Costs of Being a Medical Home

Better primary care seems like a good idea.  One concept for that is the medical home, in which a primary care practice proactively takes responsibility for monitoring a managing a patient’s health care needs.  Organizations and payers have set up all kinds of requirements to be a medical home and guess what, it isn’t cheap to retrofit a practice to meet those requirements, or to manage it going forward in a manner consistent with those requirements.  Rand Corporation researchers estimated the costs of being a medical home in an article published in the Journal of General Internal Medicine.  (Rand Release)  Using interviews with physician leaders among a dozen primary care practices in a recent Pennsylvania medical home demonstration  and activity-based costing analyses, the authors found that there were substantial startup and ongoing operating costs associated with becoming a medical home.  The practices surveyed were generally small, independent ones, which are least able to find the resources for the necessary investment.  The median one-time costs of transforming to a medical home were $30,991 per practice, or $9814 per clinician and $8 per patient.  The ongoing operating costs were $147,573 per practice, or $64,768 per clinician or $30 per patient per year.  The primary component of these costs was added labor in the form of resources to coordinate care. Information systems needs also contribute to the cost increases.  There was a wide range in variance of costs across practices, from $7694 to $117,810 in startup costs, and from $83,829 to $346,603 in ongoing ones.  This may indicate that some practices are more ready than others to be a medical home because they already have the capabilities in place or that some practices are simply more efficient that others.  There was no analysis of revenue increases which might offset these new costs, but you can see that they would need to be fairly substantial.  Medical homes may, and we emphasize the may, improve health outcomes, and they may, and we really emphasize this may, reduce long-run total health spending, but they clearly add to the cost of operating a clinical practice.