Spurred by the passage of the Patient Protection and Affordable Care Act (ACA) in 2010, the healthcare industry is in the midst of an unprecedented transformation. The ACA was passed in an effort to increase access to health insurance and healthcare, while simultaneously improving the quality of healthcare and slowing the growth of healthcare costs.[i] President Donald Trump has made continued healthcare reform an immediate focus of his presidency, leaving the future of the ACA uncertain. While the future of the law is unknown, it is unlikely the pace of healthcare transformation will slow because reform efforts like the Medicare Access and CHIP Reauthorization Act (MACRA) are expected to move forward as planned.[ii]
MACRA represents the most sweeping change to physician payment for Medicare services in over two decades. With Medicare accounting for $618.7 billion, or 20 percent of national health expenditures, MACRA is guaranteed to have a substantial and immediate impact on both hospitals and physicians.[iii] In reacting to the implementation of MACRA’s Quality Payment Program (QPP), physicians will need to examine their existing organizational structure, evaluating their relationships with hospital partners. This five part article series examines how MACRA functions as a driving force for the evolving hospital-physician relationship. Part 1 provides an overview of the legislation and Part 2 explores the strategic implications of the legislation, while Part 3 looks at what the legislation may mean for hospital-physician alignment. Part 4 examines the legislation’s financial implications and Part 5 will wrap things up, providing you with some next steps for your organization.
Part 1: Overview of MACRA and the Quality Payment Program
By Emma Ravenscroft MHA, MBA
Director of Research and Development
Passed as a bipartisan solution to replace the sustainable growth rate (SGR) formula, MACRA will engender widespread payment reform for physicians, regardless of their specialty. Through the creation of the Quality Payment Program (QPP), MACRA rewards the “delivery of high-quality patient care through two avenues: (1) Advanced Alternative Payment Models (Advanced APMs) and (2) the Merit-based Incentive Payment System (MIPS) for eligible clinicians or groups under the Physician Fee Schedule (PFS).”[iv]
(1) Advanced APMs:
Advanced APM participation qualifies a physician for a five percent lump sum bonus payment in addition to what they would be paid under the PFS. The following programs are considered Advanced APMs under MACRA:[v]
- Comprehensive End-Stage Renal Disease (ESRD) Care Model (Large Dialysis Organization (LDO) arrangement)
- Comprehensive ESRD Care Model (non-LDO arrangement)
- Comprehensive Primary Care Plus (CPC+)
- Medicare Shared Savings Accountable Care Organization (ACO) Track 2
- Medicare Shared Savings ACO Track 3
- Next Generation ACO Model
- Oncology Care Model (two-sided risk arrangement)
Beginning in 2018, CMS plans to add the following programs to the list of qualifying Advanced APMs, which is likely to increase the number of clinicians participating in Advanced APMs:[vi]
- ACO Track 1+ (newly developed program)
- New voluntary bundled payment model
- Comprehensive Care for Joint Replacement Payment Model (Certified Electronic Health Record Technology (CEHRT) track)
- Advancing Care Coordination through Episode Payment Models Track 1 (CEHRT)
The five percent lump sum bonus is calculated using the Medicare Part B billed charges for all Advanced APM participants. The lump sum bonus is paid out with a two year lag, so a bonus for 2017 performance will be paid out in 2019. It is estimated that there will be anywhere from 70,000 to 120,000 clinicians participating in an Advanced APM in 2017, and therefore eligible for the five percent lump sum bonus payments that will be paid out in 2019.
To qualify for the five percent lump sum bonus, clinicians must meet either a minimum Medicare payment threshold or a minimum Medicare patient volume threshold. In 2017 and 2018, eligible clinicians must receive at least 25 percent of their total Medicare payments through an Advanced APM or see at least 20 percent of their total Medicare patients through an Advanced APM. In 2019 and 2020 clinicians must receive at least 50 percent of their total Medicare payments through an Advanced APM, or see at least 35 percent of their Medicare patients through an Advanced APM. In 2021 and forward, the payment threshold is at 75 percent, and the patient volume threshold is at 50 percent (please see Tables 1-A and 2-A in Appendix A for the patient count and payment amount thresholds). The five percent lump sum bonus payment is in addition to any shared savings payments from their Advanced APM program.
MACRA combines the Physician Quality and Reporting System (PQRS), Meaningful Use program, and the Value Modifier program into the MIPS program based on individual or group reporting across the following four domains:
- Quality (PQRS)
- Resource Utilization (Value Modifier program)
- Advancing Care Information (Meaningful Use)
- Clinical Practice Improvement Activities (similar to National Committee for Quality Assurance (NCQA) Patient Centered Medical Home (PCMH) Activities)
By successfully reporting and performing in these four domains in 2017, eligible clinicians generate a composite performance score which can earn them up to a four percent payment adjustment in 2019 and forward. However, these payment adjustments are bi-directional and increase to a nine percent positive or negative payment adjustment in 2023 based on a physician’s reporting and performance in year 2021 (please see Table 1-B in Appendix B for the future payment adjustments).
The four domains are weighted to determine a physician’s overall performance score. For 2017, the quality domain will account for 60 percent of performance score, resource utilization will account for zero percent of the score, advancing care information will account for 25 percent of the score, and clinical practice improvement will account for 15 percent of the score. By 2019, the weight of the quality domain will decrease to 30 percent, and the weight of resource utilization will increase to 30 percent (please find the transition year domain weights in Table 2-B in Appendix B). In 2017, approximately 670,000 eligible clinicians will be affected by MIPS resulting in approximately $500 million $699 million in positive payment adjustments based on MIPS performance.[vii] If a clinician participates in a qualifying Advanced APM, they will not be subject to the MIPS payment adjustments.
[ii] Phelps, Anne. What might Donald Trump’s election mean for health care? Deloitte Health Care Current. https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/health-care-current-november10-2016.html. Published November 2016. Accessed November 21, 2016.
[iii] Centers for Medicare and Medicaid Services. National Health Expenditures Fact Sheet. CMS Research, Statistics, Data, and Systems. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-andreports/nationalhealthexpenddata/nhe-fact-sheet.html Published 2014. Updated August 2016. Accessed November 22, 2016.
[iv] Centers for Medicare and Medicaid Services. Medicare Access and Reauthorization Act. 81 FR 77008, pages 77008 – 77831. https://www.federalregister.gov/documents/2016/11/04/2016-25240/medicare-program-merit-based-incentive-payment-system-mips-and-alternative-payment-model-apm. Published November 2016. Accessed November 15, 2016.
[vi] Centers for Medicare and Medicaid Services. The Quality Payment Program. CMS Newsroom. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-10-25.html. Published October 2016. Accessed November 23, 2016
[vii] Centers for Medicare and Medicaid Services. Medicare Access and Reauthorization Act. 81 FR 77008, pages 77008 – 77831. Table 60. https://www.federalregister.gov/documents/2016/11/04/2016-25240/medicare-program-merit-based-incentive-payment-system-mips-and-alternative-payment-model-apm. Published November 2016. Accessed November 15, 2016.