The Divergent Paths of MACRA

“Two roads diverged in a yellow wood/And sorry I could not travel both.”

No federal legislation will ever be mistaken for poetry. For one thing, poetry uses far fewer acronyms. But like the narrator in the famous Robert Frost poem quoted above, today’s providers find themselves staring at a fork in the road.

With the Medicare Access and CHIP Reauthorization Act (MACRA), CMS is taking a definitive step toward reimbursing physicians for value-based care delivery. And while providers will be compelled to follow CMS’s lead, they do have a choice in how they get there. Beginning as soon as 2019, providers will be able to decide between two reimbursement tracks – one that continues to reimburse them on a fee-for-service (FFS) basis but with enhanced incentives, and another based on their participation in alternative payment models (APMs). As part of our ongoing review of this legislation, we’ll take a closer look at these two paths.

Track 1: Enhanced FFS Model — Merit-Based Incentive Payments

If the first track looks familiar, it should – it resembles the existing Medicare Physician Payment System. In lieu of the controversial Sustainable Growth Rate (SGR), which MACRA eliminates, this first track will increase Medicare Physician Fee Schedule (MPFS) rates by 0.5% each year from July 2015 to 2019. Payment rates will remain static through 2025, and then increase 0.25% annually beginning in 2026.

Although the base rate won’t change much for a period of 10 years, 2019 will mark the implementation of a merit-based incentive payment system (MIPS) that will introduce opportunities and risks based on value criteria. To assess physician performance, MIPS will replace three existing performance programs – the Physician Quality Reporting System, EHR meaningful use, and the physician value-based modifier – and score physicians in accordance with four categories:

  • Clinical quality
  • Resource utilization
  • Meaningful use
  • Clinical practice improvement

Providers’ performance in each of these categories will be compiled into a composite score on a scale of 0 to 100, which will be used to differentiate between the best and worst performers. MIPS will essentially be budget-neutral, so there will be winners and losers. A penalty/reward structure will be phased in such that by 2026, the maximum payment penalty will be 9% and maximum reward will be 27% (though the likelihood of achieving that upside is very slim).

Track 2: Alternative Payment Models

Up until now, this has been the road less traveled by. FFS models still dominate the reimbursement landscape, but organizations are increasingly planning and positioning themselves to accept greater risk.

Although the second track is not as well defined as the first, it clearly represents a more dramatic departure from the historical reimbursement model. Under this track, providers who have a significant Medicare population can participate in APMs, such as accountable care organizations (ACOs) and patient-centered medical homes (PCMHs).

To encourage physicians to enter into APMs, MACRA offers an additional 5% in annual bonuses for services in 2019 to 2024 and a higher cumulative payment update (0.75%) beginning in 2026. Like Track 1, APMs will also have quality reporting requirements. Providers will have the ability to phase into the APM track over several years.

This second track wants for details, but as CMS irons out the finer points, stakeholders will have an opportunity to make their voices heard. The criteria for APMs will be based on a notice and comment process, affording an opportunity to provide input on the alignment of incentives for evidence-based outcomes payment methods. Stakeholders can also propose models other than ACOs and PCMHs for comment.

With the introduction of this two-track system, providers have a choice: stick with the current system, with modifications, and accept essentially flat reimbursement; or move into alternative models with more risk but also higher reimbursement potential.

Which track is best for your organization?

This entry was posted in Accountable Care Organization, Healthcare Reform, Healthcare Reimbursement, Legislative & Regulatory Issues, PCMH, Physician Compensation and tagged , , , , , , , by Dave Wofford. Bookmark the permalink.

About Dave Wofford

For almost 20 years, Dave has focused on improving performance and achieving alignment between hospitals, physicians, and other entities. Dave’s clients appreciate his knowledge of the issues related to hospital/physician relationships and affiliations, as well as his understanding of the perspective and value that each party brings. This, in turn, allows him to help parties reach sustainable arrangements. As providers seek opportunities for clinical affiliation and collaboration in an era of shrinking revenue sources and increased competition, Dave works closely with hospitals and medical groups on matters such as physician compensation plan redesign, strategic planning, and the negotiation and development of professional services arrangements. He consults to hospitals and physicians on issues concerning operations, business planning, strategic alignment, and in particular, professional revenue cycle performance turnaround. Recently Dave worked with Children’s Hospital Los Angeles Medical Group, an organization consisting of approximately 500 professionals. He led an effort to improve the group’s revenue cycle performance, which resulted in significant reductions in accounts receivable and IT vendor fees, positioning the organization for enhanced ongoing collections. Prior to joining ECG, Dave served as an officer in the U.S. Army for 8 years, and today his clients value the leadership qualities honed during important international assignments.

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