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Born with a rare heart defect, Kyler Westmoreland spent his first three months of life in the hospital.

"Doctors told us we were going to lose him," recalls his mom, Nicole Westmoreland. But he survived three open-heart surgeries, two strokes and two stomach surgeries.

"He was easily a million-dollar baby," says Nicole.

Kyler, now 4, continues to beat the odds. He's also racking up medical bills — not as high as that first year, but high enough to place him in a special class of health care consumers.

He is on Medicaid and ranks among the 20 percent who consume 80 percent of the health care the program provides.

Were it not for the watchful care of his pediatrician at Intermountain Healthcare's Sandy Clinic, Westmoreland is convinced, it could be worse.

Kyler could be among the 1 percent, or the 3,379 Medicaid clients who accounted for 25 percent of spending in 2010, a total of $400 million. The No. 1 consumer last year was a child with an abdominal defect and pulmonary hypertension whose bills exceeded $1.5 million.

States looking to trim their Medicaid budgets are targeting superusers, the sickest and priciest patients.

Most are elderly, disabled and in long-term care. A chunk are cancer patients, and kids with severe birth defects — "major medical conditions that aren't necessarily preventable," says state Medicaid Director Michael Hales.

But nationally there's a race to pioneer better ways to manage care for the medically fragile and people with chronic problems like asthma, diabetes and heart disease.

'She's like family' • Utah policymakers are pinning their hopes on a growing network of pediatric clinics like the one in Sandy. For kids like Kyler, who was born missing the left side of his heart, the Sandy Clinic is home, a medical home.

Nicole is usually able to schedule same-day or next-day appointments with her son's doctor, Lisa Palmieri.

"We have her pager number and cell. She's like family," says Nicole. "There's times when I've just shown up. Kyler can code at any time. His heart can just say, 'I'm done.' "

In early February, Westmoreland brought him in, worried because his oxygen levels were "all over the place." He had caught a cold, and though his fever had subsided, his cough made him wretch, which can aggravate a nerve regulating the heart.

Front-desk staff ushered him straight to an exam room, sparing his immune system from exposure to a waiting room of sniffling kids. "Hi Kyler. What's new?" greeted a nurse. "And how's everyone else feeling at home, Mom? Are you still in school?"

Introduced by the America Academy of Pediatrics in 1967, medical homes offer ready access to round-the-clock care catering to the whole family.

Because Palmieri intimately knows Kyler's family and medical history, she's able to intervene when a specialist orders a new treatment that's been tried and hasn't worked. She can pester his heart doctor to get lab results to the lung specialist, and make sure surgeries are scheduled at convenient times for his single, widowed mother.

"I'm kind of the circus ring-leader," says Palmieri.

The clinic also tends to families' nonmedical needs, such as referring them to counseling. "Sometimes siblings are jealous because their brother or sister is getting all the attention," says Palmieri.

Medicaid and Intermountain also pay to staff the clinic with a coordinator, Kathy Heffron, who connects families with educational and financial resources. "There's only two schools in valley that handle kids with severe disabilities," says Westmoreland. "Kathy is helping us navigate that."

Gold standard hurdles • Medical homes are the gold standard for kids with special health needs and have been shown to improve care through reduced emergencies and hospitalizations. New research suggests they may benefit all children.

But keeping them going and scaling up will require convincing insurance companies to pay doctors for the extra work they do.

And without proof the model saves money, that may not happen.

"Insurers always ask what's the ROI, or return on investment. The comment I get is, 'Pediatrics is not a big expense for us. And the quality of care we deliver here is already high, so the margins for savings and improvement are low,'" says Chuck Norlin, a professor and pediatrician at University of Utah Health Sciences.

Norlin oversees a $10.3 million federal grant to promote the spread of pediatric medical homes. Some of the money was used to train doctors. A third went to build protocols and place case managers like Heffron in 22 clinics serving 80,000 patients across the Wasatch Front.

But the grant runs out in 2013.

"He has some real sustainability issues ahead of him," said Lincoln Nehring, a health policy advocate at Voices for Utah Children.

Norlin wants to set up an insurance pool, to which all insurers contribute, that would pay doctors a flat monthly, per-patient fee.

So far, only Medicaid has agreed to participate. Private insurers have told Norlin it's not in their budgets.

'Problems that we couldn't crack' • Utah has tried payment reform before.

In 2008, lawmakers passed legislation setting up experiments involving diabetics and pregnant women — and later added Norlin's pediatric medical homes. They put HealthInsight, a consulting firm, in charge.

But the nonprofit's former vice president of medical affairs, Kim Bateman said, "We ran up against some really big problems that we couldn't crack."

Insurance claims are a burden and waste, explained Bateman, noting it costs $20 to $30 per office visit to create a claim and see it through.

But it's not just the cost of a claim, it's what it makes doctors do. Said Bateman, "Insurance pays three times more to remove a mole than observe it. It's cheaper to give an unnecessary antibiotic than it is to spend 15 minutes explaining to the patient why it would be better not to take it."

Bateman advocates paying doctors a retainer and allowing them to share in any leftover money, which frees them to innovate and sit with patients, instead of piling on more tests and treatments.

But, according to Bateman, insurers couldn't bring themselves to do that.

"Part of it was trust; they needed new billing systems to ensure that docs were doing what they say they were doing. And they weren't willing to alter their massive systems for a simple pilot," he said.

And doctors weren't willing to change their practices unless "all insurers were on board," he says. "If you have two masters and one pays more than the other, which master are you going to choose?"

There were data problems, too.

To measure results,HealthInsight needed to compare the health spending and outcomes of patients inside the experiment to patients getting traditional care. To do that they needed access to the Utah Department of Health's repository of insurance claims, the All Payer Database (APD).

"The APD was concerned about the sensitivity of the data and releasing it on their own terms," Bateman said. "We just didn't have a data source."

In the meantime, federal health reform passed, and changed all the rules.

An unproven payoff • State-based reform is still alive; Utah plans to steer Medicaid patients into managed care networks known as Accountable Care Organizations, which would pay doctors monthly per-patient retainers.

"Everyone expects ACOs to be looking at the medical home model to manage care and cut costs," said Nehring.

But Medicaid's superusers, the disabled and mentally ill, aren't included in the experiment. Norlin can't yet prove his model improves care or saves money.

Several clinics, including the one in Sandy, are only now analyzing data.

"With kids it's hard to prove short-term gains because they're generally healthy," Norlin said. "Often with preventive care the pay off is 10, 20 or 30 years down the road."

Palmieri is convinced it makes a difference with her patients. She estimates if she "cranked higher patient volumes" she would spare herself three to five hours of unpaid work a week. "I'd get home earlier in the evenings," she said.

But the close ties she has with families is personally gratifying, she said. "This is how I prefer to practice medicine. I wouldn't have it any other way."

Kyler is stable but hasn't seen the last of big medical bills. He needs special therapy to overcome developmental delays from oxygen deprivation. He had a fourth heart surgery in 2008 and will eventually need a transplant.

There's no avoiding that, said Palmieri. "But I can keep him out of the hospital and ER."

kstewart@sltrib.comTwitter: @kirstendstewart —

Utah's 20 most expensive Medicaid patients in 2011

Most of the high-cost Medicaid patients in Utah are disabled or mentally ill. Some might benefit from better preventive care and disease management.

$1.5 million

A child with birth defects, an abdominal defect and pulmonary hypertension

$1.3 million

Adult with heart and lung disease and gastrointestinal problems, treated for a heart attack

$1.3 million

Adult with two types of leukemia and complications with respiratory and renal disease


Adult female with depression, diabetes and in need of a bone marrow transplant


Adult with congenital heart defect


Adult with hemophilia treated for a head injury


Premature birth


Premature birth


A child with a diaphramatic hernia, pulmonary problems, pneumonia and a liver abnormality, in need of a liver transplant


Premature birth


Premature birth


A baby with severe kidney problems


Premature birth


An adult with leukemia, melanoma and breast cancer


A child with lymphoma


A quadriplegic adult with hypertension and renal failure


A mentally ill adult with type II diabetes, renal failure, acute respiratory failure and chronic metabolic disease


An adult who had complications from chemotherapy


An adult with heart disease who had a heart attack and a stroke


An adult with leukemia

Total: $16.4 million —

More about Kyler

O Visit Nicole Westmoreland's blog.