Given today's declining reimbursements for medical services, one wouldn't expect the federal government to be doling out extra money for health care. "New money from CMS [the Centers for Medicare and Medicaid Services] is an absolute windfall for any organization," says Dr. Barbara Walters, senior medical director of the Dartmouth-Hitchcock Clinic.

But as part of a pay-for-performance initiative, CMS is giving bonuses to health-care organizations that provide high-quality care efficiently. For containing costs and improving care for Medicare beneficiaries, Dartmouth-Hitchcock received an additional $6.7 million from CMS—the largest bonus earned under the initiative.

Care: The payment was for the Clinic's performance in year two of the CMS Physician Group Practice (PGP) Demonstration, a project begun in 2005 with 10 multispecialty group practices nationwide. In the first year of the demo, two groups qualified for bonuses. In year two, four received payments totaling $13.8 million. To earn a bonus, a PGP has to provide quality care to Medicare beneficiaries for less than is spent on comparable patients who get care from other doctors in the area. Practices that do are reimbursed for up to 80% of the savings, depending on how well they also meet several quality goals.

In year one, there were 10 goals for diabetes care; Dartmouth-Hitchcock met 9 of the 10 but didn't achieve enough savings to get a bonus. (For more on year one results, see "Clinic saves feds $2.8 million and improves care.")

The graph shows Dartmouth's results on two of the demo's 27 quality measures.

"New money from CMS is an absolute windfall," says Walters.

In year two—April 2006 to March 2007—17 quality measures for congestive heart failure and coronary artery disease were added to the 10 for diabetes. All the PGPs met at least 25 of the 27 goals, but only four—including Dartmouth-Hitchcock—met the savings target and got performance bonuses.

Team: "There's a very strong linkage between evidence-based care and resource utilization," says Dr. Alan Kono, director of the Congestive Heart Failure (CHF) Clinic at DHMC. Kono's team educated caregivers about the incidence of CHF—550,000 new cases are diagnosed annually in the U.S.—and about evidence-based guidelines.

Clinicians also began using electronic charts for CHF patients that track vital signs, vaccinations, tests, and more. One goal was to prevent hospital readmissions, both to improve care and to reduce costs associated with inpatient stays. Now, nurses call patients within 24 hours of their release from the hospital to make sure they're following discharge instructions. Ideally, high-risk CHF patients see a provider within two weeks of their discharge and again within a month.

Dr. Edward Catherwood, interim chief of cardiology, spearheaded the development of a similar program for patients with coronary artery disease.

"The CMS project basically caused us to take a step back and better organize all of our chronic-disease-state care," says Walters, who is coordinating work on the CMS demo.

Disagree: Health-policy experts disagree about the effectiveness of pay-for-performance initiatives. According to American Medical News, the American Medical Association "expressed concern that the opportunity for payments in the current project is based toomuch on savings and not enough on quality improvement." But Kono feels the demo "acted as a major institutional springboard to really focus on quality improvement for multiple chronic diseases."

"From a budget perspective and from a quality perspective," says Walters, "if I were the government I would say, 'Well, there's something about this that works. We should continue it, see if it works in the long run, and then spread it.'"