Medicare Physician Group Practices: Innovations in Quality and Efficiency

The Centers for Medicare and Medicaid Services initiated the Physician Group Practice (PGP) Demonstration to provide participating practices the opportunity to earn performance payments for improving the quality and cost-efficiency of health care delivered to Medicare fee-for-service (FFS) beneficiaries. This report discusses experiences of the participating practices, as well the implications for the Medicare program and the health care system overall. To date, the PGP demonstration experience has shown that it is possible for large, multi-specialty group practices to respond to a hybrid set of quality improvement and cost-containment incentives layered on top of an FFS payment system. PGPs have used the demonstration to expand data systems, care management programs, coordination-of-care efforts, and other interventions that are not directly reimbursed. At the same time, the PGP demonstration system retains many of the positive features of FFS reimbursement, such as the patient’s free choice of provider and reduced incentives for undertreatment. Support for this research was provided by The Commonwealth Fund and by the Centers for Medicare and Medicaid Services (CMS) under Contract No. 500-00-0024, T.O. No. 13. The views presented here are those of the authors and do not necessarily reflect the views of The Commonwealth Fund or its directors, officers, or staff, or the views or policies of CMS. The authors assume responsibility for the accuracy and completeness of the information contained in this report. This report and other Fund publications are available online at www.cmwf.org. To learn more about new publications when they become available, visit the Fund’s Web site and register to receive e-mail alerts. Commonwealth Fund pub. no. 971.