In April 2015, the Medicare Access and CHIP Reauthorization Act (MACRA) was signed into law, representing the most sweeping set of changes to Medicare’s physician payment methodology in more than two decades. MACRA largely made headlines for its repeal of the sustainable growth rate (SGR) formula, thereby averting the planned 21% across-the-board cut in Medicare’s provider payments. But perhaps more importantly, it represents for Medicare a dramatic step away from traditional fee-for-service reimbursement and toward value-based payments for physician services.
During the next 5 years, CMS will implement a two-track reimbursement system that will reward providers for delivering high-quality, cost-effective care. The first track will allow providers to be reimbursed on a fee-for-service basis, but with enhanced incentives. The second track is a more dramatic departure from the traditional reimbursement model, and will encourage providers to participate in alternative payment models such as accountable care organizations and patient-centered medical homes. As such, hospitals and health systems must reevaluate their existing financial relationships with physicians, whether they are employed or operating through professional services agreements. This assessment will need to include not only a review of physician compensation itself, but also an evaluation of the organization’s ability to implement and track the multitude of quality and resource-related metrics that CMS will use to establish physician reimbursement rates.
The substance of this legislation is still fairly broad, and federal agencies have been given wide latitude to interpret and flesh out the details over the next several years. Still, it is critical for providers to appreciate that the post-MACRA landscape will essentially be a zero-sum game that rewards certain providers at the expense of others. Although many of the changes outlined in MACRA will not take effect until 2019, providers who expect to thrive under the new payment methodology will need to start the process of planning for and implementing structural changes long before then.
Over the next several weeks, we’ll take a closer look at the key elements of MACRA, its impact on providers that bill Medicare for physician services, and ways that hospitals and other providers can stay ahead of the curve. In the meantime, check out Making Way for MACRA: Positioning Your Organization for Payment Reform.