WASHINGTON – A five-year health IT-supported Medicare demonstration project that helped shape the accountable care organization (ACO) model being promoted today has shown what government officials say is significant improvement in care, while also saving Medicare millions of dollars.

Four of the 10 participating physician groups will receive incentive payments of $29.4 million (from total savings to Medicare of $36.2 million). Over the five years of the demonstration, Medicare has paid $110 million in incentives to seven of the PGP participants. The incentive payments reward the PGP participants for both the savings they have achieved for the Medicare program, as well as quality improvements that have resulted in not only better health, but also a better experience of care for patients, according to CMS.

All 10 groups in the Physician Group Practice (PGP) project have agreed to continue in a new PGP Transition Demonstration, a two-year supplement to the original pilot.

"As we work to help bring care coordination to a broader set of providers through accountable care organizations, the lessons learned by this demonstration provide great insight into how to use Medicare’s payment systems to improve quality while reducing costs,” said CMS Administrator Donald M. Berwick, MD. “We have learned to invest in sustained improvement over time, and that short-term comparisons between start-up costs and measureable results may fail to realize the long-term value of these efforts.”

Under the PGP Demonstration, physician groups earn incentive payments based on the quality of care they provide and the estimated savings they generate in Medicare expenditures for the patient population they serve. For each participating PGP practice, CMS established a minimum benchmark for each of the quality performance measures. In order to receive incentive payments, a group had to meet the quality performance benchmark.

In the fifth year of the demonstration, seven groups achieved benchmark performance on all 32 performance measures:

• Billings Clinic in Billings, Mont.
• Everett Clinic in Everett, Wash.
• Forsyth Medical Group in Winston-Salem, N.C.
• Geisinger Health System in Danville, Pa.,
• Middlesex Health System in Middletown, Conn.
• Park Nicollet Health Services in St. Louis Park, Minn.,
• and St. John’s Health System in Springfield, Mo.

The remaining three groups achieved benchmark performance on at least 30 of the 32 reported measures. These results mark a significant increase from year 1, when only two physician groups achieved benchmark performance on all measures, Berwick noted.

All 10 physician groups achieved benchmark performance on heart failure, coronary artery, and preventive care measures.

Over the five years of the demonstration, the physician groups also increased their quality scores in the following areas an average of:  

• 11.0 percentage points on diabetes measures,
• 12.4 percentage points on heart failure measures,
• 6.0 percentage points on coronary artery disease measures,
• 9.2 percentage points on cancer screening measures, and
• 3.8 percentage points on hypertension measures.

The first performance year of the two-year PGP Transition Demonstration began on Jan. 1, 2011. The demonstration will provide CMS with additional performance data and insight into how the successes of this type of program can be sustained, as well as offer CMS the opportunity to continue testing additional quality measures using a methodology that encourages continual improvement. The demonstration also continues to provide incentives for improvement as the broader Medicare Shared Savings Program and the Innovation Center’s Pioneer Accountable Care Organization begin to become operational.

Under the PGP Transition Demonstration, PGPs will need to have lower growth in Medicare costs relative to a national benchmark in order to share in savings. The PGP Transition Demonstration design includes a retrospective assignment algorithm based on services provided by primary care providers, rather than all specialties as it was done under the initial PGP Demonstration. This methodology underscores the important role primary care providers play in coordinating care to achieve better quality and cost outcomes, said Berwick. Quality performance continues to be a key aspect of the Demonstration design, he said, and the PGP Transition Demonstration includes new measures and areas of focus, including claims and chart based measures, composite measures, and patient experience measures.