Comparing total Medicare costs for patients receiving primary care in Federally Funded Health Centers, physician offices and outpatient clinics

We compared total (primary and non-primary) annual costs of care for Medicare beneficiaries receiving primary care in Federally-Funded Health-Centers (HCs) to those receiving care in physician offices and outpatient clinics.  We modeled separately total annual costs, annual primary care costs, and annual non-primary care costs as a function of patient characteristics (such as age, gender, race, Medicare eligibility, severity) and Primary Care Service Area (PCSA) fixed effects.  Inference was based on robust standard errors, and sensitivity analyses were conducted. Non-primary care costs included inpatient, emergency room, and specialty outpatient care costs.  Models were stratified by age (over and under 65). The sample included Part A and B claims for over 4 million Fee-For-Service Medicare beneficiaries from 14 states in 2009.  Costs increased with duration of insurance coverage, age, female gender, and illness severity, and differed by race. HC beneficiaries had total annual costs ($2370 for the median patient) that were 10% lower than those of physician office beneficiaries ($2,667), and 30 percent lower than those of outpatient clinic beneficiaries ($3,580).  This was due to lower non-primary care costs in HCs. Annual primary care costs were higher among beneficiaries receiving care in HCs compared to those seen in physician offices by 19 percent, and lower compared to those seen in outpatient clinics, by 23-25 percent. HCs might, therefore, offer a lower total cost alternative to CMS.  However, before policies encouraging beneficiaries to seek care in HCs are adopted, studies comparing the quality of care HCs provide should also be performed.