In the first year of a three-year trial, the Dartmouth-Hitchcock Clinic saved the federal government $2.8 million, while providing better patient care. That's according to a Centers for Medicare andMedicaid Services (CMS) trial, the Physician Group Practice Demonstration, which began in April 2005. The demonstration is designed to reward providers for reducing costs and improving quality.

Demo: The Dartmouth-Hitchcock Clinic, one of 10 groups to participate in the demonstration, exceeded 9 of the 10 quality targets CMS set for year one. The other groups did well, too; altogether, the participants saved Medicare $21 million. Yet only two met the financial requirements to share in those savings. Medicare paid those two groups a total of $7.3 million, even though they did not meet all the trial's quality targets. In year one of the demo, reducing costs was more important than achieving the quality targets, at least in terms of divvying up the money saved. Dartmouth-Hitchcock just missed the threshold for sharing in the savings. But that doesn't seem to bother Dr. Barbara Walters, the project coordinator at Dartmouth.

"This is the kind of clinical care that we should be moving toward and practicing anyway," she says. It's not known how much Dartmouth-Hitchcock has spent on the project, but the only personnel cost was half of a full-time position,Walters points out. She and her team focused on changing providers' responsibilities rather than simply hiring more staff.

Coaches: Among the changes was the integration of health coaches into primary- care departments. The coaches, who are R.N.'s, worked from a registry of about

This shows the Clinic's performance in a federal CMS trial on one of 10 quality measures—the percentage of diabetic patients who get regular foot exams.

Dartmouth exceeded 9 of the 10 quality targets set for year one.

30,000 patients who had certain diseases or had been recently hospitalized at DHMC for a major condition. By mail and phone, the coaches provided education, counseling, and an occasional nudge to get needed tests. Sometimes the coaches helped with such basic tasks as reading and filling out forms. Then, when the patients came in for appointments, they were better prepared, says Walters, and could "have a much more productive physician encounter." After visits, coaches checked in with patients again.

The goal was to help them manage their chronic illnesses better, keeping them healthier and avoiding costly hospitalizations and emergency procedures.

To gauge the performance of the 10 trial participants, CMS set quality benchmarks and looked at the total cost of care for Medicare patients treated by each group. The quality targets for year one of the trial centered on diabetes care and included blood-sugar testing and control, blood- pressure control, lipid testing and LDL cholesterol control, urine-protein testing, eye and foot exams, and influenza and pneumonia vaccinations. For example, CMS's target for LDL cholesterol was that about 65% of patients test below 130; nearly 90%of Dartmouth-Hitchcock patients achieved that goal.

The target for reducing costs was more complicated. The cost for patients who getmost of their care at Dartmouth- Hitchcock had to rise more slowly than the cost of care for similar Medicare patients in the region who get their care elsewhere. The difference had to be more than 2% in the first year of the demo.

Cost: In year two, saving money will again be given more weight than improving quality. But by year three, cost and quality will be weighted equally. This structure has drawn criticism from the American Medical Association and others, though "it's better than the fee-for- service . . . model that we're all stuck with at this moment," says Walters. (For more on alternative payment models, see this article.)

"Pay-for-performance," she adds, "at least attempts to bring quality into the equation."