Managing patient care cost in Minnesota medical group practices

This study was designed to identify the mechanisms employed by medical group practices in Minnesota to control the costs of care. Several studies have found that health care costs in Minnesota are lower than in many other states, but no one knows why. We explore this issue by analyzing the factors in Minnesota medical group practices considered to be essential to cost control and, to the degree possible, by comparing those data with national data. It appears that Minnesota practices are somewhat less efficient than national averages--as measured by relative value units or procedures per full-time equivalent physicians--but that Minnesota practices have lower per-member, per-month (PMPM) costs. It also appears that the lower PMPM costs result from structural factors such as electronic information systems, physician profiling, and use of clinical guidelines rather than from financial incentive systems. This article also reports physician compensation and revenue trends, most notably that there appears to be a shift away from fixed salaries and toward productivity-based compensation; and there is a shift away from capitation payments and toward modified fee-for-service payments.