MACRA Proposed Rules Provide Some Clarity, But Questions Remain

Last week CMS released its much-anticipated proposed rules for the Medicare Access and CHIP Reauthorization Act (MACRA), which was passed by Congress approximately 1 year ago and introduced substantive changes in the way Medicare will reimburse physician services. Readers of previous ECG blog posts and articles may recall that, like the ACA before it, this legislation grants the HHS Secretary great latitude in fleshing out the details through rulemaking. While these are only proposed rules, and CMS is using this as an opportunity to solicit commentary from the public, they do shed light on what we can expect when the rules are finalized in November.

MACRA establishes two tracks for reimbursement: the Merit-Based Incentive Payment System (MIPS), which resembles the current Physician Fee Schedule, and Alternative Payment Models (APMs), which encourage a greater level of innovation coupled with stronger financial incentives. The proposed rules provide greater clarity on each of these tracks while leaving some details to be determined.

MIPS Details Revealed

Of the two tracks, MIPS was the more clearly defined in the original MACRA legislation. This remains the case, as the proposed rules give a great deal of additional information about how this track will be administered. Some of the key questions that have been addressed (though not finalized) are listed below.

Timing of Payment Adjustments

As we expected, it looks like there will be a 2-year time lag between the performance period and the payment period. That is, since payment adjustments begin in 2019, they will be based on performance during calendar year 2017. That means that providers will have little time to adjust their performance because the measures won’t be finalized until November of this year. Fortunately, for the quality incentive, which represents 50% of the total incentive in the first year, no new measures will be introduced this year from the existing PQRS system on which it is based.

Scoring Methodology

Each of the four incentive components (quality, resource use, IT, and clinical practice improvements) will have its own scoring methodology. The quality and resource use incentives will grade providers on a linear sliding scale based on their percentile ranking for the reported metrics, as opposed to the “all or nothing” scheme that was a source of complaint with the existing PQRS system. The IT incentive will award a base score for meeting foundational requirements plus a variable component for attaining higher levels of performance. Lastly, the clinical practice improvement incentive will award points for successful participation in a number of specified initiatives, and the score will be based on the number of points awarded relative to the maximum allowable of 60 points.

Strength of Incentives

A major question (in our minds, at least) with the original legislation was how aggressively the MIPS program would redistribute payments from low performers to high performers. The Executive Summary of the proposed rule addresses this question directly by quantifying the total amount of positive and negative adjustments that it expects to experience in the first year. These estimates suggest that in the first year, the average MIPS adjustment (positive or negative) would be several thousand dollars per clinician. This will increase over time, however, as the money at risk increases and, potentially, as standards of performance become more stringent.

Exceptions and Simplifications

Many commenters noted that the MIPS incentives under MACRA could significantly disadvantage small practices, practices in rural areas, practices that have limited or no patient-facing contact, and others. These objections have been heard, and HHS has proposed rules that will substantially ease the burden for many of these practices by reducing the number of measures required, allowing a re-weighting of incentive categories in certain circumstances, and offering other concessions. That said, small as well as large practices will likely find that the requirements posed by MACRA remain daunting.

APMs More Clearly Defined

MACRA defines APMs rather vaguely, which has created great interest in better understanding this reimbursement track, since the financial incentives clearly favor APMs over MIPS. In providing greater clarity on APMs, CMS introduced the term “Advanced APM” to identify those models that qualify a provider for reimbursement under this track, as opposed to other APM models that do not meet those criteria but would still be applicable under MIPS.

The proposed rule elucidates the criteria used in determining whether an APM qualifies for this track, such as (1) quality measures comparable to the MIPS incentives; (2) use of certified electronic health record technology; and (3) financial risk above a nominal amount. These criteria, which are listed in the original legislation, are explained much more clearly in the proposed rules. Applying these criteria, CMS listed six models that meet the definition of an Advanced APM:

  • Comprehensive ESRD Care (LDO Arrangement)
  • Comprehensive Primary Care Plus (CPC+)
  • Medicare Shared Savings Program: Track 2
  • Medicare Shared Savings Program: Track 3
  • Next Generation ACO Model
  • Oncology Care Model Two-Sided Risk Arrangement

Just as importantly, CMS offers information on why other models, such as MSSP Track 1, the Comprehensive Care for Joint Replacement, and Bundled Payments for Care Improvement Models 1, 2, and 3, do not meet the proposed criteria for Advanced APMs. This will be useful in providing insight into the types of future models that might meet CMS’s criteria. It is important to note that CMS acknowledges that the above list could change based on modifications to its criteria in the final rules and/or changes to the models themselves.

Also interesting is that CMS predicts that a relatively small number (between roughly 30,000 and 90,000) of clinicians will participate in APMs in the first year of the program, as compared those participating in MIPS (687,000 to 746,000). CMS further indicates that it expects the average clinician bonus in Year 1 to be between $4,500 and $5,000, although this will likely change as providers increase their level of participation in APMs.

Looking Ahead

Much could change in the 6 months prior to the publication of the final MACRA rules. However, the proposed rules do shed light on CMS’s thinking and what we can expect after the program is fully implemented. While the reporting requirements are significant, and the financial incentives are substantial, it is important not to view MACRA in isolation. Providers need to be looking at MACRA from the perspective of how to integrate it into a risk-based strategy that addresses not only MIPS and APMs, but Medicare Advantage, Medicaid incentives, and commercial payors’ programs. Otherwise, the risk is real that providers will get lost in the maze of programs and incentives and not be successful with any payor. Stay tuned for future posts as we address these thoughts more fully.

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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