After saving the federal government millions of dollars but losing revenue in the process, Park Nicollet Health Services finally got a bit of a payback on Monday.

The St. Louis Park-based hospital received a $5.7 million performance bonus for its work in a five-year federal demonstration project that included physician groups at nine other hospitals and clinics around the country.

The pilot project, launched in 2005 by the Centers for Medicare and Medicaid Services, aimed to give hospitals a financial incentive to keep patients healthy and out of the hospital -- which runs counter to the way they get paid these days.

And that's just the point.

Reining in the nation's escalating health care costs means changing the payment model, which pays caregivers for treatments they give and not for how well they do keeping people away from the doctor's office.

In the coming years, federal health care reform laws will force hospitals to move away from that fee-for- service model. The experience of physician groups involved in the demonstration project is shaping the way the reform gets put into action, Park Nicollet officials said. The project will continue for another two-year transitional period.

"We improved their health, we kept them out of the hospital," said Park Nicollet's Chief Medical Officer Steven Connelly. "But because we kept them away from admissions in the emergency room, we actually lost revenue on those patients. It's not a tenable business model. But if you transition into reimbursing for the quality of care delivered, then you have the benefit both to the organization and to the patient."

Medicare has paid $110 million in incentives to seven of the 10 participants over the course of the project. They are paid out of the savings they deliver to Medicare as well as for giving patients a better care experience.

Park Nicollet said it saved Medicare $12.3 million since the program began, with $10 million coming in the past year.

"It's not for the faint of heart," said Mark Skubic, Park Nicollet's main contact with the federal government program. "It's an awful lot of work, but we learned a lot."

Participants were rated on 32 performance measures for heart failure, diabetes, coronary artery disease, high blood pressure and prevention. To receive incentive payments, hospitals and clinics needed to meet certain care benchmarks.

Park Nicollet officials heralded their program for congestive heart failure. When the pilot began, Park Nicollet signed up about 500 patients who phoned in every day and answered five simple questions about their weight, sleep patterns, whether their feet were swollen or whether they were out of breath when walking.

Nurses followed up with patients who showed warning signs. Sometimes nurses would adjust medication, other times they suggested that patients visit the doctor.

Skubic estimated that the call-in program avoided one hospital visit per patient per year. If similar programs were adopted across the country, Skubic said, it would save taxpayers $25 billion.

Wisconsin clinic

Park Nicollet is the only hospital system in Minnesota involved in the program. A rural hospital system in Marshfield, Wis., about 160 miles east of the Twin Cities, also is participating.

With 54 medical and dental centers, Marshfield is one of only two sites to earn a performance payment in all five years. This year, Marshfield received $15.8 million.

The hospital already had a proprietary electronic medical records system. But as part of the project it put in new support tools, such as triggers to make sure flu shots were given each year, said Marilyn Follen, administrator for Marshfield's Institute for Quality Innovation and Patient Safety.

The clinics also started a 24-hour nurse telephone support line. Among its biggest gains in care came when Marshfield used the TeleHealth line to focus on high-risk patients taking the blood thinner warfarin, which requires tight oversight of patients.

"We demonstrated to the country that this can be done," Follen said. "We can bend the cost curve while improving quality. But we know we have a lot more work to do."

The other sites are Dartmouth-Hitchcock Clinic in Bedford, N.H.; Deaconess Billings Clinic in Billings, Mont.; Everett Clinic in Everett, Wash.; Geisinger Clinic in Danville, Pa.; Integrated Resources for the Middlesex Area in Middletown, Conn.; Forsyth Medical Group in Winston-Salem, N.C.; St. John's Health System in Springfield, Mo.; and University of Michigan Faculty Group Practice in Ann Arbor, Mich.

Jackie Crosby • 612-673-7335