The researchers used Capital District Physicians’ Health Plan, a nonprofit network-model HMO in New York, as a test case. In January 2009, the plan launched a pilot program in three primary care practices where providers received bundled payments, adjusted to account for patients’ level of risk and supplemented by substantial performance bonuses. The practices had begun work to become medical homes during the previous year.
With estimated savings of $8 dollars per member per month during the first two years, the pilot is now being extended to 350 providers. It is a “virtual all-payer” pilot—the new payment system applies to all patients in participating practices, not just those for whom the health plan accepts financial risk. The health plan continued to process fee-for-service payments from outside insurers such as Medicare and Medicaid patients, but paid providers solely through the new payment model.
The authors discuss the practical structures needed to support this approach, including three key administrative functions: a sponsor, which provides start-up funds to support practices’ transition to medical homes and covers any shortfalls; an administrator, which manages financial and data processing tasks; and a medical home consortium, which provides a governance structure for the sponsor, participating practices, and payers.