What Might We Expect in the MACRA Proposed Rule?

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Nearly a year ago President Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) into law. MACRA, among other things, repeals the 1997 Balanced Budget Act’s Sustainable Growth Rate (SGR) formula for calculating annual updates to Medicare Part B physician and other eligible professionals’ payment rates.1 The bill received overwhelming support in both the House and Senate, only 45 out of 529 total votes cast opposed the bill despite the fact the legislation is estimated to add $141 billion to the federal deficit by 2025.2 Support for the legislation can, in part, be attributed to the Congress having grown tired of rescinding SGR mandated payment cuts or passing nearly 20 “doc fix” “patches,” over 18 years. Presently, Medicare physicians are awaiting CMS’s proposed rule that will define how the agency intends to implement the six sections of MACRA Title I, or how the agency will annually update physician performance beginning in 2019 based on the use of the law’s Merit-Based Incentive Payment System (MIPS) and its Alternative Payment Models (APMs) pathway. The proposed rule, expected to be published in the next few weeks, is highly anticipated because the rewards and penalties under either MIPS and APMs can be significant.

Between 2015 and 2019 MACRA will provide physicians with an annual 0.5 percent payment increase.   For the following six years, or from 2020 through 2025, the payment update will be 0 percent. This is because beginning in 2019 the law financially incents physicians to improve care quality and lower spending growth. (That MACRA passed three months after DHHS Secretary Burwell announced her Medicare payment quality and value goals is likely not coincidental.) Beginning in 2019 physician payment updates will be calculated based on either MIPS or APMs. Since the Congress only outlined these two payment systems it is up to DHHS Secretary Burwell through CMS to define specifically.

Overview of the MIPS and APMs

MIPS calculates physician performance using four component scores: care quality; resource use; clinical practice improvement activities; and, health information technology meaningful use (MU). The four component scores are differently weighted and weights can change over time. Initially, quality measures and resource use will be weighted 30 percent, MU at 25 percent and clinical practice at 15 percent. As in the Physician Quality Reporting System (PQRS) physicians will have some choice in selecting appropriate quality measures. Resource use measures currently exist in the Value-Based Payment Modifier (VM) program and MACRA outlines six clinical practice improvement activity areas including beneficiary engagement, care coordination and population management. While performance will be measured at the group level, each physician and other eligible professionals will receive a composite performance score, expressed as a percentage, that will be compared to a performance threshold. Scores will be zero, or at the performance threshold, or positive or negative. If a physician performs at the threshold, that is achieves the mean or median score (the Secretary much choose), they will receive no annual payment adjustment. If the physician performs a percent or more above or below the threshold they will receive a corresponding positive or negative payment adjustment. Failure to report results in the lowest potential score. In 2019 payment adjustments can range from positive to negative four percent. In 2020 this increases to five percent. In 2021, the increase is seven percent and in 2022 and subsequent years the range is nine percent. Specifically, this means a percentage added to the physician’s otherwise fee schedule reimbursements. Physicians with exceptional performance can receive an additional positive adjustment up to 10 percent. Beginning in 2020, MACRA will also “take into account” year-over-year improvement. Presumably this means an additional bonus. Practices with 15 or few professionals and in rural areas will receive guidance and technical assistance. While MIPS payments in sum will be zero sum or budget neutral, adjustments can be asymmetric, for example, gains could be a higher dollar value than losses. Only first year Medicare physicians and those below a volume threshold will be exempted from MIPS. Finally, physician level MIPS data will be made publicly available.

Alternative Payment Models (APMs)

As titled this pathway financially incents physicians to deliver care via an Alternative Payment Model. The financial incentive is a five percent lump sum payment based on the aggregate physician fee payment amount received for the proceeding year. The payment would not be added to determining total ACO reconciled reimbursements. MACRA defines an APM as one that is, for example, a type of a Medicare Accountable Care Organization or is a CMS required demonstration such as the Comprehensive Care for Joint Replacement bundled payment demonstration. Patient Centered Medical Homes (PCMHs) also qualify but CMS’s definition of a PCMH APM is yet to be determined. The upside for these qualifying PCMH physicians is they will face no downside risk exposure. An APM could also be a “Physician-Focused Payment Model” (PFPM). These would be vetted by a MACRA-created PFPM Technical Advisory Committee that would recommend to the Secretary whether or not the proposed PFPM meets predefined criteria, criteria that the Secretary will create by November. The law also requires the APM use certified Electronic Health Record (EHR) technology, have payments based on quality performance similar to MIPS and bear “financial risk for monetary losses” “in excess of a “nominal amount.” What is a “nominal amount” will be defined in regulation. For 2019 and 2020 a qualifying APM would also have to receive at least 25 percent of their Medicare reimbursements through an APM, in 2021 and 2022 at least 50 percent and in 2023 and subsequent years 75 percent although this percentage can combine Medicare and other APM-like reimbursements. A provider group can also qualify or partially qualify as an APM by the number of Medicare patients, or in lieu of Medicare payments. A physician group qualifies as an APM “during the most recent period for which data are available (which may be less than a year).” Providers can also qualify as a partial APM. This means providers in 2019 with at least 20 percent, five percent short of the required 25 percent, can choose to opt out of MIPS participation.

What Might We Expect In the Proposed Rule

While MACRA legislation leaves much to the imagination, directionally, here’s likely what can be expected.

Under MIPS, MACRA consolidates CMS’s PQRS, VM and MU quality measurement programs. Four reasons explain why initially the MIPS will likely employ established measures. First, though the legislation states the Secretary shall “emphasize the application of outcome measures,” these measures do not yet exist. Second, it’s generally believed performance data used in calculating MIPS will be two years in arrears. This means CMS would use 2017 performance data to calculate 2019 MIPS scores. If so, this leaves the agency little time to reinvent performance measures under MIPS by next year. Third, CMS is no where near correlating quality measures to value or lower spending growth. For example, among the 60 ACOs that earned a maximum quality score in 2014, only 22 earned shared savings.3 Absent a positive correlation, it’s difficult to reason how or why the agency dramatically moves away from its current measures. Lastly, to improve the measurement of resource use MACRA requires CMS to develop care episode and patient condition groups and patient relationship categories. Whether these three new ways of classifying clinical services can be developed and made useful by 2019 is uncertain. The one MIPS component score that may change noticeably is MU. CMS Acting Administrator Andy Slavitt has repeatedly stated over the past several months CMS will, as he noted in January, move away from “rewarding providers for the use of technology and towards the outcomes they achieve with their patients.”

4. Establishing the MIPS performance threshold for 2019 and 2020 will be based on the prior performance period. This means physicians will have a good idea of how they will perform under MIPS. For example, of the 13,800 physician groups rated under the 2015 VM program, 8,200 will receive no bonus or penalty. Since 5,400 failed to minimally report, they incur a two percent cut; 59 groups will see a pay decrease of one or two percent; and, 128 groups will receive a Medicare reimbursement increase. Because only a small percent of physician groups receive a positive VM adjustment, MedPAC predicts MIPS results will likely be similar.5 In addition, to prepare physicians for MIPS beginning in 2017 CMS will make available to physicians their quality and resource use performance data.

Most of the pre-proposed rule discussion among stakeholder groups has concerned APMs since Congress clearly intended this to be the more attractive pathway. The primary APM question begged is how CMS will define “nominal risk.” ACO proponents argue no risk Track 1 ACOs should qualify as APMs because the financial investments they made in participating in the program may not be recovered if they fail to earn shared savings. (Only approximately 25 percent of ACOs have been successful to date.) Others argue “nominal risk” should amount to some percent of reimbursement. One suggestion is to mirror MIPS. That is in 2019 “nominal risk” should be four percent of reimbursements.6 When asked Congressional staffers say the Congress intended “nominal risk” to mean at risk ACO Tracks 2 and 3 only. This would make sense if for no other reason than if all current ACOs qualified, or 434 ACOs caring for approximately 7.5 million beneficiaries, CMS would be obligated to pay at minimum $9 billion in APM bonus payments over ten years.7 Because CMS wants, or needs, to move ACO Track 1 providers to risk, only 22 ACOs are currently in Track 2 or 3, CMS is well aware APM bonuses present a substantial opportunity to motivate providers to sign a Track 2 or 3 agreement in 2018 or 2019.  If made final this summer, CMS’s current proposed rule to improve how the agency calculates an ACO’s reset and updated benchmark would provide additional incentive for ACOs to sign a risk agreement.

MACRA does not include Medicare Advantage (MA) physicians in either the MIPS or APM pathway. (MA spending was also excluded from the Secretary payment for quality and value goals announced in January 2015.) MACRA does though require the Secretary to submit to the Congress by July 1st a study examining the feasibility of integrating APMs in the Medicare Advantage (MA) program. In CMS’s February MA Draft Rate Notice and Call Letter, the agency noted its interest in collecting data on the proportion of MA payments made to physicians that are value based. In March, MedPAC discussed alternative premium setting competitive bidding methods to save money under MA. These efforts, though limited, recognize the MA program has become too big to continue to ignore. MA currently accounts for approximately 17 million, or 30 percent, of all Medicare beneficiaries and is rapidly growing. As administrative pricing MA is not designed to reduce spending growth. CBO does not score MA for savings. If CMS’s pay for value models are going to work, principally ACOs, they must be put on a level playing field with MA. As MedPAC has stated the two programs need to be “synchronized.” Both programs have to take on attributes of the other. Beyond financial benchmarking, MA plans currently enjoy quality measurement, beneficiary assignment or enrollment, risk adjustment and other advantages over ACOs. For these reasons and others it’s likely the Congress and/or CMS will work to create policy to incorporate MA in MACRA – particularly when the MA community, desirous to participate as APMs, is asking the Congress and CMS to do so.

The MACRA proposed rule is anticipated soon. However the Secretary and CMS begin to implement physician payment updates under the law, one thing is certain. MIPS and the APM pathway will make Medicare far more dynamic that, hopefully, makes it more sustainable program.

<em?David Introcaso is an independent healthcare research and policy consultant based in Washington, D.C.


  1. For as detailed summary of MACRA see, for example, Jim Hahn and Kristin B. Blom, “The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10),” Congressional Research Service, November 10, 2015, at: https://www.fas.org/sgp/crs/misc/R43962.pdf.
  2. The Congressional Budget Office’s March 25, 2015 MACRA score is at: https://www.cbo.gov/publication/50053.
  3. David Introcaso and Greg Berger, “MSSP Year Two: Medicare ACOs Show Muted Success,” September 24, 2015, Health Affairs Blog, at: http://healthaffairs.org/blog/2015/09/24/mssp-year-two-medicare-acos-show-muted-success/.
  4. Andy Slavitt, “Comments of CMS Acting Administrator Andy Slavitt at the J.P. Morgan Annual Health Care Conference, The CMS Blog, January 11, 2016, at: https://blog.cms.gov/2016/01/12/comments-of-cms-acting-administrator-andy-slavitt-at-the-j-p-morgan-annual-health-care-conference-jan-11-2016/.
  5. Virgil Dickson, “Medicare Value-Based Purchasing Bonuses Go To Handful of Eligible Practices,” Modern Healthcare (March 10, 2016), at: http://www.modernhealthcare.com/article/20160310/NEWS/160319986, and David Glass and Kate Bloniarz, MedPAC, “Alternative Payment Models: Potential Principles and Implementation Issues (January 15, 2016), at: http://www.medpac.gov/documents/january-2016-meeting-presentation-alternative-payment-models-(apms)-potential-principles-and-implementation-issues.pdf?sfvrsn=0.
  6. Harold Miller, “Implementing Alternative Payment Models Under MACRA,” Center for Healthcare Quality and Payment Reform (April 16, 2015), at: http://www.chqpr.org/downloads/ImplementingAPMsUnderMACRA.pdf.
  7. In 2013 CMS paid $68.6 billion to cover physician services to 32 million beneficiaries in fee for services. ACO’s currently account for approximately 7.5 million beneficiaries or approximately one quarter of these 32 million or $17 billion in reimbursement. Five percent of $17 billion is $850 million. This amount over ten years equals $8.5 billion. This assumes there is no growth over the next three years in the number of ACOs and the number of beneficiaries they serve and assumes these ACOs serve no additional Medicare beneficiaries. The five percent bonus is paid on total annual Medicare physician reimbursement. See, for example, Robert Steinbrook, “The Repeal of Medicare’s Sustainable Growth Rate for Physician Payment,” Journal of the American Medical Association (April 17, 2015), at: http://jama.jamanetwork.com/article.aspx?articleid=2277734.










1 reply »

  1. Very comprehensive! Nicely done. Five percent as a “bonus” isn’t enough, but we knew that. We are trying to incent behavior change. The well described Congressional fiasco is anything but behavior changing. Thanks for sharing.

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