Cost-efficiency in the patient centered medical home model: New evidence from federally qualified health centers.

Abstract

This research analyzes the cost-efficiency of the Patient Centered Medical Home (PCMH) model vis-à-vis the traditional care delivery model in the Federally Qualified Health Centers (FQHC). We apply the three-stage least squares modeling approach on 2014 UDS data on all FQHCs to estimate per-visit and per-patient cost functions. Log-quadratic and linear-quadratic functional forms of cost are used for the analysis. The estimated models reveal substantial scale economies and cost advantages associated with PCMH status. Aggregate cost-saving impact of PCMH across all FQHCs in 2014 is estimated to be $1.05 billion. Simulations reveal that the PCMH impact on cost savings grows with the size of the patient population. Reaching the full cost-saving potential in PCMH-recognized FQHCs hinges on expanding the health workforce at all levels of care to meet the need of the growing patient population due to aging and Medicaid expansion. For FQHCs that are not PCMH-recognized, capacity/infrastructural expansion appears to be the immediate policy choice.