Spending Differences Associated With the Medicare Physician Group Practice Demonstration

Study Questions:

What are the cost savings associated with the Medicare Physician Group Practice Demonstration (PGPD), a predecessor of accountable care organizations (ACOs) recently launched by the Centers for Medicare and Medicaid Services (CMS)?


This was a quasi-experimental analysis in which trends in spending of PGPD participants (10 physician groups across the United States) were compared to local control groups prior to intervention (2001-2004) and following intervention (2005-2009). The intervention group was composed of fee-for-service Medicare beneficiaries (n = 990,177) receiving care from the 10 participating institutions. The control group (n = 7,514,453) was composed of Medicare beneficiaries from the same geographical region as the intervention arm, but receiving care largely from non-PGPD physicians. The main outcome measure was annual spending per Medicare fee-for-service beneficiary.


Cost savings per beneficiary across PGPD sites compared to controls were modest (adjusted mean $114; 95% confidence interval [CI], $12-$216) and largely attributable to the more substantial savings among the 15% of participants who were dually eligible for Medicare and Medicaid (adjusted mean $532; 95% CI, $277-$786). There was heterogeneity across participating groups, ranging from an overall mean per-capita annual savings of $866 (95% CI, $815-$918) to an increase in spending of $749 (95% CI, $698-$799).


Savings associated with the Medicare PGPD are modest (adjusted mean $114/beneficiary), largely concentrated on dually eligible beneficiaries and heterogeneous across participating sites.


The current study adds to previous PGPD analyses by demonstrating modest cost savings associated with this pilot ACO, and concentrated within dually eligible beneficiaries. These results are encouraging, as there are implications for substantial cost savings for this particularly vulnerable and high-cost population. The variation of cost savings across participating sites is a call to action to define best practices and evaluate institutional factors that drive the success or failure of national initiatives.

Keywords: Physicians, Eligibility Determination, Centers for Medicare and Medicaid Services (U.S.), Cost Savings, Medicare, United States, Group Practice

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