Medicare Physician Payment
Care Coordination Programs Used in Demonstration Show Promise, but Wider Use of Payment Approach May Be Limited Gao ID: GAO-08-65 February 15, 2008Congress mandated in 2000 that the Centers for Medicare & Medicaid Services (CMS) conduct the Physician Group Practice (PGP) Demonstration to test a hybrid payment methodology for physician groups that combines Medicare fee-for-service payments with new incentive payments. The 10 participants, with 200 or more physicians each, may earn annual bonus incentive payments by achieving cost savings and meeting quality targets set by CMS in the demonstration that began in April 2005. In July 2007, CMS reported that in the first performance year (PY1), 2 participants earned combined bonuses of approximately $7.4 million, and all 10 achieved most of the quality targets. Congress mandated that GAO evaluate the demonstration. GAO examined, for PY1, the programs used, whether the design was reasonable, and the potential challenges in broadening the payment approach used in the demonstration to other physician groups. To do so, GAO reviewed CMS documents, surveyed all 10 groups, and conducted interviews and site visits.
All 10 participating physician groups implemented care coordination programs to generate cost savings for patients with certain conditions, such as congestive heart failure, and initiated processes to better identify and manage diabetes patients in PY1. However, only 2 of the 10 participants earned a bonus payment in PY1 for achieving cost savings and meeting diabetes quality-of-care targets. The remaining 8 participants met most of the quality targets, but did not achieve the required level of cost savings to earn a bonus. Many of the participants' care coordination programs were not in place for all of PY1. CMS's design for the PGP Demonstration was generally a reasonable approach for rewarding participating physician groups for achieving cost-savings and quality-of-care targets, but created challenges. CMS's decision to use comparison groups, adjust for Medicare beneficiaries' health status, and include a quality component in the design helped ensure that bonus payments were attributable to demonstration-specific programs and that cost-savings were not achieved at the expense of quality. However, the design created challenges. For example, neither bonuses nor performance feedback for PY1 were given to participants until after the third performance year had begun. CMS provides participants with quarterly claims data sets, but most participants report they do not have the resources to analyze these data sets and generate summary reports on their progress and areas for improvement. The large relative size of the 10 participating physician groups (all had 200 or more physicians) compared with most U.S. physician practices (less than 1 percent had more than 150 physicians) gave the participants certain size-related advantages that may make broadening the payment approach used in the demonstration to other physician groups and non-group practices challenging. Their larger size provided the participants with three unique size-related advantages: institutional affiliations that allowed greater access to financial capital, access to and experience with using electronic health records systems, and prior experience with pay-for-performance programs.
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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
February 2008:
Medicare Physician Payment:
Care Coordination Programs Used in Demonstration Show Promise, but
Wider Use of Payment Approach May Be Limited:
GAO-08-65:
GAO Highlights:
Highlights of GAO-08-65, a report to congressional committees.
Why GAO Did This Study:
Congress mandated in 2000 that the Centers for Medicare & Medicaid
Services (CMS) conduct the Physician Group Practice (PGP) Demonstration
to test a hybrid payment methodology for physician groups that combines
Medicare fee-for-service payments with new incentive payments. The 10
participants, with 200 or more physicians each, may earn annual bonus
incentive payments by achieving cost savings and meeting quality
targets set by CMS in the demonstration that began in April 2005. In
July 2007, CMS reported that in the first performance year (PY1), 2
participants earned combined bonuses of approximately $7.4 million, and
all 10 achieved most of the quality targets. Congress mandated that GAO
evaluate the demonstration. GAO examined, for PY1, the programs used,
whether the design was reasonable, and the potential challenges in
broadening the payment approach used in the demonstration to other
physician groups. To do so, GAO reviewed CMS documents, surveyed all 10
groups, and conducted interviews and site visits.
What GAO Found:
All 10 participating physician groups implemented care coordination
programs to generate cost savings for patients with certain conditions,
such as congestive heart failure, and initiated processes to better
identify and manage diabetes patients in PY1. However, only 2 of the 10
participants earned a bonus payment in PY1 for achieving cost savings
and meeting diabetes quality-of-care targets. The remaining 8
participants met most of the quality targets, but did not achieve the
required level of cost savings to earn a bonus. Many of the
participants‘ care coordination programs were not in place for all of
PY1.
CMS‘s design for the PGP Demonstration was generally a reasonable
approach for rewarding participating physician groups for achieving
cost-savings and quality-of-care targets, but created challenges. CMS‘s
decision to use comparison groups, adjust for Medicare beneficiaries‘
health status, and include a quality component in the design helped
ensure that bonus payments were attributable to demonstration-specific
programs and that cost-savings were not achieved at the expense of
quality. However, the design created challenges. For example, neither
bonuses nor performance feedback for PY1 were given to participants
until after the third performance year had begun. CMS provides
participants with quarterly claims data sets, but most participants
report they do not have the resources to analyze these data sets and
generate summary reports on their progress and areas for improvement.
Gap between Completion of First Performance Year and Expected Bonus
Payments:
[See PDF for image]
This figure is an illustration of the Gap between Completion of First
Performance Year and Expected Bonus Payments. The following data is
depicted:
Performance Year 1: April 1, 2005 - April 1, 2006; Number of months:
12.
Performance Year 2: April 1, 2006 - April 1, 2007; Number of months: 12
(extended to 15, through July 1, 2007); April 2007: Cost-savings
feedback for PY1; Mid-June 2007: Cost-savings and quality-of-care
bonuses for PY1; July 2007: Bonus payments distributed for PY1.
Performance Year 2: April 1, 2007 - April 1, 2008; Number of months:
12.
Source: GAO analysis of GMS data.
Note: The 15-month period includes the typical 6-month period necessary
for CMS to process a sufficient number of claims to meet its 98 percent
complete claims threshold that it uses for analysis.
[End of figure]
The large relative size of the 10 participating physician groups (all
had 200 or more physicians) compared with most U.S. physician practices
(less than 1 percent had more than 150 physicians) gave the
participants certain size-related advantages that may make broadening
the payment approach used in the demonstration to other physician
groups and non-group practices challenging. Their larger size provided
the participants with three unique size-related advantages:
institutional affiliations that allowed greater access to financial
capital, access to and experience with using electronic health records
systems, and prior experience with pay-for-performance programs.
What GAO Recommends:
CMS should provide participating physician groups with interim summary
reports that estimate participants‘ progress in achieving cost-savings
and quality-of-care targets. CMS agreed with the intent of GAO‘s
recommendation.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-65]. For more information, contact
Kathleen M. King at (202)512-7114 or kingk@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Participating Physician Groups Implemented Care Coordination Programs
Designed to Achieve Cost Savings and Management Processes to Meet CMS-
Set Diabetes Quality-of-Care Targets in PY1:
CMS's PGP Demonstration Design Was Generally a Reasonable Approach, but
Created Challenges:
Participating Physician Groups Had Several Size-Related Advantages,
Which May Pose Challenges in Broadening the Payment Approach Used in
the Demonstration to More Participants:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: New and Expanded Programs Implemented by the 10
Participating Physician Groups for the PGP Demonstration:
Appendix III: Reported PGP Demonstration-Related Start-up and Operating
Costs for New and Expanded Programs:
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Description of the Participating Physician Groups in the
Physician Group Practice Demonstration:
Table 2: CMS's Demonstrations Related to Physician Pay-for-Performance:
Table 3: Percentage of FTEs Devoted to Largest New and Expanded Care
Coordination Programs Implemented by PGP Demonstration Participants,
PY1:
Table 4: Management Processes Developed or Enhanced by Participating
Physician Groups to Meet Diabetes Quality-of-Care Targets, PY1:
Table 5: Range and Average of Initial Start-up and PY1 Operating
Expenditures Reported by Participating Physician Groups, by Program
Type and Order of Average Amount Spent, 2005:
Figures:
Figure 1: Illustration of CMS Bonus Payment Methodology for PGP
Demonstration, Performance Year 1:
Figure 2: Medicare Spending Growth Rate of Participating Physician
Groups Relative to Their Comparison Group and the 2 Percent Threshold
in PY1:
Figure 3: Percentage of New and Expanded Programs Implemented by
Participating Physician Groups:
Figure 4: Gap between Completion of First Performance Year and
Performance Feedback and Bonus Payments:
Figure 5: Relative Proportion of Physician Practices in the United
States, by Practice Size, 2005:
Abbreviations:
ASC: ambulatory surgical center:
BIPA: Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000:
CAD: coronary artery disease:
CAH: critical access hospital:
CHF: congestive heart failure:
CMS: Centers for Medicare & Medicaid Services:
COPD: chronic obstructive pulmonary disease:
E&M: evaluation and management:
EHR: electronic health record:
FFS: fee-for-service:
FTE: full-time equivalent:
HCC: hierarchical condition category:
HEDIS®: health plan employer data and information set:
IRMA: Integrated Resources for the Middlesex Area:
IT: information technology:
IVR: interactive voice response:
MedPAC: Medicare Payment Advisory Commission:
MGMA: Medical Group Management Association:
NCQA: National Committee for Quality Assurance:
PGP: physician group practice:
PY1: performance year one:
PY2: performance year two:
PY3: performance year three:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 15, 2008:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable John D. Dingell:
Chairman:
The Honorable Joe Barton:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Charles B. Rangel:
Chairman:
The Honorable Jim McCrery:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
Medicare spending for physician services paid through Medicare's Part B
fee-for-service (FFS) program grew rapidly from 2000 to 2006,
increasing from $37 billion in 2000 to $58 billion in 2006, at an
average annual growth rate of almost 8 percent, outpacing the national
economy's annual average growth rate for that period of 5.2
percent.[Footnote 1] Growth in Medicare spending for physician services
has heightened congressional concerns about how physicians are
reimbursed under the Medicare FFS payment system as well as the long-
term fiscal sustainability of the Medicare program. The Medicare
Payment Advisory Commission (MedPAC) and other experts believe that the
method for paying physicians under the current Medicare FFS payment
system is contributing to the rapid growth in Medicare
expenditures,[Footnote 2] because the FFS payment system generally does
not encourage physicians to make efficient use of resources, encourage
coordination of physician services with services paid under the
Medicare Part A program,[Footnote 3] or encourage improvements in
quality of care. Some private sector insurers that pay physicians on an
FFS basis have recently implemented payment systems, referred to as pay-
for-performance, in which a portion of a physician's or hospital's
payment is based on meeting performance measures designed to improve
the quality of care. Congress mandated in the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA)[Footnote
4] that the Centers for Medicare & Medicaid Services (CMS), the agency
that oversees the Medicare program, conduct demonstrations to test
incentive-based alternative payment methods for physicians reimbursed
under Medicare FFS. The Physician Group Practice (PGP) Demonstration
was the first of several physician pay-for-performance demonstrations
CMS has implemented. In line with BIPA's mandate and the ongoing
concerns about growth in Medicare spending for physician services,
CMS's PGP Demonstration aims to encourage the coordination of Part A
and Part B services, promote efficiency through investment in
administrative processes, and reward physicians for improving health
outcomes.[Footnote 5]
CMS's PGP Demonstration tests a hybrid payment methodology that
combines Medicare FFS payments with a bonus payment that participating
physician groups can earn by demonstrating savings through better
management of patient care and services and meeting quality-of-care
performance targets. Performance for the demonstration is based on the
success of the entire physician group practice, and not on the
individual performance of any one physician. CMS stated that it chose
to focus on large physician group practices because these organizations
influence a significant amount of Medicare expenditures and have
sufficient Medicare beneficiary volume to calculate Medicare savings or
losses under the demonstration. CMS initially designed the PGP
Demonstration for a 3-year period and recently, December 2007,
continued the demonstration for a fourth performance year. CMS
solicited participation from physician practices across the United
States, and selected 10 physician group practices with at least 200 or
more physicians that were multispecialty physician groups, which had
the capacity to provide a variety of types of clinical
services.[Footnote 6] The first year of the demonstration, referred to
as performance year one (PY1), ran from April 1, 2005, through March
31, 2006, and the fourth performance year will end on March 31,
2009.[Footnote 7]
In July 2007, CMS reported the results of PY1. As a result of their
efforts, 2 of the 10 participating physician groups participating in
the PGP Demonstration earned a performance bonus payment. Specifically,
the Marshfield Clinic and the University of Michigan Faculty Group
Practice earned bonuses of approximately $4.6 million and $2.8 million,
respectively. As a part of the overall design of the demonstration, to
obtain bonus payments, each participant had to generate cost savings to
Medicare of more than 2 percent relative to a unique comparison group
of Medicare beneficiaries intended to be similar to Medicare
beneficiaries treated by that participant.[Footnote 8] Only
participants that earned this cost-savings portion of the bonus also
were eligible to increase their bonus payments if they met certain
disease-specific, quality-of-care performance targets. CMS selected 10
diabetes management measures as the quality-of-care performance
targets, and in PY1, all 10 participants achieved 7 or more of CMS's 10
quality-of-care targets. Performance year two (PY2) and performance
year three (PY3) used the same bonus payment methodology, with two
exceptions: (1) other disease-specific quality measures are phased in
over time and (2) the share of any bonus earned by meeting quality
targets increases each year. While the specific quality-of-care
measures for each year were selected by CMS, each participating
physician group had the latitude to determine what programs--such as
patient care coordination and administrative processes--it would
implement to both generate cost savings and meet the quality measures.
No one savings or quality management program was required to be
implemented uniformly.
BIPA required us to report on the progress of the PGP Demonstration. As
discussed with the committees of jurisdiction, in this report we
examined for the first performance year of the demonstration: (1) what
actions the participating physician groups took to achieve cost savings
and meet the CMS-set, diabetes quality-of-care targets, (2) the extent
to which the PGP Demonstration design was a reasonable approach to
rewarding participating physician groups for cost-savings and quality
performance, and (3) potential challenges involved in broadening the
payment approach used in the demonstration from the 10 large
participating physician groups to other physician groups and nongroup
practices.
To determine the programs used by the participating physician groups
for the PGP Demonstration, we analyzed data we collected through
written questionnaires and interviews. We supplemented this information
by conducting site visits to 5 of the 10 locations.[Footnote 9] We
included in our analysis new programs or expansions of existing
programs created in response to the demonstration. To determine the
extent to which the PGP Demonstration design was reasonable, we
analyzed documents on the overall design and bonus payment methodology
we obtained from CMS, analyzed data collected through the
questionnaire, and used interviews we conducted with representatives of
the participating physician groups and CMS. We also reviewed and
analyzed CMS documents on the design of the PGP Demonstration. To
determine the potential challenges involved in broadening the payment
approach used in the demonstration to other physician practices, we
compared selected characteristics of the 10 participating physician
groups with all physician practices in the United States, and we also
relied on interviews with the participating physician group practices,
CMS officials, and relevant industry experts. In doing our work, we
tested the reliability of the data and determined they were adequate
for our purposes. We conducted this performance audit from May 2006
through December 2007 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
For additional details of our scope and methodology, see appendix I.
Results in Brief:
To achieve cost savings in the PGP demonstration, all 10 participating
physician groups implemented care coordination programs that focused on
specific patient populations, such as those with congestive heart
failure (CHF), that the participants believed were the most likely to
generate cost savings. However, only 2 of the 10 participants earned a
bonus payment in PY1 for achieving cost savings and meeting quality-of-
care targets. The remaining 8 participants met 7 or more of CMS's 10
quality-of-care targets in PY1, but were not eligible for bonus
payments because they did not achieve the required level of cost
savings. To meet the quality-of-care targets set by CMS for PY1 on 10
diabetes measures, such as whether a beneficiary's blood pressure was
at the recommended level, participants generally initiated processes to
better identify patients with diabetes, improve documentation of
diabetes-management-related exams and tests completed, and provide
feedback to physicians on achievement of the targets. All 10
participating physician groups reported that their care coordination
programs were making progress in both achieving cost savings and
providing broader benefits to their programs and communities because,
for example, demonstration program initiatives were typically
implemented for all patients in a physician's care regardless of
whether they were part of the demonstration. Despite early positive
indicators of cost savings, the full impact of programs implemented for
the PGP Demonstration, particularly in care coordination, is largely
unknown for a variety of reasons, including that many programs were not
in place for all 12 months of the first performance year.
CMS's design for the PGP Demonstration was generally a reasonable
approach for rewarding physician groups in the demonstration for cost
savings and quality performance, but created challenges. CMS's decision
to use comparison groups and adjust for differences in health status
among Medicare beneficiaries helped ensure that bonus payments
reflected programs and incentives attributable to the demonstration. In
addition, having a quality component of the design helped ensure that
participating physician groups did not achieve cost savings at the
expense of quality. However, the demonstration design created a
particular challenge for CMS in providing timely performance feedback
and bonus payments to the participating physician groups, which, if
received, may have enabled them to improve their programs.
Specifically, neither bonuses nor performance feedback for PY1 were
given to participants until after PY3 began. While CMS has begun to
provide each participant with a quarterly patient claims data set
related to beneficiaries it served, most participants reported they did
not have the necessary resources to analyze and use these data sets to
determine their progress and areas for potential improvements.
Participants also raised additional concerns about the demonstration's
design, including the use of a uniform 2 percent savings threshold for
all participants, which may have made earning a bonus more challenging
for particular providers. CMS officials indicated that they planned to
examine these issues as part of their evaluation at the conclusion of
the PGP Demonstration.
The large relative size of the 10 participating physician groups
compared with most U.S. physician practices gave the participants
certain size-related advantages that may make broadening the payment
approach used in the demonstration to other physician groups and
nongroup practices challenging. Whereas all physician groups
participating in the demonstration had 200 or more physicians, less
than 1 percent of all physician practices nationwide had more than 150
physicians. In addition to the number of physicians, participants were
larger in terms of their annual medical revenues and staff size. Their
larger size provided the participating physician groups with three
unique size-related advantages: institutional affiliations that allowed
greater access to financial capital, access to and experience with
using electronic health records (EHR) systems, and experience prior to
the PGP Demonstration with pay-for-performance programs. For example, 8
of the 10 participants had an EHR, which was essential to participants'
ability to gather data and track progress in meeting quality-of-care
targets; only about 24 percent of physician practices in the U.S. had a
full or partial EHR in 2005. Most participating groups believed these
three advantages were critical to achieving cost savings and improving
quality.
We recommend that the Administrator of CMS provide participating
physician groups with interim summary reports that estimate their
progress in achieving cost-savings and quality-of-care targets. In
commenting on a draft of this report, CMS agreed with the intent of our
recommendation. CMS stated that it was developing a new quarterly
report and refined data set to aid physician groups in monitoring their
performance, coordinating care, and improving quality.
Background:
Physician groups with at least 200 physicians were eligible to apply
for the PGP Demonstration and 10 were selected by CMS. (See table 1.)
CMS's technical review panel evaluated each applicant based on its
organizational structure, operational feasibility, geographic location,
and demonstration implementation strategy.[Footnote 10] Collectively,
the 10 participating physician groups are all multispecialty practices
comprising more than 6,000 physicians who provide care for more than
220,000 Medicare FFS beneficiaries. While all the participants have at
least 200 physicians, group practice size varies widely, ranging from
232 to 1,291 physicians. Except for the Marshfield Clinic, all
participants identified themselves as integrated delivery systems that
include, in addition to their group practice, other health care
entities such as hospitals, surgical centers, or laboratories.[Footnote
11] Nearly all of the participants have nonprofit tax status, except
for the Everett Clinic and the Integrated Resources for the Middlesex
Area (IRMA), which are for profit. Overall, a majority of the 10
participants are located in small cities and serve either predominantly
rural or suburban areas. These participants provide care over wide
geographic areas by using satellite physician group office locations,
ranging from 10 to 65 physician group office locations.
Table 1: Description of the Participating Physician Groups in the
Physician Group Practice Demonstration:
Participating physician group: Billings Clinic;
Description of participants' affiliations and the geographic area
served: A physician group practice that is part of an integrated
delivery system, which includes a general hospital, a skilled nursing
facility, and other facilities. The system also operates a private
health insurance plan. Its geographic service area includes the city of
Billings, Montana, south-central Montana, and northwestern Wyoming, a
predominantly rural area;
Number of physician group office locations: 10;
Number of physicians in the physician group[A]: 232.
Participating physician group: Dartmouth-Hitchcock Clinic;
Description of participants' affiliations and the geographic area
served: A faculty/community group practice that is a part of an
integrated delivery system, which includes an academic medical center,
an ambulatory surgical center (ASC), and a laboratory. Its geographic
service area includes New Hampshire and eastern Vermont, a
predominantly rural area with small cities;
Number of physician group office locations: 35;
Number of physicians in the physician group[A]: 907.
Participating physician group: The Everett Clinic;
Description of participants' affiliations and the geographic area
served: A physician group practice that is a part of an integrated
delivery system, which includes two ASCs, a radiology center, a
laboratory, but no general hospital. Its geographic service area
includes the city of Everett, Washington, and west-central Washington,
a predominantly suburban area;
Number of physician group office locations: 10;
Number of physicians in the physician group[A]: 250.
Participating physician group: Geisinger Health System;
Description of participants' affiliations and the geographic area
served: A physician group practice that is part of an integrated
delivery system, which includes three general hospitals, a home health
agency, two specialty hospitals, and other facilities. The system also
operates a private health insurance plan. Its geographic service area
includes central-northeast Pennsylvania, a predominantly rural area
with small cities;
Number of physician group office locations: 55;
Number of physicians in the physician group[A]: 833.
Participating physician group: Integrated Resources for the Middlesex
Area;
Description of participants' affiliations and the geographic area
served: An independent practice association that provides management
services to a network of physicians and physician groups that are part
of an integrated delivery system. The system includes a general
hospital, a home health agency, an ASC, and other facilities. Its
geographic service area includes south-central Connecticut, a
predominantly suburban area with small cities;
Number of physician group office locations: 57;
Number of physicians in the physician group[A]: 293.
Participating physician group: Marshfield Clinic;
Description of participants' affiliations and the geographic area
served: A physician group practice without affiliations with other
facilities, it operates a private health insurance plan. Its geographic
service area includes the city of Marshfield, Wisconsin, and north-
central Wisconsin, a predominantly rural area;
Number of physician group office locations: 41;
Number of physicians in the physician group[A]: 1,039.
Participating physician group: Novant Medical Group;
Description of participants' affiliations and the geographic area
served: A physician group practice that is part of an integrated
delivery system, which includes two general hospitals, two skilled
nursing facilities, and a laboratory. Its geographic service area
includes the small urban area of Winston-Salem, North Carolina, and
other parts of northwestern North Carolina, a predominantly rural area;
Number of physician group office locations: 44;
Number of physicians in the physician group[A]: 250.
Participating physician group: Park Nicollet Health Services;
Description of participants' affiliations and the geographic area
served: A physician group practice that is part of an integrated
delivery system, which includes two general hospitals and a home health
agency.[B] Its geographic service area includes suburban areas adjacent
to Minneapolis-St. Paul, Minnesota, and south-central Minnesota, a
predominantly suburban area;
Number of physician group office locations: 29;
Number of physicians in the physician group[A]: 648.
Participating physician group: St. John's Health System;
Description of participants' affiliations and the geographic area
served: A physician group practice that is part of an integrated
delivery system, which includes six general hospitals, six home health
agencies, an ASC, and other facilities. The system also operates a
private health insurance plan. Its geographic service area includes the
city of Springfield, Missouri, as well as south-central Missouri and
northwest Arkansas, predominantly rural areas;
Number of physician group office locations: 65;
Number of physicians in the physician group[A]: 522.
Participating physician group: University of Michigan Faculty Group
Practice;
Description of participants' affiliations and the geographic area
served: A faculty group practice that is a part of an integrated
delivery system, which includes an academic medical center, two other
general hospitals, a home health agency, two ASCs, and other
facilities. The system also operates a private health insurance plan.
Its geographic service area includes the city of Ann Arbor, Michigan,
and southeastern Michigan, a predominantly suburban area with small
cities;
Number of physician group office locations: 28;
Number of physicians in the physician group[A]: 1,291.
Source: GAO.
[A] The number of physicians includes physicians and physician
extenders--those who can bill Medicare as physicians, such as physician
assistants.
[B] Park Nicollet Health Services has full ownership of one general
hospital and partial ownership of a second.
[End of table]
Demonstration Design, Including Bonus Payment Methodology:
Under the PGP Demonstration's design, participating physician groups
are eligible to earn annual cost-savings bonuses for generating
Medicare program savings. Participants that received cost-savings
bonuses were also eligible to receive additional bonuses for meeting
certain quality targets. Both the cost-savings and quality bonuses are
in addition to payments physicians receive under Medicare FFS. There
are three main steps in CMS's bonus payment methodology to determine
which participants are awarded bonus payments and the amount of these
bonuses: (1) determination of eligibility for performance bonus
payments, (2) determination of the size of the bonus pool, and (3)
determination of actual bonus payments earned. (See fig. 1.)
Figure 1: Illustration of CMS Bonus Payment Methodology for PGP
Demonstration, Performance Year 1:
[See PDF for image]
This figure includes both data describing the bonus payment methodology
as well as graphical illustrations of the same. The following data is
depicted:
Step 1, Determination of eligibility for bonus payment: CMS determines
whether a participating physician group is eligible for a demonstration
bonus based on whether the participant generated annual Medicare
savings greater than 2% of its target expenditures.
-Medicare program savings generated by the participating physician
group in excess of 2% of its target expenditure amount.
Step 2, Determination of size of bonus pool: 80% is available as a
bonus pool to the participating physician group; 20% is considered
Medicare program savings.
Step 3, Determination of actual bonus payment earned: Of the bonus pool
of savings available: 70% is awarded as a cost-savings bonus; Up to 30%
is awarded (for those who received the cost-savings bonus) to those who
also meet diabetes quality targets for PY1. Any unearned portion is
considered Medicare program savings. Total actual bonus payment = cost-
savings bonus (70% of bonus pool) received + quality bonus received (up
to 30% of bonus pool).
Source: GAO analysis of CMS data.
Notes: CMS retained a share (25 percent) of the actual bonus earned by
participating physician groups in Performance Year 1 to protect against
any potential losses in future performance years. Spending increases in
excess of 2 percent, relative to a comparison group of beneficiaries
intended to have similar characteristics, of the spending target are
carried forward as losses and deducted from any bonus earned in future
years. The total actual bonus earned cannot be greater than 5 percent
of the participating physician group's original spending target. If it
is higher, it will be reduced to the 5 percent level.
[End of figure]
For the first step of the bonus payment methodology, to determine
eligibility for receiving bonus payments, participating physician
groups had to generate savings greater than 2 percent of their target
expenditure amounts, relative to a comparison group of beneficiaries
intended to have similar characteristics. CMS stated that the purpose
of the 2 percent savings threshold was to further account for the
possibility of random fluctuations in expenditures rather than actual
savings. CMS also stated that it used separate comparison groups for
each of the participants to distinguish the effect of the
demonstration's incentive payments from trends among Medicare
beneficiaries unrelated to the demonstration. Operationally, Medicare
beneficiaries were assigned to the comparison groups or to the
participating physician groups retrospectively at the conclusion of
each performance year, using Medicare claims data sent to CMS by
providers following the delivery of care. As a part of the process of
selecting beneficiaries for each comparison group that were similar to
those served by the participating physician group they were being
compared with, CMS ensured that beneficiaries (1) resided in the same
geographic service areas as the beneficiaries assigned to the
corresponding physician group;[Footnote 12] (2) had received at least
one office or outpatient service, referred to as an evaluation and
management (E&M) service, in that performance year;[Footnote 13] and
(3) had not received any E&M services from the corresponding physician
group that year or had been assigned to the participant's group of
beneficiaries in any previous performance year.
For step two, determining the size of the bonus pools, participating
physician groups that generated savings beyond the 2 percent threshold
were eligible to receive up to 80 percent of those savings as potential
bonuses. The remaining 20 percent, and all other savings not awarded to
the participants,[Footnote 14] were retained by the Medicare program.
In the third step, the determination of actual bonus amounts earned,
eligible participating physician groups could receive up to the full
amount available in their bonus pools as cost-savings bonuses and
quality-of-care bonuses. Specifically, for PY1, 70 percent of the bonus
pool was awarded as a cost-savings bonus to participants who met the 2
percent cost-savings threshold, and up to 30 percent of the bonus pool
could have been awarded as a quality-of-care bonus, for those who met
the cost-savings threshold. The quality-of-care bonus was awarded to
participants that met or exceeded various quality-of-care targets
within an area of clinical focus selected by CMS, in collaboration with
other organizations and the participating physician groups.[Footnote
15] In PY1, CMS focused on diabetes management, and required
participants to meet targets on a set of 10 diabetes measures,
including whether a beneficiary received an eye exam or foot
exam.[Footnote 16] To meet the quality-of-care target for each of the
diabetes measures, a participant had to either improve its performance
by a certain amount relative to its baseline performance or meet a
national set of performance measures, referred to as HEDIS® measures,
established by the National Committee for Quality Assurance
(NCQA).[Footnote 17] Participants could also receive a prorated share
of the quality-of-care bonus, based on success meeting some, but not
all, of the quality-of-care targets.
While the bonus payment methodology will remain the same throughout the
demonstration, CMS added other quality-of-care measures and increased
the relative significance of the quality-of-care measures in PY2 and
PY3. In PY2, quality-of-care measures pertaining to CHF and coronary
artery disease (CAD) were added to the existing diabetes measures. In
PY3, quality-of-care measures pertaining to the management of
hypertension and screening for breast and colorectal cancer were added
to the existing diabetes, CHF, and CAD measures. The proportion of the
bonus pool dedicated to meeting the quality-of-care targets--30 percent
in PY1--also increased in each performance year. For PY2, the potential
quality-of-care bonus increased to 40 percent of the potential bonus
pool, and the proportion of the bonus pool that will be paid as a cost-
savings bonus decreased to 60 percent. For PY3, the cost-savings and
quality-of-care bonuses each will constitute 50 percent of the total
bonus paid.
Results from Performance Year 1:
In July 2007, CMS reported that in PY1, 2 of the 10 participating
physician groups earned bonuses for achieving cost-saving and quality-
of-care targets, while all 10 participants achieved 7 or more of the 10
quality-of-care targets. The Marshfield Clinic and the University of
Michigan Faculty Group Practice received performance bonus payments of
approximately $4.6 million and $2.8 million, respectively, in PY1. The
Marshfield Clinic generated approximately $6 million in Medicare
savings in PY1, above the 2 percent threshold established by CMS. Of
this $6 million bonus pool, the Medicare program retained approximately
$1.2 million, and Marshfield Clinic earned $3.4 million for the cost-
savings component of the bonus and $1.2 million for meeting 9 of the 10
quality-of-care targets.[Footnote 18] The University of Michigan
Faculty Group Practice generated approximately $3.5 million in savings
in PY1 above the 2 percent threshold. Medicare retained approximately
$700,000 and the University of Michigan Faculty Group Practice earned
nearly $2 million for the cost-savings component of the bonus, and just
over $800,000 for meeting 9 of the 10 quality-of-care targets.[Footnote
19]
Of the remaining eight participating physician groups that did not earn
cost-savings bonuses in PY1, all performed well in meeting the quality-
of-care targets. Specifically, all eight of these participants achieved
7 or more of the 10 quality-of-care targets, with two participants
meeting all 10 quality-of-care targets and two others achieving 9 of
the targets. In addition, six of the participants came close to
achieving the 2 percent threshold for the cost-savings component of the
performance bonus payment in PY1. These six groups reduced their
Medicare spending growth rates compared to their comparison group, but
not beyond the 2 percent threshold.[Footnote 20] (See fig. 2):
Figure 2: Medicare Spending Growth Rate of Participating Physician
Groups Relative to Their Comparison Group and the 2 Percent Threshold
in PY1:
[See PDF for image]
This figure is a bar graph depicting the Medicare Spending Growth Rate
of Participating Physician Groups Relative to Their Comparison Group
and the 2 Percent Threshold in PY1. The vertical axis of the graph
represents difference in Medicare spending growth rate from -5 to +5,
with -2 being the 2% threshold. The horizontal axis of the graph
represents Physician group practice from 1 to 10. The following data is
depicted:
Physician group practice: 1;
Difference in Medicare spending growth rate: -4.3.
Physician group practice: 2;
Difference in Medicare spending growth rate: -3.7.
Physician group practice: 3;
Difference in Medicare spending growth rate: -2.0.
Physician group practice: 4;
Difference in Medicare spending growth rate: -1.2.
Physician group practice: 5;
Difference in Medicare spending growth rate: -0.7.
Physician group practice: 6;
Difference in Medicare spending growth rate: -0.7.
Physician group practice: 7;
Difference in Medicare spending growth rate: -0.5.
Physician group practice: 8.
Difference in Medicare spending growth rate: -0.5.
Physician group practice: 9;
Difference in Medicare spending growth rate: 2.2.
Physician group practice: 10;
Difference in Medicare spending growth rate: 3.6.
Source: CMS and RTI International.
Note: Participating group 3 reduced its Medicare spending by almost 2
percent, but did not exceed the threshold.
[End of figure]
PGP Demonstration, Early Test of Public Sector Pay-for-Performance
Models:
While the number of pay-for-performance programs--programs in which a
portion of a provider's[Footnote 21] payment is based on their
performance against defined measures--has increased in recent years,
this growth has occurred largely in the private sector by commercial
health plans. MedVantage reported that 107 pay-for-performance programs
were in place as of November 2005, up from 84 the year before.[Footnote
22]
Of these 107 pay-for-performance programs, 21 were public sector
programs, of which 10 were Medicare programs. Currently, CMS has 5
programs, including the PGP Demonstration, that are demonstrations
testing alternative physician payment methods. (See table 2.) Among
these 5 physician pay-for-performance demonstrations, 4, including the
PGP Demonstration, test physician pay-for-performance methods by
offering incentives to physicians for meeting clinical performance
standards, while 1 focuses on aligning financial incentives between
hospitals and physicians. The PGP Demonstration was the first of CMS's
Medicare demonstrations to test physician pay-for-performance.
Participants in CMS's Medicare Health Care Quality Demonstration,
projected to begin in 2008,[Footnote 23] may elect to use this overall
design and bonus payment methodology from the PGP Demonstration. Among
CMS's other pay-for-performance demonstrations that are not physician
related, is the Premier Hospital Quality Incentive Demonstration, a
hospital-specific pay-for-performance demonstration for more than 260
hospitals in the Premier Inc., system. Under this demonstration, CMS
provides bonus payments for hospitals with the highest levels of
performance in five clinical conditions, including acute myocardial
infarction. A recent study examining this demonstration concluded that
among hospitals receiving performance bonuses, patients did not have a
significant improvement in quality-of-care of care or outcomes for
acute myocardial infarction.[Footnote 24]
Table 2: CMS's Demonstrations Related to Physician Pay-for-Performance:
CMS demonstration project: Physician Group Practice Demonstration;
Targeted organizations: Physician groups with 200 or more physicians;
Statutory authority: BIPA,[A] section 412;
Description: Participating physician groups are rewarded for improving
the quality and efficiency of health care services delivered to
Medicare fee-for-service beneficiaries through a methodology that
shared savings with the Medicare program. The demonstration seeks to
encourage coordination of inpatient and outpatient services, promote
efficiency through investment in administrative structures and process,
and reward physicians for improving health outcomes;
Timing of demonstration: 3 years, CMS recently continued the
demonstration for an additional year.
CMS demonstration project: Medicare Health Care Quality Demonstration;
Targeted organizations: Physician groups and integrated delivery
systems;
Statutory authority: MMA,[B] section 646;
Description: Participating physician groups will test the effectiveness
of different payment methodologies to improve quality and reduce costs.
Participants will be rewarded using their choice of (1) a similar
design and bonus payment methodology to that used in the PGP
Demonstration or (2) a different payment methodology they elect;
Timing of demonstration: 5 years, application period closed, projected
to begin in 2008.
CMS demonstration project: Care Management for High Cost Beneficiaries
Demonstration;
Targeted organizations: Physician groups, hospitals, and integrated
delivery systems;
Statutory authority: Section 402(a), Social Security Amendments of
1967[C];
Description: Six organizations will test the ability of direct-care
provider models to coordinate care for high-cost, high-risk
beneficiaries by providing clinical support beyond traditional settings
to manage their conditions;
Timing of demonstration: 3 years, began October 2005.
CMS demonstration project: Medicare Care Management Performance
Demonstration;
Targeted organizations: Solo and small to medium-sized physician
practices in California, Arkansas, Massachusetts, and Utah;
Statutory authority: MMA,[B] section 649;
Description: Participants will be rewarded for meeting clinical
performance standards for (1) treating diabetes, congestive heart
failure, and coronary artery disease; (2) providing preventive services
provided to high-risk, chronically ill patients; and (3) implementing
electronic health records systems;
Timing of demonstration: 3 years, began July 1, 2007.
CMS demonstration project: Medicare Hospital Gainsharing Demonstration;
Targeted organizations: Hospitals;
Statutory authority: DRA,[D] section 5007;
Description: Participating hospitals will be allowed to provide
incentive payments to physicians to reward improvements in quality of
care and increased financial efficiency;
Timing of demonstration: 3 years, expected to begin January 1, 2007 but
start currently delayed.
Source: CMS.
[A] Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, Pub. L. No. 106-554, App. F, § 412, 114 Stat. at 2763A-
509.
[B] Medicare Prescription Drug, Improvement, and Modernization Act of
2003, Pub. L. No. 108-173, 117 Stat. 2066.
[C] Pub. L. No. 90-248, 81 Stat. 821, 930-31 (1968), as amended by Pub.
L. No. 92-603, § 222(b)(2), 86 Stat. at 1393.
[D] Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4
(2006).
[End of table]
Participating Physician Groups Implemented Care Coordination Programs
Designed to Achieve Cost Savings and Management Processes to Meet CMS-
Set Diabetes Quality-of-Care Targets in PY1:
The participating physician groups implemented care coordination
programs to achieve cost savings and improved their management
processes to meet quality improvement targets CMS set for particular
diabetes measures in PY1. More specifically, management process
improvements included enhancing information technology (IT) systems,
incorporating more team-based approaches, and improving administrative
processes. Despite early positive indicators in cost savings, the full
impact of programs implemented for the PGP Demonstration, particularly
in care coordination, is largely unknown because many programs were not
in place for all 12 months of the first performance year.
Participating Physician Groups Implemented 47 Programs for the
Demonstration, Largely in Care Coordination:
The participating physician groups implemented 47 programs, which were
either new or expansions of existing programs, to achieve cost savings
and meet the CMS-set diabetes quality-of-care targets, with each
participant implementing from 2 to 9 programs.[Footnote 25] (See app.
II for a complete list of new and expanded programs implemented for the
PGP Demonstration.) More specifically, participants focused nearly
three-quarters of their new and expanded programs on care coordination-
-programs that manage the care of a small number of chronically ill and
frail elderly patients who account for a disproportionately large share
of overall costs. (See fig. 3.) The remaining one-quarter of programs
focused on patient education, medication-related issues, improving
administrative processes, and other initiatives.
Figure 3: Percentage of New and Expanded Programs Implemented by
Participating Physician Groups:
[See PDF for image]
This figure contains two pie-charts depicting the following data:
All new and expanded programs:
Care coordination: 72%;
Administrative processes: 15%;
Patient education: 6%;
Medication related: 4%;
Other: 2%.
New and expanded care coordination programs: Of the 72% Care
coordination:
Disease management: 36%;
Case management: 36%.
Source: GAO.
Note: There are two types of care coordination programs: (1) case-
management programs that target high-cost, high-risk patients with
multiple medical conditions, and (2) disease-management programs that
treat patients with a specific disease, such as congestive heart
failure. Information technology initiatives are not counted as discrete
new or expanded programs because these initiatives were parts of
broader participating physician group efforts. Administrative processes
include such activities as physician and staff education programs,
physician feedback systems, and data collection processes. Because of
rounding, the pie chart does not total to 100 percent.
[End of figure]
Among the 47 programs, participating physician groups devoted the
largest portion of their program resources to care coordination
programs designed to reduce hospitalizations by improving post-acute
care. Our analysis showed that for 9 of the 10 participants at least
half of demonstration-specific, full-time equivalents (FTE) were
devoted to care coordination programs. (See table 3.) Participants told
us they selected care coordination programs that provided post-acute
care because they believed these programs would reduce future
hospitalizations and yield the most cost savings in the shortest amount
of time. For example, both Billings Clinic and Park Nicollet Health
Services used a telephonic interactive voice response (IVR) system to
monitor patients' health status at home following a hospitalization or
another significant health event.[Footnote 26]
Table 3: Percentage of FTEs Devoted to Largest New and Expanded Care
Coordination Programs Implemented by PGP Demonstration Participants,
PY1:
Participating physician group: Billings Clinic;
Largest care coordination program: Cancer treatment center (disease
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Provided outpatient
treatment, prevention, and education programs to decrease patients'
risk for infections or other potentially harmful exposures to decrease
the number and length of hospital stays;
Percentage of demonstration-specific FTEs: 27.
Participating physician group: Dartmouth-Hitchcock Clinic;
Largest care coordination program: Health coaching (case management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Helped patients follow
hospital post-discharge instructions, make follow-up appointments with
physicians, and take the correct medications and dosages;
Percentage of demonstration-specific FTEs: 55.
Participating physician group: The Everett Clinic;
Largest care coordination program: Palliative care program (case
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Educated patients about
end-of-life planning, and provided information on community support
agencies, alternative living options, and in-home support;
Percentage of demonstration-specific FTEs: 67.
Participating physician group: Geisinger Health System;
Largest care coordination program: Post-acute Case Management (case
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Contacted patients to
ensure home health services were received and correct medications were
being taken, and assisted with coordinating community service programs;
Percentage of demonstration-specific FTEs: 60.
Participating physician group: Integrated Resources for the Middlesex
Area;
Largest care coordination program: Heart smart program (disease
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Provided case-management
services to cardiac patients enrolled in home-care services;
Percentage of demonstration-specific FTEs: 50.
Participating physician group: Marshfield Clinic;
Largest care coordination program: Anticoagulation Program (case
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Worked with patients
taking the anti-clotting drug Warfarin to ensure dosages were adjusted
properly, and recognize other factors affecting coagulation, such as
diet, activity, other medications, and other illnesses;
Percentage of demonstration-specific FTEs: 70.
Participating physician group: Novant Medical Group;
Largest care coordination program: Outpatient case management (case
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Ensured that high-risk,
high-cost patients scheduled follow-up visits with physicians and
informed patients of available resources;
Percentage of demonstration-specific FTEs: 100.
Participating physician group: Park Nicollet Health Services;
Largest care coordination program: Heart failure care coordination
(disease management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Monitored patients'
medication usage and dietary regimes through an IVR system and
initiated medical care when patients' health status worsened;
Percentage of demonstration-specific FTEs: 100.
Participating physician group: St. John's Health System;
Largest care coordination program: Case management systems (case
management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Coordinated inpatient and
outpatient care for high-risk patients and helped patients follow
physician treatment plans;
Percentage of demonstration-specific FTEs: 79.
Participating physician group: University of Michigan Faculty Group
Practice;
Largest care coordination program: Post-discharge transitional care
(case management);
Description of care managers' responsibilities following a
hospitalization or significant medical event: Provided medication
counseling, guidance on post-acute care treatment, assistance making
post-discharge appointments, and assistance with nonclinical services,
such as arranging transportation;
Percentage of demonstration-specific FTEs: 63.
Source: GAO analysis of survey data.
Note: Care coordination programs were defined as large based on
resources, as measured in FTEs, devoted to the program.
[End of table]
Approximately half of the care coordination programs were case-
management programs that targeted high-cost, high-risk patients with
multiple medical conditions, while the other half were disease-
management programs that treated patients with a specific disease, such
as CHF. Seven participants focused on case-management programs by using
care managers for patients with multiple medical conditions to reduce
hospitalizations. For example, an official from the Dartmouth-Hitchcock
Clinic stated that the clinic's primary strategy for the PGP
Demonstration was to reduce hospitalizations and readmissions through
more effective discharge planning, such as calling patients at home
following their hospital discharge and encouraging them to schedule
follow-up appointments with their physicians. Three participants
committed the majority of their resources to disease-management
programs; two of the three participants told us they focused on CHF
because it is a costly disease to treat and would therefore generate
savings within the first performance year. Other diseases, such as
diabetes, could take several years to generate cost savings. CHF and
diabetes are two of the most common chronic diseases among Medicare
beneficiaries, according to recent health policy research.[Footnote 27]
All 10 participating physician groups reported that their care
coordination programs were making progress in both achieving cost
savings and providing broader benefits to their programs and
communities. In particular, four participants reported declines in
hospitalizations for patients enrolled in their CHF care coordination
programs. For example, Park Nicollet Health Services reported a 61
percent reduction in hospitalizations for patients enrolled in its CHF
care-management program, which utilized an IVR to interact with
patients on a daily basis. Park Nicollet representatives estimated this
program saved $4,680 yearly, on average, for each patient enrolled in
the program. Because the demonstration included other Medicare and non-
Medicare patients, its benefits extended beyond the patients assigned
to Park Nicollet for the demonstration. Further, several participants
stated that collaboration and information sharing among the 10
participants on designing and implementing programs and analyzing data
resulted in improvements to their demonstration programs, which broadly
benefit their organizations. Representatives from St. John's Health
Systems stated that creating a care-coordination program had additional
benefits, including the adoption of such programs by other health
systems and physician groups throughout the community.
Despite early positive indicators of cost savings, the full impact of
programs implemented for the PGP Demonstration, particularly in care
coordination, is largely unknown for a variety of reasons, including
that many programs were not in place for all 12 months of the first
performance year. Only 1 of the 10 participants had all of its programs
in place for all 12 months of PY1. For example, the Marshfield Clinic
had a case-management program operational for all 12 months in PY1, and
a disease-management program operational for 4 months. By the beginning
of PY2, only 6 of the 10 participants had all of their care
coordination programs operational. Officials from participating
physician groups stated that program implementation delays were caused
by program complexity, the process of gaining management approval for
significant program start-up costs, and educating physicians about the
programs. In addition, two participants stated that because their care
coordination programs were phased in throughout the first two
performance years, PY3 may be the first year that the full impact of
these programs is realized.
Participating Physician Groups Improved Management Processes to Meet
the Diabetes Quality-of-Care Targets in First Performance Year:
To meet the quality-of-care targets set by CMS on diabetes management,
participating physician groups improved their management processes by
investing in IT, creating team-based approaches, and improving
administrative processes, particularly for diabetes management, the
quality-of-care target for PY1. To earn the maximum bonus, participants
that met the 2 percent cost-savings target had to further meet a
quality-of-care improvement target in a particular clinical area. The
measures selected by CMS for each performance year of the demonstration
focused on chronic conditions prevalent in the Medicare population that
are treated in primary care.[Footnote 28] In PY1, CMS selected diabetes
management as the focus for quality improvement for the demonstration
participants. See table 4 for a categorization of how the participants
worked to improve quality, specifically for diabetes, by using
physician feedback, patient registries, team-based approaches, and
improved documentation.
Table 4: Management Processes Developed or Enhanced by Participating
Physician Groups to Meet Diabetes Quality-of-Care Targets, PY1:
Participating physician group: Billings Clinic;
Physician feedback: [Check];
Patient registry: [Check];
Team-based approaches: [Check];
Improved documentation: [Empty];
Description of unique program components[A]:
* Developed an electronic database that allowed physicians to identify
patients with diabetes;
* Utilized electronic database to generate reports for physicians on
meeting diabetes quality-of-care measures;
* Allowed care managers to manage certain aspects of a patient's care
such as adjusting diuretic medications for heart failure patients.
Participating physician group: Dartmouth-Hitchcock Clinic;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Check];
Improved documentation: [Check];
Description of unique program components[A]:
* Provided reports to physicians on meeting diabetes quality measures
through intranet;
* Improved physician coordination with nurses, health coaches, and case
managers;
* Used flowcharts to ensure that diabetes patients receive the
appropriate tests and treatments.
Participating physician group: The Everett Clinic;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Check];
Improved documentation: [Empty];
Description of unique program components[A]:
* Provided reports to physicians online, enabling them to view the
percentage of diabetes quality-of-care measures they had completed for
each patient;
* Instructed medical assistants to begin performing more initial
screenings on patients.
Participating physician group: Geisinger Health System;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Check];
Improved documentation: [Empty];
Description of unique program components[A]:
* Implemented an electronic system to track physicians' compliance with
diabetes quality-of-care measures;
* Implemented standing orders for nurses to test diabetic patients'
urine for protein before each visit.
Participating physician group: Integrated Resources for the Middlesex
Area;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Empty];
Improved documentation: [Check];
Description of unique program components[A]:
* Issued aggregated report cards for each physician location that
measured performance in meeting the diabetes quality-of-care measures;
* Distributed flow sheets to physicians at the point of care to help
monitor care for diabetes patients.
Participating physician group: Marshfield Clinic;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Check];
Improved documentation: [Check];
Description of unique program components[A]:
* Provided reports to physicians on meeting diabetes quality-of-care
measures through intranet;
* Implemented standing orders for medical assistants to order tests and
allowed care managers to adjust patients' Warfarin dosages based on
protocols;
* Created paper forms to help ensure that foot exams are completed and
documented for diabetes patients.
Participating physician group: Novant Medical Group;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Empty];
Improved documentation: [Check];
Description of unique program components[A]:
* Provided reports to physicians on meeting diabetes quality-of-care
measures, based on paper charts;
* Used paper checklists placed in patients' medical records to record
data on eye and foot exams for diabetes patients.
Participating physician group: Park Nicollet Health Services;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Check];
Improved documentation: [Empty];
Description of unique program components[A]:
* Developed electronic alerts and reminders that inform physicians of
patients' immediate and future clinical needs, including the diabetes-
related measures;
* Implemented standing orders for care managers to administer various
treatments.
Participating physician group: St. John's Health System;
Physician feedback: [Check];
Patient registry: [Check];
Team-based approaches: [Empty];
Improved documentation: [Empty];
Description of unique program components[A]:
* Used electronic database to check progress on meeting diabetes
quality-of-care measures;
* Developed an electronic database that allows physicians to identify
diabetes patients.
Participating physician group: University of Michigan Faculty Group
Practice;
Physician feedback: [Check];
Patient registry: [Empty];
Team-based approaches: [Empty];
Improved documentation: [Empty];
Description of unique program components[A]:
* Provided reports to physicians at the point of care detailing each
diabetes patient's test results, appointments, and medications.
Sources: GAO and CMS.
[A] Participating physician groups may have implemented more than one
program to meet quality-of-care targets, with multiple components, and
only a sample of selected components are included.
[End of table]
All participating physician groups made new investments in IT, by
adding features to existing EHR systems or using technology to track
physicians' performance on the quality-of-care measures set by CMS. For
example, Marshfield Clinic implemented electronic alerts in its EHR
system to remind clinical staff to provide care, such as immunizations.
Participants primarily used electronic methods for physician feedback
as a tool for physicians to track their performance and that of their
peers to improve their internal operations and patient care. For
example, Geisinger Health System's physician feedback system provided
physicians with access to monthly reports for each physician, which
compared each physician's performance in meeting the quality-of-care
measures. According to administrators from Geisinger, this transparent
approach fostered positive competition among its physicians to improve
quality of care. Participants also invested in IT by creating
electronic patient or disease-specific databases or lists referred to
as patient registries to better identify patients eligible for
enrollment in diabetes programs. The St. John's Health System, which
did not have an EHR system, created an electronic patient registry to
track patients with diabetes and to alert physicians to provide certain
tests.[Footnote 29]
Six of the participating physician groups relied to a greater extent on
a team-based approach to improve care processes. Using a team-based
approach, participants expanded the roles and responsibilities of
nonphysician staff such as nurses, medical assistants, and care
managers so that they worked more effectively with physicians to
deliver quality care. Although the demonstration required additional
quality reporting, officials from two of the participating physician
groups stated that they were able to treat the same number of patients
in a day. For example, Dartmouth-Hitchcock Clinic used care managers
who were nurses to maximize the effectiveness of patients' office
visits. These staff scheduled lab tests in advance of patients' office
visits when appropriate, developed patient action plans, and
communicated with physicians before and after patients' arrivals.
Physicians from Dartmouth-Hitchcock told us that the time they spent
with patients had become more effective because of this new approach.
Four participating physician groups improved their administrative
processes by creating better documentation methods for diabetes-related
tests and exams. They created worksheets, derived from patients'
medical records, to ensure that patients received diabetes tests, such
as foot and eye exams. In addition to improving documentation, these
initiatives served as reminders to physicians to complete diabetes-
related tests and exams and also reduced the burden of data collection
for reporting purposes. For example, IRMA created paper forms that were
added to patient records to collect data on tests as they were
conducted. In addition to improving documentation, these forms were
intended to relieve some of the burden of collecting data for smaller
practices within the organization. IRMA physicians also received paper
worksheets at the point of care to help monitor and track care provided
to their diabetes patients.
CMS's PGP Demonstration Design Was Generally a Reasonable Approach, but
Created Challenges:
CMS's design for the PGP Demonstration was generally a reasonable
approach for rewarding participating physician groups for cost-savings
and quality performance. However, the demonstration design created a
particular challenge for CMS in providing timely performance feedback
and bonus payments to the participants which, if received more quickly,
may have enabled them to improve their programs.
CMS's PGP Demonstration Design Was Generally a Reasonable Approach for
Rewarding Participating Physician Groups:
CMS's design for the PGP Demonstration was generally a reasonable
methodological approach for determining whether the actions taken by
the participants resulted in cost savings and improvements in quality,
and rewarding participants as appropriate. In particular, three aspects
of the PGP Demonstration design were consistent with established
methodological practices considered effective: a rigorous research
study design to isolate the effects of the demonstration's incentives,
a risk-adjustment approach to adjust for changes in patient health
status, and a quality component to help ensure that participating
physician groups did not achieve cost savings at the expense of
quality.
CMS used a rigorous research design to enable it to isolate the
effectiveness of the actions taken by each of the participants in the
demonstration. Specifically, CMS used a modified "pre-test/post-test"
control group design that is generally viewed by experts as an
effective way to control for some of the most common threats to
internal validity, in this case the ability of the study design to
measure the true effects of CMS's incentive payments.[Footnote 30] The
features of CMS's study design included a separate comparison group for
each participant to distinguish the effects of the demonstration's
incentives from unrelated spending trends in the participants' service
areas. Comparison groups' beneficiaries are from the participants'
geographic service areas and, as such, are affected by the same local
market trends as the participants. In addition, the study design
included a baseline period, before the demonstration began, that helped
to control for trends that may have occurred without demonstration-
related interventions. A standard pre-test/post-test control group
design would have randomly assigned beneficiaries to either a
comparison group or a participant's beneficiaries. To avoid having to
restrict or control beneficiaries' choice of providers and health care
services, and to continue to operate within the Medicare FFS system
while the demonstration was in place, CMS modified this standard
approach. Rather than assigning beneficiaries randomly at the start of
the demonstration to participant or comparison groups, the agency
retrospectively assigned beneficiaries at the end of each year based on
the beneficiaries' natural use of outpatient E&M services.
CMS also used a rigorous risk-adjustment approach to adjust for changes
in patients' health-care status. Without these adjustments, CMS could
not have been reasonably assured that changes in spending growth were
not attributable to changes in patients' health care status, and the
severity and complexity of diagnosis. For the PGP Demonstration, CMS
tailored the CMS-Hierarchical Condition Category (HCC) model, the risk-
adjustment model that it currently uses to make capitation payments to
Medicare managed care plans.[Footnote 31] This model accounts for
changes in the health status of beneficiaries.
Furthermore, CMS incorporated a quality component into the research
design, which helped ensure that participants would not achieve cost
savings at the expense of quality. The quality-of-care measures CMS
selected were based on a consensus of experts and were developed in
collaboration with the American Medical Association and quality
assurance organizations and with input from the participants. In
addition, CMS has placed an increased emphasis on quality in its bonus
payment methodology for future years. By PY3, half of the available
bonus pool will be awarded based on each participant's success in
meeting quality-of-care metrics in six clinical areas: diabetes, CHF,
CAD, management of hypertension, and screening for breast cancer and
colorectal cancer.
PGP Demonstration Design Created Several Challenges:
While CMS's research design for the PGP Demonstration was generally a
reasonable approach, it also created some challenges for the
participating physician groups. Challenges resulting from the
demonstration design included providing timely performance feedback and
bonus payments and the use of a uniform 2 percent savings threshold
that may have disadvantaged certain participants. Participants also
raised other concerns related to the demonstration design that were
related to their local markets.
Certain Aspects of the Demonstration Design Made Providing Timely
Feedback and Bonus Payments Challenging:
Overall, participants did not receive performance feedback or bonus
payments for their PY1 efforts until after the beginning of the third
performance year. Specifically, CMS provided participants with
performance feedback and bonus payments regarding their efforts in PY1
in three phases beginning 12 months after the end of PY1. In April
2007, CMS provided each participant with a cost-savings summary report
displaying its success in controlling Medicare expenditures for PY1 and
the size of its cost-savings bonus pool. (See fig. 4.) A little over 2
months later, CMS provided each participant with a detailed settlement
sheet displaying its individual cost-savings and quality-of-care
bonuses for PY1. It was not until July 2007, 15 months after the end of
PY1, that the two participants that earned a demonstration bonus for
PY1--the Marshfield Clinic and the University of Michigan Faculty Group
Practice--received their bonus payments of $3.4 million and $2.1
million, respectively.
Figure 4: Gap between Completion of First Performance Year and
Performance Feedback and Bonus Payments:
[See PDF for image]
This figure is an illustration of the Gap between Completion of First
Performance Year and Expected Bonus Payments. The following data is
depicted:
Performance Year 1: April 1, 2005 - April 1, 2006;
Number of months: 12.
Performance Year 2: April 1, 2006 - April 1, 2007;
Number of months: 12 (extended to 15, through July 1, 2007);
April 2007: Cost-savings feedback for PY1;
Mid-June 2007: Cost-savings and quality-of-care bonuses for PY1;
July 2007: Bonus payments distributed for PY1.
Performance Year 2: April 1, 2007 - April 1, 2008;
Number of months: 12.
Source: GAO analysis of GMS data.
Note: The 15-month period includes the typical 6-month period necessary
for CMS to process a sufficient number of claims to meet its 98 percent
complete claims threshold that it uses for analysis.
[End of figure]
CMS officials explained that generating feedback for the participating
physician groups required 15 months because the demonstration design
depended on the time-consuming process of retrospectively analyzing
Medicare beneficiaries' claims and chart-based data. Specifically, CMS
officials stated that the process of calculating participants' cost-
savings bonuses required at least 12 months after the conclusion of the
first performance year--6 months to accrue claims data that were
sufficiently complete and a second 6 months to analyze and calculate
the bonus amounts.[Footnote 32] In addition, they stated that the
calculation of the quality-of-care bonus required an additional 3
months to audit and reconcile chart-based data with claims-based data
pertaining to the 10 diabetes quality-of-care measures. CMS officials
stated that to calculate the cost-savings bonus they chose to use a
claims file that was 98 percent complete because they wanted to ensure
that the feedback they provided to participants was accurate. CMS
officials also stated that the time frames for providing performance
feedback and bonus payments to participants in PY1 will be the same for
PY2 and PY3.
Officials from all 10 participating physician groups expressed concern
about the length of time CMS took to provide them with performance
feedback and bonus payments. Several participants stated that they had
difficulty making adjustments to their programs and improving their
overall performance because of delayed feedback and payments. One
official from the Novant Medical Group stated that the 15-month time
lag in receiving bonus payments would prevent the organization from
reinvesting these resources into demonstration-related programs and
improving them for subsequent performance years. In addition, two of
the participants told us that other pay-for-performance programs they
have participated in have used payment methodologies that yielded more
timely performance feedback or bonus payments. For example, officials
from the University of Michigan Faculty Group Practice indicated that a
pay-for-performance program sponsored by Blue Cross Blue Shield of
Michigan provided them twice a year with feedback for meeting certain
quality-of-care targets.
In response to these concerns, CMS has been working to provide each
participating physician group with a quarterly Medicare patient claims
data set related to beneficiaries they served. Initially, data sets
were provided quarterly and focused on identifying patients with
chronic conditions who had a hospital admission or emergency room
visit. In July 2007, CMS provided each participating group with a data
set on hospital inpatient, outpatient, and physician information
consisting of the Medicare claims of beneficiaries likely to be
included in the PY2 cost-savings calculations. In September 2007, CMS
responded to participants' requests for quarterly claims data that
would allow them to assess their cost-savings performance during the
performance year, by providing them with a revised data set. CMS's most
recent data set included Medicare inpatient, outpatient, and physician
claims data for beneficiaries likely to be included in the year-end
cost-savings calculation. The data set includes information on these
beneficiaries for the first quarter of PY3. CMS noted that it will not
provide equivalent information pertaining to comparison group
beneficiaries because these data are too time-consuming to assemble.
While CMS's provision of ongoing quarterly data sets to participants is
timelier than the information provided before, most participants told
us they do not have the necessary resources to analyze these data sets
in a timely manner. This lack of timely actionable data could hinder
participants' ability to adjust their programs on a more "real-time"
basis. Officials from only 2 of the 10 participants told us they would
able to analyze and use the quarterly data sets CMS provided.
Consequently, the data sets are not as useful as providing CMS-
generated quarterly reports, similar to the final reports CMS provided
on participants' progress in achieving cost-savings and quality-of-care
targets. CMS may not be able to provide quarterly reports that include
comparison group trends or provide quality-of-care data that rely on
chart-based data because of complexity and cost. However, CMS could
provide participants with estimates on their growth in per-beneficiary
expenditures each quarter, as well as changes in the profile of the
beneficiaries who are likely to be assigned to the participants. CMS
could also use more readily available claims data to provide quarterly
estimates of participants' progress in meeting the quality-of-care
targets. In PY1, for example, that would have included reporting
progress on 4 of the 10 claims-based quality targets on diabetes, such
as whether a beneficiary received an eye exam.
Use of a Uniform 2 Percent Savings Threshold for All Participants May
Have Made Earning a Bonus More Challenging for Particular Providers:
CMS officials said they adopted the use of a uniform 2 percent
threshold to ensure that savings generated really were due to
demonstration-related programs. Just as CMS used individual comparison
groups for each participant, CMS could have used separate savings
thresholds that more closely reflected the market dynamics of each
participant's overall area instead of a uniform savings threshold
chosen based on historical data averaged across the 10 participants.
However, use of different thresholds for each participant, according to
CMS officials, would have been complex and would have generated
additional administrative burden in processing bonus payments.
Nevertheless, the use of a uniform savings threshold--2 percent--that
all participating physician groups had to achieve before becoming
eligible for a bonus payment may have made earning bonus payments more
challenging for particular providers, specifically those with already
low Medicare spending growth rates or those that had comparison group
providers with low spending growth rates. Participants with low
relative spending may have had difficulty generating annual Medicare
savings of greater than 2 percent compare to those participants with
high spending growth rates before the demonstration began, some
participants argued. Supporting this concern is the wide variation in
the amount participants spent per beneficiary in the year prior to the
demonstration, which ranged from $6,426 to $11,520, after adjusting for
health status. In addition, participants with comparison groups that
had relatively low spending growth may have faced more of a challenge
reducing their spending below 2 percent of their comparison groups'
spending than participants with comparison groups that had higher
relative spending growth. In fact, both participants that received a
bonus, Marshfield Clinic and the University of Michigan Faculty Group
Practice, were measured against comparison groups with high relative
spending growth rates--the 2 largest among the 10 participants. While
their success cannot necessarily be attributed to the high relative
spending of their comparison groups, the high spending growth of the
comparison groups against which they were measured may have had some
effect.
Additional Participant Concerns:
In addition, several participating physician groups noted selected
concerns particular to their local markets. For example, officials from
one participating physician group expressed concern that CMS did not
adequately adjust for the conversion of several hospitals in their
market to critical access hospitals (CAH),[Footnote 33] which generally
receive higher Medicare payments. Participant officials noted that
their physician group treat more patients from these hospitals, which
resulted in a higher spending trend and lower likelihood of obtaining a
cost-savings bonus. CMS stated that the agency will examine this issue
as part of its evaluation at the conclusion of the PGP Demonstration.
Several participating physician groups were also concerned that their
groups had more beneficiaries with specialist visits relative to their
comparison groups.[Footnote 34] As a result, participants providing
more specialty care may have had less control over the health outcomes
of these beneficiaries. However, analyses conducted by CMS showed that
these participants provided 80 percent or more--a predominant share--of
the E&M services for most of the beneficiaries assigned to them in PY1,
regardless of specialty, and had meaningful opportunities to influence
beneficiary health care expenditures. CMS officials stated that they
will continue examining this issue and other related issues brought to
their attention by the participants as part of their evaluation of the
demonstration.
Participating Physician Groups Had Several Size-Related Advantages,
Which May Pose Challenges in Broadening the Payment Approach Used in
the Demonstration to More Participants:
The large size of the 10 participating physician groups compared with
the majority of physician practices operating in the U.S. gave the
participants certain size-related advantages that might make broadening
the payment approach used in the demonstration to more participants
challenging. The 10 participating physician groups had significantly
higher numbers of physicians, higher annual medical revenues, and
higher numbers of supporting staff, and were more likely to be
multispecialty practices than most practices in the U.S. Specifically,
the participating physician groups generally had three unique size-
derived advantages: institutional affiliations that allowed greater
access to financial capital, access to and experience using EHR
systems, and experience prior to the PGP Demonstration with pay-for-
performance programs.
While all the participating physician groups in the demonstration have
200 or more physicians in their practices,[Footnote 35] significantly
less than 1 percent of the approximately 234,000 physician practices in
the U.S. in 2005 had 151 or more physicians in their practice.[Footnote
36] (See fig. 5.) By contrast, practices with only 1 or 2 physicians
comprised 83 percent of all practices. Furthermore, while all 10
participants were multispecialty practices, 68 percent of the all
practices in the U.S. were single-specialty practices, which are
generally smaller organizations. The 10 participating physician groups
were also large compared with other physician practices in terms of
annual medical revenues and nonphysician staff. Participants generated
an average of $413 million in annual medical revenues in 2005 from
patients treated by their group practice,[Footnote 37] far greater than
the revenues generated by single specialty practices in the U.S. Only
about 1 percent of single specialty practices had revenues greater than
$50 million. In addition, these physician groups and their affiliated
entities, such as hospitals, employed approximately 3,500 nonphysician
FTEs, over 100 times more than the average single-specialty
practice.[Footnote 38]
Figure 5: Relative Proportion of Physician Practices in the United
States, by Practice Size, 2005:
[See PDF for image]
This figure contains graphical illustrations of the Relative Proportion
of Physician Practices in the United States, by Practice Size, 2005.
The following data is depicted:
1 to 2 physicians:
Proportion of physicians practices, by practice size: 83% (194,2780;
All physician practices: 100% (234,222).
3 to 10 physicians:
Proportion of physicians practices, by practice size: 14% (33,660);
All physician practices: 100% (234,222).
11 to 25 physicians:
Proportion of physicians practices, by practice size: 2% (4,135);
All physician practices: 100% (234,222).
1 to 2 physicians:
Proportion of physicians practices, by practice size: 1% (2,149) [Among
this group, 280 physician groups had 151 or more physicians and all 10
of the physician groups participating in the PGP Demonstration had 200
or more physicians];
All physician practices: 100% (234,222).
Source: Medical Group Management Association.
Note: Physician groups are defined as a subset of physician practices,
consisting of three or more physicians.
[End of figure]
Their larger relative size gave the 10 physician groups participating
in the PGP Demonstration three size-related advantages over smaller
physician practices, which may have better prepared them to participate
in the demonstration's payment model and implement programs encouraged
by the demonstration. First, participants typically had institutional
affiliations with an integrated delivery system, a general hospital, or
a health insurance entity. Specifically, 9 of the 10 participating
physician groups were a part of an integrated delivery system, 8 were
affiliated with a general hospital, and 5 were affiliated with an
entity that marketed a health insurance product. In contrast, a
representative of the Medical Group Management Association estimated
that approximately 15 percent of all physician practices in the U.S.
have an affiliation with a general hospital.
As a result of these affiliations, participating physician groups
generally have greater access to the relatively large amounts of
financial capital needed to initiate or expand programs. On average,
each participating physician group invested $489,354 to initiate and
expand its demonstration-related programs and $1,265,897 in operating
expenses for these programs in PY1. (See app. III.) Specifically for
individual programs, participants reported spending an average of
$190,974 to initiate and $409,332 to operate case management programs
in PY1, almost twice the spending associated with any other type of
program. (See table 5.) Several participants reported that the majority
of their individual program expenditures were labor costs for care
managers. Officials from several participating physician groups said
that smaller practices might have difficulty implementing similar
programs because they may not have the financial resources to do so.
Table 5: Range and Average of Initial Start-up and PY1 Operating
Expenditures Reported by Participating Physician Groups, by Program
Type and Order of Average Amount Spent, 2005:
Type of investment: Initial start-up expenditures;
Type of program: Case management;
Minimum amount spent: $75,000;
Maximum amount spent: $891,499;
Average amount spent: $190,974.
Type of investment: Initial start-up expenditures;
Type of program: Administrative processes[A];
Minimum amount spent: $2,350;
Maximum amount spent: $411,000;
Average amount spent: $107,595.
Type of investment: Initial start-up expenditures;
Type of program: Disease management;
Minimum amount spent: $4,450;
Maximum amount spent: $917,398;
Average amount spent: $89,530.
Type of investment: Initial start-up expenditures;
Type of program: Other programs;
Minimum amount spent: $93,200;
Maximum amount spent: $93,200;
Average amount spent: $93,200.
Type of investment: Initial start-up expenditures;
Type of program: Medication related;
Minimum amount spent: $12,536;
Maximum amount spent: $94,879;
Average amount spent: $53,707.
Type of investment: Initial start-up expenditures;
Type of program: Patient education;
Minimum amount spent: $15,110;
Maximum amount spent: $85,500;
Average amount spent: $20,122.
Type of investment: Annual operating expenditures for PY1;
Type of program: Case management;
Minimum amount spent: $55,404;
Maximum amount spent: $2,005,422;
Average amount spent: $409,332.
Type of investment: Annual operating expenditures for PY1;
Type of program: Patient education;
Minimum amount spent: $1,897;
Maximum amount spent: $947,245;
Average amount spent: $214,479.
Type of investment: Annual operating expenditures for PY1;
Type of program: Administrative processes[A];
Minimum amount spent: $33,049;
Maximum amount spent: $411,000;
Average amount spent: $179,059.
Type of investment: Annual operating expenditures for PY1;
Type of program: Disease management;
Minimum amount spent: $5,500;
Maximum amount spent: $917,398;
Average amount spent: $174,873.
Type of investment: Annual operating expenditures for PY1;
Type of program: Medication related;
Minimum amount spent: $65,997;
Maximum amount spent: $238,003;
Average amount spent: $147,221.
Type of investment: Annual operating expenditures for PY1;
Type of program: Other programs;
Minimum amount spent: $92,500;
Maximum amount spent: $92,500;
Average amount spent: $92,500.
Source: GAO.
Note: Start-up investment expenditures for Integrated Resources for the
Middlesex Area were not available.
[A] Administrative processes include such activities such as physician
and staff education programs, physician feedback systems, and data
collection processes.
[End of table]
The second advantage the 10 large participating physician groups had
over smaller physician practices is a greater likelihood of having or
acquiring EHR systems, which was essential in participants' ability to
gather data and track progress in meeting quality-of-care targets.
Eight of the 10 participating physician groups had an EHR in place
before the demonstration began, and the 2 other participants, out of
necessity, developed alternative methods for gathering patient data
electronically specifically for the demonstration, such as creating
patient registries. In contrast, only an estimated 24 percent of all
physician practices in the United States had either a full or partial
EHR in 2005, and large practices were more likely to have EHRs than
small practices.[Footnote 39] These systems enable physician group
practices with multiple locations, such as the 10 participating
physician groups, to share patient information and other administrative
resources across a wide geographic area. Health care information
technology experts believe that the primary reason smaller physician
practices have not implemented EHRs is their cost, estimated at $15,000
and $50,000 per physician. In addition, experts estimated that annual
maintenance costs add between 15 and 25 percent of the initial per
physician investment.[Footnote 40] Furthermore, experts noted that
small practices tend to pay more per physician for EHR systems than
larger physician practices because larger physician practices are
better able to spread the fixed costs of these systems across more
physicians.
Finally, the third size-related advantage that most of the 10
participating physician groups had over smaller physician practices was
the larger groups' experience with other pay-for-performance systems
prior to participating in the PGP Demonstration. Overall, 8 of the 10
participants had previous experience with pay-for-performance programs
initiated by private or public sector organizations. This experience
may have eased their adjustment to the PGP Demonstration and afforded
them greater initial and overall success. For example, the University
of Michigan Faculty Group Practice's participation in a pay-for-
performance system sponsored by Blue Cross Blue Shield of Michigan
offered the physician group incentives to upgrade its chronic care
infrastructure. In addition to experience with pay-for-performance
programs, generally, the majority of the 10 participating physician
groups had experience with specific elements of pay-for-performance,
such as physician bonus compensation methods and physician feedback
processes. Representatives from some of the participating physician
groups stated that their exposure to one of these various elements of
pay-for-performance elements prior to the PGP Demonstration may have
enabled their organizations to adjust to the demonstration more
rapidly.
Conclusions:
The care coordination programs used by the participating physician
groups show promise in achieving cost savings and improving patient
outcomes for Medicare beneficiaries. As a result of the demonstration,
participating physician groups generated several different approaches
for coordinating patient care across inpatient and physician settings
for high-risk and high-cost patients, such as those with CHF, and
better managing patients with diabetes, the quality-of-care target for
the demonstration set by CMS. Additional years of the demonstration may
be needed, however, for CMS to collect and analyze the information
necessary to fully evaluate the effectiveness of these care
coordination programs and their potential for cost savings in this
demonstration. Only one participant had all of its care coordination
programs operational for all 12 months of PY1, and participants did not
receive timely feedback from CMS on their progress until PY3 had
already begun.
While CMS's demonstration design was generally reasonable, the lengthy
time CMS took to provide participating physician groups with
performance feedback and bonus payments may limit more widespread use
in other demonstrations, or use as an alternative method for paying
physicians group in Medicare FFS. The lack of timely and actionable
performance feedback also hinders participants' ability to improve
their programs in response to data. Providing performance feedback and
bonus payments to participants more than 12 months after the end of the
measurement period precludes physician groups from adjusting their
program strategies on a more "real-time" basis. CMS has recently taken
action to provide participants with quarterly claims data sets on their
beneficiaries for PY3, but most participants indicated they would have
difficulty analyzing such data to determine their progress in achieving
cost-savings and quality-of-care targets.
Measuring participants' performance using a comparison group where
beneficiaries were retrospectively assigned after the end of a
performance year, as used in this demonstration, may be impractical for
more widespread use beyond this demonstration because physician groups
cannot accurately predict on an ongoing basis whether they would be
able to generate cost-savings and receive bonus payments. In addition,
the use of a uniform savings threshold amount, such as the 2 percent
used in this demonstration, raises questions about whether this
approach provides a disincentive for physician groups that have lower
spending. Physician groups with fewer than 200 physicians--the vast
majority of practices in the United States--may also have more
difficulty than larger practices, such as the participants in this
demonstration, absorbing the start-up and annual-operating costs of the
care coordination programs and implementing them without EHR systems
that many groups believed were necessary to achieve cost savings while
maintaining and improving the quality of care.
As the PGP Demonstration continues, data will become available to CMS
to determine how much influence factors such as the delay in the start-
up of participating physician groups' care coordination programs and
its decision to use a uniform 2 percent threshold, and other factors,
may have had on participants' ability to earn bonus payments.
Consequently, it is understandably too early to determine the success
of the PGP demonstration, but evidence so far indicates that the care
coordination programs initiated by the participants show promise, but
that the wider applicability of the payment methodology used in the
demonstration may be more limited.
Recommendation for Executive Action:
We recommend that the Administrator of CMS provide participating
physician groups with interim summary reports that estimate
participants' progress in achieving cost-savings and quality-of-care
targets.
Agency Comments and Our Evaluation:
CMS reviewed a draft of this report and provided comments, which appear
in appendix IV. CMS stated that it appreciated our thoughtful analysis
and that our report would provide additional insight into performance
year one results and complement its ongoing evaluation efforts.
CMS agreed with the intent of our recommendation. CMS stated that it
was developing a new quarterly report and refined data set to aid the
physician groups in monitoring their performance, coordinating care,
and improving quality. CMS stated that these reports would address a
key limitation of existing quarterly data sets--that most physician
groups do not have the necessary resources to analyze the data sets in
a timely manner. We agree that this information would be helpful in
improving performance feedback to physician groups, which would allow
them to adjust their program strategies on a more "real-time" basis. As
the demonstration continues, we encourage CMS to continue its efforts
to improve performance feedback to the physician groups participating
in the PGP demonstration.
We are sending copies of this report to the Administrator of CMS. We
will provide copies to others on request. In addition, this report is
available at no charge on the GAO web site at [hyperlink,
http://www.gao.gov].
If you or your staff have questions about this report, please contact
me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff members who made key contributions to
this report are listed in appendix V.
Signed by:
Kathleen M. King:
Director, Health Care:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
For the first performance year, we examined three objectives: (1) what
actions the participating physician groups took to achieve cost savings
and meet the diabetes quality-of-care targets selected by the Centers
for Medicare & Medicaid Services (CMS), (2) the extent to which the
demonstration design was a reasonable approach to rewarding
participating physician groups for cost savings and quality
performance, and (3) potential challenges involved in broadening the
payment approach used in the demonstration from the 10 large
participating physician groups to other physician groups and nongroup
practices. For each of our reporting objectives, we analyzed data we
collected, by written questionnaire, and supplemented this information
with interviews in person and by telephone and site visits to 5 of the
10 locations.
Questionnaire:
We sent questionnaires to individuals CMS identified as points of
contact at each of the participating physician groups. These
individuals were often physicians or administrative staff tasked with
overseeing their physician group's demonstration efforts. All 10
participants completed and returned our questionnaire. The
questionnaire contained three sections. The first section gathered
standardized information about the practice's general characteristics,
including organizational structure, size, institutional affiliations,
and the extent to which it used electronic health records systems. The
second section gathered information about the programs participants
used as a part of the Physician Group Practice (PGP) Demonstration.
This section confirmed summary statements the individual practices
described in their original applications to CMS or in other documents
we obtained from CMS's contractor, Research Triangle Institute (RTI),
and provided an opportunity for the group to add new programs, if
needed. Summary statements detailed the purpose, type, and
characteristics of each program. We also asked participants whether
each of their programs was created specifically for the demonstration,
was a preexisting program, or was an expansion of a preexisting
program. In addition, we asked officials from these physician groups to
identify the start-up costs and the annual operating costs of these
programs. We also asked about the extent to which the physician groups
believe smaller physician practices could implement similar programs.
The third section of the questionnaire gathered information about how
the participating physician groups compensated their physicians and how
any demonstration bonus dollars they may earn would be distributed to
individual physicians within the group.
Site Visits and Interviews:
We also conducted site visits or telephone interviews with staff of all
10 participating physician groups. Five of these interviews were site
visits, which we chose to reflect geographic diversity (region of
country and urban/rural), size, and ownership status, among other
factors. We conducted site visits to Geisinger Health System in
Pennsylvania, Park Nicollet Health Services in Minnesota, Marshfield
Clinic in Wisconsin, Billings Clinic in Montana, and the Everett Clinic
in Washington. We collected the same information by telephone from the
other participants in the demonstration. For these in-person or
telephone interviews, we interviewed the demonstration project
managers, physicians, care managers, finance officials, and information
technology staff.
Analysis for Reporting Objectives:
To identify programs used by the participating physician groups to
achieve cost savings and meet the CMS-set diabetes quality-of-care
targets, we analyzed data we collected by written questionnaires and
interviews, supplemented with information we obtained at site visits to
5 of the 10 participants. We included in our analysis new programs or
expansions of existing programs created in response to the
demonstration. To determine the extent to which the demonstration's
design was reasonable, we analyzed documents on the overall research
design and bonus payment methodology obtained from CMS, analyzed data
collected through the questionnaire, and used interviews we conducted
with the participating physician groups and CMS and its contractor RTI.
We also reviewed and analyzed CMS-contracted documents on the design of
PGP Demonstration. To determine the potential challenges involved in
broadening the payment approach used in the demonstration to other
physician groups, we compared selected characteristics of the 10
participating physician groups to physician practices in the United
States, using data primarily from the Medical Group Management
Association's (MGMA) annual survey. We also used data we collected from
the questionnaire and from our interviews with officials from the
physician group practices. We also interviewed experts on health
information technology systems.
Data Reliability:
We assessed the reliability of the information we obtained about
participating physician group practices and the data we used to compare
them to other physician groups in the U.S. in several ways. First, we
checked the internal consistency of the information we obtained from
the physician groups with information from RTI's PGP Demonstration site
visit reports and CMS's 2006 Report to Congress on the PGP
Demonstration. We verified the information we collected from the
questionnaire with detailed follow-up interviews with officials from
all 10 participants. Second, we spoke to the survey director for the
2005 MGMA survey to ensure that we used the information from that
survey appropriately and that we understood any data limitations. In
addition, we compared the data we used on U.S. group practices from the
2005 MGMA survey with data from the 2005 National Ambulatory Medical
Care Survey and determined that the results were largely consistent and
adequate for our purposes. Third, on the basis of this comparison and
discussions with experts knowledgeable about the data, we used broad
categories to describe the data. We determined that the data used in
our analysis were sufficiently reliable for the purposes of this
report.
We conducted our work from May 2006 through December 2007 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: New and Expanded Programs Implemented by the 10
Participating Physician Groups for the PGP Demonstration:
Participating physician group: Billings Clinic;
Program name and program type: Cancer treatment center--care
coordination (disease management);
New or expanded program: Expansion;
Description: Patients received coordinated cancer care including
screening, prevention education, and infusion treatments.
Participating physician group: Billings Clinic;
Program name and program type: Chronic obstructive pulmonary disease
(COPD) management--care coordination (disease management);
New or expanded program: Expansion;
Description: Care managers worked with COPD patients to avoid
functional decline, offer preventive services such as immunizations,
and treat complications early.
Participating physician group: Billings Clinic;
Program name and program type: Community crisis center--care
coordination (case management);
New or expanded program: New;
Description: High-risk patients with chronic psychiatric conditions
were redirected from the emergency room to the psychiatric center for
treatment.
Participating physician group: Billings Clinic;
Program name and program type: Diabetes program--administrative
process;
New or expanded program: Expansion;
Description: A patient registry was used to identify diabetes patients
and create patient report cards, which displayed treatment confirmation
and treatment gaps.
Participating physician group: Billings Clinic;
Program name and program type: Heart failure clinic--care coordination
(disease management);
New or expanded program: Expansion;
Description: Care managers monitored an automated system, which
recorded patients' answers to health status questions, and intervened
if necessary.
Participating physician group: Billings Clinic;
Program name and program type: Hospitalist program--care coordination
(case management);
New or expanded program: New;
Description: Hospitalists worked with internists and family
practitioners to improve the communication and care provided to
patients at hospital discharge.
Participating physician group: Billings Clinic;
Program name and program type: Medication reconciliation--medication
related;
New or expanded program: New;
Description: Electronic prescription system better reconciled patients'
medications between inpatient and outpatient settings to reduce adverse
events.
Participating physician group: Billings Clinic;
Program name and program type: Palliative care program, 5 wishes--
administrative process;
New or expanded program: Expansion;
Description: Nursing home staff educated on consulting a Billings
geriatrician before admitting patient to the hospital.
Participating physician group: Billings Clinic;
Program name and program type: Physician assistants at nursing homes--
administrative process;
New or expanded program: Expansion;
Description: To coordinate nursing home and hospital care, physician
assistants were assigned to patients entering the hospital's emergency
room from local nursing homes.
Participating physician group: Dartmouth-Hitchcock Clinic;
Program name and program type: Cancer care/palliative care--care
coordination (case management);
New or expanded program: New;
Description: Care managers assisted cancer patients and families in
coordinating, planning end-of-life care.
Participating physician group: Dartmouth-Hitchcock Clinic;
Program name and program type: Health coaching--care coordination (case
management);
New or expanded program: New;
Description: Care managers helped patients follow hospital post-
discharge instructions, make physician appointments, and take the
correct medications and dosages.
Participating physician group: Dartmouth-Hitchcock Clinic;
Program name and program type: Provider performance support and
feedback--administrative process;
New or expanded program: New;
Description: Physicians received feedback through intranet, met with
management on identified issues.
Participating physician group: The Everett Clinic;
Program name and program type: Coronary artery disease (CAD)
management--administrative process;
New or expanded program: New;
Description: Forms were placed on the front of patients' medical charts
to remind physicians of CAD quality-of-care measures.
Participating physician group: The Everett Clinic;
Program name and program type: Director for PGP demonstration--other;
New or expanded program: New;
Description: A director position was created and charged with
coordinating program interventions and with overseeing all care for
Medicare patients.
Participating physician group: The Everett Clinic;
Program name and program type: Hypertension management program--care
coordination (disease management);
New or expanded program: New;
Description: A patient registry was used to identify patients with
hypertension and remind physicians to measure and document patients'
blood pressure.
Participating physician group: The Everett Clinic;
Program name and program type: Palliative care program--care
coordination (case management);
New or expanded program: Expansion;
Description: Care managers provided patients and families end-of-life
planning information on quality-of-life issues, alternative living
options, and in-home support.
Participating physician group: The Everett Clinic;
Program name and program type: Patient care coordination--care
coordination (case management);
New or expanded program: New;
Description: Care managers coordinated inpatient and outpatient care,
helping to ensure proper discharge planning and schedule follow-up
appointments with physicians.
Participating physician group: Geisinger Health System;
Program name and program type: COPD management--care coordination
(disease management);
New or expanded program: Expansion;
Description: Care managers worked with patients to monitor their health
status and to encourage patients to visit their physicians when
necessary.
Participating physician group: Geisinger Health System;
Program name and program type: Congestive heart failure management--
Care coordination (disease management);
New or expanded program: Expansion;
Description: Care managers monitored patients' health status through a
voice recognition system and contacted patients when their health
status became problematic.
Participating physician group: Geisinger Health System;
Program name and program type: Diabetes disease management--care
coordination (disease management);
New or expanded program: Expansion;
Description: Care managers worked with patients to educate them on
managing diabetes.
Participating physician group: Geisinger Health System;
Program name and program type: Moderate risk case management--care
coordination (case management);
New or expanded program: New;
Description: Care managers worked with patients to reduce risk factors
associated with potential future hospitalizations.
Participating physician group: Geisinger Health System;
Program name and program type: Postacute case management--care
coordination (case management);
New or expanded program: New;
Description: Care managers contacted patients after a hospital
discharge to ensure that home health services were received, correct
medications taken, etc.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Anticoagulation--care coordination (case
management);
New or expanded program: New;
Description: Pharmacists and physicians worked with patients during a
hospitalization to ensure prescriptions were correct and to assist in
the transition from inpatient to outpatient care.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Cancer care management--care
coordination (disease management);
New or expanded program: New;
Description: Care managers worked with colon, breast, and lung cancer
patients and their physicians to ensure that evidence-based treatment
guidelines are followed for psychological, nutritional, and palliative
care.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Chronic care management--care
coordination (case management);
New or expanded program: New;
Description: Care managers educated patients admitted to the hospital
on disease self-management and proper medication use.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Congestive heart failure (CHF)--care
coordination (disease management);
New or expanded program: New;
Description: Care managers helped patients understand and follow their
post-discharge instructions.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Diabetes disease management--care
coordination (disease management);
New or expanded program: Expansion;
Description: Care managers worked with diabetes patients to coordinate
care across providers, provide in-person patient education, and remind
patients of appointments.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Diabetes education--patient education;
New or expanded program: Expansion;
Description: Certified diabetes educators assisted patients in
understanding diabetes self management tools.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: Heart smart program--care coordination
(disease management);
New or expanded program: Expansion;
Description: Care managers provided case management services to cardiac
patients enrolled in home care services.
Participating physician group: Integrated Resources for the Middlesex
Area;
Program name and program type: HomeMed program--care coordination (case
management);
New or expanded program: New;
Description: Frail, elderly patients with multiple conditions receive a
telemedicine device in their home that monitors vital signs.
Participating physician group: Marshfield Clinic;
Program name and program type: Anticoagulation--care coordination (case
management);
New or expanded program: Expansion;
Description: Care managers worked with patients to ensure that dosages
of the anticlotting drug Warfarin were adjusted properly. Also educated
patients on recognizing factors that can influence anticoagulation such
as diet, activity, other medications, and other illnesses.
Participating physician group: Marshfield Clinic;
Program name and program type: CHF management--care coordination
(disease management);
New or expanded program: New;
Description: Care managers called patients to check on health status,
schedule physician visits, and answer questions.
Participating physician group: Novant Medical Group;
Program name and program type: Disease management, compass--care
coordination (disease management);
New or expanded program: New;
Description: Care managers assisted patients with medication
management, appointments, and physician referral.
Participating physician group: Novant Medical Group;
Program name and program type: Outpatient case management--care
coordination (case management);
New or expanded program: New;
Description: Care managers helped high-risk, high-cost patients
recently discharged from the hospital schedule follow-up physician
visits and learn of available resources.
Participating physician group: Novant Medical Group;
Program name and program type: Palliative care program--administrative
process;
New or expanded program: Expansion;
Description: Physicians and staff were educated on how to talk to
patients about palliative care.
Participating physician group: Novant Medical Group;
Program name and program type: Physician and staff education--
administrative process;
New or expanded program: Expansion;
Description: Participating physician group: Physicians and clinical
staff were educated on evidence-based guidelines for chronic disease
management.
Participating physician group: Novant Medical Group;
Program name and program type: Transition of care program--care
coordination (case management);
New or expanded program: New;
Description: Nurses contacted patients after hospital discharges to
ensure patients made follow-up physician appointments.
Participating physician group: Park Nicollet Health Services;
Program name and program type: Diabetes care management--care
coordination (disease management);
New or expanded program: New;
Description: Care managers educated newly diagnosed diabetes patients
on diabetes self management.
Participating physician group: Park Nicollet Health Services;
Program name and program type: Health support model;
New or expanded program: New;
Description: During a 30-minute office visit, patients received an
evaluation of needs, health education, diagnoses, prevention measures,
and fitness counseling.
Participating physician group: Park Nicollet Health Services;
Program name and program type: Heart failure care coordination--care
coordination (disease management);
New or expanded program: New;
Description: Care managers monitored patients' medication usage and
dietary regimes through an interactive voice response system.
Participating physician group: Park Nicollet Health Services;
Program name and program type: 24/7 nurse triage/nurse on call--patient
education;
New or expanded program: Expansion;
Description: Patients telephoned a call center where nurses directed
them to care based on their symptoms.
Participating physician group: St. John's Health System;
Program name and program type: Case management systems--care
coordination (case management);
New or expanded program: Expansion;
Description: Care managers provided care to high-risk patients
including coordination of inpatient and outpatient care services and
guidance on following treatment plans.
Participating physician group: St. John's Health System;
Program name and program type: Disease management--care coordination
(disease management);
New or expanded program: Expansion;
Description: Care managers managed, educated, and coached patients with
chronic conditions.
Participating physician group: St. John's Health System;
Program name and program type: CHF program (disease management);
New or expanded program: New;
Description: Nurses assessed the health status of heart failure
patients.
Participating physician group: St. John's Health System;
Program name and program type: Medication access--medication-related;
New or expanded program: New;
Description: Low-income patients were assisted in obtaining free
medications from pharmaceutical companies.
Participating physician group: University of Michigan Faculty Group
Practice;
Program name and program type: Complex care coordination-- care
coordination (case management);
New or expanded program: New;
Description: Care managers monitor patients with multiple chronic
diseases and educate them on self management.
Participating physician group: University of Michigan Faculty Group
Practice;
Program name and program type: Post-discharge transitional care--care
coordination (case management);
New or expanded program: New;
Description: Care managers provided education, medication counseling,
guidance on post-acute care treatment, and assistance with making and
getting to post-discharge appointments.
Sources: GAO and CMS.
[End of table]
[End of section]
Appendix III: Reported PGP Demonstration-Related Start-up and Operating
Costs for New and Expanded Programs:
Physician group: Billings Clinic;
Number of programs: 9;
Start-up investment expenditures: $317,503;
Total operating expenditures for performance year 1: $2,703,379.
Physician group: Dartmouth-Hitchcock Clinic;
Number of programs: 3;
Start-up investment expenditures: $878,031;
Total operating expenditures for performance year 1: $1,344,749.
Physician group: The Everett Clinic;
Number of programs: 5;
Start-up investment expenditures: $365,750;
Total operating expenditures for performance year 1: $617,500.
Physician group: Geisinger Health System;
Number of programs: 5;
Start-up investment expenditures: $82,573;
Total operating expenditures for performance year 1: $929,888.
Physician group: Integrated Resources for the Middlesex Area;
Number of programs: 8;
Start-up investment expenditures: [A];
Total operating expenditures for performance year 1: $1,192,185.
Physician group: Marshfield Clinic;
Number of programs: 2;
Start-up investment expenditures: $917,398;
Total operating expenditures for performance year 1: $2,922,820.
Physician group: Novant Medical Group;
Number of programs: 5;
Start-up investment expenditures: $916,499;
Total operating expenditures for performance year 1: $917,500.
Physician group: Park Nicollet Health Services;
Number of programs: 3;
Start-up investment expenditures: $402,226;
Total operating expenditures for performance year 1: $512,762.
Physician group: St. John's Health System;
Number of programs: 5;
Start-up investment expenditures: $96,354;
Total operating expenditures for performance year 1: $1,081,801.
Physician group: University of Michigan Faculty Group Practice;
Number of programs: 2;
Start-up investment expenditures: $427,848;
Total operating expenditures for performance year 1: $436,386.
Physician group: Average for physician group;
Number of programs: 4.7;
Start-up investment expenditures: $489,354;
Total operating expenditures for performance year 1: $1,265,897.
Physician group: Total;
Number of programs: 47;
Start-up investment expenditures: $4,404,182;
Total operating expenditures for performance year 1: $12,658,970.
Source: GAO.
[A] Start-up investment expenditures for Integrated Resources for the
Middlesex Area were not available.
[End of table]
[End of section]
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Office of the Administrator:
Washington, DC 20201:
Date: January 22, 2008:
To: Kathleen King:
Director, Health Care:
Government Accountability Office:
From: [Signed by] Kerry Weems:
Acting Administrator:
Subject: Government Accountability Office (GAO) Draft Report: "Medicare
Physician Payment: Care Coordination Programs Used in Demonstration
Show Promise, But Wider Use of Payment Approach May Be Limited" (GAO-08-
65):
The Centers for Medicare & Medicaid Services (CMS) appreciates the
opportunity to respond to GAO's draft report entitled, "Medicare
Physician Payment: Care Coordination Programs Used in Demonstration
Show Promise, But Wider Use of Payment Approach May Be Limited." Like
GAO, CMS is encouraged by the Physician Group Practice (PGP)
Demonstration's first-year results. The results show that we are on the
right track to meeting the demonstration's goals and objectives of
fostering coordination of Part A and Part B services, promoting
investment in care management and quality improvement processes, and
rewarding providers for improving health outcomes.
At the end of the first year, we found that all groups improved the
clinical management of diabetes patients. Two groups earned $7.3
million as their share of the total savings of $9.5 million generated
for the Medicare Trust Funds, and six additional physician groups had
lower Medicare spending growth rates than their local market areas, but
not sufficiently lower to share in savings under the demonstration's
performance payment methodology.
We also observed the PGP participating physician groups investing in
and implementing care management strategies designed to anticipate
patient needs, prevent chronic disease complications and avoidable
hospitalizations, and improve quality of care. Your report found 78
programs in place at the 10 physician practices, of which 47 programs
were new or expanded as a result of the opportunity to share in savings
under the demonstration. We are optimistic that as these care
management programs mature, we will share additional savings and
observe further quality improvements.
The PGP Demonstration provides critical learning opportunities as we
focus on finding ways to control health care costs while also improving
the overall quality of care. In addition, the demonstration compliments
many local pay-for-performance initiatives and serves as a catalyst in
local markets to improve the quality and efficiency of care across all
patient populations.
GAO Recommendation:
The Administrator of CMS should provide PGP participating physician
groups with interim summary reports that estimate participants'
progress in achieving cost-savings and quality-of-care targets.
CMS Response:
We have been working with the physician groups on how best to provide
interim feedback within the demonstration's resources since the start
of the demonstration. Initially, we provided quarterly data sets that
identified patients with a chronic illness who had a visit at the group
and who also had a hospital admission or emergency room visit during
the quarter. However, most physician groups, as you note, do not have
the necessary resources to analyze these data sets in a timely manner
but are interested in expenditure data on patients likely to be
assigned to them under the demonstration.
As a result, we began to explore with the physician groups how best to
provide interim information on patients likely to be assigned to them
at annual reconciliation and their utilization of inpatient services.
The information about inpatient services utilization is designed to
serve as a proxy for financial performance since many of the physician
groups' care management and quality improvement activities are designed
to reduce avoidable inpatient admissions to generate shareable savings
under the demonstration.
In November 2007, we held a conference call with the physician groups
to: discuss how the quarterly data sets have been used; identify
specific ideas or strategies for using the quarterly data sets; and
solicit feedback on the information that should be contained in a new
quarterly data set. As a result of the call, we are developing a new
quarterly report and refined data set to aid physician groups in
monitoring their performance, coordinating care, and improving quality.
The new quarterly report and data set will include aggregated
information and specific data elements in the following areas: assigned
beneficiary demographics; hospital utilization; hierarchical condition
category risk adjustment status; and quality of care gaps.
Our intention is that these new quarterly reports and refined data sets
will be consistent with the reports and data sets provided to physician
groups as part of the annual reconciliation process. They will address
a key limitation of existing quarterly data sets identified in your
report, that most physician groups do not have the necessary resources
to analyze the data sets in a timely manner. They will give physician
groups interim information on patients for whom they are most likely to
be held accountable, as well as information on a key proxy for savings
under the demonstration.
While we are working to improve the quarterly reports, we do not plan
to provide interim expenditure results for several reasons. First,
interim expenditure results may conflict with annual performance year
results since they do not use final action claims and have not
undergone the extensive review and validation process that the annual
reconciliation results and reports undergo. Second, the production of
interim expenditure results presents significant operational and
resource issues. Finally, interim expenditure results may not be
actionable by physician groups since only information on likely
assigned patients is provided and comparison group expenditure data is
required to calculate savings and performance under the demonstration.
In closing, your report provides additional insight into performance
year one results and complements our ongoing evaluation activities. We
appreciate your thoughtful analysis as we continue to learn from this
and other pay-for-performance demonstrations on how best to incorporate
value-based purchasing strategies into the Medicare program.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kathleen M. King, (202) 512-7114 or kingk@gao.gov:
Acknowledgments:
In addition to the contact named above, Thomas Walke, Assistant
Director; Jennie Apter; Kelly Barar; Zachary Gaumer; and Jennifer
Rellick made key contributions to this report.
[End of section]
Footnotes:
[1] Medicare Part B helps pay for doctors' services, outpatient
hospital care, and durable medical equipment.
[2] MedPAC is an independent federal body established by the Balanced
Budget Act of 1997, Pub. L. No. 105-33, §4022, 111 Stat. 251, 350-55,
to advise Congress on issues affecting the Medicare program.
[3] Medicare Part A pays for inpatient hospital stays, care in skilled
nursing facilities, hospice care, and some home health care.
[4] Pub. L. No. 106-554, App. F, § 412, 114 Stat. 2763, 2763A-509-
2763A-515.
[5] 67 Fed. Reg. 61116 (Sept. 27, 2002).
[6] The number of physicians includes physicians and clinical
professionals who can bill Medicare as physicians, such as physician
assistants. Unless otherwise noted, the term physician includes all
professionals paid under the Medicare physician fee schedule.
[7] Performance year two began April 1, 2006 and ended March 31, 2007,
and performance year three began April 1, 2007, and ends March 31,
2008.
[8] In each performance year, the Medicare beneficiaries assigned to
each of the 10 unique comparison groups are similar to the Medicare
beneficiaries being served by the participating physician group they
are compared against, in terms of their geographic location and the
services they receive.
[9] We visited Geisinger Health System in Pennsylvania, Park Nicollet
Health Services in Minnesota, Marshfield Clinic in Wisconsin, Billings
Clinic in Montana, and The Everett Clinic in Washington.
[10] CMS received 26 applications in response to its Request for
Proposal for the PGP Demonstration from a variety of organizations.
[11] We defined an integrated delivery system as a health care system
that includes at least one hospital in addition to the physician group,
and may include other health care providers, such as home health
agencies or nursing homes. The Everett Clinic identified itself as an
integrated delivery system that does not include a general hospital but
does include two ambulatory surgical centers, a laboratory, and a
radiation center.
[12] For the purposes of the PGP Demonstration, service areas consist
of all counties in which a given participating physician group derives
at least 1 percent of its assigned Medicare FFS beneficiaries. These
counties are combined to form each participating physician group's
service area.
[13] Under the Medicare physician payment system, E&M services refer to
visits and consultations furnished to patients by physicians and
include 10 current procedural terminology codes that represent the
level of E&M service provided.
[14] Other savings generated by the participating physician groups but
not awarded to them include the first 2 percent of savings generated as
well as any unearned quality-of-care bonuses.
[15] The quality measures were developed by CMS in conjunction with
professional associations such as the American Medical Association's
Physician Consortium for Performance Improvement, the National
Committee for Quality Assurance, the National Quality Forum, and the 10
participating physician groups.
[16] The other measures were influenza vaccination, pneumonia
vaccination, low-density lipoprotein cholesterol test, urine protein
test, and Hemoglobin A1c test (which measures blood sugar level) in the
recommended time interval, and whether Hemoglobin A1c, blood pressure,
and low-density lipoprotein cholesterol are at the recommended levels.
[17] NCQA created the health plan employer data and information set
(HEDIS®) to measure performance on important dimensions of care and
service, and it is now a tool used by more than 90 percent of health
plans. For each measure, participating physician groups must achieve at
least one of three targets: (1) meet the higher of 75 percent
compliance or the Medicare HEDIS® mean for the measure (for those
measures where HEDIS® indicators are also available), (2) demonstrate a
10 percent or greater reduction in the gap between the administrative
baseline and 100 percent compliance, or (3) achieve the 70th percentile
Medicare HEDIS® level (for those measures where HEDIS® indicators are
also available).
[18] The Marshfield Clinic was eligible to earn about $1.5 million
($1,448,613) in PY1 as a quality bonus if it met all 10 of the diabetes
quality targets.
[19] The University of Michigan Faculty Group Practice was eligible to
earn $838,951 in PY1 as a quality bonus if it met all 10 of the
diabetes quality targets.
[20] Collectively, these theoretical savings amounted to about $8
million. However, CMS does not consider these savings to be actual
savings because based on the demonstration design, savings below the 2
percent threshold could be caused by random fluctuations in
expenditures.
[21] A provider could be a physician, hospital, or other professional
health care service organization.
[22] Congressional Research Service, The Library of Congress, CRS
Report for Congress: Pay-for-Performance in Health Care (Washington,
D.C.: updated Dec. 12, 2006). CRS's count of pay-for-performance
programs includes those targeting compensation to physicians, physician
groups, and hospitals.
[23] For this demonstration, participants can also choose a different
payment methodology rather than the bonus payment methodology used in
the PGP Demonstration as long as it includes a hybrid shared savings
approach incorporating a cost-savings and quality component.
[24] Seth W. Glickman et al., "Pay for Performance, Quality of Care and
Outcomes in Acute Myocardial Infarction," The Journal of the American
Medical Association, vol. 297, no. 21 (2007).
[25] Participants in the PGP Demonstration reported using 78 total
programs to achieve cost savings and quality targets: 28 were new
programs created specifically for the demonstration, 19 were expansions
of existing programs, and 31 were existing programs that did not change
as a result of the demonstration.
[26] Interactive voice response systems are automated telephonic
systems that patients call in to on a regular basis to answer a series
of health-related questions.
[27] See Michael Trisolini et al., "Medicare Physician Group Practice:
Innovations in Quality and Efficiency," Commonwealth Fund, (December
2006), and Stuart Gutterman et. al., "Enhancing Value In Medicare:
Demonstrations and Other Initiatives to Improve the Program,"
Commonwealth Fund, (January 2007).
[28] The quality measures selected by CMS for the PGP Demonstration are
a subset of the measures CMS developed for its Doctors' Office Quality
project. This project was designed to develop and test a comprehensive,
integrated approach to measuring the quality of care for chronic
disease and preventive services in the doctors' offices. Participants
for this demonstration are located in California, Iowa, and New York.
[29] Officials at the St. John's Health System regarded this as a
precursor to a full-featured EHR system.
[30] For a more detailed discussion of the study design and its
tradeoffs, see Donald T. Campbell and Julian C. Stanley, Experimental
and Quasi-Experimental Designs for Research (Boston: Houghton Mifflin
Company, 1963).
[31] To adapt the CMS-HCC model for the PGP Demonstration, CMS used
current-year data to make projections, rather than using prior-year
data, and in doing so increased the explanatory power of the model from
10 percent to 50 percent. In addition, CMS made a mathematical
adjustment to the weights of the CMS-HCC model to accommodate the
population of beneficiaries eligible for the demonstration, end-stage
renal disease patients, organ transplant patients, and people who join
Medicare in the middle of a performance year.
[32] CMS officials stated that in any given year, they considered a
claims data file to be sufficiently complete if it contained 98 percent
of claims for services provided to a given group of Medicare
beneficiaries.
[33] CAHs are small rural hospitals that receive Medicare payments for
their reasonable costs of providing inpatient and outpatient services,
rather than being paid fixed amounts for services.
[34] Assignment may be based on providing less than half of a
beneficiary's evaluation and management E&M services if no other
physician practice has provided a larger portion of E&M services during
the performance year.
[35] The 10 participating physician groups had an average of 627
providers in their practices, including nonphysician providers who can
bill Medicare as physicians, ranging from 232 to 1,291.
[36] The majority of individual physicians in the U.S. practiced
medicine in a group-practice setting in 2005. While 1 percent of
physician practices consisted of more than 25 physicians, 36 percent of
physicians practiced in physician groups with more than 25 physicians.
[37] Annual medical revenues were not available from IRMA.
[38] Ninety-nine percent of single-specialty practices in the United
States had annual medical revenues that were $50 million or less, and
the average single-specialty practice employed 29 FTEs in 2005.
[39] National Center for Health Statistics' National Ambulatory
Medicare Care Survey, 2005.
[40] An official from the Certification Commission for Healthcare
Information Technology added that its estimate of initial acquisition
costs of EHR systems includes hardware, software, training, and
implementation costs and its estimate of annual maintenance costs does
not include the expected costs physician groups will likely incur to
hire the internal information technology management staff needed to
operate EHR systems.
[End of section]
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