CHICAGO — The Medicare Physician Group Practice Demonstration achieved modest cost savings and quality enhancements in the project's first 2 performance years, researchers reported at the annual research meeting of AcademyHealth. Data released in August reinforce that finding.

The project involves 10 large, geographically diverse physician group practices with a total of 5,000 physicians caring for 200,000 Medicare fee-for-service beneficiaries. The practices include multispecialty groups, integrated delivery systems, faculty groups, and a physician network.

During each year of the project, each group was retroactively assigned a population of Medicare beneficiaries, with an average of 20,000 patients per group (range 10,000-37,000). Each group was held accountable for total Part A and Part B expenditures for these patients.

Patients had complete freedom of choice in providers and were not required to receive care through the participating group practice. However, only patients who received most of their outpatient evaluation and management for the year from the group practice were assigned to the group. Groups that kept increases in expenditures below 2 percentage points of their target growth rate shared up to 80% of the savings; Medicare retained 20%.

The group practices assumed all business risks associated with investments related to their participation in the demonstration, and there was no guarantee of savings.

“Savings are a function of the ability of the group to control growth in Medicare spending as well as changes in [health] status of their assigned population over time relative to their local market,” explained John Pilotte, a senior research analyst at the Centers for Medicare and Medicaid Services. The groups were free to make whatever investments and enhancements they felt were necessary to reach their quality and efficiency goals.

In the first year of the demonstration, two participating group practices earned a total performance payment of $7.3 million and two lost a total of $1.5 million, Gregory Pope of RTI International in Waltham, Mass., a nonprofit research and development firm working with the CMS, reported at the meeting. In the second year, four groups shared a total payment of $13.8 million and one lost $2 million. Savings to Medicare totaled $677,000 and $1.6 million for the first and second years, respectively.

Results for the third year were announced in August; five physician groups will receive performance payments totaling $25.3 million as part of their share of $32.3 million of savings generated for the Medicare Trust Funds in that year, the CMS announced.

Quality was assessed by the groups' adherence to 27 measures as indicated by Medicare claims and clinical records data. The measures covered heart failure, diabetes, coronary artery disease, hypertension, and preventive care.

In the third year, all 10 groups achieved benchmark performance on at least 28 of the 32 measures reported, according to the CMS. Two groups—Geisinger Clinic in Danville, Pa., and Park Nicollet Health Services in St. Louis Park, Minn.—achieved benchmark performance on all 32 performance measures.

Over the first 3 years of the demonstration, the physician groups increased their quality scores an average of 10 percentage points on 10 diabetes measures, 11 points on 10 heart failure measures, 6 points on 7 coronary artery disease measures, 10 points on 2 cancer screening measures, and 1 percentage point on 3 hypertension measures.

Additional research is needed to determine the keys to success, according to Mr. Pilotte of the CMS. “Trying to figure out how to make this work in a program that processes over 1 billion claims each year is not a small feat. … It takes a while to get these projects up and running both from our side of the house and the provider side.”

Although the group practices generally have sophisticated health information management systems and dedicated information technology leadership, “even that doesn't seem to be enough to control growth in expenditures.”

One key lesson learned so far during the demonstration is that “leadership and champions within the organization are really important,” Mr. Pilotte said. “All of these groups have someone who is on point for monitoring and reporting the quality metrics to us every year and developing mechanisms … to be able to capture the information.”

Another lesson learned is the importance of having quality measures consistent with clinical practice and high-quality care in order to achieve physician buy-in. “That's why we spent a fair amount of time early on with these physician groups on which measures we were going to use and to gain their support, because it really wouldn't be possible without them,” he said.

For more information, visit www.cms.hhs.gov/DemoProjectsEvalRpts/MD/list.asp

Joyce Frieden contributed to this report.

Medicare Group Demo Achieved Modest Savings