Understanding the Costs of Patient-Centered Medical Homes
J Gen Intern Med
EDITORIAL AND COMMENT Understanding the Costs of Patient-Centered Medical Homes
Kenneth W. Kizer 0
0 UC Davis School of Medicine and Betty Irene Moore School of Nursing and UC Davis Health System, Institute for Population Health Improvement , Sacramento, CA , USA
T other developed countries, but receives less health value
he United States spends far more on health care than
for its expenditures.1,2 Since this is due in significant part to
our market-based fee-for-service method of paying for health
care services, moving to more value-based methods of
payment is an integral part of current health care reform
strategies.3–6 Multiple models of value-based payment are currently
being tested, including various forms of pay for performance,
episode of care bundled payment, accountable care
organizations, and patient centered medical homes.
The patient-centered medical home (PCMH) is considered
one of the most promising models of value-based payment for
primary care, as well as a potential vehicle for revitalizing the
primary care foundation of the health care delivery system.
While the basic concept of the medical home was popularized
in pediatrics in the 1960s, the current model of the primary
care medical home is little more than a decade old and is still
PCMHs are primary care practices that have been
redesigned according to a set of principles aimed especially
at promoting optimal health, improving the quality of care,
reducing unnecessary care, and ensuring timely and
coordinated care, particularly for persons with chronic conditions.7–9
Multiple professional associations and other organizations
have variously defined the PCMH, and while there is no single
universally agreed upon definition, the operational and
functional characteristics associated with National Committee for
Quality Assurance accreditation have become the de facto
PCMH standard.10 Central elements of the primary care
medical home model include patients having a close ongoing
relationship with a specific clinician and caregiver team, care
management to coordinate and integrate services across the
continuum of care, a ‘whole person’ and population health
orientation to care, extensive use of advanced information and
communication technologies to identify patient needs and
enhance access and patient engagement, and use of
standardized processes for improving quality and safety.
Hundreds of PCMH projects have been launched over the
past decade and numerous outcome studies have been
published. These studies have provided generally encouraging but
inconsistent and sometimes conflicting results linking this new
model of care to improved clinical and financial
performance.11–13 Some of the variability in results can be attributed
to differences in how medical homes have been defined and
operationalized, as well as to differences in length of patient
follow-up, which outcome variables have been assessed, and
other study design features, but, overall, the evidence tying
PCMHs to improved health care value remains inconclusive.
Notwithstanding the intuitive logic and apparent face
validity of the conceptual underpinnings of the PCMH model, the
widespread adoption and mandatory inclusion of medical
homes in some state Medicaid programs14 is curious, given
the ambiguous evidence of the model’s superiority. Such
mandates seem even more incongruous considering how
poorly quantified are the costs of transforming a typical primary
care practice to a medical home. Creating an infrastructure to
successfully achieve the functionalities of a medical home
clearly entails start-up and ongoing operational costs, but the
magnitude of these costs has been imprecisely detailed.8
In this issue of JGIM, Martsolf and colleagues from
RAND and Harvard provide important insights into the
costs associated with implementing medical homes.15
They report on the initial transformation and ongoing
operational costs associated with implementing medical
homes at 12 primary care practices participating in the
Pennsylvania Chronic Care Initiative (PACCI), a
statewide multi-payer medical home pilot program including
both commercial and Medicaid managed care plans. The
costs of medical home transformation were determined
by conducting semi-structured interviews with practice
managers and other practice representatives to identify
the structural and functional changes directly related to
medical home transformation, and then calculating the
costs corresponding with the changes.
These investigators found the investment costs to establish
the requisite information technology and care management
infrastructure were substantial but varied widely depending
on the baseline characteristics and capabilities of the
practice.15 One-time start-up costs to transform to medical home
practice ranged from $7,694 to $117,810, with a median of
$30,991, while ongoing annual operating costs ranged from
equated to per clinician median start-up and annual ongoing
costs of $9,814 and $64,768, respectively, and per patient
start-up and ongoing costs of $8 and $30, respectively.
Funding these costs was especially challenging for small and
The conclusions that can be extrapolated from this study are
limited insofar as it evaluated the costs of only one PCMH
initiative in a single state and the results may have been
affected by variable respondent recall; nonetheless, the study
is important for three main reasons.
First, the cost data are important in and of themselves.
Transforming to a PCMH typically requires, among other things,
implementing new electronic health record and other IT systems
to identify, stratify, and track patients with specific health and
social service needs; extending office hours and otherwise
enhancing access, often through advanced information and
communication technologies; and hiring new personnel to function as
care managers, navigators, and health coaches, and to conduct
home visits and provide phone and internet contact. Martsolf et
al. found that hiring care managers to help coordinate care was
the single greatest ongoing cost associated with the medical
home.15 Knowing how much the various infrastructure elements
cost, and then linking them to clinical outcomes, is necessary to
determine how the model affects health care value, as well to
fashion appropriate financial assistance mechanisms and
payment policies that will facilitate successful transformation and
sustain the ongoing operation of medical homes.
Second, the data may help explain some of the discrepant
outcomes found in medical home intervention studies. While
quality and utilization outcomes achieved by PCMHs have
produced divergent and conflicting results, the results are more
consistent when comparing fully implemented medical homes
to traditional primary care practices, instead of comparing
participants and non-participants in practices striving to
become medical homes.15 The divergent outcomes may result, at
least in part, from medical home intervention participants
simply being unable to afford the costs of fully transforming
to a medical home, and therefore never being able to achieve
the desired outcomes.
Third, these data provide a cautionary note for Medicaid and
other publicly funded health care programs that have embraced
the medical home model.14 Many of the primary care practices
that would be candidates for medical home transformation in
Medicaid reform initiatives are small and independent practices
having little capacity to absorb the potentially substantial costs
associated with transforming to a medical home. These costs
are a particular concern in view of Medicaid’s typically meager
operating margins. Inadequate financial support for the medical
home infrastructure could prove to be a major barrier to the
success of Medicaid PCMH initiatives.
Transforming traditional primary care practices to medical
homes entails non-trivial effort and financial investment. As
described by Martsolf and colleagues in this issue of JGIM, the
initial and ongoing costs of transforming to medical homes are
significant, but vary according to the nature and baseline
characteristics of a practice. Further studies are needed to
better understand the nature of these costs and, importantly,
what they buy. Understanding them and their return on
investment will be critical to the ultimate success and scalability of
this new model of care.
Corresponding Author: Kenneth W. Kizer, MD, MPH; UC Davis
School of Medicine and Betty Irene Moore School of Nursing and UC
Davis Health SystemInstitute for Population Health Improvement,
Sacramento, CA, USA (e-mail: ).
Compliance with Ethical Standards:
Conflict of Interest: The author declares that he does not have a
conflict of interest.
1. Institute of Medicine. U.S. Health in International Perspective: Shorter Lives, Poorer Health. Washington, DC: National Academies Press; 2013 .
2. Squires D , Anderson C. U.S. Health Care from a Global Perspective: Spending , Use of Services, Prices, and Health in 13 Countries. New York, NY: The Commonwealth Fund; 2015 .
3. Berwick DM , Nolan TM , Whittington J. The triple aim: care, health and cost . Health Aff . 2008 ; 27 ( 3 ): 759 - 69 .
4. Whittington JW , Nolan K , Lewis N , Torres T. Pursuing the triple aim: the first 7 years . The Milbank Quart . 2015 ; 93 ( 2 ): 263 - 300 .
5. Burwell SM . Setting value-based payment goals-HHS efforts to improve U.S. health care . N Engl J Med . 2015 ; 372 ( 10 ): 897 - 9 .
6. Health Care Transformation Task Force . Major health care players unite to accelerate transformation of U.S. health care system . 2015 . Available at http://www.hcttf.org/releases/2015/1/28/major-health -care-playersunite-to-accelerate-transformation-of-us-health-care-system.
7. Cassidy A . Patient-centered medical home . Health Aff . 2010 ; 29 ( 9 ): 1 - 6 .
8. Berenson RA , Devers KJ , Burton RA . Will the Patient-Centered Medical Home Transform the Delivery of Health Care? The Urban Institute : Washington, DC; 2011 .
9. Stange KC , Nutting PA , Miller WL , et al. Defining and measuring the patient-centered medical home . J Gen Intern Med . 2010 ; 25 ( 6 ): 601 - 12 .
10. National Committee on Quality Assurance. Physician Practice Connections - Patient-Centered Medical Home Standards and Guidelines , 2011 . Available at http://www.ncqa.org/tabid/629Default.aspx.
11. Jackson GL , Powers BJ , Chatterjee R , et al. The patient-centered medical home. A systematic review . Ann Intern Med . 2013 ; 148 ( 3 ): 169 - 78 .
12. Kern LM , Edwards A , Kaushal R. The patient-centered medical home and association with health care quality and utilization: a 5-year cohort study . Ann Intern Med . 2016 . doi: 10 .7326/M14-2633. Published online February 16 , 2016 .
13. Nielsen M , Buelt L , Patel K , Nichols LM . The Patient-Centered Medical Home's Impact on Cost and Quality . Annual Review of Evidence 2014 - 2015. Washington, DC: Patient-Centered Primary Care Collaborative; 2016 . Available at https://www.pcpcc.org.
14. State Legislation: PCMH and Advanced Primary Care . Washington, DC: Patient-Centered Primary Care Collaborative. Available at https://www. pcpcc.org/legislation.
15. Martsolf GR , Kandrack R , Gabbay RA , Friedberg MW . Cost of transformation among primary care practices participating in a medical home pilot . J Gen Intern Med . 2015 . doi: 10 .1007/s11606-015-3553-6.