The American Journal of Managed Care
May 2015
Volume 21
Issue 5

Innovative Care Models for High-Cost Medicare Beneficiaries: Delivery System and Payment Reform to Accelerate Adoption

This paper illustrates how Medicare Advantage plans and accountable care organizations could benefit from adopting innovative care delivery models, and suggests policy changes to accelerate spread.


Objectives: About a third of Medicare beneficiaries are covered by Medicare Advantage (MA) plans or accountable care organizations (ACOs). As a result of assuming financial risk for Medicare services and/or being eligible for shared savings, these organizations have an incentive to adopt models of delivering care that contribute to better care, improved health outcomes, and lower cost. This paper identifies innovative care models across the care continuum for high-cost Medicare beneficiaries that MA plans and ACOs could adopt to improve care while potentially achieving savings. It suggests policy changes that would accelerate testing and spread of promising care delivery model innovations.

Study Design and Methods: Targeted review of the literature to identify care delivery models focused on high-cost or high-risk Medicare beneficiaries.

Results:This paper presents select delivery models for high-risk Medicare beneficiaries across the care continuum that show promise of yielding better care at lower cost that could be considered for adoption by MA plans and ACOs. Common to these models are elements of the Wagner Chronic Care Model, including practice redesign to incorporate a team approach to care, the inclusion of nonmedical personnel, efforts to promote patient engagement, supporting provider education on innovations,and information systems allowing feedback of information to providers.The goal of these models is to slow the progression to long-term care, reduce health risks, and minimize adverse health impacts, all while achieving savings.These models attempt to maintain the ability of high-risk individuals to live in the home or a community-based setting, thereby avoiding costly institutional care. Identifying and implementing promising care delivery models will become increasingly important in launching successful population health initiatives.

Conclusions: MA plans and ACOs stand to benefit financially from adopting care delivery models for high-risk Medicare beneficia- ries that reduce hospitalization. Spreading these models to other organizations will require provider payment policy changes. Integration of acute and long-term care would further spur adoption of effective strategies for reducing or delaying entry into long-term institutional care.

Take-Away Points

This paper presents 9 delivery models for high-risk Medicare beneficiaries in different settings that Medicare Advantage (MA) plans and accountable care orga- nizations (ACOs) could adopt to achieve better care at lower costs.
 Common to these models is a team approach to care, including nonmedical personnel, and providing care in home- or community-based settings to avoid costly institutional care.

Our review of the literature included intervention models such as Advanced Primary Care, Home-Based Primary Care, CAPABLE, MIND at Home, PACE, Hospi- tal at Home, Hospital Elder Life Program, Transitional Care, and INTERACT. Policy changes to permit MA plans, ACOs, and service providers to share Medicaid long- term care savings would further accelerate adoption.

About a third of Medicare beneficiaries are now covered by Medicare Advantage (MA) plans or accountablecareorganizations (ACOs).1 These organizations have an incentive to adopt innovations in care delivery that yield better care, improve patient outcomes, and lower costs.MA plans are at financial risk for the total cost of Medicare services, and Medicare ACOs are either at full or partial risk, or eligible for shared savings. Delivering care in a way that reduces the costly use of inpatient hospital care and emergency departments (EDs) helps these organizations to realize savings and gain market share.

Factors that place Medicare beneficiaries at risk for higher acute, post acute, and long-term care utilization and expen- ditures include age, number and type of chronic conditions, functional impairment, income level, and social support system (eg, living alone). Those Medicare beneficiaries with multiple chronic conditions, functional impairment, and low income, and/or who are living alone or in institutions, account for most Medicare expenditures and high rates of ED visits, hospitalizations, readmissions, and nursing home placements.2 These high-risk beneficiaries also tend to spend the most—5% of Medicare’s beneficiaries account for more than 40% of the costs.3,4


Despite the potential for savings, adoption of innovative care delivery models focused on the highest cost, highest risk patients is limited—in part, this reflects the need for large- scale testing of innovations in care delivery, as evidence is limited on what works and why. The Center for Medicare and Medicaid Innovation (CMMI) is starting to fill this gap with $10 billion in funding to experiment with innovative payment models and improved care delivery systems, as part of the Affordable Care Act.5-7 CMMI has launched a number of initiatives, with the primary focus on ACOs, bundled payments for care improvement, and primary care transformation.8,9 These initiatives have helped spur the development of ACOs, health systems, and advanced primary care practices. The first evaluation results for Pioneer ACOs indicate some modest success in improving care and lowering costs.10Better targeting of high-risk beneficiaries and the use of models that manage care across the continuum could yield greater savings. For the high-risk individuals who transition frequently across settings of care, to date less emphasis has been placed on specific tools or care models, which could enhance quality of care and patient experience, as well as to reduce cost ().

The largest obstacle to the diffusion of innovative delivery models that integrate care is a lack of aligned financial incentives and the presence of a fragmented payment system across different providers. MA plans often continue to pay providers on a fee-for-service basis, giving providers little incentive to provide lower-cost, higher-quality care. The closer integration of the insurance and provider functions, however, is starting to align provider incentives. Integrated delivery systems with MA plans or managed care at-risk provider contracts have the incentive to identify methods of providing better care at lower costs. This has spurred peer-to-peer learning and the creation of a Medicare Innovations Collaborative to provide technical assistance to promote the simultaneous adoption of multiple complex-care models.11

Collaborations will continue to grow as Medicare and other payers begin paying for total care for a population over time or over an episode, with accountability for quality and patient health outcomes.12Identifying interventions that prevent long-term nursing home admissions could yield significant savings, as non-alignment of incentives across providers, families, and social service agencies has been a barrier to the diffusion of models of care that reduce these admissions. Medicaid is responsible for many long-term care costs, adding more complexity in designing incentive strategies to reduce long-term care admissions.

This paper examines how integrated delivery systems, health systems, and MA plans bearing financial risk could benefit from adopting specific care delivery models across the care continuum that show promise of better results for high-risk Medicare beneficiaries. It also explores policy changes to create a global payment system, which is more amenable to implementing new care delivery models.

Innovations for High-Risk Medicare Populations

The budgetary pressure to bend the cost curve for Medicare beneficiaries is likely to persist or accelerate as those born after World War II become eligible for benefits. Since the majority of spending is concentrated among a minority of beneficiaries, the importance of appropriately targeting innovation initiatives on high-cost, high-risk subpopulations will increase. The diversity of beneficiaries by health status, functioning, living arrangements, and income suggests that rather than focus on a uniform program with uniform benefits, Medicare might look to adapt benefits and care delivery to the specific needs of Medicare beneficiary sub-groups based on their health risks. As the population ages, with unprecedented growth in the oldest cohort, considering the risks of long-term care as well as acute care grows in importance.

Table 1

describes characteristics of potential high-risk beneficiaries based on the authors’ estimates from the Health and Retirement Study for 2010.13Beneficiaries eligible for both Medicare and Medicaid are 4 times more likely to have 6 or more chronic conditions than beneficiaries with incomes 200% or more of the federal poverty level not covered by Medicaid, and they are 3 times more likely to have 2 or more restrictions in activities of daily living. Dual eligibles are more likely to live alone and more likely to be disabled than higher-income Medicare beneficiaries with incomes 200% or more of the federal poverty level. Those Medicare beneficiaries with incomes below 200% of the poverty level who are not covered by Medicaid are also more at risk than higher-income beneficiaries, with a greater likelihood of having multiple chronic conditions and functional impairments, as well as to be living alone.

To illustrate how strategies that target high-risk groups that are designed to achieve savings could work, we offer promising care delivery innovations as examples here. Interventions showing modest success have generally tried to improve coordination among the patient, family members, providers, and even social service agencies. All of the select innovations incorporate the major elements of the Wagner Chronic Care Model, including practice redesign, patient engagement, provider support and education, and information systems designed to furnish feedback of information to providers.14The Wagner Chronic Care Model is applicable to this high-risk Medicare population because most members have chronic conditions in addition to functional limitations. The model stresses the need for patients to be actively involved in their care, as well as practice redesign, ongoing provider education, and meaningful use of information systems. Successful models that are able to demonstrate savings will likely have some aspects of all 4 elements.

All patients benefit from better care from providers, but high-risk patients have the added challenge of moving across multiple care settings, from primary care to possibly the hospital and nursing home.15For the high-risk elderly, the care continuum starts with normal functioning in the home, with interventions needed in the primary care setting to maintain function. As the course of disease and aging continues, the elderly may need more support to stave off transitioning to nursing homes, in addition to coordinating care across multiple providers. For all elderly, reducing the number and severity of hospitalizations is crucial, and some interventions target this particular care setting. Lastly, high-risk elderly in nursing homes have their own set of needs to minimize transitions in and out of acute care settings.

Table 2


The illustrative care delivery model innovations examined here were selected because: 1) they have some evidence of improved care, better patient care experiences, and outcomes with lower cost; 2) they incorporate elements of the Wagner model; and 3) they encompass the full continuum of care (eg, primary care, home or community care, inpatient hospital care, transitional care from inpatient to post acute care, and long-term care). 16-24 provides a brief description of each model, its target population, and promising results from at least 1 evaluative study. The models selected point to the policy changes that would be required to create incentives for adoption. The (available at ) describes the models in more detail and highlights particular barriers to wider implementation.

Barriers to Spreading Innovations for High-Risk Elderly

Table 3

summarizes major obstacles to the diffusion of innovative models of care for high-risk older adults. These include the fact that savings associated with the delivery of more efficient care may accrue to Medicaid, families, or providers/parties other than those incurring the cost of the innovation, thereby diluting the return to the Medicare program and adopting organizations. To realize a return, eligible beneficiaries or organizations providing services may need to meet specific requirements to ensure likelihood of yielding the anticipated savings or outcomes. This might entail screening costs or administrative burdens on Medicare and participants, and may increase the risk of fraud or system gaming. Finally, upfront assistance with capital costs or the costs of training qualified personnel, or reinsurance against high-cost cases, may be required.

Barriers to adoption are particularly onerous in the long-term care setting. Incentives are not aligned across acute and long-term care sectors. Hospitals that reduce institutional care—for example, through reduction of delirium in at-risk hospitalization patients—incur added staffing costs, yet do not benefit from Medicaid long-term care savings that may result. Nursing homes do not benefit from initiatives that reduce hospitalization and, in fact, typically lose Medicare revenues for post acute care when residents are not hospitalized for acute illnesses. Further, the added costs of nursing home staffing to prevent or manage conditions typically requiring hospitalization are not compensated.

Payment approaches that stimulate integration of care across acute and long-term care services through sharing savings need further policy development. This is a particularly important issue for the dual eligible population. While not all at-risk Medicare beneficiaries are covered by Medicaid, lower-income Medicare beneficiaries with functional limitations are likely to eventually exhaust their financial resources and qualify for Medicaid. Interventions that reduce the need for long-term institutional care would not only benefit beneficiaries and their families, but ultimately lower Medicaid costs.

New Payment Models Key to Success

A key determinant of success will be designing payment models that show promise of achieving better out- comes and lower acute and long-term care costs. This could be the evolution of ACOs and MA plans to take financial risk for long-term care costs as well as Medicare services, or more modest steps such as Medicaid and/or Medicare payment of care management fees for services in the home and shared long-term care savings.

These examples of innovative delivery models have important implications for how Medicare and Medicaid payment models would need to change to capitalize on these promising innovations on a large scale. In all models, MA plans, integrated delivery systems, and ACOs are the most likely to benefit from shared savings initiatives due to aligned financial incentives that would accrue with reduced use of expensive Medicare services. However, even these organizations do not benefit from reduced Medicaid long-term care costs.

Table 4

summarizes the target populations and the services not currently covered by Medicare that are crucial to the delivery model innovations. In most cases, the noncovered services that are key to the delivery models are those provided by social workers or nurse case managers. Table 4 also highlights the source of total health and long- term care savings, which for high-risk beneficiaries mostly accrue from reduced hospitalizations and readmissions, as well as from reduced nursing home admissions. Additionally, Table 4 distills the payment changes needed to further align incentives and encourage adoption and spread of the delivery models, for fee-for-service providers, MA plans and provider organizations at financial risk for cost of care or sharing in savings, and Medicaid managed care plans.

The most obvious source of savings for MA plans and ACOs come from better management of high-risk beneficiaries in their homes or in nursing homes to avoid ED use and hospitalization. Models such as Hospital at Home and INTERACT should be especially attractive to MA plans and ACOs, as they effectively reduce costly hospitalization of Medicare patients. However, mounting these interventions in patients’ homes or in nursing homes requires upfront costs—in particular, the cost of providing services in patients’ homes, or training and supervising nurse aides in nursing homes, are not now typically incurred by MA plans and ACOs. Testing and refining effective models of care on a smaller scale and closely monitoring their impact may be needed to overcome this obstacle to implementation.


Innovative care delivery models for Medicare beneficiaries with physical and cognitive functional limitations show substantial promise of improving quality of life for these beneficiaries and their caregivers, as well as for reducing costs—especially costly long-term nursing home placements. MA plans and ACOs looking for care delivery innovations that could reduce cost of hospitalization could especially benefit from implementing the Advanced Primary Care, Independence at Home, Home-based Primary Care, Hospital at Home, Transitional Care, and INTERACT models of care delivery—all of which have potential to reduce hospitalization or readmissions. Other models such as CAPABLE, MIND at Home, PACE, show promise of helping at-risk Medicare beneficiaries continue to live independently at home by reducing or delaying nursing home placement; this has the potential to yield Medicaid savings. Medicaid managed care plans or those financially responsible for dual eligibles could well benefit from their adoption.

However, for most health plans and healthcare organizations, changes in Medicare policy will be required to permit shared savings for nursing home care and/or to cover the additional cost of nurse or social worker care management and other services such as providing training and support to family caregivers and handyman services that support independent living. Care management fees to cover these costs for a targeted group of high-risk beneficiaries who can most benefit from these interventions should be the focus of intensive demonstrations by the Center for Medicare and Medicaid Innovation. If successful, coverage of these care management fees and shared savings for organizations implementing these innovative care models would accelerate adoption and spread.

Author Affiliations:

Johns Hopkins Bloomberg School of Public Health (KD, FB, JLW), Baltimore, MD; Johns Hopkins University School of Medicine (BL, QMS), Baltimore, MD; Johns Hopkins University School of Nursing (SS), Baltimore, MD; RAND Corporation (CB), Ar- lington, VA.

Source of Funding:

The Commonwealth Fund.

Author Disclosures:

Dr Davis is a board member of Geisinger Health System and received funding for this work from The Commonweatlh Fund. Dr Leff has received royalties for Hospital at Home and has received a grant from the John A. Hartford Foundation for Hospital at Home; Johns Hopkins Medicine has an institutional consulting agreement with Centura Health Systems and Swedish Health Systems for services provided by Dr Leff regarding Hospital at Home. Dr Samus received a CMS Health Care Innovation Award dementia care coordination model. Drs Szanton, Buttorff, and Wolff and Mr Bandeali report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information:

Concept and design (KD, BL, SS); acquisition of data (CB, BL); analysis and interpretation of data (KD, BL, QMS, JW); drafting of the manuscript (KD, CB, FB, BL, QMS, SS, JW); critical revision of the manuscript for important intellectual content (CB, FB, KD, BL, QMS, SS, JW); statistical analysis (KD); obtaining funding (KD); administrative, technical, or logistic support (FB, KD); and supervision (KD).

Address correspondence to:

Karen Davis, PhD, 624 N Broadway, Rm 693, Baltimore, MD 21205. E-mail:


1. CMS proposes 2015 payment and policy updates for Medicare Health and Drug Plans [press release]. room/MediaReleaseDatabase/Press-releases/2014-Press-releases- items/2014-02-21-02.html. Published February 21, 2014. Accessed March 24, 2014.

2. Chronic conditions chartbook: 2012 edition. CMS website. http:// and-Reports/Chronic-Conditions/2012Chartbook.html. Published 2012. Updated April 25, 2013. Accessed November 6, 2013.

3. Wolff JL, Starfield B, Anderson G. Prevalence, expenditures, and complications of multiple chronic conditions in the elderly. Arch Intern Med. 2002;162(20):2269-2276.
4. A CBO paper: hight-cost medicare beneficiaries. Congressional Budget Office website. dispending.pdf. Published May 2005. Accessed February 2014.

5. Shrank W. The Center for Medicare and Medicaid Innovation's blueprint for rapid-cycle evaluation of new care and payment models. Health Affairs (Millwood). 2013;32(4):807-812.

6. Barr MS, Foote SM, Krakauer R, Mattingly PH. Lessons for the new CMS innovation center from the Medicare health support program. Health Aff (Millwood). 2010;29(7):1305-1309.

7. Davis K, Buttorff C, Leff B, Samus Q, Szanton S, Wolff J. For high-risk Medicare beneficiaries: targetting CMMI demonstrations on promising delivery models. Health Affairs blog website. blog/2014/04/22/for-high-risk-medicare-beneficiaries-targeting-cmmi- demonstrations-on-promising-delivery-models/. Published April 22, 2014. Accessed April 22, 2014.

8. Innovation models. CMS website. tives/index.html#views=models. Published 2013. Accessed December 4, 2013.

9. Bindman AB, Blum JD, Kronick R. Medicare payment for chronic care delivered in a patient-centered medical home. JAMA. 2013;310(11): 1125-1126.

10. Pioneer accountable care organizations succeed in improving care, lowering costs. CMS website. eleaseDatabase/Press-Releases/2013-Press-Releases-Items/2013-07-16. html?DLPage=3&DLSort=0&DLSortDir=descending. Published July 16, 2013. Accessed December 4, 2013.

11. Leff B, Spragens LH, Morano B, et al. Rapid reengineering of acute medical care for Medicare beneficiaries: the Medicare innovations col- laborative. Health Aff (Millwood). 2012;31(6):1204-

12. Guterman S, Davis K, Schoenbaum S, Shih A. Using Medicare pay- ment policy to transform the health system: a framework for improv- ing performance. Health Aff (Millwood). 2009;28(2):w238-w250.

13. RAND HRS Data Files, supported by NIA and SSA. RAND website. Accessed February 2014.

14. Wagner EH, Austin BT, Von Korff M. Organizing care for patients with chronic illness. Milbank Q. 1996;74(4):511-544. Review.

15. Lynn J, Straube BM, Bell KM, Jencks SF, Kambic RT. Using popula- tion segmentation to provide better health care for all: The “Bridges to Health” model. Milbank Q. 2007;85(2):185-208; discussion 209-212.

16. Steele GD, Haynes JA, Davis DE, et al. How Geisinger’s advanced medical home model argues the case for rapid-cycle innovation. Health Aff (Millwood). 2010;29(11):2047-2053.

17. Hughes SL, Weaver FM, Giobbie-Hurder A, et al; Department of Veterans Affairs Cooperative Study Group on Home-Based Primary Care. Effectiveness of team-managed home-based primary care: a randomized multicenter trial. JAMA. 2000;284(22):2877-2885.

18. Szanton SL,Thorpe RJ, Boyd C, et al. Community aging in place, advancing better living for elders: a bio-behavioral-environmental intervention to improve function and health-related quality of life in disabled older adults. J Am Geriatr Soc. 2011;59(12):2314-2320.

19. Samus QM, Johnston D, Black BS, et al. A multidimensional home- based care coordination intervention for elders with memory disor- ders: the Maximizing Independence at Home (MIND) Pilot Randomized Trial. Am J Geriatr Psychiatry. 2014;22(4):398-414.

20. Leff B, Reider L, Frick KD, et al. Guided care and the cost of com- plex healthcare: a preliminary report. Am J Manag Care. 2009;15(8): 555-559.

21. Weiland D. Five-year survival in a program of all-inclusive care for elderly compared with alternative institutional and home- and commu- nity-based care. J Gerontol A Biol Sci Med Sci. 2010;65(7):721-726.

22. Inouye SK, Bogardus Jr ST, Charpentier PA, et al. A multicompo- nent intervention to prevent delirium in hospitalized older patients. N Engl J Med. 1999;340(9):669-676.

23. Coleman EA, Parry C, Chalmers S, Min SJ.The care transitions intervention: results of a randomized controlled trial. Arch Intern Med. 2006;166(17):1822-1828.

24. Ouslander JG, Lamb G,Tappen R, et al. Interventions to reduce hospitalizations from nursing homes: evaluation of the INTERACT II collaborative quality improvement project. J Am Geriatr Soc. 2011;59(4):745-753.

Related Videos
Ali Khawar
Kimberly Westrich, MA, chief strategy officer of the National Pharmaceutical Council
ISPOR 2024 Recap
Phaedra Corso, PhD, associate vice president for research at Indiana University
Julie Patterson, PharmD, PhD
Nancy Dreyer, MPH, PhD, FISE, chief scientific advisor to Picnic Health
Neil Goldfarb, CEO, Greater Philadelphia Business Coalition on Health
Screenshot of Mary Dunn, MSN, NP-C, OCN, RN, during a video interview
Seth Berkowitz, MD, MPH, associate professor of medicine, University of North Carolina at Chapel Hill
Inma Hernandez, PharmD, PhD, professor at the University of California, San Diego Skaggs School of Pharmacy and Pharmaceutical Sciences
Related Content
CH LogoCenter for Biosimilars Logo