In the early days of Accountable Care Organizations, it seemed they would be the natural resting place for the patient-centered medical home (PCMH). That thinking has changed. While it appears ACOs may use some medical home concepts, there is growing doubt about the compatibility of the two entities. Let’s understand why.
Why would ACOs would be resistant to medical homes? First, the medical home concept promotes coordinated care and shared savings, core values in health care reform. Second and fundamentally, health care reform means a change in the financial positioning of primary care versus specialty care. In the current fee-for-service system, some would contest, primary care is underpaid while specialty care is overpaid. The balance is shifted by the core tenets of health care reform so that primary care becomes better paid, basically at the expense of specialty care. And hospitals and health systems, where ACOs typically reside, are predominantly specialist-oriented.
For the sake of simplicity in the following discussion, we’ll be viewing primary care and specialty care in separate business contexts even though we know that within hospitals, health systems and ACOs the two exist under one roof.
To begin, let’s use precise figures from the Ohio Comprehensive Primary Care Initiative (CPCI); it is modeled as a medical home and we know the numbers. Reimbursement for primary care physicians through the medical home model involves two key changes: the first is that the medical home gets paid a separate fee for coordinating the care of patients; secondly, the medical home gets to share in the savings created as a result of care coordination.
What is the effect on PCP income of getting paid for coordinating the care of patients? Let’s assume that the office of a primary care physician can coordinate the care of 500 patients. This requires the medical home to hire an additional staff person at a cost of $50,000. The CPCI in Ohio is paying $22.50 per head per month for care coordination. This generates $11,500 per month, or $138,000 per year, in additional revenue to the medical home. After the cost of the additional staff person, the new revenue leaves $88,000 for organizational profit. Supposing that the medical home provider has some miscellaneous expenses, we’ll allocate $75,000 toward profit. The average income for a primary care physician in the USA today is $135,000. Therefore, by becoming a medical home, a primary care physician practice increases its income to about $210,000. So we can see how becoming a medical home, versus remaining simply an independent PCP practice, can significantly increase the income of the primary care physician. Yet, we haven’t begun to consider the real income-increasing potential of a medical home: shared savings accounts. This is where it gets interesting.
To be continued …
Jim Grue, O.D.
Alistair Jackson, M.Ed.
