Cost of Transformation among Primary Care Practices Participating in a Medical Home Pilot

Abstract

Background: 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. Objectives: To estimate costs of transformation incurred by primary care practices participating in a medical home pilot. Design: We interviewed practice leaders in order to identify changes practices had undertaken due to medical home transformation. Based on the principles of activity-based costing, we estimated the costs of additional personnel and other investments associated with these changes. Setting: The Pennsylvania Chronic Care Initiative (PACCI), a statewide multi-payer medical home pilot. Participants: Twelve practices that participated in the PACCI. Measurements: One-time and ongoing yearly costs attributed to medical home transformation. Results: Practices incurred median one-time transformation-associated costs of $30,991 per practice (range, $7694 to $117,810), equivalent to $9814 per clinician ($1497 to $57,476) and $8 per patient ($1 to $30). Median ongoing yearly costs associated with transformation were $147,573 per practice (range, $83,829 to $346,603), equivalent to $64,768 per clinician ($18,585 to $93,856) and $30 per patient ($8 to $136). Care management activities accounted for over 60% of practices’ transformation-associated costs. Per-clinician and per-patient transformation costs were greater for small and independent practices than for large and system-affiliated practices. Limitations: Error in interviewee recall could affect estimates. Transformation costs in other medical home interventions may be different. Conclusions: The costs of medical home transformation vary widely, creating potential financial challenges for primary care practices—especially those that are small and independent. Tailored subsidies from payers may help practices make these investments. Primary Funding Source: Agency for Healthcare Research and Quality