generosity of care coordination fee makes financial return not feasible.
V
The medical home is a promising model and a great opportunity for primary care. And we’ve seen great results from early adopters. We’re also talking about a major transformation of how primary care is organized, with impacts on strategy, process, technology and teams and roles–not to mention daunting change management issues. We can’t forget that most care is delivered by small practices, and these new models need to be implemented beyond these early adopters or exceptional performers–who may not be representative.
Unless we better address implementation, change management and workforce readiness issues, my fear is that is a risk that medical homes will fall into the category of “great idea, lousy execution.” We need good models, but good models are not enough–models must be scaled and applied. Fortunately, we have research and best practices from many other industries to guide us.