When a new medical home is formed, a rather complex set of formulae is used to predict the cost of care in the traditional delivery system. Going forward, the actual cost of coordinated care is tracked, so eventually it is known whether the coordinated care or the traditional care was more expensive. The hypothesis is that coordinated care is able to deliver better quality at a lower cost, so let’s assume that the coordinated care, in fact, ends up less expensive. At least in these early years, the formula for shared savings dictates that the medical home gets paid 85% of the savings. Yes, almost the complete amount saved through the medical home’s coordinated care approach is given back to the medical home. This will no doubt change over time; a big return is intentionally structured as a major incentive in order to convert quickly to the new model, a similar approach to the EHRs incentive program – money speeds adoption.
Now let’s look at the savings possible. Almost all providers, new to the medical home concept, are concerned that the primary care physician will act as a gatekeeper, preventing them from seeing the patient or doing the required tests. In reality, nothing could be further from the truth, which we’ll see below. Cost savings are not generated by reducing or eliminating necessary care. In fact, the maximum savings are generated when the coordinator ensures that the patient receives the very best care. It is difficult to think of an example where poor care is less expensive than the best care. If a patient isn’t properly diagnosed and treated then invariably there are more visits to eventually get it right. If the best surgery is not performed, the result is simply more after-care at higher expense. So the first mandate of a care coordinator is to make sure all care received by every patient is the best available. This alone will generate savings.
The next step is to eliminate duplication of care that doesn’t result in better outcomes. A familiar scenario will serve us well here: in eye care, if an optometrist does specialty tests then has to refer the patient to an ophthalmologist, in almost all cases, the ophthalmologist repeats every specialized test. In the case of ODs and retinal specialists co-following patients, both typically see the patient on an ongoing basis and both continue to perform the same specialty tests. This happens right now because the two specialists get to decide what tests they want, not to mention that it’s in the economic interests of both to perform the tests. If we were in a position to coordinate the care of this patient, we’d know exactly how to increase those shared savings! We’d make sure the appropriate tests were being done but by one provider only and we’d have the results shared by all providers seeing the patient. The only time a test would need to be repeated would be if there was a question of its accuracy, which then gives the coordinator the incentive to ensure that the office that performs the tests is the one that proves over time its ability to get the most consistent, accurate results.
Scenarios like this one are replicated in different ways throughout medicine every day. So, the care coordinator has two simple tasks that create huge savings: ensure every patient receives the best available care at every visit; identify and reduce or eliminate redundant costs which do not improve the quality of care.
Studies have shown that these two things alone have the potential to reduce the total cost of care by as much as 30%. Those are big dollar amounts. When we consider that the cost of health care in the United States is approximately $7,000 per person per year, we start to see the potential shared savings. Using this figure, a medical home coordinating the care of 500 patients is coordinating $3.5 million dollars of care per year. If 30% can indeed be saved, the potential savings is over $1 million. The 85% rule tells us that the medical home could receive over $850,000 from shared savings. These are staggering numbers for PCPs whose average annual earnings are currently $135,000. Do we dare think PCPs are not all over this opportunity? If in doubt, check out the website of the American Academy of Family Physicians and see what they’re doing about the PCMH initiative.
To be continued …
Jim Grue, O.D.
Alistair Jackson, M.Ed.
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