The Impact of an Insurance Administration-Free Primary Care Office on
Hospital Admissions: A Community-Level Comparison to
Traditional Fee-for-Service Family Practice Groups
Mark D. Agee, Ph.D. Zane Gates, M.D.
Department of Economics UPMC Altoona
Pennsylvania State University 620 Howard Avenue
Altoona, PA 16601 Altoona, PA 16601
Keywords: Healthcare for the Uninsured, Hospital Admissions, Frequency of Office Visits, Case
Study, Insurance-Free Office, Healthcare Finance
Agee, M. D., & Gates, Z. (2014). The Impact of an Insurance Administration–Free Primary Care
Office on Hospital Admissions: A Community-Level Comparison to Traditional Fee-for-Service
Family Practice Groups. Journal of Primary Care & Community Health, 5(3), 202-207.
This study compares hospital admissions over a three year period (2009-2011) between a
community’s two major private, fee-for-service physician groups and an insurance
administration-free, hospital-affiliated clinic designed to provide a full array of primary care
services to low-income individuals at little or no cost. We use data on patients’ chronic
conditions and inpatient hospital admissions to compare patients’ average number of physician
office visits and overall hospital admission rates per 1000 patients. The data indicate that while
clinic patients have a higher (or equal) average number of chronic conditions compared with
patients in the private physician groups, they exhibit lower hospital admission rates. Clinic
patients also exhibit a higher average annual frequency of physician visits. Results of this study
suggest that enhanced access to primary care could help mitigate inefficient use of non-urgent
care hospital resources for the uninsured and reduce costly hospitalizations even in the short-run.
Administrative costs in U.S. primary care offices have been growing steadily over the last
forty years without improvements in overall patient health. Obesity and DM rates continue to
rise and according to The World Health Report (2000), the U.S. health system ranked 37th out of
its 191 members in health outcomes . The percent spent on billing and insurance in a single
specialty primary care office has risen to 14.5% of total revenue according to Kahn et al. .
While health insurance plans have taken steps to reduce the administrative time burdens they
place on physicians and clinical staff, physicians spend nearly three weeks per year, and nursing
staff nearly twenty three weeks per year, interacting with health plans. This time cost is
especially large for primary care offices, particularly small offices .
This paper examines the potential health outcomes benefits of a new approach to
ambulatory medicine, an insurance administration-free primary care office. The current patient-
centered medical home (PCMH) model initiatives around the country have shown promise [3,4],
although results vary [5,6]. Geisinger’s PCMH has shown a decrease of 56 admissions per 1000
patients in hospital admissions using the coordinated method [7,8]. The home model utilizes
nurse managers who coordinate the care between the patients, primary care physicians, and
subspecialists. However, managers are also responsible for maneuvering patients through their
individual insurance plans. The more variable the covered benefits and associated time costs
needed to administer patients’ insurance plans, the more difficult it is for managers to execute a
truly coordinated treatment plan. Also, cost is a key factor in patients’ choice of treatment plans.
With the advent of high deductible plans in the health exchanges, the RAND study showed that
with a $1000 dollar deductible policy, both low and high income patients chose to forgo certain
tests and procedures important to their preventive care . This contrasts with mounting
evidence that increased interaction with healthcare professionals leads to improvements in
patient well behaviors and health outcomes [10-13].
2. Study, Data, and Methods
This study compares Partnering for Health Services (PHS), a completely insurance
administration-free office located in Altoona, Pennsylvania, to the two largest primary care
groups in the Altoona, Blair County, Pennsylvania region: Blair Medical Associates (BMA), and
Mainline Medical Associates (MMA). BMA and MMA provide primary care under the
traditional insurance fee-for-service payment method to almost 60% of Blair County’s 127, 121
residents . BMA is a large multi-specialty group with a total of 40 physicians. We limit our
focus to the family practice portion of this group which consists of 16.5 fulltime equivalents
(FTE’S). MMA is Altoona’s second largest family practice group with 12.84 FTE’s. BMA and
MMA follow a patient procedure common to most insurance fee-for-service primary care offices
in the U.S.: The patient enters the office and is met by a receptionist who must process their
insurance information. The patient is then escorted by a nurse to an examination room. In the
examination room, the nurse assesses the patient’s perceived clinical symptoms and insurance
coverage. The physician then examines the patient and designs a treatment plan around the
patient’s insurance coverage. Finally, the patient stops at the receptionist a second time to pay
co-pays required by insurance. After the patient leaves the office a nurse must contact the
insurance company via telephone or electronically for approval of the treatment plan and any
tests ordered by the physician. The nurse must also inform the patient of the treatment plan and
discuss any barriers to compliance of the treatment plan due to cost.
PHS is a hospital-based family practice clinic started by Altoona Regional Health System
(ARHS) in 1999 as a way to divert uninsured patients away from the emergency department for
non-urgent services yet still provide the care they need. The clinic does not accept health
insurance for its primary care services, even though approximately 30% of PHS patients carry
hospitalization-only coverage. PHS is not a free clinic; rather it functions as a traditional full-
service doctor’s office, open 4.5 days per week, providing all types of primary care services,
diagnostic services, medications, and referrals to specialists within its network. PHS is an
affiliate of ARHS as a cooperative effort among ARHS, volunteer physicians, full-time paid
physician assistants, and patients. Patients are accepted into the practice by proof of no primary
care insurance, have household income up to 300% of the federal poverty level, and do not
qualify for Medicaid. For unlimited visits to the clinic with no co-pays or deductibles, patients
pay a monthly capitation fee based on income. Patients with household income up to 150% of
poverty level pay no fee; patients with income up to 300% of poverty level pay $99 per month.
Small business owners can also purchase an employee-based plan for $169 per month per
PHS’s patient procedure differs from that of a traditional insurance fee-for-service
primary care office. Initially, each patient is assessed clinically by a nurse. The physician then
examines the patient without insurance influence and designs a treatment plan based solely on
the clinical criteria set forth by the PHS providers using ACP guidelines. After the examination,
the patient meets one-on-one with a nurse care coordinator (or “nurse closer”) who counsels the
patient about the treatment plan and the patient’s role in the plan, reviews medications, sets up
referral appointments with any specialists, and orders all tests, prescriptions, and refills. The
patient then leaves the office without co-pays or deductibles. Clinic patients who are diagnosed
with chronic illnesses are encouraged to have frequent visits to the clinic. Dieticians and diabetic
educators are also embedded into the clinic’s model as part of a comprehensive treatment plan.
The forgoing analysis uses three years of data on unique (currently active) patients’
chronic health conditions, practice FTE’s, number of patient visits, and number of inpatient
hospital admissions to compare the PHS clinic to BMA and MMA in terms of overall patient
health and hospital admission rates. Data consist of all patients in the 18-64 age range currently
active at PHS, BMA, or MMA from 2009-2011. Hospital admission rates are compared among
the practices using average admissions per provider per 1000 patients.
Prevalence of Chronic Disease. Table 1 provides some basic summary health statistics
on the patient populations based on data obtained from the CFO’s of MMA and BMA [personal
communications, Val Mignogia, CEO, MMA; Charles Zorger, CFO, ARHS], and from the PHS
clinic nurse manager and hospital billing department [personal communication, Cloyd Beers,
Director]. We calculate group percentages of chronic diseases from the top five diagnoses
outlined by Vital and Health Statistics from NCHS . The five diagnoses determined by ICD-
9 codes of each patient visit are Hypertension (HTN), Cerebral Vascular Accident (CVA),
Coronary Artery disease (CAD), Diabetes (DM), and Chronic Obstructive Pulmonary Disease
(COPD). Percentages are calculated as the annual number of unique patients with each disease
divided by total annual unique patients. Since the annual percentages exhibit very little variation
over the 2009-2011 time range, Table 1 figures represent three-year averages.
Table 1. Provider Population Percentages by Chronic Disease Diagnosisa
aGroup percentages were compared using the
test; household income was compared using the
In Table 1, group percentages of HTN, DM, and CAD were significantly higher among
MMA patients. According to HCUP , CAD is the second leading cause of a hospital
admission. Among PHS patients, the prevalence of COPD (at 16.6%), the sixth leading cause of
a hospital admission, is significantly higher than BMA and MMA patients. BMA patients
exhibit the lowest prevalence of 4 of the 5 diseases, but do not differ significantly from PHS
patients with the exception of COPD prevalence. While MMA patients claim the highest
prevalence in 3 of the 5 categories, PHS patients exhibit the widest between-practice disparity in
COPD cases. One plausible explanation for this disparity is household income, as higher COPD
rates have been found to occur among unemployed or low income workers who either smoke or
work in jobs that expose them to dust or other respiratory hazards . However, with regard to
the other four diagnoses, no such income gradient is apparent.
Frequency of Provider Visits. Frequency of provider visits per patient was calculated
using data on actual appointments confirmed within the specific calendar year for all unique
patients ages 18-64. Since there were only slight annual differences in visit numbers across
PHS, BMA, and MMA over the 2009-2011 period, numbers are calculated as three-year
averages. In addition, due to slight differences in the number of unique patients per provider,
patient numbers were rounded to the nearest thousand to maintain consistency. This rounding
actually led to slightly lower average annual visits for PHS and higher average annual visits for
BMA and MMA patients.
Table 2. Average Annual Provider Visits for Unique Patients Age 18-64, 2009-2011
Patients Total Visits Average Annual Provider Visits
Table 2 shows BMA with a total of 46,100 visits from 17,074 unique patients averaging
2.7 visits per patient per year from 2009 to 2011. MMA recorded slightly lower average visits at
2.5 for its 12,938 unique patients. PHS recorded the highest number of average visits, totaling
4860 visits from its 986 unique patients, nearly twice that of MMA and BMA. One explanation
for this difference could be the PHS clinic’s design, which encourages patients to visit the clinic
often until control over their chronic illness is established. Another explanation might be that
PHS patients, once accepted, encounter no insurance-related access problems; also, clinic
physicians and staff engage in no insurance administration activities thus enabling them to see
Hospital Admissions. PHS, BMA, and MMA use the same hospitalist service,
Lexington Hospitalist, for their inpatient admissions. The eleven-group hospitalist rotates shifts
and has standing orders for most responsibilities including determination of the appropriateness
and the coordination of patient admissions and follow-up visits, providing bedside care,
managing consultations and communications with specialists, ordering labs and procedures, and
managing the discharge of patients . Lexington Hospitalist has no access to insurance
information of the patient, unless they request it, and treat each patient with predesigned
treatment protocols to assure no variability in management of patients amongst the primary care
physician, regardless of practice. Lexington Hospitalist provided data on admissions per each of
the three providers for the years 2009-2011. Data provided by the Altoona Regional Hospital’s
billing services was used to cross-check Lexington Hospitalist data for accuracy. Table 3
tabulates for each practice the average annual admissions per provider per 1000 patients.
Table 3. Average Annual Hospital Admissions per Provider per 1000 Patients
The average annual admission rate for BMA patients varied only slightly from 2009 to
2011 with a three-year average of 51.47 admissions per provider per 1000 patients. MMA’s rate
was slightly lower at 47.87. By comparison, the average admission rate for PHS was 26.67 per
provider per year, 21.2 fewer annual admissions than MMA (P = .002, 95% confidence interval
[CI] = -10.3, -32.7) and 24.8 fewer admissions than BMA (P < .001, 95% CI = -14.0, -36.2).
This study compared hospital admission rates from three primary care practices located in
community, Altoona, Blair County, Pennsylvania. Partnering for Health Services (PHS) is a full
service, insurance-free primary care practice serving low-income uninsured residents. Blair
Medical Associates (BMA) and Mainline Medical Associates (MMA) are the community’s two
largest traditional insurance fee-for-service primary care practices serving approximately 60% of
privately insured patients and 5% Medicaid patients. Data on patients’ chronic illnesses,
household income, number of provider visits, and number of hospitalizations were used to
compare among the three practices patients chronic health conditions, household income,
patient-physician visits, and hospitalization rates over the three year period, 2009-2011. Of the
three practices examined, the PHS clinic recorded the highest number of patient office visits
(nearly twice that of BMA and MMA) and the lowest number of hospital admissions (nearly half
that of BMA and MMA).
One possible explanation for PHS’s visits/hospitalizations numbers is the clinic’s
insurance administration-free model, reducing insurance-related access problems for qualified
low-income patients as well as eliminating the time physicians and nurses must allocate toward
administering health insurance. Recent research suggests the time burden associated with
insurance administration could be substantial [2,3,18]. According to Michelle Adams, Clinical
Director of Partnering for Health Services, based on her past experience in a traditional insurance
“When a patient has any type of insurance there are always numerous steps the provider
and office staff must take in order to ensure payment of the service for the patient. These steps
can be very time consuming and are usually spent on the phone with an insurance representative
anywhere from 30 to 60 minutes for the approval of one test for one patient. Of course, this step
is repeated multiple times each day, which consequently leads to less time directly spent on
patient care and education.”
Reflecting on her current role at the PHS clinic, Ms Adams remarks:
“…fortunately, PHS provides office visits, ancillary testing, hospital admissions,
emergency department visits, and, in most cases, consultations with specialists at low or no cost.
The PHS design not only greatly benefits patients from a financial perspective but also benefits
them from a healthcare delivery perspective. All our staff including the clerical staff, nurses and
providers have increased time to spend on direct patient care.” (Michelle Adams, PHS, personal
communication, August 19, 2013).
Our results are consistent with some prior research in which greater patient-physician
contact lead to improvements in patients’ health outcomes [10-13,19-21]. Whether this
increased contact improves patients’ ability to better follow treatment guidelines and/or
encourages patient activation (a patient’s willingness and ability to take independent action to
manage their health and care ), evidence from this research found that, even after disease
severity and demographic characteristics were controlled for, patients’ active engagement with
their healthcare providers resulted in lower rates of costly use of medical services such as
hospitalizations and emergency department visits. Albeit limited, there is also research
suggesting that patient engagement strategies applied to uninsured patients in a low or no cost
medical clinic setting results in significant improvements in patients’ management of their
chronic diseases [23-25]. The treatment and patient activation strategies examined in these prior
studies, which included a nurse-managed delivery system, evidence-based disease management
guidelines, and promotion of patient self-management, are very similar to the PHS model. The
PHS model is designed to aggressively manage chronic health conditions of the uninsured by
moving them from the outpatient setting to the inpatient setting. By design, the clinic provides
more face time with physicians, physician’s assistants, and nurses to provide care for chronic
illnesses. For example, by request of the clinic, diabetic patients are seen at PHS as often as
once or twice per week until control over their diabetes is established. COPD patients are also
encouraged to visit the clinic as early as possible upon onset of an exacerbation in order for the
clinic to monitor changes in their condition (see e.g., Lawlor et al. ). This approach would
be difficult for BMA and MMA to implement since insurance generates a variable cost with each
office visit due to the tasks of billing and processing co-pays and deductibles. Indeed, the
current U.S. health insurance market discourages frequent use of primary care services and
would dramatically increase premiums if every chronically ill patient would utilize services in
this manner [2, 3, 9]. The PHS’s cost is fixed; this cost does not change by increasing or
decreasing office visits because each patient’s visit does not generate a bill that must be
The PHS clinic also utilizes a “nurse-closer” whose role is to review test results, explain
and reinforce the treatment information provided by the physician, and explain and call in
prescriptions, thus strengthening the PHS clinic’s aggressive approach to managing chronic
conditions. According to the CEO’s of BMA and MMA [personal communications, Val
Mignogia, CEO, MMA; David Duncan, CEO, BMA], since the nursing staff spends nearly half
their clinical time processing insurance, both practices would have to increase their staff to make
available a nurse-closer to meet exclusively with every patient at discharge. Such an increase in
staff would make it difficult for the practices to maintain neutral operating margins.
Although the Patient Protection and Affordable Care Act (PPACA), when implemented
in full, projects 32 million additional Americans will acquire health insurance coverage, the
Congressional Budget Office estimates that 23 million people will remain uninsured. There will
also continue to be a large number of immigrants and others without access to insurance. Since
most of our Nation’s uninsured are low-income working households, their healthcare options are
limited even if they qualify for Medicaid. As a result, the uninsured often delay or forego
necessary primary and preventive healthcare due to cost and/or access problems. Most policy
makers, healthcare industry leaders, and healthcare providers agree that accessible primary care
for the uninsured can be long-run cost saving as early and preventive care costs less than use of
emergency department or inpatient services that might later be needed for undertreated chronic
health conditions. As such, communities, hospitals, and other healthcare providers will need to
continue exploring new mechanisms for providing primary care services to vulnerable
populations. The results of this study suggest that access to primary care could help reduce the
inefficient use of hospital resources for non-urgent care for the uninsured and thus reduce costly
hospitalizations even in the short-run.
In August 2013, the Pennsylvania General Assembly unanimously passed Senate Bill 5
(SB5), which makes available $10 million annually to the State Department of Health for grants
to hospital-based clinics . The $10 million appropriation is sufficient to fund a pilot program
to open 5 new clinics that replicate the PHS model of primary care delivery. Funding will cover
all salaries, operating and laboratory costs for a clinic of up to 1500 patients, as well as
additional money to expand the clinics’ range of care to improve prenatal, obstetric, postpartum
and newborn care. In addition, another $5 million annually will be made available as tax credits
to businesses that donate funds, products, or services to a hospital-based health care clinic.
SB5’s design was based in part on the record of success of the PHS clinic. For example, from
2009 to 2012, Altoona Regional Health System funded the PHS clinic’s operating costs and
salaries at an average annual cost of $1.36 million. On average, Altoona Regional realized an
estimated annual savings of $1.49 million in avoided emergency department visits and inpatient
admissions from uninsured patients, for a net annual savings of $201,414 .
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