Medicare Pilot Project Finds Wide Variation in Cost Savings

Savings achieved by some physician group practices participating in the Medicare Physician Group Practice Demonstration (PGPD) were offset by a lack of savings at other participating institutions, according to a report in the September 12 Journal of the American Medical Association.

Importantly, most of the savings were associated with care for dually eligible beneficiaries—those eligible for both Medicare and Medicaid—researchers at the Dartmouth Institute for Health Policy and Clinical Practice and colleagues found. They compared savings achieved by the PGPD program for all beneficiaries and for both dually and nondually eligible beneficiaries. The researchers examined preintervention (2001–2004) and postintervention (2005–2009) trends in spending of PGPD participants compared with practices not participating in the program. The study included 10 physician groups from across the United States.

There was significant variation in savings across practice groups, ranging from an overall mean per-capita annual savings of $866 to an increase in expenditures of $749.

Annual savings per beneficiary were modest overall, averaging $114. Annual savings were significant in dually eligible beneficiaries, however, with an average of $532 in savings, but were not significant among nondually eligible beneficiaries (averaging just $59).

The PGPD is similar to ongoing demonstration projects involving accountable care organizations (ACOs), which are mandated by the Affordable Care Act, the health care reform law. In the PGPD program, participating physician groups were eligible for up to 80 percent of savings they generated if they were also able to demonstrate improvement on 32 quality measures, including the adequacy of preventive care and the effectiveness of chronic-disease management.

“We know little about why some succeeded and others failed to achieve savings,” the authors noted. “One hypothesis is that organizations beginning with higher spending levels have greater opportunities to achieve savings. Other factors may have contributed to achieving higher levels of performance in some sites, such as governance models; internal leadership; physician engagement strategies; the degree of coherence of electronic health records and other health information technological tools; and the specific approaches adopted for chronic-disease management, care transitions, and quality improvement.”

“Our results suggest that the ACO reforms included in the Affordable Care Act … have at least the potential to slow spending growth, particularly for costly patients.”

In an accompanying editorial, Donald Berwick, M.D., M.P.P., former president and CEO of the Institute for Healthcare Improvement and former administrator of the Centers for Medicare and Medicaid Services, called the results for dually eligible patients—many of whom have mental illness—“important and encouraging.”

He said, “Most of the 9.2 million people in that Medicare subgroup receive poor, uncoordinated care in the status quo, and they account for over $300 billion in annual costs and 40 percent of state Medicaid expenditures.”

Berwick added, “[T]he substantial variation of results among PGPD sites offers hope for continual learning about best practices, and therefore, maybe, better results in more places over time.”