This open access article from Health Care Financing Review is authored by members of the RTI International evaluation team for the Medicare Physician Group Practice Demonstration.  The article explains the initial design of the first Medicare fee-for-service pay-for-performance demonstration, authorized by the Medicare, Medicaid, and State Child Health Insurance Program Ben­efits Improvement and Protection Act of 2000 and initiated in 2005.   While launched as a three-year demonstration, the project has already completed a fifth performance year and has been used as a basis for designing the proposed Medicare Shared Savings Program accountable care organizations.

Many of the design elements in the proposed Medicare Shared Savings Program ACOs, including Medicare fee-for-service beneficiary assignment, calculation of shared savings available, and quality measures required, are based on the design of this Physician Group Practice demonstration.

Some of the most significant differences in the proposed Medicare Shared Savings ACO design are that hospitals and other Medicare participants will participate in the ACO (in addition to physicians), there are significantly more quality measures to report (65 rather than 32), a two-sided risk model (including liability for losses, or higher than projected Medicare expenditures) is available, and the shared savings available to the ACO will be limited to 65% (in the two-sided model, with bonus for Federally Qualified Health Center or Rural Health Center participation) rather than 80%.

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