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. 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. Only 1 of the 10 participants had all of its programs in  place for all 12 months of PY1. 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. 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. 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. 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. 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. 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. GAO staff members who made key contributions to this  report are listed in appendix V.

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. A director position was created and charged with  coordinating program interventions and with overseeing  all care for Medicare patients.
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. 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.