The Medicare Physician Group Practice (PGP) demonstration was a United States government policy that implemented a physician pay-for-performance (P4P) initiative for Medicare. The demonstration established incentives for quality improvement and cost efficiency. Ten large physician groups participated in the demonstration, which started on April 1, 2005, and ran for 5 years. Previous funding arrangements, like the volume performance standard (VPS) and the sustainable growth rate (SGR) did not provide incentives to slow the growth of services. The Medicare PGP demonstration was intended to overcome that limitation in previous funding arrangements.
Introduction Section 412 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 established the Medicare Physician Group Practice (PGP) Demonstration, a project designed to create incentives for physicians to improve both the cost efficiency and quality of the care they provide to Medicare beneficiaries.Medicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011 The Demonstration is a prime example of the shared savings model of payment reformRosenthal, M.B., Beyond Pay for Performance – Emerging Models of Provider-Payment Reform, The New England Journal of Medicine, September 2008. and represents Medicare's first physician Pay-for-Performance initiative.Kautter, J., Pope, C., Trisolini, M., et al., Medicare Physician Group Practice Demonstration Design: Quality and Efficiency Pay-for-Performance, Health Care Financing Review, 2007. Volume 29, No. 1. The three main goals of the PGP Demonstration are: To encourage physician participation in Parts A and B of the Medicare Program; To promote cost efficiency and quality of care; and To reward physicians for improved health outcomes. The demonstration spanned five years, beginning on April 1, 2005, and ending on March 31, 2010.Medicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011
Demonstration design
Selection criteria
Participants in the PGP Demonstration were selected based on a wide variety of criteria, including but not limited to organizational structure, operational feasibility, geographic location, and proposed implementation strategy, with preference given to multispecialty groups with highly developed clinical and management information systems. Participating organizations were required to include 200 or more physicians.Medicare Physician Payment: Care Coordination Programs Used in Demonstration Show Promise, but Wider Use of Payment Approach May Be Limited, United States Government Accountability Office, February 2008.
Participating physician groups 10 large multispecialty groups representing approximately 5,000 physicians and 220,000 Medicare fee-for-service beneficiaries participated in the Demonstration. The participating groups included:
Billings Clinic, Billings, Montana Dartmouth-Hitchcock Clinic, Bedford, New Hampshire The Everett Clinic, Everett, Washington Forsyth Medical Group, Winston-Salem, North Carolina Geisinger Health System, Danville, Pennsylvania Marshfield Clinic, Marshfield, Wisconsin Middlesex Health System, Middletown, Connecticut Park Nicollet Health Services, St. Louis Park, Minnesota St. John's Health System, Springfield, Missouri University of Michigan Faculty Group Practice, Ann Arbor, MichiganMedicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011.
Participant Organizational Structure Part of Integrated Delivery System? Includes Academic Medical Center? Service Area Dartmouth-Hitchcock Clinic Faculty/Community Group Practice Yes Yes New Hampshire/Eastern Vermont Billings Clinic Group Practice Yes No South-Central Montana/Northwestern Wyoming Geisinger Clinic Group Practice Yes No Central-Northeast Pennsylvania Middlesex Health System Network Model Yes No South-Central Connecticut Marshfield Clinic Group Practice No No North-Central Wisconsin Forsyth Medical Group Group Practice Yes No Northwest North Carolina Park Nicollet Clinic Group Practice Yes No South-Central Minnesota St. John's Clinic Group Practice Yes No South-Central Missouri/Northwest Arkansas Everett Clinic Group Practice No No West-Central Washington University of Michigan Faculty Group Practice Faculty Practice Yes Yes Southeastern Michigan Source: Kautter, J., Pope, G.C., Trisollini, M., RTI International, and Grund, S., Iowa Foundation for Medical Care.Kautter, J., Pope, C., Trisolini, M., et al., Medicare Physician Group Practice Demonstration Design: Quality and Efficiency Pay-for-Performance, Health Care Financing Review, 2007. Volume 29, No. 1.
Beneficiary assignment For each performance year of the demonstration Medicare beneficiaries were retrospectively assigned to each PGP group if the majority of the patient's office or other outpatient services were provided by the PGP group.
Spending growth rate An assigned beneficiary growth rate was calculated at the end of each performance year by comparing the total Medicare Part A and Part B per capita expenditures to a base year period. PGPs that were able to attain a spending growth rate of more than 2% lower than their comparison populations were eligible for shared savings. Each PGP's local market area served as the basis for comparison populations.
Risk adjustment Medicare Part A and Part B expenditures were risk adjusted according to the CMS-HCC concurrent risk adjustment model. The Centers for Medicare and Medicaid Services (CMS) HCC (Risk Adjustment and Hierarchical Condition Category) is a payment model mandated in 1997 by CMS to estimate future costs for patients. The CMS-HCC concurrent risk adjustment model uses current year diagnoses to adjust current year expenditures to account for changes in case-mix or the health status of assigned beneficiaries in a PGP group.
Regular payment mechanism
Under the PGP Demonstration physicians continued to be paid for Part A and Part B services provided to Medicare beneficiaries according to regular Medicare fee-for-service fee schedules.
Performance payments Performance payments were separated into two metrics: cost efficiency and quality. Cost efficiency: PGPs were eligible for performance payments up to 80% of savings generated for Medicare after exceeding the 2% minimum savings threshold. The Medicare Trust Fund retained a minimum of 20% of the savings. Quality Measures: PGPs were eligible to receive incentive payments for satisfactorily reporting data on quality measures under the Physician Quality Reporting Initiative (PQRI) administered by the Centers for Medicare and Medicaid Services (CMS).
Quality measures The quality measures used in the Demonstration were developed by CMS in collaboration with the American Medical Association's Physician Consortium for Performance Improvement and the National Committee for Quality Assurance (NCQA), and were reviewed by the National Quality Forum.Medicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011. Quality measures were phased in such that Year 1 included only measures related to diabetes mellitus, Year 2 added measures related to congestive heart failure and coronary artery disease, and Year 3 added preventive care measures related to hypertension and cancer screening.Trisolini, M., Aggarwal, J., Leung, M., et al., The Medicare Physician Group Practice Demonstration: Lessons Learned on Improving Quality and Efficiency in Health Care, The Commonwealth Fund, February 2008. Volume 84.
Diabetes Mellitus Congestive Heart Failure Coronary Artery Disease Preventive Care HbA1c Management Left Ventricular Function Assessment Antiplatelet Therapy Blood Pressure Screening HbA1c Control Left Ventricular Ejection Fraction Testing Drug Therapy for Lowering LDL Cholesterol Blood Pressure Control Blood Pressure Management Weight Measurement Beta-Blocker Therapy – Prior MI Blood Pressure Control Plan of Care Lipid Measurement Blood Pressure Screening Blood Pressure Breast Cancer Screening LDL Cholesterol Level Patient Education Lipid Profile Colorectal Cancer Screening Urine Protein Testing Beta-Blocker Therapy LDL Cholesterol Level Eye Exam Ace Inhibitor Therapy Ace Inhibitor Therapy Foot Exam Warfarin Therapy for Patients HF Influenza Vaccination Influenza Vaccination Pneumonia Vaccination Pneumonia Vaccination Source: Medicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011.Medicare Physician Group Practice Demonstration: Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration, Centers for Medicare & Medicaid Services, Department of Health & Human Services, July 2011.
Performance results