Spending Differences Associated With the Medicare Physician Group Practice Demonstration

In the Medicare Physician Group Practice Demonstration (PGPD), 10 accountable care organization (ACO) physician groups were eligible to receive a portion of savings generated if they also showed improvement on 32 quality measures. The Centers for Medicare & Medicaid Services found that the program reduced spending by $137 million over five years (2005–2009). Nothing is known, however, about the effects of the PGPD program on a costly subset of patients—those dually eligible for Medicare and Medicaid, who often have multiple, severe health conditions.

These researchers compared trends in spending among PGPD participants and those in the same counties who received care from non-PGPD physicians. They compared those dually eligible to non-dually eligible. To reduce some problems in risk adjustment that are subject to differences in coding practices, the researchers used the “low-variation conditions” of hip fracture, stroke, colorectal cancer, and acute myocardial infarction, rather than the CMS risk-adjustment methodology.

Overall, they found average annual Medicare payments per beneficiary in PGPD sites increased $1,206 (15.2%) over the time period studied, compared to $1,230 (16.5%) for controls. The spending growth rate for dual eligibles treated by PGPD participants was 9.7 percent, compared with 15.3 percent in the control group. The authors conclude that “ACOs and similar shared-savings contracts have the potential to improve care for this high-cost group.”