Coordinated primary care models have shown great potential to reduce health care costs while improving care, a goal that will become even more important after the Affordable Care Act (ACA) coverage expansion provisions take full effect next year. The models typically involve communication among providers, a focus on patients with complex and expensive health needs, physician-patient communication, and a migration from fee-for-service payments to some form of per-member-per-month payment that rewards value.

For example, the Centers for Medicare and Medicaid Services (CMS) Innovation Center has launched patient-centered medical home (PCMH) demonstration projects for Medicare and Medicaid beneficiaries. In one demonstration, so-called Advanced Primary Care Practices (APC) receive a monthly care management fee to serve as medical homes for chronically ill patients.

Employers Take Advantage of the PCMH Model:

Patient-centered medical homes also have a place in the private sector, where employers look for payment reform options as they struggle with rising costs of employee health care. A recent brief from Bailit Health Purchasing looked at a couple of successful case studies of PCMH projects in the private sector and the military health system.

Below are some highlights from the brief:

1. Tri-Service PCMH
The Department of Defense (DOD) estimates its PCMH project at Hill Air Force Base in Utah has reduced health insurance costs by 4.5 percent over the past two years. The program has worked particularly well for diabetes patients, saving the Air Force $300,000 per year on diabetes care alone.

2. Cleveland Area Employers Collaborate
Several employers in the Cleveland area, including Progressive Insurance, banded together and convinced a health system in Northeast Ohio to achieve PCMH accreditation for all of its primary care practices. The medical homes would serve employees from those organizations. The employers and the health system also have talked about instituting a shared savings agreement that gives the health system a portion of the savings employers get from having employees use medical homes.

High-Intensity Primary Care:

High-intensity primary care is another model employers might consider. As with medical homes, it focuses on care coordination and patient communication to reduce costs and improve care. But high-intensity primary care payment specifically focuses on developing and following care plans for patients with complex health needs, such as multiple chronic diseases.

A separate Bailit report discusses impressive results in three trial cases with large employers:

1. Boeing
Boeing found three local primary care physician practices that were willing to agree to give high-intensity primary care to several hundred employees, pre-Medicare retirees, and employee spouses. The practices, in exchange, received an extra per-capita payment for those services. Health care spending dropped 20 percent, more than accounting for the extra payments, and employee wellbeing and performance improved on several measures.

2. Local 54 of the Hotel Employees and Restaurant Employees International Union
As with Boeing, the union partnered with a primary care practice to provide intensive services to patients with complex care needs. Health costs decreased more than 12 percent for the program participants, compared to a similar control group.

3. California Public Employees Retirement System (CalPERS)
An analysis of results will not be released until later this year, but a few specific cases show promise, the Bailit brief says. One participant spent an average $2,947 per month before enrolling in the program, a figure that dropped to $640 per month while in the program.

Health Plans Have an Opportunity to Promote Medical Homes:

Health plans represent another group of payers that have an incentive to promote coordinated care. Health plans already promote care coordination as part of Medicaid managed careMedicare Advantage, and Special Needs Plans for Medicare-Medicaid dual eligibles (D-SNP). Starting in 2014, many of them also will offer Qualified Health Plans (QHP) on the Health Insurance Exchanges (HIX). By promoting patient-centered medical home and other coordinated care models, health plans have an opportunity to solidify their corporate wellbeing while also helping to reform the U.S. health care system at large.

For more on that subject, see this recent article in the journal American Health and Drug Benefits: The Opportunity for Health Plans to Improve Quality and Reduce Costs by Embracing Primary Care Medical Homes. The authors – Sarah Collins, MBA; Kip Piper, MA, FACHE, and Gary M. Owens, MD – recommend six steps health plans should use to take advantage of medical homes as a means to improve healthcare quality and to reduce costs.

Health Insurance More Expensive for Employers and Employees:

Health costs for employers and employees have risen dramatically in recent years. From 2001 to 2009, employer-sponsored insurance premiums increased 60 percent for the employer’s share and 90 percent for the employee’s share. Employers also have reduced retiree health benefits and, says the Employee Benefit Research Institute (EBRI), most employers in 2013 will increase retiree premiums while reducing health benefits.

Bailit Health Purchasing, in partnership with the Robert Wood Johnson Foundation (RWJF), recently published a series of briefs that might interest businesses struggling with health costs and spending. The briefs discuss four payment reform models, analyze a few test cases, and include additional resources for organizations that want to implement the models.

This post is part of a series highlighting new payment models and cases.