Report finds new model of care can improve quality, lower costs and increase physician efficiency

December 02, 2004

(LEAWOOD, Kan.) - A report released today by America's family physicians projects that widespread implementation of the New Model of care recommended in the recently released "Future of Family Medicine" report would lead to increases in efficiency and compensation for family physicians, improved quality of care and satisfaction for patients and significant savings for the U.S. healthcare system. The findings, which are published as an online supplement to the November/December 2004 issue of Annals of Family Medicine, are based on practice- and societal-level financial models developed by the national consulting firm, The Lewin Group.

Following on the recommendations laid out in the report, the AAFP late last month approved the creation of a New Model Practice Resource Center to provide on-going consultation and support to family medicine practices across the country looking to transform to the New Model. The initial focus of of the Practice Resource Center is to develop, implement and evaluate a 'proof of concept' National Demonstration Project to pilot test the New Model of care in 10-20 family medicine practices of varying sizes across the country.

Based on the concept of a relationship-centered personal medical home for all Americans, the New Model of care includes a number of characteristics, including the following, which are listed in order of importance to patients based on focus group interviews conducted as part of the report:Practice-level financial models described in the report show that by implementing the New Model of care in the current fee-for-service system of reimbursement, a typical five-physician practice could use the increases in productivity created by the New Model to expand the time spent with each patient or reduce their hours worked by 12 percent. Alternatively, those same family physicians could increase their total compensation by up to 26 percent by working the same number of hours as before.

"In larger numbers than ever, family physicians are saying they want exactly what patients want - to spend more time with patients and less time pushing paper," said Dr. Michael Fleming, a member of the task force charged with developing the report and board chair of the AAFP. "The good news is that the New Model of care, with its emphasis on electronic health records and advanced information systems, can make that wish a reality. When it comes down to it, the New Model of care allows doctors to become more efficient and more patient-centered."

Macroeconomic financial models indicate the New Model also has important implications for system-wide health care spending. According to the report, widespread implementation of the New Model, because of its renewed focus on primary care services, would likely result in a significant reduction in health care expenditures by all payers, including employers, government and individuals. Models suggest that if every American used a primary care physician as their usual source of care, health care costs would likely decrease by 5.6 percent, resulting in a national savings of $67 billion dollars per year, with a significant improvement in the quality of the health care provided.

"This analysis shows that the New Model of care is not only what patients want, but it is viable," said John Sheils, vice president of The Lewin Group. "The New Model has real potential to propel the U.S. health care system toward improved performance and results that are satisfying to patients, health care professionals, purchasers and payers."

Financial models developed by The Lewin Group also show that modifications to the current fee-for-service reimbursement system, such as payments for e-mail consultations, chronic disease management and the introduction of quality-based physician incentive bonus payments, could lead to further improvements in compensation for family physicians practicing the New Model of care. The authors further posit that the adoption of a mixed reimbursement model, which would add an annual per-patient fee, a chronic care bonus, and an overall performance bonus to the current reimbursement system, could increase total annual compensation by 66 percent over current compensation levels.

"Today's family physicians are caught in a productivity squeeze," explained Fleming. "They are working harder, putting in longer hours, and their overhead keeps going up. Increasing expenses and declining reimbursements are forcing many primary care physicians out of practice."

The year 2003 was the third consecutive year that increases in production outpaced increases in compensation, according to the Medical Group Management Association's 2004 Physician Compensation and Production Survey. Median compensation for family physicians increased 3.7 percent, from $148,992 in 2002 to $154,463 in 2003, while median gross charges, or the total amount billed, increased 11.6 percent, from $439,068 to $489,913, according to the 2004 Medical Group Compensation & Financial Survey. The widening gap between compensation and charges illustrates how much harder family physicians are working for their reimbursement.

"The trends are disturbing. We're going to need more, not fewer, primary care physicians in the future, yet the current disparities discourage medical students from choosing careers in primary care. We must take immediate steps to assure the financial viability of primary care in order to ensure access to care and better health for all Americans," urged Fleming.

Researchers included in the financial modeling 10 features of the New Model that have a direct effect on practices and are most amenable to modeling, including open access scheduling, online appointments, electronic health records, group visits, e-mail consultations, chronic disease management, Web-based patient information, a team approach to care, the use of clinical practice guideline software and outcomes analysis.

The New Model Practice Resource Center is designed to assist family physicians in transforming their practices to the New Model of Family Medicine. The initial focus of the Practice Resource Center is to develop, implement and evaluate a National Demonstration Project that will provide on-going consultation and support to demonstration practices and assist them with the implementation of technology. The Center, a wholly-owned, for-profit subsidiary of the AAFP, will be established in the first quarter of 2005.

While the initial focus of the Practice Resource Center will be to support the pilot practices, future plans call for the Center to expand its service offering to family physicians across the country. In future phases, the Center will provide family physicians in small to medium-size group practices fully integrated and prepackaged products and services, including the expertise and experience with implementing the New Model with ease. By forging partnerships with technology vendors, developing customized and integrated product and service packages, refining existing products to meet family physicians' needs and providing consultation, advice and training to practices, the Practice Resource Center will assist family medicine practices in transitioning to the New Model of Care. An initial offering of Practice Resource Center products and services to early adopters of the New Model is expected in 2006.

The two-year National Demonstration Project was approved by the AAFP Board of Directors in November 2004 as one of the first initiatives to be undertaken by the Practice Resource Center and is anticipated to launch in September 2005. Pilot practices selected to participate in the project will implement fully all elements of the New Model and undergo thorough, real-time evaluation to determine empirically the model's impact on the quality of care and business performance. A final report is expected in late 2007.

"Family physicians are enthusiastic about the New Model and what it can mean for their practices and for the future of health care in this country, but they are skeptical about the viability of the New Model in today's health care system," explained Fleming. "They want demonstrated proof that it will enhance patient care, improve efficiency and increase revenues."

The pilot projects will include a wide variety of practice types and sizes, reflective of the diversity in family medicine practices across the country, so family physicians will be able to see just how the New Model affects practices similar to theirs. Practices will be recruited on a competitive basis based on a number of factors, including practice size, age, location, ownership, arrangement and revenue. All practices chosen to participate will demonstrate a commitment to transformative practice change and collaborative learning.

Pilot practices will be provided with free software technology, training, support and evaluation services for the duration of the project and will be reimbursed for participation in the project. They will participate in periodic meetings and conference calls, and a dedicated e-mail discussion group and Web site will be created to provide a forum for collaboration between the practices.

"There is a palpable urgency for change among family physicians, and the AAFP is committed to moving forward quickly and decisively with the New Model of care," said Fleming. "Pilot testing in the real world will give practicing physicians an objective view into how this new approach might affect their patients and their practices, and the Resource Center will provide them with the support and resources they need to transform to the New Model."

"Transition to the New Model of care will not be easy," Fleming said. "Practices will incur transition costs, but the evidence suggests that physicians will see a rapid return on their investment. The Academy's goal is to make this process as turn-key and financially attainable as possible."

According to the report, the estimated cost of transitioning to the New Model ranges from $23,442 to $90,650 per physician, depending on the temporary productivity loss associated with implementing an electronic health records system. The authors assert that a physician could expect to recoup his share of transition costs in one to two years.

"Any viable solution to the current crisis in American health care must have both a systems and a patient focus. The New Model has both, and we are excited about the possibilities it has for the future of health care in this country. We are moving forward with a vision and a purpose to reshape how America's health care is delivered," said Fleming.
Annals of Family Medicine is a peer-reviewed research journal that provides a cross-disciplinary forum for new, evidence-based information affecting the primary care discipline. Launched in May 2003, the journal is sponsored by six family medical organizations, including the American Academy of Family Physicians, the American Board of Family Practice, the Society of Teachers of Family Medicine, the Association of Departments of Family Medicine, the Association of Family Practice Residency Directors and the North American Primary Care Research Group. The journal is published six times each year and contains original research from the clinical, biomedical, social and health services areas, as well as contributions on methodology and theory, selected reviews, essays and editorials. A board of directors with representatives from each of the sponsoring organizations oversees Annals. Complete editorial content and interactive discussion groups can be accessed free of charge on the journal's Web site,

Editor's Note:
Recommendations from the "Future of Family Medicine" report, released as a supplement to the March/April 2004 Annals of Family Medicine, led to the formation of Task Force 6 in January 2004. The Task Force, comprised of 15 representatives with expertise in health economics, healthcare financing, healthcare policy and practice management, was charged with formulating and recommending financial models that sustain and promote thriving family medicine and primary care practices. The Task Force utilized the efforts of a national consulting firm, The Lewin Group, to develop its report. Model assumptions were derived from the published medical literature, existing practice management databases and discussions with experienced physicians and other content experts. The work of Task Force 6 was funded by the American Academy of Family Physicians.

American Academy of Family Physicians

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