By KIP SULLIVAN, JD

When I read the original MACRA rule that CMS published last April, I was appalled at its complexity, at CMS’s total disinterest in measuring “performance” accurately, and CMS’s willingness to hype the performance of ACOs and “medical homes” (the main prototypes for the “alternative payment models” [APMs] authorized by MACRA). I entertained the faint hope that CMS would come to its senses after hearing the reaction to its original rule and propose something less complex, or maybe even urge Congress to suspend enforcement of the law until it could be rewritten. Foolish me.

I have read a substantial portion of CMS’s final rule, published last Friday. It is clear to me CMS intends to implement its original rule with only minor changes. I predict the implementation process will be a nightmare.

The most fundamental problem with the rule is its insane complexity. The complexity is a function of both the complexity of medicine and the impossibility of what Congress has asked CMS to do – to measure the cost and quality of physician services at both the individual and group level and to punish and reward doctors based on inaccurate scores, and to oversee the creation of vaguely defined and unproven entities like ACOs and “medical homes” which will also dish out penalties and rewards based on inaccurate data. 

Implementing such a monstrously complex law, or even portions of it, would be very difficult even for an agency run by clear thinkers. But CMS is not run by clear thinkers. It is run by people who think like employees of advertising agencies. They think their job is to persuade their listeners that their product is wonderful. They think they are supposed to exaggerate what MACRA will do, and to deny or obfuscate MACRA’s obvious defects.

CMS committed both types of errors – exaggeration and denial – in its first rule, and it committed identical errors in the final rule. At this point I think it’s reasonable to predict that CMS won’t admit either type of error until long after implementation has begun and reality has repeatedly smashed its staff over the head. Of course, by then much time and money will have been wasted, and many patients may have been harmed as well.

I’ll devote the rest of this essay to examining the worst examples of both types of errors – hyping that which should not be hyped, and overlooking that which should not be overlooked. I will close with a comment on how similar MACRA and the Affordable Care Act are. Both laws are already in trouble because they rely on the same bankrupt theory of cost-containment. Their troubles have only just begun.

“Evangelism is no vice, agnosticism is no virtue”

The most compelling evidence that CMS thinks of itself as an advertiser, as the PR agent for Congress, is its willingness to articulate their most basic premises as beliefs as opposed to conclusions backed by evidence. Consider the following quotations from the final rule (“final with comment period,” is the official label for this rule):

• We believe participation in any APM offers eligible clinicians and beneficiaries significant benefits. [p. 1396]
• [W]e believe that all APMs offer meaningful opportunities and benefits to clinicians…. [p. 1427]
• We believe that both the inclusion of payment based on performance on quality measures in the Advanced APMs and the ongoing monitoring and evaluations conducted on all APMs are mechanisms for identifying whether appropriate care is withheld to save costs. [p. 1454]
• The costs for implementation and complying with the advancing care information performance category requirements could potentially lead to higher operational expenses for MIPS eligible clinicians. However, we believe that the combination of MIPS payment adjustments and long-term overall gains in efficiency will likely offset the initial expenditures….. [p. 1818] [emphasis added]

Not one of those statements is documented. They are all based on faith. And yet all of those statements have to be true if MACRA is going to improve quality and lower costs. It has to be true, for example, that “any APM offers eligible clinicians and beneficiaries significant benefits” – or at least that the great majority of APMs do so. It has to be true, to take another example, that CMS can detect and punish any denial of necessary care caused by risk-shifting to APMs and the physicians who work for them.

And yet CMS didn’t document these statements and numerous other claims that began with “we believe.” They didn’t for a good reason: They couldn’t. The evidence either doesn’t exist or the evidence indicates the assumptions are wrong.

Take for example the crucial claim that “all APMs … offer benefits to clinicians.” This boast must, at minimum, mean doctors will not lose money if they join APMs. But we have no evidence for that assumption. Ashish Jha recently reported on THCB that CMS’s ACOs are, on average, not saving money, and when CMS’s bonus payments are counted, ACOs are raising Medicare costs. Similarly, all the evaluations of CMS’s “home” pilots indicate they are saving no money for Medicare, and those evaluations plus other studies demonstrate that physicians working in the “homes” are not being paid enough to cover the extra costs they incur to buy the goods and services “homes” are supposed to buy (see my discussion of the evidence here.

“Denial is no vice”

CMS’s sins of exaggeration are aggravated by sins of denial. The worst and most important examples of denial are CMS’s refusal to state that performance must be measured accurately if paying for performance is going to work. You will not find in either the original or the final rule a statement that says anything like, “We believe performance measurement must be accurate.” Is that not an obvious and essential statement? How hard would it be to say that? But you won’t catch CMS saying that.

Here are the two most important “we believe” statements I would have added to the rule:

1. “We believe pay-for-performance can work only if performance is measured accurately.”

1. “We believe accurate measurement of performance requires at minimum (a) adequate sample size, (b) accurate attribution of patients to doctors, and (c) accurate adjustment of quality and cost scores to reflect differences in patient health and other factors beyond physician control.”

These statements appear nowhere in the rule despite the fact that numerous commenters raised questions about the accuracy of patient attribution and risk adjustment. CMS just blew those people off. Here is an example:

One commenter was concerned with inaccurate data being reported on Physician Compare…. Another commenter expressed some concern with the accuracy of the information and its usefulness for consumers. One commenter recommended a principal focus be on providing reliable and useful data rather than expediency. Response: We appreciate your comments and remain dedicated to publicly reporting data that generally meet public reporting standards. [pp. 1393-94]

Translation: “We’re CMS. We’ll pretend to seek your input, but on the all-important question of whether we are measuring performance accurately, we intend to ignore you. We absolutely do not want to have an honest conversation about whether it’s financially or technically possible to measure physician performance accurately at any level relevant to even a few types of patients or diseases, much less all of them.”

Republicans and Democrats share the blame for the MACRA mess

In this post I have aimed my criticism at CMS for approaching MACRA with the mindset of a PR agent. CMS deserves harsh criticism because they are not being forthright, and in some cases they have been downright dishonest. [1] CMS’s unwillingness to tell the truth about MACRA does not bode well for its implementation and the ensuing public debate.

But the ultimate blame for MACRA’s nightmarish complexity falls on Congress. Democrats and Republicans voted overwhelmingly for MACRA. How quickly we resolve the mess created by MACRA will depend ultimately on how quickly leaders of both parties understand MACRA’s defects. If both parties engage in some honest introspection, they will at some point realize both parties have subscribed to the same bankrupt theory of cost containment. This should be interesting to watch. On the issue of health care cost containment, there is no daylight between the parties.

The Affordable Care Act, a law Republicans detest, is based on the same bankrupt cost-containment theory that MACRA is based on, namely the managed care diagnosis (overuse) and the managed care solution (shift insurance risk to doctors and micromanage them). Not one Republican voted for the ACA, a law which will succeed only if the claims made for “accountable care organizations” and “medical homes” and other alleged “value-based” reforms are true. And yet Republicans voted overwhelmingly for MACRA, a law which will succeed only if the claims made for ACOs, “homes” and other alleged “value-based” reforms are true.

Republicans need to get their message straight. They can continue telling the public the ACA has no effective cost containment in it (which would be accurate) and is therefore not affordable, but in that case they must level the same criticism at MACRA – it will not cut Medicare costs. Or they can continue to promote the false message that MACRA will cut Medicare costs, but in that event they must stop carping about the ACA and join Democrats in claiming the ACA really will “bend the cost curve” (which is sheer fantasy).

Because neither MACRA nor the ACA promote cost containment, and because both have destructive side effects (including higher administrative costs, more consolidation of the entire health care system, and accelerated physician burnout), both are going to fail. The only issue is how they will fail. Will they collapse overnight? No, I wouldn’t bet on it. I predict, rather, that they will create, each in their own way, so much antagonism that Congress will, after much dithering, be forced to amend them beyond recognition. My only hope is that when Congress amends the ACA it won’t result in a higher uninsured rate and worse coverage, but I fear that’s where we’re headed, at least in the short term.

I predict as well that the amendments that will transform the ACA and MACRA will be contained in multiple bills enacted over a period of years rather than a single bill enacted in one session. These amendments will be stimulated by widespread anger – anger that starts out relatively subdued and spreads as reality sinks in and Congress dithers. The ACA will create (and already has created) anger among taxpayers and patients, while MACRA will create (and already has created) anger among doctors and some patients, including yours truly. Congress will eventually have to recognize this anger and do something about it. My hope for both MACRA and the ACA is total repeal and replacement with a law that focuses on the price of US health care and the administrative waste that drives price up as opposed to the volume, i.e. the overuse, of medical services sold. It is the obsession with overuse that brought us the MACRA mess.

[1] In both the original and final MACRA rule, CMS repeated a false statement it first made in an August 25, 2015 press release, namely, CMS’s ACO pilots are saving money (see p. 1821 of the final rule). Kaiser Health News was the first to demonstrate  this was not true. John O’Shea recently called attention to a report by the HHS Inspector General which criticized CMS for inflating the savings achieved by Pioneer ACOs. As O’Shea put it, “[A]fter the close of the Pioneer ACO Program’s Performance Year (PY) 1, CMS allowed five ACOs that would have had shared losses exceeding $6.8 million to retroactively transfer from a two-sided risk model to a one-sided model with no risk of shared losses. While CMS published information about the results of Pioneer Model PY1’s total shared savings and shared losses, it did not include the information about the five ACOs that had been permitted retroactively to select a one-sided payment arrangement. The $6.8 million in losses that they would have incurred were not included in the results.”