Grant Description: The project was designed to identify the organizational characteristics of medical practices that provide high quality care at low costs. While differences in health care costs and quality across geographic regions and health plans within those regions have been well documented, little is known about these differences at the medical group practice level. The researchers addressed this issue by analyzing the cost and quality of care provided by physicians in 256 medical group practices serving 742,765 Medicare enrollees in seven geographic regions during 2009. They also conducted an analysis of 48 practices in one community where both Medicare and private sector health insurance claims were available. The practices range in size from five to 750 physicians. All provide primary care but about 56% also provide specialty services and 40% of the practices are owned by hospitals or integrated delivery systems. Per-member-per-year (PMPY) total paid costs, risk adjusted costs, and costs of providing a quality unit (cost/quality efficiency) were calculated from claims data. All PMPY costs except prescription drugs were included in this analysis. Six HEDIS quality measures and inappropriate ER and hospital use rates were calculated from claims data. Medical group practice and organizational structure and culture data were obtained from the Medical Group Management Association (MGMA).
Policy Summary: Physician-owned practices out-performed hospital-owned practices on costs and quality separately and on the cost/quality efficiency measure. Hospital-owned practices have higher paid and risk-adjusted costs, have higher inappropriate ED and avoidable hospital rates, and have lower cost/quality efficiency. Quality of care was found to vary by type of service and provider. There is significant variation in the quality measures across the regions, among the medical group practices in the regions, and even within the practices. High performance on one of the measures in a practice does not assure high performance on others.
The influence of practice structure on costs presents both good and bad news from a policy perspective. The good news is that practice size (number of FTE physicians), multi-specialty versus primary care status, and rural location have no influence on adjusted PMPY costs, when regional influence is controlled. This means that the pool of candidates for health care reform initiatives that focus on best practices will find a broad range of these organizational types that will qualify as candidates. Moreover, it appears that many of these practices can absorb reduced payment because those with the most efficient patient care systems do not lower costs at the patient level. In other words, they are not using the most efficient mix of services to care for patients but they are more efficient in the way they produce those services. The bad news from a policy perspective is that hospital-owned practices have significantly higher PMPY-adjusted costs for Medicare patients, and, according to MGMA, hospitals are rapidly buying practices in all regions of our study.
An important finding is that previously reported regional differences in costs of care for Medicare enrollees decrease when analyzed at the group practice level. Four of the seven regions have similar mean paid costs. The Northeast, East Midwest, and lower Midwest have higher unadjusted costs. However, when these costs are adjusted to account for illness burden, differences in two of the regions (Northeast and East Midwest) are no longer statistically significant and the Upper Midwest, a region widely noted for low costs, becomes one of the higher cost regions.