A couple of years ago, one East Coast insurer set out to see whether, given the right incentives, doctors could drop costs while improving the quality of care they're providing. One year into the experiment, they're seeing promising results, including almost $40 million in reduced costs, on $23 million in quality-tied bonuses handed out to docs.

Those results came as part of a patient-centered medical home effort in Maryland, North Virginia and the District of Columbia, undertaken by CareFirst, a licensee of Blue Cross Blue Shield. With it, the insurer hoped to motivate those doctors to put an emphasis on the sickest patients battling chronic conditions such as obesity and Type 2 diabetes.

"The whole idea here is incentives affect behavior," CareFirst President and CEO Chet Burrell said during a conference call with reporters last week. "And there's no more important behavior to affect than the way primary care physicians pay attention to people with chronic disease."

All told, about 3,600 primary care physicians and nurses currently take part in the program, serving nearly 1 million CareFirst subscribers. The insurer had providers form panels of five to 15 physicians, and they weren't required to purchase electronic health record systems or hire new staff to participate.

CareFirst offered up several different bonuses to participating doctors, including new reimbursement fees for developing care plans for certain patients and for monitoring those plans, increased reimbursement fees just for participating in the program, and for notching lower costs of care than expected. They expect to pay out the incentives over one year starting on July 1.

About 150 of 250 eligible panels (active in the program as of July 1, 2011) received incentives, Burrell said. Those who received bonuses spent about 4.2 percent less than expected costs, compared to 4 percent higher for those who didn't earn them. Award winners, on average, saw their reimbursements increase by 20 percent.

What CareFirst is doing with its patient-centered medical home effort isn't entirely unique, save for its massive size, which those involved believe make it one of, if not the largest such programs in the country.

Last September, we wrote about the growing enthusiasm and popularity of the medical home model. In that piece, we discussed how payers and providers are seeing the medical home model as a first step toward an accountable care organization, sometimes referred to as a medical neighborhood. The National Committee for Quality Assurance had bestowed the patient-centered medical home designation on 1,500 primary care practices as of Dec. 31, 2010, we reported.

And in our May issue, we interviewed Paul Grundy, M.D., president of the Patient-Centered Primary Care Collaborative and IBM's global director of care transformation. Grundy spoke of the recent evolution of the model, which actually dates back to 1962. "The next step is to understand how to engage a patient differently, measuring that and paying for that," he said. "The next step would be coordinated care — seeing your doctor and having a care coordinator follow you with a plan to make sure you're complying. A diabetic doesn't need an episode of care. A diabetic needs a manager, a plan, coordinated care and a reminder to take meds and exercise. We need to engage patients in a very different way."