GAO Reports on Physician Group Practice Demonstration Project

On February 15, 2008, the Government Accountability Office (GAO) released a Medicare physician payment report entitled Care Coordination Programs Used in Demonstration Show Promise, but Wider Use of Payment Approach May Be Limited (Report). 

In the Report, the GAO examines the Medicare Physician Group Practice (PGP) Demonstration.  The PGP Demonstration was authorized by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 and began in April 2005 with 10 participating physician groups (each having 200 or more physicians).  The PGP Demonstration tests a hybrid payment methodology that combines Medicare fee-for-service payments with bonus payments that can be earned by demonstrating cost savings through better patient care management and meeting quality of care performance targets.

In July 2007, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release announcing that, in the first performance year (PY1), 2 participating physician groups earned combined bonuses of approximately $7.3 million and that all 10 physician groups achieved most of the quality targets. In the Report, the GAO evaluates the PY1 of the PGP Demonstration by examining the programs used, whether the design was reasonable, and the potential challenges in broadening the payment approach of the PGP Demonstration to other physician groups. 

According to the Report, the GAO found that the design for the PGP Demonstration was generally reasonable.   However, the GAO also found that the PGP Demonstration design has some challenges. For instance, the GAO reports that the bonuses and performance feedback for PY1 were not given to the participating physician groups until after PY3 began.  The GAO points out that more timely delivery of the bonuses and feedback may have enabled the physician groups to improve their programs. 

Further, although CMS provided each physician group with quarterly patient claims data, the GAO reports that most of the groups did not have the necessary resources to analyze and use the data to measure their progress and potential improvement areas.  The Report also indicates that some of the physician groups raised concerns about the PGP Demonstration, including the use of a uniform 2 percent savings threshold, which may have made earning a bonus more challenging for particular groups.

Finally, the GAO found that the large relative size of the 10 participating physician groups (200 or more physicians) compared to most U.S. physician practices gave the participants certain size related advantages that may make broadening the payment approach of the PGP Demonstration to other physician groups and nongroup practices challenging.  In the Report, the GAO points out the 3 size related advantages:

• Institutional affiliations that allow greater access to financial capital;
• Access to and experience with using electronic health records; and
• Experience prior to the PGP Demonstration with pay-for-performance programs.

In fact, the Report indicates that most of the physician groups believed that the 3 size related advantages were critical to achieving cost savings and improving quality.