Recent announcements from CMS regarding the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) have the healthcare community buzzing.  It’s not surprising considering this piece of legislation represents the most sweeping set of changes to Medicare’s physician payment methodology since the current system was put in place 25 years ago.  MACRA is also yet another reminder of the government’s commitment to accelerate the shift toward value-based payments.

At its core, beginning in 2019, providers will have the option of participating in the merit-based incentive payment system (MIPS) – an enhanced version of the current fee for service (FFS) system – or moving into alternative payment models (APMs) such as Comprehensive Primary Care Plus and Next Generation ACO models.  Both carry financial risk for failing to meet program goals.

CMS recently announced that under MIPS, physician performance will be evaluated on the following four categories: (1) cost, replacing the cost component of the Value Modifier Program (10% of total score in year one); (2) quality, replacing the Physician Quality Reporting System (PQRS) and the quality component of the Value Modifier Program (50% of total score); (3) clinical practice improvement (15% of total score); and (4) advancing care information, replacing Meaningful Use (25% of total score). This new program will establish a single score for every physician, which will be the basis for adjusting payment up or down (up to 4% in the first year, rising to 9% in subsequent years).

The details of how CMS will implement the MACRA legislation are subject to change as rules are finalized and as the program is rolled out.  Nevertheless, CMS has demonstrated its commitment to moving away from FFS reimbursement and toward value-based payments with its recent release of the first proposed MACRA rule.

MACRA Implications for Physicians and Healthcare Executives

The implications of MACRA for individual physicians and physician practices are rather clear.  Financial incentives will be provided to those physicians who shift toward alternative payment methodologies and deliver high-quality, cost-effective care.  Physicians who fail to comply with these requirements will be penalized through reduced reimbursement.  The CMS expects to achieve budget neutrality by providing $833 million in both negative payment adjustments and incentive payments beginning in 2019.  CMS will also distribute $500 million among the highest-scoring physicians for “exceptional” performance.  Smaller practices are expected to be negatively impacted the most in year one according to CMS projections.

Hospitals and health systems will also be impacted by MACRA legislation. Particularly for hospitals with a large cohort of employed physicians, cuts to Medicare Part B reimbursement will have a direct impact on the bottom line.  But MACRA will also have implications for healthcare executives that are less obvious.  Here, we look at some additional potential effects of the legislation that providers need to be thinking about now.

Streamlined processes for quality reporting will need to be in place

According to a recent study in Health Affairs, clinicians and staff spend an average of 15.1 hours per week per physician tracking and reporting quality measures to Medicare, Medicaid and private payers. This time away from treating patients translates into $15.4 billion in annual costs.  While CMS appears to have listened to the medical community’s demands for greater harmony and reduced complexity with respect to quality reporting under MACRA, physician quality reporting and improvement will remain a foundational requirement under the new law.

As healthcare delivery organizations increasingly assume greater risk for managing the health of their populations, executives need to ensure that physician compliance with MIPS or APM reporting requirements does not result in meaningless engagement, wasted resources or otherwise interfere with patient access to personalized care.  Here, streamlined processes for physician reporting will need to be in place.

Physician compensation and service agreements will need to evolve

Moving forward, hospitals and health systems must reevaluate their existing financial relationships with physicians, whether they are employed or operating through professional services agreements. In part, executives will need to determine to what extent physicians or the health system will bear the risks and reap the rewards associated with MIPS and other pay for performance programs.

In addition, when contracting with physicians, system leaders must ensure that incentives are tied to performance in delivering high value care, if they aren’t already.  The implementation of MACRA should support such efforts. While some past CMS initiatives (including PQRS) have historically focused on simply reporting certain data, quality evaluation under MIPS will examine physician performance versus benchmarks on outcome and process measures.

Physician performance under MIPS can influence overall patient volume

Under MIPS, providers will receive a composite score based on performance in each of four aforementioned categories. Quality measures from core domains will be determined annually, and data will be made publicly available via the Physician Compare website.

Composite scores create obvious concerns for providers regarding the reliability and validity of specific individual measures as well as weights used to create the composite.  However, as consumers assume greater financial responsibility for healthcare services in this country, they’re likely to turn to simple, rolled up scores such as these to understand a physician’s overall performance.

With these additions, Physician Compare has the potential to be an important source of information and empowerment for consumers, employers, and payers, and ultimately a significant driver of choice and competition.  Thus, MIPS reporting could have impact beyond physician compensation under Medicare Part B – if the data points influence patients’ choice of physicians (directly, or via insurers or employers that steer them to the highest performing doctors), the scores may also influence a hospital’s referral stream, reputation and overall market share.

Beyond MACRA

With all of the trends affecting the current healthcare landscape, hospital executives have a lot on their minds.  That said, making the transition from volume to value remains a top area of concern for most.

MACRA, along with several other government-sponsored quality and payment initiatives, including the Comprehensive Care for Joint Replacement (CJR) program and Medicare’s Five-Star Quality Rating System, represents ongoing movement away from FFS in favor of a greater emphasis on value.  The ultimate goal of value-based care is to deliver better health outcomes at lower cost, and this requires an integrated approach to managing costs and quality of care.

To succeed in this new environment, hospital executives will need to ensure their house is in order.  Specifically, organizations will need clearly communicated goals and objectives that are aligned to drive the right behaviors across the organization in addition to structures put in place to support goal and objective accomplishment.  Effective implementation of a value-based care model will require engaging physicians in a new way – and creating an incentive program that reinforces their participation.  Organizations will also need to up their game in terms of understanding cost structures, establishing evidence based care paths and managing variation in cost and quality – not only internally, but across the care continuum.

Organizations that are able to do these things will be well-prepared for value-based initiatives, regardless of how they’re structured.

Numerof has a long history of helping providers change their operating model and address a broad range of strategic, reimbursement, quality, network development, and clinical improvement challenges.  Leveraging these insights, Numerof can quickly identify and address the cultural, capability, procedural, infrastructure, and other components that may impede an organization’s ability to optimize performance under value-based payment models, including MACRA.

Contact us to learn more about our services in this area, including our MACRA Readiness Assessment.

1. Casalino LP et al. US Physician Practices Spend More Than $15.4 Billion Annually To Report Quality Measure. Health Affairs.  March 2016 vol. 35 no. 3 401-406