Health Care Client Alert - August 2016

The Changing Reimbursement Landscape for Physician Practices:
MACRA and the New Quality Payment Program for Medicare Part B Providers

Big changes are coming in the way Medicare Part B providers are reimbursed. In 2015 Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA), overhauling the way Medicare pays Part B providers for their services. Three major changes to the current regime were made: (1) the sustainable growth rate model for determining physician’s fee schedules was repealed; (2) a framework was created that is intended to reward providers based on the quality of care; and (3) existing quality reporting programs were consolidated into one cohesive system. These changes are a continuation of the Affordable Care Act’s mandate to establish value-based payment modifiers rooted in the quality of care.

Collectively called the Quality Payment Program (QPP), the Centers for Medicare and Medicaid Services (CMS) recently published its proposed rule for payments to Part B providers. The QPP consists of two paths: the Merit-Based Incentive Payment System (MIPS) and the Alternative Payment Models (APMs). Both paths link the quality of care delivered to patients with the level of reimbursement such providers will receive from Medicare. Under the proposed rule, data gathered during 2017 will be used to set the baseline for the reimbursement adjustments that are slated to begin in 2019. Please note that all of this information is based off of CMS’ proposed rule, which should be finalized later this fall. Any or all of these details are subject to change, but the overall outline of the QPP is likely to stay intact.

The Merit-Based Incentive Payment System (MIPS)

MIPS consolidates all or part of the Physician Quality Reporting System (PQRS), the Value Modifier (VM), and the Medicare Electronic Health Record (EHR) incentive program to set performance standards across four categories: (1) quality (50%), (2) resource use (10%), (3) clinical practice improvement activities (CPIAs) (15%) , and (4) meaningful use of certified EHR technology (25%). Based upon the data gathered during 2017 in these categories, a baseline will be set as the mean or median composite score for all MIPS-eligible clinicians, with a maximum composite performance score of up to 100 points. Clinicians who perform a certain amount above or below this baseline will receive either a positive or negative payment adjustment. Through these payment adjustments, MIPS creates a carrot-and-stick incentive program intended to drive positive changes in patient care and costs. CMS predicts that nearly all Part B clinicians will be subject to MIPS unless they are exempt under one of the few categories for exemption.

There are two types of financial impacts for clinicians participating in MIPS. The first is a small, annual inflationary adjustment to the Part B fee schedule. This inflationary adjustment is set at an annual +0.5% increase for the payment years 2016 and 2019. Then, in 2026, another inflationary adjustment of +0.25% would be applied each year thereafter.

The second type of financial impact is seen in the incentive payments and penalties imposed through payment adjustments. Physicians with higher composite scores will be eligible for a positive payment adjustment up to three times the baseline positive payment adjustment for a given year. Exceptional performers could see their payment adjustment as much as triple, but negative adjustments will not exceed the payment adjustment. For example, in 2019 the proposed payment adjustment is set at 4%. A top-scoring practice far above the baseline could receive up to a 12% positive payment adjustment (three times the 4% payment adjustment) to their baseline reimbursements, while a low-scoring practice could see their payments adjusted down by a maximum of 4%. These payment adjustments are set to increase each year, with a negative payment adjustment of 9% in 2022 based on performance during 2020.

Commentators have already identified one major shortfall under the MIPS program in that it is intended to be budget-neutral. Therefore, the pot of Medicare money available for payment adjustments will be equally distributed between negative and positive adjustments. In other words, the actual payout could be much less than any hard number the percentage modifier may indicate because there is a finite amount of money to be distributed amongst all clinicians.

Alternative Payment Models (APMs)

Qualification and reimbursement under APMs work in a completely different fashion than under MIPS. APMs provide a 5% a lump-sum incentive payment to eligible providers who participate in qualified APMs at certain threshold levels and it exempts them from MIPS. Because of this benefit, the threshold to qualify for an APM incentive payment is quite high. First, the provider must be either (1) an innovative payment model expanded under the Center for Medicare and Medicaid Innovation (CMMI) that is not a Health Care Innovation Award recipient, (2) a Shared Savings Program Accountable Care Organization (ACO), (3) a Medicare Health Care Quality or Acute Care Episode demonstration program, or (4) a demonstration program required under federal law. In addition, the provider must require participants to use certified EHR technology, provide pay for covered services based on quality measures comparable to those in MIPS, and be either an expanded Medical Home Model under the CMMI or bear more than a nominal amount of risk for monetary losses. CMS will determine who qualifies under APMs on an annual basis. If CMS determines that a provider has qualified under an APM at a certain level, the clinician would then receive a 5% lump-sum incentive payment.

What can I do to prepare?

Providers should prepare to excel under MIPS. With very few exceptions, all clinicians should expect reimbursement under MIPS in 2019. After that, those that qualify for APMs will be notified and would receive their incentive payment for 2020.

Despite the high bar, most practices will probably want to qualify for APMs in the long run. They should do so by striving for top performance under MIPS. Doing so will allow the best possible outcomes under MIPS, while edging ever closer to the certainty of the lump-sum payment available under the APMs.
The final rule is expected this fall, and the metrics by which the 2017 performance period will be measured should arrive around that time as well.

* A special thanks to Caleb McCallum for assisting with the research for and preparation of this alert.


The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2017.

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