Bending the Cost Curve? Results from a Comprehensive Primary Care Payment Pilot

There is much interest in understanding how using bundled primary care payments to support a patient-centered medial home (PCMH) affects total medical costs. Research Design and Subjects: We compare 2008-2010 claims and eligibility records on about 10,000 patients in practices transforming to a PCMH and receiving risk-adjusted base payments and bonuses, with similar data on approximately 200,000 patients of non-transformed practices remaining under fee-for-service reimbursement. Methods- We estimate the treatment effect using difference-in-differences, controlling for trend, payer type, plan type, and fixed effects. We weight to account for partial-year eligibility, use propensity weights to address differences in exogenous variables between control and treatment patients, and use the Massachusetts Health Quality Project (MHQP) algorithm to assign patients to practices. Results- Estimated treatment effects are sensitive to: control variables, propensity weighting, the algorithm used to assign patients to practices, how we address differences in health risk, and whether/how we use data from enrollees who join, leave or change practices. Unadjusted PCMH spending reductions are 1.5% in year one and 1.8% in year 2. With fixed patient assignment and other adjustments, medical spending in the treatment group appears to be 5.8% (p=0.20) lower in Year 1 and 8.7% (p=0.14) lower in Year 2 than for propensity-matched, continuously-enrolled controls; the largest proportional two-year reduction in spending occurs in laboratory test use (16.5%, p=0.02). Conclusion- Although estimates are imprecise due to limited data and quasi-experimental design, risk-adjusted bundled payment for primary care may have dampened spending growth in three practices implementing a PCMH.