While the ink is barely dry on the 962 pages of proposed regulations issued in April by CMS, the ripples of the Medicare Access and CHIP Reauthorization Act (MACRA) is already being felt throughout the health care industry. Keeping in mind this is still a proposed rule with comments to CMS due at the end of June, the final rule could very well look much different from what has been proposed. One thing is very clear – MACRA, in whatever form it finally takes, formally replaced the Sustainable Growth Rate (SGR), which would have continued to cut physicians’ reimbursement by 21 percent each year had it not been eliminated last year.

The Medical Association is studying the proposed rule and may provide comments particularly on those provisions of the rule of most significance to smaller practices. The timeline of the implementation of MACRA is of the utmost importance in that physicians will begin reporting Jan. 1, 2017, which will affect Medicare payments in 2019. The Association will provide more information as it becomes available.

MACRA repealed the SGR payment system, which governed how physicians were paid under Part B of the Medicare program, and replaced its fee-for-service reimbursement model with a new two-track system requiring physicians to accept a certain amount of risk: Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs).

It’s estimated that in 2017, about 90 percent of practices will fall into the MIPS category, and it will serve as a stepping stone for some of those practices to join APMs in subsequent years. The data collected during the 2017 calendar year reporting period will be reflected in 2019 payment adjustments.

While MACRA only impacts Medicare payments, commercial payers typically follow Medicare’s payment models, and it is likely that risk will be more prominent in the commercial setting over the next several years. Initially, physicians can choose MIPS or join an APM such as an accountable care organization or patient-centered medical home. If they make no choice or are deemed to be ineligible for an APM incentive payment, they will be assigned to MIPS.

Merit-based Incentive Payment System (MIPS)

The majority of physicians today participate in one or more of three existing payment incentive and quality improvement initiatives – Physicians Quality Reporting System, Meaningful Use and the Physicians Value-Based Payment Modifier – which will be dissolved as separate programs and melded into MIPS.

Under MACRA, physicians under MIPS will have to report their performance measures to CMS to be graded on four factors:

  1. Quality of Care – 30 percent
  2. Use of Resources – 30 percent
  3. Meaningful Use of EHRs – 25 percent
  4. Clinical Practice Improvement Activities – 15 percent

High-scoring physicians will get a bonus while low-scoring physicians will see a reduction in their fees. Physicians will be allowed to choose the quality measures upon which they will be evaluated. For the calculation of payment bonuses and penalties (and for ease of eventual consumer use through public reporting on Physician Compare), the Department of Health and Human Services (HHS) will be tasked with developing a composite score for each physician based on these factors. Maximum bonuses and penalties will be 4 percent in 2019, 5 percent in 2020, 7 percent in 2021, and 9 percent in 2022 and beyond. Additional funding of up to $500 million a year will be provided for separate bonuses for “exceptional performance,” from 2019 through 2024.

Alternative Payment Models (APMs)

Physicians choosing an APM will have to join an accountable care organization or an approved patient-centered medical home, or otherwise be in an alternative payment model entity where payment is at least partly based on quality performance and on total spending. Payment tied to performance must be 25 percent of a doctor’s or group practice’s Medicare revenue in 2019, increasing to 75 percent in 2022.

Physicians who join a CMS-approved alternative payment model will get an annual 5 percent bonus in their fees from 2019 to 2024. And, starting in 2026, physicians in alternative payment models will receive an annual across-the-board fee increase of 0.75 percent. Physicians participating in MIPS will get a 0.25 percent annual increase.

CMS proposes an approach to implementing the MACRA APM pathway through which eligible clinicians can become “qualifying participants” and earn statutorily specified incentives for participation. Advanced APMs must meet three proposed requirements deriving from the MACRA statute:

  1. Required use of certified EHRs;
  2. Payment for covered professional services based on comparable quality measures; and,
  3. Either being an enhanced medical home or bearing more than “nominal risk” for losses.

Joining an APM requires physicians to accept a certain degree of risk. Unfortunately, CMS has not yet adequately defined what degree of risk participants must accept to qualify. However, CMS proposed a “generally applicable financial risk standard” requiring APMs to include provisions that, if actual expenditures exceed expected expenditures, CMS can withhold payment, reduce payment rates, or require the APM to incur a debt to CMS. The risk must be more than nominal, which CMS accepts as “meaningful for the entity but not excessive.”

For more information about how MACRA can affect your payments, check out Health Affairs’ Health Policy Brief on Medicare’s New Physician Payment System from April 21, 2016.

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