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Study: Medical Homes Saved North Carolina Nearly $1 Billion

The idea of medical homes — a method of coordinating medical services that relies on primary care physicians to manage patients' care — has been around for more than 40 years. North Carolina, a leading innovator in the field, has used medical homes to improve care and lower costs in its Medicaid program since 1991.

Now, the federal Affordable Care Act is encouraging all states to experiment with the model by offering to pay for 90 percent of the costs for the first two years. But few studies have identified the savings that can be achieved from this type of program.

This month, a study commissioned by the North Carolina legislature found that Medicaid recipients in a medical home program got better care and consumed significantly fewer state dollars than those who received traditional fee-for-service care. According to the study by actuarial firm Milliman Inc., North Carolina avoided spending $984 million by placing 1.1 million Medicaid enrollees in medical homes between fiscal years 2007 and 2010.

In general, medical homes provide a monthly per patient fee for primary care practices that agree to coordinate their patients' care with other health care providers. In some cases, physician practices also receive bonuses based on clinical outcomes.

Doctors in the program make it easier for patients to get preventive care, and teach them techniques for managing their chronic diseases. Hallmarks of the model include same-day appointments and expanded office hours, assigning the same personal physician to each patient for every visit, monitoring the care patients receive outside of the doctor's office and using health information technology and improved forms of communication, such as emails, to keep patients better informed about their conditions and treatments.

In North Carolina, Milliman used Medicaid claims data to compare the costs incurred by recipients enrolled in one of the state's 14 regional medical home programs to those of patients that were not. Researchers found that more frequent office visits and treatment of newly diagnosed conditions initially added to per person costs in the medical homes program. But fewer emergency room visits and hospital admissions, combined with greater efficiencies and improved care resulted in better health and sizeable savings over the longer term, the report says.

As North Carolina enrolled more of its Medicaid beneficiaries in medical homes, Milliman found annual cost reductions increased. The state saved $103 million in fiscal year 2007, $204 million in 2008, $295 million in 2009 and $382 million in 2010.

Nationwide, more than 3,000 practices and 15,000 doctors and nurse practitioners are certified as providers of medical homes by the National Committee for Quality Assurance (NCQA), a non-profit health care group that started recognizing medical home practices in 2009. Other accrediting organizations have more recently entered the field as the medical home model has gained traction in both the public and private health sectors. Of the total number of primary care practices accredited by NCQA, 228 are in North Carolina.