While excitement about — and controversy over — the accountable care organization concept has hogged the spotlight for months, another model — the medical home — is quietly transforming the way care is delivered in many communities across America.

That's because payers see so much potential in medical homes they are willing to kick in funding to get them started.

By using a population-health management approach, the medical home model has been demonstrated to save money and improve patient outcomes. That's prompting health plans in dozens of communities across the country to team with health systems and stand-alone physician groups to push the concept forward.

In the Dallas–Fort Worth area, for example, every primary care practice owned by Baylor Health Care System has been designated as a patient-centered medical home. Aetna helped fund the conversion from standard primary care clinics.

"Moving from volume-based reimbursement to population health payments requires some investment," says Joel Allison, Baylor's president and CEO. "I think most payers understand this, and those that we have worked with have been, frankly, quite good at partnering with us."

Beyond that, payers and providers see the medical home model as the logical first step toward an integrated accountable care organization —sometimes called the "medical neighborhood."

In New Jersey, for example, AtlantiCare's original medical home clinic for patients with chronic conditions found that its enrollees had 41 percent fewer inpatient hospital admissions and 48 percent fewer emergency department visits during a one-year period than members of a control group.

Katherine Schneider, M.D., AtlantiCare's senior vice president of health engagement, says knowing how to keep chronically ill patients out of the hospital will serve AtlantiCare well when it establishes its ACO and is financially rewarded for doing so. "This has been our learning lab for how we can dramatically change the health experience and costs and outcomes for a very sick population of patients by the way we take care of them," she says.

Why Insurers Rush to the Table

The National Committee for Quality Assurance, which sets the standards for three levels of patient-centered medical homes, had bestowed the PCMH imprimatur on more than 1,500 primary care practices — representing nearly 8,000 clinicians — as of Dec. 31, 2010.

Meanwhile, the Patient-Centered Primary Care Collaborative lists 65 multistakeholder medical home initiatives ranging from the Colorado Multi-Payer, Multi-State, Patient-Centered Medical Home Pilot to the CIGNA/Dartmouth-Hitchcock Patient-Centered Medical Home Pilot.

The Collaborative, a coalition of hospitals, health plans, employers and others working to advance the PCMH concept, collects and disseminates the results of the pilot initiatives that have so excited health plans.

Among them: The HealthPartners Medical Group medical home in Minnesota experienced a 39 percent decrease in emergency department visits and 24 percent decrease in hospital admissions per enrollee between 2004 and 2009, while the Geisinger Health System medical home in Pennsylvania is generating total per-member, per-month costs that are 7 percent below those of a control group.

The Minneapolis Model

The Minneapolis market was one of the first to experiment with the PCMH model. The model, which emphasizes proactive, preventive and personalized care, proved that physicians can influence costs and patient outcomes by their practice patterns.

"We are seeing a slowing of the rate of rise of health care costs," says Charles Fazio, M.D., former medical director at the Medica health plan. "But more importantly, we are seeing attention across the community to quality and efficiency and how those turn into value for consumers."

Building on their success with the medical home model, all the large health systems in the Minneapolis market are now contracting with the major payers in "shared savings" contracts that reward them for hitting quality and cost benchmarks. That, Fazio says, holds promise for even greater improvement.

Two large care systems contacted Medica in the last six months to ask for any information on the quality and efficiency of the specialists they use. "That would never have happened two years ago," Fazio says.

Despite widespread enthusiasm for the general PCMH concept, the actual implementation of medical homes varies dramatically from one example to the next. In fact, the only thing that almost all medical home sponsors share is dissatisfaction with the term "medical home."

AtlantiCare's Schneider prefers "advanced primary care as the phrase that won't confuse people into thinking this is some kind of nursing home."

AtlantiCare created its Special Care Center in 2007 to serve chronically ill casino hotel employees covered by a union health and welfare fund that wanted to reduce medical costs and lost work time associated with poorly managed diabetes, asthma and other conditions. The health system's employees with chronic conditions are also encouraged to use the center.

By offering specialty and primary care, along with pharmacy, behavioral health, nutrition and laboratory services at one site, the center is designed to make it easier for patients to manage their health status. Personal health coaches work with patients between center visits, and patients have round-the-clock phone access to members of their health care team. Insurance benefits are designed to encourage compliance with physician orders; for example, copayments are waived and prescription drugs are discounted or, for some conditions, free.

The fee-for-service payment system is out the window, and AtlantiCare receives a monthly fee for each person enrolled in the center.

"The work processes are totally different … from what you would see in a typical primary care practice. The incentives are very different, and the outcomes, frankly, have been very different as well," Schneider says.

Improved control of diabetes, high blood pressure, lipids and other health factors at the population level and improved access to care and communication with the Special Care Center team translates into fewer hospitalizations. Patients served at AtlantiCare's Special Care Center have a 30-day hospital readmission rate of less than 6 percent — almost half that of the general population.

"For the most part, these are preventable admissions for out-of-control conditions so, if we're being true to our vision, we don't want these people in the hospital," she says.

Based on the success of its first medical home, AtlantiCare opened a second Special Care Center earlier this year.

Payment Reform, Practice Reform

In upstate New York, Capital District Physicians' Health Plan Inc. introduced the medical home model in 2008 in the hope that it could wring enough costs out of health care delivery to increase primary care physicians' annual incomes by $85,000.

It appears to be working. The initial three-practice pilot cut total medical costs for its patients by 9 percent in the first year. A second wave of 21 practices started preparing to become medical homes last year, and a third group of practices is currently being recruited.

Like AtlantiCare, CDPHP thinks the medical home model requires ditching fee-for-service payment. The health plan pays the medical home physicians a risk-adjusted capitated payment; a physician might receive $18 per member per month to care for a healthy 25-year-old and $44 to treat a 25-year-old with diabetes.

But rather than focus exclusively on patients with chronic conditions or build a dedicated space for the medical home clinic, primary care physicians in the CDPHP program convert their existing practices to a new way of operating.

"We decided early on that our project was going to be about payment reform as well as practice reform," says Bruce Nash, M.D., the health plan's chief medical officer. The health plan pays for a consulting organization that helps the practices convert.

Rommel Tolentino, M.D., at Schodack Internal Medicine and Pediatrics in Castleton, N.Y., says his medical home practice reorganized to provide a team approach to patient care and it standardized procedures, ranging from rooming patients to ordering medication. Among many other changes, a care manager was hired to handle insurance authorizations, follow up on laboratory results and check up on patients who recently were discharged from the hospital.

"It has made the way I practice more enjoyable and more in line with the way I expected to practice medicine when I got out of medical school," Tolentino says.

In the pilot, the practices received a $35,000 stipend per physician and were eligible for bonuses up to $50,000 per physician, based on quality and efficiency measures.

Health System, Insurer Partner

A third approach to developing medical homes has emerged in North Carolina, where the state's health care system and the largest insurer in the market are building a clinic together.

When it opens later this year, the medical home clinic will be co-branded to reflect the partnership between UNC Health Care and BlueCross BlueShield of North Carolina. The two will share the costs of operating the clinic and any profits or losses that are incurred.

"We've really turned the competition model on its head," says David Rubinow, M.D., UNC's director of innovation and health care system transformation.

The new clinic will be responsible for 5,000 Blues members who have hypertension, asthma or another chronic condition. In addition to on-site pharmacy, laboratory and nutrition counseling, mental health services will be provided.

Rubinow, a psychiatrist, sees the clinic as an opportunity to reverse the long trend of treating patients' mental health conditions separately from their physical issues. "This idea that we can compartmentalize our patients and isolate them and just focus myopically on whatever it is that they happen to be presenting with at the time is both an extravagance that we can't afford, and a disservice to our patients," he says. "It's very clear from the literature that if you don't attend to mental illness in patients with medical comorbidities, you increase the progression of those comorbidities and increase the cost by two- to threefold."

The North Carolina Blues plan already contracts with more than 1,000 physicians working as medical homes, and it has seen "pretty terrific results," says medical director Eugenie Komives, M.D.

But the new clinic — a relationship between a single payer and a single provider group — offers an opportunity to learn more about what works and doesn't work in patient care.

"When we are evaluating our community practices, we largely have to rely on our administrative claims data, but in the relationship that we have with the UNC model practice, we will have access to a lot more clinical data as well as the claims data that we currently have," she says.

Fairview Health Services in Minneapolis converted four of its owned primary care clinics to the medical home model in 2009 as part of a systemwide transformation to become an accountable care organization. Just two years later, Fairview — like all the other health systems in Minneapolis — has "shared savings" contracts with its major payers, meaning that it is financially incentivized to deliver high-quality, low-cost care.

"We are learning that we can effectively reduce utilization, and it's not by denying access to care," says Dave Moen, M.D., president of Fairview Physician Associates and executive medical director of the system's Care Model Innovation. "It's actually by improving access to the kind of care people need, and doing it in a much more proactive way."

In the original pilot, primary care practices reorganized to provide team-based care, added more nurses and other staff members and deployed electronic medical record technology.

Swift Impact on Cost

By using individualized care planning for the highest-risk patients and giving patients around-the-clock access to care management, the Fairview medical home model is proving that health care costs can be lowered almost immediately. Moen reports a study of 600 high-risk patients found that their ED utilization and inpatient admissions fell by 40 percent over 120 days, compared with their historical use of hospital services.

When it became clear that the medical home model improved patient outcomes while lowering costs, Fairview rolled it out to all of its 40 owned primary care clinics. Then it recruited more than 200 independent primary care physicians who admit patients to Fairview hospitals to become medical homes as well.

"So they are now getting access to care management resources, identification of high-risk patients and other types of things that we know will help bring down unnecessary emergency and inpatient visits, which are a major piece of the cost equation," Moen says.

Fairview also is extending the medical home model to specialists who receive referrals from its primary care physicians. The health system is training more than 200 specialists about identification of high-risk patients, care management protocols and proactive management of patient conditions. As financial savings from that improved care accrue, Fairview will share it with those specialists.

The medical home is one way that Fairview is fundamentally changing the way the health care payment system works. By the end of this year, all its employed physicians will be paid based on five elements: panel size, acuity of the panel of patients, quality, total cost and patient satisfaction.

"Some docs like it; some docs don't like it.," Moen says. "But we feel that long-term it does give us the opportunity to actually align the incentives of the team caring for patients with our desire to create value in the marketplace."

Lola Butcher is a freelance writer in Springfield, Mo.