Spending differences associated with the Medicare Physician Group Practice Demonstration

The Centers for Medicare & Medicaid Services (CMS) recently launched accountable care organization (ACO) programs designed to improve quality and slow cost growth. The ACOs resemble an earlier pilot, the Medicare Physician Group Practice Demonstration (PGPD), in which participating physician groups received bonus payments if they achieved lower cost growth than local controls and met quality targets. Although evidence indicates the PGPD improved quality, uncertainty remains about its effect on costs.

To estimate cost savings associated with the PGPD overall and for beneficiaries dually eligible for Medicare and Medicaid.

Quasi-experimental analyses comparing preintervention (2001-2004) and postintervention (2005-2009) trends in spending of PGPD participants to local control groups. We compared estimates using several alternative approaches to adjust for case mix.

Ten physician groups from across the United States.

The intervention group was composed of fee-for-service Medicare beneficiaries (n = 990,177) receiving care primarily from the physicians in the participating medical groups. Controls were Medicare beneficiaries (n = 7,514,453) from the same regions who received care largely from non-PGPD physicians. Overall, 15% of beneficiaries were dually eligible for Medicare and Medicaid.

Annual spending per Medicare fee-for-service beneficiary.

Annual savings per beneficiary were modest overall (adjusted mean $114, 95% CI, $12-$216). Annual savings were significant in dually eligible beneficiaries (adjusted mean $532, 95% CI, $277-$786), but were not significant among nondually eligible beneficiaries (adjusted mean $59, 95% CI, $166 in savings to $47 in additional spending). The adjusted mean spending reductions were concentrated in acute care (overall, $118, 95% CI, $65-$170; dually eligible: $381, 95% CI, $247-$515; nondually eligible: $85, 95% CI, $32-$138). There was significant variation in savings across practice groups, ranging from an overall mean per-capita annual saving of $866 (95% CI, $815-$918) to an increase in expenditures of $749 (95% CI, $698-$799). Thirty-day medical readmissions decreased overall (-0.67%, 95% CI, -1.11% to -0.23%) and in the dually eligible (-1.07%, 95% CI, -1.73% to -0.41%), while surgical readmissions decreased only for the dually eligible (-2.21%, 95% CI, -3.07% to -1.34%). Estimates were sensitive to the risk-adjustment method.

Substantial PGPD savings achieved by some participating institutions were offset by a lack of saving at other participating institutions. Most of the savings were concentrated among dually eligible beneficiaries.