Implementation & Evaluation of the Physician Group Practice Demonstration

Mandated by Section 412 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, the Physician Group Practice Demonstration rewards physicians for improving the quality and cost efficiency of health care services delivered to a Medicare fee-for-service population. Under the demonstration, physician groups continue to be paid under regular Medicare fee schedules and may share in savings derived care management programs and quality improvement initiatives. Physician groups may earn performance payments of up to 80% of the savings they generate. The Medicare Trust Funds retain at least 20% of the savings. Performance payments are divided between cost efficiency for generating savings and performance on 32 ambulatory care quality measures, focusing on common chronic conditions and preventive care, phased in during the demonstration. At the end of the four performance year, all 10 of the participating physician groups continued to improve the quality of care for chronically ill patients by achieving benchmark or target performance on at least 29 out of the 32 quality markers for patients with diabetes, coronary artery disease, congestive heart failure, hypertension, and cancer screening. Over the first four years of the demonstration, physician groups increased their quality scores an average of 10 percentage points on the diabetes, 13 percentage points on the heart failure measures, 6 percentage points on the coronary artery disease measures, 9 percentage points on the cancer screening measures, and 3 percentage points on the hypertension measures. As a result, all physician groups received at least 92 percent of their Physician Quality Reporting Initiative (PQRI) incentive payments which they agreed to place at risk for quality performance under the demonstration. The 10 physician groups earned PQRI incentive payments totaling $8.1 million. In addition, five physician groups earned $31.7 million in performance payments for improving the quality and cost efficiency of care as their share of a total of $38.7 million in Medicare savings. Additional physician groups had lower growth in expenditures than their local market area, but not sufficiently lower to share in savings under the demonstration's performance payment methodology. In total, the 10 physician groups earned performance payments for improving the quality and efficiency of care totaling $39.8 million in the fourth performance year.