P4P demo pays off for Medicare, but not for most doctors involved

Federal officials say more physician practices could see bonuses from the project's second and third years.

By — Posted Aug. 6, 2007

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

Ten large physician practices participating in one of the first Medicare pay-for-performance projects have proven that such programs lead to better performance, according to government officials. But only two practices were able to reduce costs enough to receive any additional pay.

Last month, the Centers for Medicare & Medicaid Services released first-year results from the Medicare Physician Group Practice Demonstration, which launched in April 2005. CMS asked 10 practices to implement care management improvements that would lead to higher quality of care. In return, the practices were eligible to receive as a bonus a portion of the money that they saved Medicare by improving patient care in a targeted group of Medicare enrollees.

CMS found that all of the participants were able to hit or exceed standards on at least seven out of the 10 clinical quality measures for the treatment of diabetes, the only condition targeted in the project's first year. For the pilot's second and third years, the agency is adding congestive heart failure, coronary artery disease and preventive care measures.

Two of the participants, Forsyth Medical Group in Winston-Salem, N.C., and St. John's Health System in Springfield, Mo., were able to make the grade on all diabetes measures.

The physicians and other health professionals involved in the pilot saved Medicare money, in part, by reducing repeat office visits, hospitalizations and trips to emergency departments, federal officials said.

"This demonstration project provides new evidence that paying for quality of care, instead of volume of services, helps the program, physicians and patients," said Dept. of Health and Human Services Secretary Michael Leavitt.

But for eight of the large practices, the amount of money they saved Medicare was not enough for them to share in the reward. Only University of Michigan Faculty Group Practice in Ann Arbor and Marshfield (Wis.) Clinic were able to obtain bonuses. (See correction)

This means that 80% of the medical groups incurred upfront costs to implement the care management reforms needed to participate but were unable to get money back from Medicare to help pay for improvements. In some cases, the uncompensated investments totaled millions of dollars.

Medicare's curveball

When CMS first proposed the project, it said participants would be able to receive a percentage of whatever savings they produced for the Medicare trust fund in the target patient population. Soon after they chose the 10 pilot practices from the 26 that applied, however, federal officials announced that savings would need to exceed 2% for each facility before the government would pay out.

At the time, the AMA expressed concern that so much of the opportunity for performance-based payments was tied to how much the program lowered costs, not how much it improved patient care. The Association called for more of a quality-based assessment in future efforts, including a CMS pay-for-performance demonstration currently under development for small- and medium-sized practices.

Dartmouth-Hitchcock Clinic in Bedford, N.H., was just under the 2% threshold and would have received a bonus if CMS had gone with its original plan, said Barbara Walters, DO, the clinic's senior medical director. "They changed the rules on us in the middle of the game," she said.

In part, Dartmouth-Hitchcock fell short of the target because of the way Medicare chose patients for whom the clinic needed to demonstrate cost savings, she said. The project was designed to choose retrospectively chronically ill patients who received the majority of their primary care during the year from the practices. But the CMS system ended up selecting a large number of Dartmouth patients who mainly accessed the clinic only for specialty services. This limited doctors' ability to coordinate care and lower costs.

All but one of the seven other participating groups that won't receive bonuses generated at least some savings.

The medical groups were unsuccessful in trying to convince CMS to change back to the original rules, Dr. Walters said. Agency officials said they implemented the 2% threshold to ensure that savings were significant enough to be traced back to the pay-for-performance program.

Herb Kuhn, director of CMS' Center for Medicare Management, said more practices could get bonuses from the project's second and third years by becoming more effective and comfortable with their new care management techniques, and by learning from lessons of the first year.

The benefits of participating

Pilot participants that receive a bonus now or in the future will be able to put the money directly back into their care improvement infrastructures, said Theodore A. Praxel, MD, Marshfield's medical director of quality improvement and care management.

In the first year, Marshfield saved the Medicare trust fund just more than $6 million, and the facility is set to receive roughly $4.5 million of that. University of Michigan Faculty Group Practice saved Medicare about $3.5 million and is in line for a roughly $2.8 million payout. (See correction)

But Marshfield implemented the care management improvements because they were the right thing to do for patients, not because of the expectation that the clinic would see a monetary return on its investment, Dr. Praxel said. "The clinic was moving down this path in any case, and participation in the demonstration project simply accelerated a number of our initiatives."

Dr. Walters echoed this sentiment regarding Dartmouth's motivation for participating. The clinic would like to get a bonus to recoup some of its upfront quality investment, but even if it never does, it will consider the project worthwhile, she said.

Drs. Praxel and Walters noted that all patients, not just Medicare beneficiaries, stand to benefit from better care management processes at the physician practices. Using such improvements as electronic medical record systems and modern disease management nursing techniques, the groups will improve patients' health outcomes and save the system more money that cannot be measured through the pilot, they said.

Back to top


Showing improvement

The Medicare Physician Group Practice Demonstration, a pay-for-performance pilot, in its first year measured how well 10 large doctor groups did on managing their patients' diabetes.

MeasureMet standard
HbA1c management10
HbA1c control10
LDL cholesterol level10
Urine protein testing10
Pneumonia vaccination9
Lipid measurement9
Eye exam9
Foot exam7
Influenza vaccination7
Blood pressure management4

Source: Centers for Medicare & Medicaid Services

Back to top

The players

The 10 practices, chosen from 26 applicants, are:

  • Dartmouth-Hitchcock Clinic, Bedford, N.H.
  • Deaconess Billings Clinic, Billings, Mont.
  • The Everett Clinic, Everett, Wash.
  • Forsyth Medical Group, Winston-Salem, N.C.
  • Geisinger Health System, Danville, Pa.
  • Marshfield Clinic, Marshfield, Wis.
  • Middlesex Health System, Middletown, Conn.
  • Park Nicollet Health Services, St. Louis Park, Minn.
  • St. John's Health System, Springfield, Mo.
  • University of Michigan Faculty Group Practice, Ann Arbor

Source: Centers for Medicare & Medicaid Services

Back to top


This story originally incorrectly stated that the second bonus recipient was Forsyth Medical Group. American Medical News regrets the error.

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story