Reducing Long-Term Cost by Transforming Primary Care: Evidence From Geisinger's Medical Home Model

Published Online: March 16, 2012
Daniel D. Maeng, PhD; Jove Graham, PhD; Thomas R. Graf, MD; Joshua N. Liberman, PhD; Nicholas B. Dermes, BS; Janet Tomcavage, RN, MSN; Duane E. Davis, MD; Frederick J. Bloom Jr, MD, MMM; and Glenn D. Steele Jr, MD, PhD
Objectives: To estimate cost savings associated with ProvenHealth Navigator (PHN), which is an advanced model of patient-centered medical homes (PCMHs) developed by Geisinger Health System, and determine whether those savings increase over time.

Study Design: A retrospective claims data analysis of 43 primary care clinics that were converted into PHN sites between 2006 and 2010. The study population included Geisinger Health Plan’s Medicare Advantage plan enrollees who were 65 years or older treated in these clinics (26,303 unique members).

Methods: Two patient-level multivariate regression models (with and without interaction effects between prescription drug coverage and PHN exposure) with member fixed effects were used to estimate the effect of members’ exposure to PHN on per-member per-month total cost, controlling for member risk, seasonality, yearly trend, and a set of baseline clinic characteristics.

Results: In both models, a longer period of PHN exposure was signifi cantly associated with a lower total cost. The total cumulative cost savings over the study period was 7.1% (95% confi dence interval [CI] 2.6-11.6) using the model with the prescription drug coverage interaction effects and 4.3% (95% CI 0.4-8.3) using the model without the interaction effects. Corresponding return on investment was 1.7 (95% CI 0.3-3.0) and 1.0 (95% Cl –0.1 to 2.0), respectively.

Conclusions: Our fi nding suggests that PCMHs can lead to significant and sustainable cost savings over time.

(Am J Manag Care. 2012;18(3):149-155)
  •  Geisinger Health Systems has implemented its own version of patient-centered medical homes called ProvenHealth Navigator (PHN) since 2006. Our results demonstrate that the longer the member has been exposed to PHN sites, the lower the cost of care. The return on investment (ROI) has not yet signifi cantly exceeded the break-even point. However, because the magnitude of savings from PHN depends on the length of members’ exposure to PHN, it remains to be seen whether the cumulative ROI can eventually exceed the break-even point.

  •  Cost savings are achievable by redesigning primary care, but it takes time to reap the benefits.
At this time of national focus on the need to simultaneously improve quality and reduce cost, novel solutions are needed. The fragmented healthcare delivery system further adds to the challenge.1 The key stakeholders—physicians, patients, health insurers, and hospital administrators, as well as the federal government—now recognize the need for healthcare redesign to increase the quality of care while containing the cost of care.2 In particular, reorienting the current healthcare delivery system to one in which greater emphasis is given to more effective primary care is likely to be an important solution to the problem.3-5

Recently, patient-centered medical homes (PCMHs) have gained attention as a way to re-engineer the care-delivery process. In the broadest sense of the term, PCMHs refer to “provision of comprehensive primary care services that facilitates communication and shared decision-making between the patient, his/her primary care providers, other providers, and the patient’s family.”2 There is early but growing evidence that PCMHs have the potential to improve care for individuals, improve health of populations, and slow the growth in costs of healthcare by reviving primary care and bringing the patient and family to the center of the care-delivery system6-10 (ie, achieving the “triple aim).”5,11

The ultimate goal of PCMHs is to improve patient outcomes via redesigned primary care. The preventive aspect of primary care enhances the value proposition of PCMHs as a long-term intervention. Such an emphasis on primary care, therefore, implies that PCMHs may have the desirable effect of reducing cost of care. The early experiences of the PCMH demonstrations strongly suggest this.12 In this study, we explicitly explore this possibility by evaluating the effect of ProvenHealth Navigator (PHN), an advanced model of PCMHs developed and implemented by Geisinger Health System (Geisinger), since 2006 on cost of care.


PHN consists of the following 5 core program components: (1) patientcentered primary care, (2) integrated population management, (3) medical “neighborhood”13 (ie, alignment of key community partners, such as home health agencies, skilled nursing facilities, outpatient/ancillary services, hospital facilities, and community pharmacies), (4) comprehensive quality improvement, and (5) value-based reimbursement redesign that includes a quality, outcome-based pay-for-performance program. More detailed descriptions of how the PHN intervention was designed and implemented are published elsewhere.6,10,14

PHN is designed to move resources further “upstream” in the primary care setting to reduce “downstream” costs from the highest acuity settings. In this system, primary care is considered upstream in the sense that it serves as the starting point in the chain of care delivery. In general, care becomes more expensive as patients move downstream to specialty and inpatient care. Therefore, successful upstream efforts are expected to result in reductions of inpatient care–related costs due to fewer uncontrolled exacerbations of chronic diseases and more effective care transitions that prevent hospital readmissions and unnecessary duplication of services.

A PHN site refers to one of the primary care clinics that has been designated as such by Geisinger and has undergone significant changes in its management and operations in accordance with the PHN practice redesign. PHN was implemented in several phases over the 5-year period from late 2006 through 2010. At its core, the PHN intervention can potentially reduce cost over time while improving quality via:

• Prevention: redesigned primary care using automation to leverage resources and enhance reliability for early detection and interventions prior to exacerbations and complications

• Chronic disease optimization: redesigned primary care using a high-touch, high-technology approach to manage emerging exacerbations and to minimize complications

• Comprehensive care management: health-plan– trained, practice-embedded “concentrated care–RNs” who serve as nurse case managers focused on proactive identification and management of the more medically complex patients


This analysis focuses on individual members’ exposure to PHN by measuring how long a member has been exposed to a PHN site and examining whether a prolonged exposure to PHN is associated with a lower cost of care over time. It is expected that the longer the patient has been exposed to a PHN site, the greater the cost savings.

As shown in the Figure, a number of primary care clinics in the Geisinger Health Plan (GHP) provider network were selected and converted to PHN sites during each phase of the intervention. As a result, primary care clinics became PHN sites at different times. We exploit this variation in time of PHN conversion to estimate the effect of PHN exposure on total cost. The fi gure also shows the trends in average permember per-month (PMPM) total cost among clinics in each PHN implementation phase. For baseline clinic characteristics in each phase, see eAppendices A and B, available at

Our data originated from GHP’s claims database covering the period between January 1, 2006, and December 31, 2010. The unit of observation was member-month (ie, there was a unique record for each member for each month during which the patient was a GHP member). If the member did not have any claims for that month, claim amounts were recorded as $0. Our sample was restricted to GHP’s Medicare Advantage plan members who were at least 65 years of age during the study period (because PHN had focused primarily on the Medicare population during this time) and enrolled in 43 primary care clinics that eventually became PHN sites by the end of 2010 (37 with physicians employed by Geisinger and 6 non- Geisinger primary care practices). About 30% of all patients treated by practices with Geisinger-employed physicians are covered by GHP.

Two measures of PHN exposure were developed: First, a member-level PHN exposure measure was calculated as the number of months a member had been enrolled in a PHN clinic as of a given time. This exposure measure was then broken into 5 categories (0, 1-6 months, 7-12 months, 13-24 months, and >24 months) in order to capture any non-linear relationship between the cost of care and PHN exposure. Second, a clinic-level PHN exposure measure was also calculated as the number of months in which the clinic had been a PHN site as of a given period since its PHN conversion on the phase start date as shown in Figure 1.

The clinic-level PHN exposure variable is intended to capture the degree to which there might have been learning at clinics over time in accordance with PHN’s rapid-cycle innovation principle.14 This is in recognition of PHN’s being a dynamic program that has undergone continuous modifi cations over time while maintaining its core components. As such, it is diffi cult to determine exactly at what point the PHN sites transitioned from practice transformation and redesign to fully functioning PHN sites. Nevertheless, we hypothesize that the longer a clinic has been designated a PHN site, the greater its impact on cost of care.

In addition to the member-level and clinic-level PHN exposure variables as described above, the covariates included age and hierarchical condition categories (HCC) risk score to capture each member’s case mix along with year-indicator variables to capture the temporal trend in total cost over time as well as month-indicator variables to capture seasonality. Other covariates included a set of baseline clinic characteristics as of 2005 (ie, percentage of male patients and average patient age in 2005, along with average total cost, HCC score, and number of inpatient admissions and readmissions in 2005). These variables were intended to capture any underlying differences among different clinics which may be correlated with each member’s total cost during the study period.

The main outcome measure was the total cost of care, defined as the total allowed amount (plan payment to providers plus copayments) for a given member in a given month (per-member-per-month [PMPM]) which included payments for inpatient and outpatient facility and professional services, as well as prescription drugs. Less than 2% of the total member- month observations in our sample had 0-value total cost, because capitation payments for certain services, such as behavioral health, were refl ected in the total cost calculations.

Because there are multiple observations for each member, a member fi xed-effects model was used to account for these repeated measures as well as to remove any unobserved and time-invariant member characteristics that could have biased our estimates. In this model, we exploit the within-member variation in the total cost and the PHN exposure variable over time. Thus, each member acts as his or her comparison. In other words, the question that our model seeks to answer may be stated as the following: relative to his or her own cost at 0 PHN exposure, what is each member’s expected total cost at 1 to 6 months, 7 to 12 months, 13 to 24 months, and greater than 24 months, of exposure?

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