Expert Perspective

September 02, 2016

MACRA - A New Era for Medicare Payment

Lynn Nonnemaker, PhD – CareAllies Contributor
Julian Harris, MD, MBA – President of CareAllies

When Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), physicians cheered the end of the Sustainable Growth Rate (SGR) system, Medicare's long-standing formula for updating Medicare physician payments. The SGR was responsible for years of uncertainty and confusion for physicians and their patients, with constant threats of large payment reductions.

Medicare's New Era of Value-based Reimbursement

As the Centers for Medicare & Medicaid Services (CMS) prepares to finalize the new payment methods and models created by MACRA, physicians need to focus on Medicare's new era of value-based reimbursement. The hallmarks of this new era include a move away from fee-for-service (FFS) payment toward paying for value, increased accountability for the cost and outcomes of care provided to Medicare beneficiaries, and moving away from the "one size fits all" model of payment updates. One thing that hasn't changed: tremendous uncertainty for physicians and practices trying to understand the new rules, maximize the opportunities for revenue growth, and minimize the potential risk of these new models.

Going forward, physicians will need to choose whether to pursue bonuses under the new Merit-Based Incentive Payment System (MIPS) or try for the bonuses and higher updates available through Alternative Payment Models (APMs). Under MIPS, physicians will be required to report on performance across a set of measures in four performance areas: Quality, Advancing Care Information (formerly the electronic health record (EHR) meaningful use standard), Clinical Practice Improvement Activities, and Cost. One attractive feature of MIPS is that it comes with the potential for higher bonuses - as high as 9 percent in future years with an additional 10 percent "exceptional performance bonus" possible (though in the first year of payouts - 2019 - the maximum upside bonus potential under MIPS is 4 percent, plus the exceptional performance bonus.) But MIPS will also come with considerable uncertainty for physicians, since bonuses will depend on where their performance falls relative to the performance for all others in the pool each year. To earn the highest available bonus, a physician will need to score well above CMS' "performance threshold", which will change every year. MIPS also brings substantial downside risk: performance scores falling toward the bottom of the pool could lead to payment reductions of as much as 4 percent in 2019, rising to 9 percent in 2022 and beyond.

Given the uncertainty inherent in a comparative performance system like MIPS, many physicians may opt to pursue the rewards available by participating in APMs. These alternatives to traditional FFS payment are not exactly new to Medicare - in the proposed rule CMS lists 24 different APMs currently underway or in development within the agency. However, only a few of these APMs will qualify as "Advanced APMs", meaning they meet CMS criteria for involving meaningful use of EHRs, they involve a quality performance component, and, perhaps the most difficult criterion to meet, they involve enough financial risk to clear the bar Congress set in MACRA for involving more than 'nominal' financial risk.

Among the current Medicare programs earning the Advanced APM designation: Tracks 2 and 3 of the Medicare Shared Savings Program, the Next Generation ACO model, and the next iteration of Comprehensive Primary Care, CPC+. Physicians will need to look closely at opportunities and trade-offs to form or join one of these programs in order to succeed in the new MACRA payment world. It isn't an easy decision, though. Along with the potential for lump sum bonuses of 5 percent on their FFS revenue, and the potential for higher annual payment updates beginning in 2026, physicians must accept substantial financial risk - at least 4 percent of expected spending. The math is complicated, and will require both strong analytics and strategic planning for how to take advantage of the opportunity while mitigating risk.

Several high profile APMs didn't make the Advanced APM list, at least initially. These include the MSSP Track 1, Comprehensive Joint Replacement demonstration, and the Bundled Payment for Care Improvement Models. While several of these met the threshold for meaningful financial risk, they failed the quality measure and/or EHR criteria. As the list of payment models that are in and out illustrates, there are a lot of moving parts that need to converge for physicians to realize the promise of higher reimbursements under MACRA.

View the complete list of APMs that qualify under the MACRA proposal.

As if that isn't complicated enough, physicians should be aware that in future years they may be able to earn bonuses and higher updates on their Medicare FFS business based in part on what they are doing to move away from FFS across their entire practice, including Medicare Advantage, Medicaid, and commercial efforts. Beginning in 2021, even if physicians don't qualify for bonuses based on the Medicare APM business, they can try to become a qualifying APM participant (QP) through arrangements with non-Medicare payers. The thresholds for counting these "Other Payer" APMs as Advanced are higher, but for physicians who partner with Medicare Advantage plans or commercial payers in the volume-to-value effort; this could be an attractive option for maximizing Medicare revenue.

There is no time to waste. CMS will begin measuring physicians in both the MIPS and APM track in 2017 with the first bonuses paid in 2019 based on 2017 performance. While CMS Administrator Andy Slavitt has suggested the possibility of a delay in the first performance period in response to physician concerns about being ready to go on January 1, 2017, the delay almost certainly won't be a long one, and reporting will begin sooner rather than later. Physicians need to start assessing both the opportunities and the risks that the new era of Medicare physician payment represents, and figure out a strategy for being successful under these new models.

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