The Not-So-Obvious Implications of MACRA

With the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) this past April, a couple of things became evident. First, there are some concepts Congress can agree on – like the unpopularity of the sustainable growth rate (SGR). An overwhelming majority in both houses voted for its repeal.

Second, Medicare is moving away from fee-for-service (FFS) reimbursement and toward value-based payments for physician services. Beginning in 2019, providers will have the option of participating in the merit-based incentive payment system (MIPS) – an enhanced version of the current FFS system – or moving into alternative payment models (APMs). Providers who opt for MIPS will see a period of essentially flat reimbursement; those who accept more risk through APMs will have a chance to reap higher rewards.

Regardless of which reimbursement path providers choose, they’ll need to focus on managing the cost of care and demonstrating value to patients and payors. That much is clear. But MACRA will also have implications that are not so obvious.

In this final installment of our blog series on MACRA, we look at some additional potential effects of the legislation that providers should be thinking about.

Physician practice consolidation and acquisitions will continue.

Many smaller physician practices will lack the internal resources needed to thrive under MIPS or participate in an APM. This will likely accelerate consolidation into larger freestanding physician practices or integrated delivery systems.

Understanding the relationship between Medicare Parts A and B will become more complicated.

Providers will need to be able to become more sophisticated in understanding how performance under Part B – particularly the resource utilization incentive – will affect reimbursement under Part A. Therefore, providers must evaluate their Medicare strategy and participation in various programs (e.g., MIPS, APMs, Medicare Advantage), as it may not be effective simply to be a passive participant in Medicare FFS.

Physician compensation and service agreements will need to evolve.

Compensation arrangements and professional services agreements will need to reflect the incentives being implemented by CMS. Under MACRA, some physicians will have the potential for much lower or higher reimbursement rates, and organizations will need a strategy to address physician performance.

Commercial contracts will need to be amended.

Many commercial payor contracts define reimbursement in terms of a percentage of Medicare. While that has worked well in the FFS world, it will not translate with the introduction of MIPS, which will make Medicare more incentive-driven. Therefore, organizations should review commercial payor contracts to determine their compatibility with MACRA and adjust language as necessary.

Providers can have a voice in shaping the final product.

MACRA may be a done deal, but CMS still has plenty of details to iron out. The legislation mandates that stakeholder input be considered in developing the finer points, so providers should take advantage of the opportunity to make their voices heard during the comment and review process.

The effects of these changes won’t be felt until 2019, but organizations need to start planning now for life under MACRA. In the coming months, ECG will dive deeper into related topics such as APMs, operational and technological considerations, the impact on health system and physician alignment, developing payor strategies, and other related topics. In the meantime, read Making Way for MACRA: Positioning Your Organization for Payment Reform for additional insights on the legislation.

This entry was posted in Accountable Care Organization, Healthcare Reform, Healthcare Reimbursement, Legislative & Regulatory Issues, PCMH, Physician Compensation, Population Health Management 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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