Risk-Based Bonus Payments for the Patient-Centered Medical Home

Arlene S. Ash, University of Massachusetts Medical School
Randall P. Ellis, Boston University

Abstract

Background

The Patient-Centered Medical Home (PCMH) requires fundamental reform of health care financing. We propose a Risk-Based Comprehensive Payment system with risk-adjusted base and bonus payments.

Bundled base payments cover the expected cost of primary care services but do not encourage quality. Bonus payments incentivize desired outcomes by rewarding better-than-expected performance in clinical quality, efficiency, and patient-centeredness.

Base and bonus payments require credible risk adjustment to discourage practices from cherry-picking easy patients and dumping difficult ones.

Methods

We estimated models to predict thirteen cost and utilization measures in 17.4 million commercially insured people using diagnoses, age, and sex from Thomson-Reuters MarketScan^® 2007 claims data.

Using the same data, we imputed assignment of 456,781 people to 436 medium-sized primary care practitioner (PCP) panels (500 – 5000 patients).

For each measure, a PCP’s performance is judged by summing the difference between observed (O) and expected (E) outcomes across panel members.

For each outcome we calculated: mean; coefficient of variation, or CV = SD/mean; and both individual and grouped R² as measures of predictive accuracy

Results

Using risk models to calculate expected outcomes explained 29-49% of the observed patient-level and 85-98% of practice-level variation in performance, with differential variability.

Deviation from the mean in total health spending is more variable at the PCP level than other more targeted measures.