Editor’s note: The post is informed by a case study, the third in a series made possible through the Merkin Initiative on Physician Payment Reform and Clinical Leadership, a special project to develop clinician leadership in health care delivery and financing reform. The case study will be presented on Wednesday, September 24 using a “MEDTalk” format featuring live story-telling and knowledge-sharing from patients, providers, and policymakers. 

The Clinical Challenge: A Chronic, but Manageable Illness

Asthma affects 7 million children – more than 10 percent of kids in the U.S. – and is the most common chronic childhood disease. Yet even with high levels of insurance coverage, 46 percent of pediatric patients have uncontrolled asthma. There are substantial gaps in appropriate prescribing and adherence to effective medications. In addition, a multitude of non-medical issues influence a child’s ability to control their asthma: low parental health literacy, poor quality housing, and environmental triggers such as pests, mold, and cleaning chemicals. As a result 800,000 kids visit the emergency department (ED) for asthma each year.

In 2007 (the latest year which data are available) the U.S. spent over $56 billion on asthma care, of which nearly $27 billion was spent on pediatric asthma. Medicaid is the primary payer for pediatric asthma related hospitalizations with 55 percent of the market. Better control may also mean lower medical costs, due to reductions in ED visits, admissions, and other health care utilization – patients with poorly controlled severe asthma cost nearly $5,000 more per patient per year compared to average pediatric asthmatic costs.

How Can Care Be Improved?

Many initiatives are underway nationwide to improve outcomes and reduce avoidable costs for children with asthma. The Community Asthma Initiative (CAI) is an enhanced asthma intervention based at Boston Children’s Hospital. Eligible children are identified during an in-patient admission or an ED visit for asthma. With parental consent, the following services are provided:

  • A nurse or case manager coordinates services with the family and primary care provider, develops an asthma action plan (AAP), and refers to appropriate social services
  • A culturally appropriate Community Health Worker (CHW) provides up to three home visits to administer asthma education, assess health literacy, and check medication adherence
  • CHWs perform an environmental assessment to identify asthma triggers and provide remediation supplies such as a HEPA (high efficiency particulate arresting) vacuum cleaner or pest management supplies (e.g. bedding encasements and covered kitchen trashcans)

During the first three years, controlling for factors other than the CAI intervention, the CAI program cost of $254,871 was offset by an estimated $349,790 in savings from decreased ED visits and admissions. Adjusted return on investment (ROI) was 1.33.

In addition, the program saved an estimated $43,795 in missed work days and $47,062 in missed school days. As of March 2014, the program has served 1,264 patients and demonstrated both improved quality – for example, number of ED visits decreased from .84 to .31 and missed school days decreased from 5.73 to 3.02 from base to 12 month follow up – and health care cost savings.

Sustainable Asthma Solutions

Evidence from asthma treatment programs around the country demonstrate improved clinical outcomes when effective medical therapy is coupled with education and environmental remediation for severely asthmatic patients – an intervention rooted in public health. However, public and private payers have been slow to pay for the non-traditional services that improve outcomes and reduce costs for children with severe asthma through additions to the fee-for-service (FFS) insurance system.

In January 2014, a ruling by the Centers for Medicare & Medicaid Services (CMS) allowed greater latitude in service provision for Medicaid/Children Health Insurance Program (CHIP) beneficiaries. This rule change, in combination with existing flexibility for states through the Medicaid State Plan and demonstration waivers, allows for reimbursement of nontraditional providers in nonclinical settings as long as the service was initially recommended by a physician or other licensed practitioner. Even so, most Medicaid programs and private payers still do not pay for the non-traditional asthma interventions that improve outcomes (See Figure 1).

Consequently, many programs like the CAI have been funded through philanthropy and ad hoc grants, an approach which is difficult to sustain or implement systematically.


Health reform has established a spectrum of payment models that generate opportunities for enhanced value, by providing more flexibility in the services that are covered for particular patients, better incentives to promote appropriate prescribing and adherence to asthma medications, and greater accountability for achieving improvements in outcomes and reductions in costs.

While clinicians may be uncomfortable with the risk associated with greater accountability, especially if they are uncertain about their ability to achieve better results, new payment models can offer greater autonomy for them to support customized innovations that improve patient care and outcomes. These new payment models represent a shift from paying for volume to paying for value, and can be conceptualized across a continuum from expanded fee for service to a comprehensive person-centered payment.

Some states are using payment reforms to support innovative care:

  • Massachusetts is implementing a bundled payment pilot program for pediatric asthmatic patients served through a limited number of MassHealth (Massachusetts Medicaid) primary care clinics pursuant to an 1115 Medicaid waiver. Bundled payments provide a fixed reimbursement for a defined service and time period, but the payment can be used for a broader range of customized services than in fee-for-service. Because payments are tied to quality of care and results, the financial model encourages providers to manage patient care episodes and prevent avoidable complications. For pediatric asthma, this may include enhanced education and environmental remediation services for high-risk patients which are rarely reimbursed under fee-for service.
  • Arkansas is implementing a two-prong approach through the Arkansas Payment Improvement Initiative (APII): a 30-day bundled payment for acute asthma exacerbations and a population-based payment to support care through medical and health homes. This two-pronged approach assigns accountability to the providers who are managing the care episode. The APII model affords greater flexibility to providers to address the root causes of asthma, while providing stronger incentives to avoid inappropriate services.

Redesigning care and payment systems can be challenging, requiring steps to overcome issues in data quality, attribution models, infrastructure barriers, administrative complexity, and risk adjustment. However, with an effective implementation plan, data and support systems, payment reform can enable clinicians to direct additional resources to the treatment approach that makes the most difference for patients, including non-traditional services, without raising costs. Thus, these models of payment and delivery reform can provide a more sustainable approach to improving care for children with asthma.

Where Evidence-Based Medicine and Evidence-Based Policy Meet

We hope that you tune into the September 24 MEDTalk to hear about how programs, states, and CMS have approached new payment models to support care redesign in pediatric asthma. We will discuss what clinicians can do to redesign care and sustain these changes in their practice and what payment changes support optimal care.