Effects of New Funding Models for Patient-Centered Medical Homes on Primary Care Practice Finances and Services: Results of a Microsimulation Model

PURPOSE We assess the financial implications for primary care practices of participating in patient-centered medical home (PCMH) funding initiatives.

METHODS We estimated practices’ changes in net revenue under 3 PCMH funding initiatives: increased fee-for-service (FFS) payments, traditional FFS with additional per-member-per-month (PMPM) payments, or traditional FFS with PMPM and pay-for-performance (P4P) payments. Net revenue estimates were based on a validated microsimulation model utilizing national practice surveys. Simulated practices reflecting the national range of practice size, location, and patient population were examined under several potential changes in clinical services: investments in patient tracking, communications, and quality improvement; increased support staff; altered visit templates to accommodate longer visits, telephone visits or electronic visits; and extended service delivery hours.

RESULTS Under the status quo of traditional FFS payments, clinics operate near their maximum estimated possible net revenue levels, suggesting they respond strongly to existing financial incentives. Practices gained substantial additional net annual revenue per full-time physician under PMPM or PMPM plus P4P payments ($113,300 per year, 95% CI, $28,500 to $198,200) but not under increased FFS payments (−$53,500, 95% CI, −$69,700 to −$37,200), after accounting for costs of meeting PCMH funding requirements. Expanding services beyond minimum required levels decreased net revenue, because traditional FFS revenues decreased.

CONCLUSIONS PCMH funding through PMPM payments could substantially improve practice finances but will not offer sufficient financial incentives to expand services beyond minimum requirements for PCMH funding.