Two Medical Home Approaches Behind $1 Billion in N.C. Medicaid Savings

Monday, January 9th, 2012
This post was written by Patricia Donovan

Aggressive care management and preventive care saved North Carolina Medicaid nearly $1 billion over four years, according to a new analysis by Milliman Inc., a national healthcare consulting firm.

This latest report of savings in the Tar Heel State from patient-centered medical homes (PCMH) links the cost reductions to reduced hospital admissions, readmissions and emergency room visits, many of which are avoided when patient care is managed more efficiently.

The savings update was announced in a press release this week by the office of the state’s office governor, Bev. Perdue.

To provide medical homes, the state continues to partner with the Community Care of North Carolina (CCNC), a nonprofit group of local healthcare provider networks that provide and coordinate care for Medicaid recipients. The 14 regional CCNC networks since 1998 have pooled their resources for technological and administrative purposes, which not only saves operational costs but also provides opportunities for cooperation and collaboration throughout the networks.

With financial support from The Commonwealth Fund, CCNC has created a 16-module toolkit on constructing a medical home approach for vulnerable and high-cost populations.

The modules span everything from program development and rollout to IT support and informatics to establishing a network pharmacist program. There are also modules dedicated to a pregnancy medical home, integration of behavioral health and other populations.

CCNC has also created a workbook and resources for organizations pursuing recognition as a patient-centered medical home.

The Milliman report found that the key to the success of medical homes approach is a strong emphasis on preventative care, and aggressive care management. Although the cost of frequent office visits and treatment of newly diagnosed conditions adds to program costs initially, the reduction of emergency room visits and hospital admissions, as well as capturing of efficiencies and improving quality of care, results in significant savings and better health for the recipient.

The report by the San Diego-based accounting firm examined the impact of the state’s support for primary care medical homes – a system to coordinate healthcare for Medicaid recipients. Milliman’s report, which was required by the General Assembly, found that recipients with a medical home get better care and consumed fewer Medicaid resources than those who lack a medical home. From fiscal year 2007-2010, N.C. Medicaid avoided spending $984 million by having 1.1 million of its members enrolled into medical homes. In just the last two fiscal years of the study – 2009 and 2010 – $677 million was saved.

As N.C. Medicaid enrolled higher numbers of its members into a CCNC medical home, Milliman found annual savings increased—$103 million in fiscal year 2007 (July 1, 2006-June 30, 2007); $204 million in FY 2008; $295 million in FY 2009; and $382 million in FY 2010.

Milliman also reported that N.C. Medicaid is on a successful path to decrease cost by enrolling aged, blind or disabled (ABD) members into a medical home. Those Medicaid populations are generally the least healthy overall and costliest to treat. Enrollment into medical homes initially would add to the cost of caring for them but pays off in the long term. Indeed, Milliman found that in FY 2006, medical home enrollment of ABD populations cost the state an additional $82 million. But by FY 2010, enrollment of ABD Medicaid recipients into medical homes had paid off with the state avoiding $53 million in costs.

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