PCCM programs can achieve cost savings, if significantly enhanced

A small but committed number of state Medicaid programs are setting out to enhance their primary care case management programs (PCCM) that link beneficiaries to primary care providers (PCPs) and pay providers for a core set of care management activities.

Some of the ways states are doing this include adding more intensive care management and care coordination for high-need beneficiaries; improved PCP incentives; and increased use of performance measures. A September 2009 report from the Hamilton, NJ-based Center for Health Care Strategies, "Enhanced Primary Care Case Management Programs in Medicaid: Issues and Options for States," examined enhanced PCCM programs in Oklahoma, North Carolina, Pennsylvania, Indiana, and Arkansas.

"We actually had to do some fairly serious investigation of state PCCM programs to find the five programs that we highlighted in the paper. There were not a lot of other examples, at that point, of states that had devoted significant resources to enhancing their PCCM programs," says James M. Verdier, JD, lead author of the report and a senior fellow at Mathematica Policy Research in Washington, DC.

However, Mr. Verdier thinks there could be some growing interest in states operating their own PCCM programs either with state staff or contractors who would administer various aspects of the programs, but they would not be at risk for services in the way a full risk-managed care organization would be.

"States have a variety of motives for wanting to do that," says Mr. Verdier. There may be dissatisfaction with the managed programs currently operating in the state, there might be a lack of interest among managed care organizations in participating in the Medicaid program, or it may be difficult to run fully capitated managed care programs in certain areas of the state.

"Sometimes states want a PCCM program as a form of competition for the managed care organizations, or as a fallback alternative if they conclude that their experience with the full risk-managed care organization is not turning out to be satisfactory," says Mr. Verdier.

ROI difficult to measure

"You can't just pay doctors $3 per member per month and expect them to do very much in the way of care coordination or case management," says Mr. Verdier. "And that's especially the case when you are talking about part of the Medicaid program that involves people with disabilities and chronic illnesses."

These individuals have very complex and substantial health care needs that are often outside the capability of an individual doctor, or even a small group of physicians with limited time and resources. "To do that effectively, you need the kind of care coordinators and nurse care managers that Oklahoma and a number of other programs have," says Mr. Verdier.

A substantial amount of resources are needed to provide the necessary level of care coordination and care management, especially for the aged/blind/disabled and Supplemental Security Income populations. "If you're talking about just moms and kids, the PCCM model works pretty well for them, taking care of basic care needs. But we didn't really look at states that were doing just that, because it didn't really require much in the way of program enhancements," says Mr. Verdier.

It's difficult for PCCM programs to save a substantial amount of money keeping people out of hospitals and EDs. One reason is that the doctors are not at financial risk for hospital use, and they don't necessarily have the contractual relationships or leverage over hospitals needed to either reduce admissions or keep a discharged patient from going back into the hospital.

"If you look at the Medicare-coordinated care demonstrations, the ones that were successful really devoted a lot of resources to keep people from being rehospitalized," says Mr. Verdier. "Virtually none of the enhanced PCCM programs that we looked at really had the capability of doing those kinds of things." Therefore, programs aren't getting the kind of savings from reduced hospital use that might be needed to fund substantial enhancements.

"Now, if you are running a PCCM program that doesn't have a lot of enhancements and is not incurring a lot of costs, then the program can be cost effective for the state," says Mr. Verdier. "That is true even if it doesn't have a major impact on expensive services like hospitalization, because it's not incurring major costs."

This is because even a bare-bones PCCM program will provide some benefit to beneficiaries. "It's always good to be linked to a primary care physician and to have that physician be your link to appropriate specialist care. So, even a PCCM with mild enhancements is going to add some value to beneficiaries," says Mr. Verdier. "But it's a separate question whether they save enough money to pay for themselves."

Return on investment is difficult to compute, based on the experience of the five states in measuring their cost savings. "We tried to look at cost issues in the paper. The conclusion I came away with is that these estimates are really hard to do," says Mr. Verdier. "This kind of estimating is expensive to do well and takes a fair amount of time to come up with any conclusions. Also, you need fairly large groups. Otherwise, you don't get statistically reliable results."

Savings require resources

To get dramatic savings, PCCM programs must have a strong focus on avoiding hospitalizations and providing people with support as they leave hospitals. "The bottom line is that in the absence of those kinds of features, it's hard to achieve major savings," says Mr. Verdier. "It's not that difficult to have a valuable impact on the quality of care for enrollees at a relatively modest cost. But it's difficult to produce actual budget savings from doing those kinds of things. You may be providing better care and running a better program, but you are not necessarily saving a huge amount of money."

Low-cost changes include providing physicians with real-time information on prescription and emergency department use by their patients. "With Medicaid sharing claims for that kind of service use with physicians, situations may be identified where the beneficiary is getting drugs from more than one physician, which the physician would typically not know about," says Mr. Verdier. It would be more difficult for Medicaid to provide physicians with real-time information about patients going into hospitals, since the Medicaid agency doesn't know about this until the hospital submits the claim, oftentimes several months later.

"But in theory, Medicaid could require the hospital to inform the PCCM agency, who in turn could inform the physician when such an admission occurs," says Mr. Verdier. "That wouldn't require a lot of resources."

Medicaid programs also can send physicians comparisons of their own service use against statewide averages. "They can see where they compare with their colleagues and areas where they might improve," says Mr. Verdier. "That is another useful, fairly low-cost enhancement, which states are doing to good effect."

Contact Mr. Verdier at (202) 484-4520 or JVerdier@Mathematica-Mpr.com.