Cost of Transitioning to a Medical Home May Be Too High for Primary Care Practices

For independent primary practices considering transitioning into a medical home, there may be substantial costs to account for, according to a recent RAND study.

The study, which surveyed 12 Pennsylvania primary care practices that underwent a medical home demonstration, aimed to investigate and analyze overall costs of transformation.

“Medical home initiatives encourage primary care practices to invest in new structural capabilities such as patient registries and information technology, but little is known about the costs of these investments,” study researchers wrote.

The purpose of medical homes is to help cut costs associated with unnecessary care, but will the cost it takes to make that transition outweigh the benefit?

The researchers interviewed leaders of the participating practices and found that median one-time costs of transforming into the medical home and median maintenance costs were $30,991 (ranging from as little as $7694 to as much as $117,810) and $147,573 (ranging from $83,829 to $346,603) per practice, respectively. Care management activities, such as hiring extra staff members to better coordinate patient care, accounted for over 60% of the costs and constituted the greatest portion of maintenance costs. Costs per clinician (ranging from $18,585 to $93,856) and per patient (ranging from $8 to $136) were found to be greater for small, independent practices than for large, system-affiliated ones.

Also, almost all participants reported that information technology systems were necessary for a successful medical home, but only 4 (one-third of the group) were able to make consistent investments in any. Such patient-centered structural capabilities include patient registries, electronic health records, health information exchange tools, and analytics software.

The study is beneficial since a greater understanding of all these costs is needed to implement a medical home model could prepare primary care practices for any potential financial challenges. The study’s concrete numbers offer these practices a clear and realistic idea of what such a switch would entail.

“For primary care practices, participating in a medical home demonstration requires substantial investments,” study lead author Grant R. Martsolf, PhD, said in a statement. “While there are financial incentives available to practices that make the shift, such investments might be especially challenging for small practices and those not associated with a larger health network, since they had higher transformation costs per clinician.”

Dr Martsolf suggests that tailored subsidies from payers could help them make these investments. Additionally, RAND reports that providers may want to consider “starting with some basic value-based reimbursement contracting to prepare them for the challenge of raising quality in pursuit of financial gains.”