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July 11, 2007

U-M Health System demonstrates that improving quality & coordination of care can cut Medicare costs

$3.5 million saved in first year of Medicare Demonstration Project

ANN ARBOR, Mich. — In just the first year of a special effort organized by the federal agency that runs the Medicare system, the University of Michigan Health System was able to significantly improve both the quality and efficiency of care that Medicare beneficiaries received at its hospitals and health centers, while also saving the Medicare system millions of dollars.

These results were announced today by the federal Centers for Medicare & Medicaid Services, together with results from nine other large physician groups that are also participating in the Physician Group Practice Medicare Demonstration Project, the first Medicare Physician Pay for Performance Demonstration.

All 10 physician groups improved quality of care for Medicare beneficiaries who have diabetes, by achieving nationally recognized benchmarks for diabetes care quality. The U-M Faculty Group Practice, which includes all the physicians on the U-M Medical School faculty who treat patients at U-M facilities, achieved 95 percent of its targets for providing specific, proven treatments and preventive measures to people with diabetes.

In addition, UMHS improved care for its Medicare patients with many other types of chronic diseases, especially those who may have more than one disease, by redesigning care to enhance coordination and efficiency. Working together, the FGP and the U-M Hospitals and Health Centers developed and implemented programs that not only contributed to better care, but also saved Medicare money.

“Defining the best way to practice medicine for our patients is advancing from theory to a proven reality, as this project demonstrates. Now we have a year of data from CMS to show that doing the right thing for our patients is win-win. I’m looking forward to more validation in coming years for redesigning patient care processes to improve clinical quality,” says David Spahlinger, M.D., FGP executive medical director.

The PGP Medicare Demonstration project provided an opportunity to share in the savings resulting from more efficient and effective care delivery. As a result, UMHS saved Medicare $3.5 million in savings the first performance year, from April 1, 2005 to March 31, 2006, largely from inpatient Medicare expenditures. Under a CMS formula, UMHS will be able to keep $2.7 million of these savings.

"We proved that you don’t have to reduce the quality of care to cut Medicare costs. We actually added services at no cost to patients or payers,” says Caroline Blaum, M.D., the U-M geriatrician who is leading the project. “For our many Medicare patients with diabetes, we have scientific, evidence-based quality indicators that demonstrate the high quality of care provided by the U-M FGP.” Blaum also is associate chief in the division of Geriatric Medicine and a research scientist at the Veterans Affairs Ann Arbor Healthcare System.

Several programs were redesigned, enhanced, or created for the first year of the project including:

  • Diabetes Quality Program: This program uses the UMHS electronic medical record system to provide individual physician/provider feedback on the quality of care for their patients with diabetes, often at the point of service. This allows the physician and patient to quickly see where there is a quality problem and correct it.
  • Transitional Care Call-back Program: Nurses, dubbed by some as ‘care traffic controllers,’ call patients and caregivers within 24 hours of a patient’s discharge from the emergency department and hospital, helping them to understand post-discharge instructions and to solve problems such as keeping the next appointment, understanding medications, getting a test or procedure, or finding transportation.
  • Chronic care coordination:  Social workers and nurses work with physicians to assist patients who have multiple risks, multiple chronic diseases, and complex health status.
  • Pharmacy-facilitated discharge:  A clinical pharmacist visits patients before discharge from the hospital to coordinate hospital medications with the medications the patient was taking before hospitalization, and to teach about medications and their benefits and side-effects.
  • Heart failure telemanagement program:  Nurses work closely with patients and cardiologists to teach patients to manage their heart failure by modifying life-style and adhering to complex medical regimens.

Other initiatives have been launched since that first year concluded, and their impact will be seen in the data from subsequent years that will be released in future.

While patients with chronic conditions benefited from UMHS’s redesigned care coordination, only data from beneficiaries with diabetes was used in the calculation of quality.  In the coming years, heart failure, coronary artery disease, hypertension and preventative services quality measures will be added.

A total of 20,505 Medicare beneficiaries who receive most of their health care at the UMHS were “assigned” to U-M as part of the PGP demonstration project during the first performance year.  Approximately 20 percent of those patients have diabetes. Because U-M is a tertiary referral center, nearly 20,000 other Medicare patients were seen only for referral and were not considered part of the Medicare Demonstration Project. 

The UMHS Faculty Group Practice is one of ten participants in the PGP Demonstration Project, and the only one in Michigan. It was chosen for several reasons including demonstrated success in chronic care management, diabetes quality, and organizational structure.

The Faculty Group Practice is the unit within the Medical School through which the faculty provide clinical services to patients within the University of Michigan Health System. There are more than 1,200 physicians within the Faculty Group Practice. The Medicare Demonstration Project will last until March 31, 2008, but may be extended.

For more information on Medicare Payment Demonstrations sponsored by the Centers for Medicare & Medicaid Services, go to

Written by: Mary Beth Reilly


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