Most Medicare demos fail to reduce costs, analysis indicates

The Congressional Budget Office (CBO) has analyzed recent Medicare demonstration projects and concluded that most have not reduced costs, but those that did had certain specific characteristics.

The CBO issue brief reviewed 10 projects, six that focused on disease management and care coordination and four that were value-based payment demonstrations. All of the care coordination projects used nurses as care managers and sought to reduce hospital admissions. On average, the programs achieved little or no reduction in admissions, but the effects of the programs varied considerably. Some programs reduced admissions by 15% or more, while in others admissions rose by at least 15%.

In most of the care coordination programs, the care manager was not integrated into the physician's office and had only telephone contact with patients. The CBO analysis found that these two design elements were associated with the results of the programs; care coordinators who interacted more closely with physicians and patients were more likely to reduce admissions. However, even these more successful programs did not, for the most part, achieve enough savings to offset the fees they were paid for the demonstration. Whether the practice's fees were at risk in the demonstration did not appear to affect the success or failure of a program.

The four value-based demonstration programs in the analysis were the Physician Group Practice Demonstration, the Premier Hospital Quality Incentive Demonstration, the Medicare Participating Heart Bypass Center Demonstration and the Home Health Pay-for-Performance Demonstration. Only the bypass demonstration yielded significant savings for Medicare, reducing expenditures for bypass surgery by about 10%. The bypass demonstration was the only one of the four that used a bundled payment system to reduce costs. Participating hospitals and physicians were motivated to accept a discounted, bundled payment for their services due to competitive pressures in their markets, the CBO brief noted.

These findings suggest that substantial changes to payment and delivery systems will be required before demonstrations like these can significantly reduce spending or improve care, the brief concluded. The author also cited several other lessons to be taken from these demonstrations, including the need to gather timely data, focus on transitions of care, use team-based care, target high-risk patients, and limit the fees paid to participating clinicians.