CBO Report Questions Success of Medicare Demonstration Projects

A new report (Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment) by the Congressional Budget Office paints a depressing picture of the cost effectiveness of many Medicare demonstration programs.  This report reviewed the outcomes of 10 major demonstrations conducted by CMS and concludes that few of them have any effect on cost and quality.  The summary of the report presents its major findings:

CBO reviewed the outcomes of 10 major demonstrations that have been evaluated by independent researchers. The evaluations show that most programs have not reduced Medicare spending. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees. Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare.

The conclusions that CBO drew from these projects are significantly different from some that were published by CMS on the same projects.  For the Physician Group Practice (PGP) project, CMS was “very pleased that the result resulted in quality improvement and savings”, although other comments of the time were not as positive (see this Single Tracks blog).  The CBO report noted that most disease management programs “have little or no effect on hospital admissions or regular Medicare spending” (that was before covering the costs of the programs themselves), and “the 34 programs did not have systematic effects on measurements of the process of delivering health care”.

In its “Other Lessons” section, CBO offered suggestions to CMS for evaluating future demonstrations, including rigorous randomized designs, reporting findings promptly, using a sufficiently large number of Medicare beneficiaries, properly accounting for coding changes that affect risk adjusters, and providing more consistent information on the features of the programs being tested.  Apparently CBO was not impressed with the methodologies that were used to evaluate these programs.

This report may be sobering reading for organizations that may plan to use many of the same promising-sounding techniques in accountable care organizations and other similar payment models as ways to reduce costs and improve quality.  Successful pilot programs often are not reproducible in other settings, but in these cases even the pilot programs did not achieve a high levels of success.  Reviewing the details of this report may be instructive to the organizers of these organizations as guidelines of what not to attempt.

The one glimmer of success in the report related to the Heart Bypass bundled payment demonstration, which created significant savings to Medicare because the participants agreed to an upfront discount on the fee-for-service payments that they would otherwise receive for performing the same services.  That program, which is similar to the recently-announced Medicare Bundled Payment Initiative, also produced positive results for the providers themselves, who were able to reduce costs and utilization, retain those savings and share them among the physicians who helped create them.  The Acute Care Episodes bundled payment demonstration project, which is currently ongoing but was not reviewed in this report, also appears to have had positive results for CMS and the providers.  Bundled payment programs allow providers to operate within a more familiar environment, and create real financial incentives for cooperation between physicians and the hospitals.  These types of arrangements may have more promise than the others described in the CBO paper.