U.S. Department of Health and Human Services rules detail new Medicare physician reimbursement

May 27, 2016

Courtesy of Amanda L. Waesch, Esq.

Brennan, Manna & Diamond, LLC

I.  Introduction and Background

On April 27, 2016, the U. S. Department of Health and Human Services (“HHS”) issued a Notice of Proposed Rulemaking to implement key provisions of the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), bipartisan legislation that replaced the Sustainable Growth Rate (“SGR”) formula with a new approach to paying clinicians under Medicare for the services they provide. MACRA eliminated the SGR formula and replaced it with two tracks of value-based reimbursement under Medicare, Alternative Payment Models (“APMs”) and the Merit-based Incentive Payment System (“MIPS”).

Congress adopted the SGR formula as part of the Balanced Budget Act of 1997 to control federal health care spending. The SGR formula was meant to keep the total increase in Medicare reimbursement to physicians from exceeding the change in the Gross Domestic Product (“GDP”). In short, the SGR formula increased payments when the growth of spending on physician services fell short of growth in GDP, and reduced payments when physician spending grew more rapidly than GDP. In the late 1990s, economic growth was high and medical cost growth was low, so the SGR formula resulted in modest increases in physician payments. In 2001, however, the combination of a recession (declining GDP) and increasing medical costs led to an automatic cut of 4.8% in 2002, and cuts each year thereafter. Every year since, Congress enacted short-term fixes to avoid the cuts and circumvent the SGR formula. Absent a fix, Medicare payments to physicians would have been cut by 21.2% starting in April 2015.

MACRA was passed in April 2015 and encompassed two goals related to Medicare physician reimbursement: (1) elimination of the SGR formula and (2) implementation of value-based reimbursement under Medicare. In short, MACRA delinked Medicare payment to physicians and some other practitioners from the SGR formula.

There is a transition period through 2019 during which physicians are encouraged to prepare for reimbursement models based on payment for value. During this transition period, physicians will receive a 0.5% annual update to the Medicare physician fee schedule. After 2019, there will be no automatic increase to the fee schedule and rates will, instead, be altered based on APMs and MIPS.

II.  Overview

Under MACRA, eligible practitioners (“EPs” – physicians, physician assistants, nurse practitioners, certified nurse specialists, and certified registered nurse anesthetists) can participate in MIPS or meet requirements to be a qualifying APM participant. EPs in MIPS will receive a positive, negative, or neutral payment adjustment. EPs determined to be qualifying or “Advanced” APMs will be excluded from MIPS and receive a 5% lump sum incentive payment for that year.

The recently issued rules did two important things: (1) identified which APMs will qualify for the 5% lump sum payment and exempt practitioners from MIPS and (2) further described the four-category scoring mechanism under MIPS.

To qualify for the 5% incentive payment under APMs, clinicians must receive enough of their payments or see enough of their patients through Advanced APMs. The participation requirements are specified in statute and increase over time. The rules issued last week identified the APMs that will qualify for bonus payments and exemption from MIPS reporting. They are:

  • Comprehensive Primary Care Plus (CPC+)
  • Next Generation ACO
  • Medicare Shared Savings Program (“MSSP”) Tracks 2 and 3
  • Oncology Care Model with two-sided risk
  • Comprehensive ESRD Care (for large dialysis organizations)

The rule also acknowledged that the Centers for Medicare & Medicaid Services (“CMS”) will continue to add payment models that qualify to be advanced APMs to the list. However, several noteworthy programs were not included on the initial list, including any bundled payment program, the Comprehensive Care for Joint Replacement (“CJR”) initiative, and Track 1 MSSP Accountable Care Organizations (“ACOs”). Currently, physicians are participating with about 800 hospitals in the CJR program. Additionally, 95% of the 434 MSSP ACOs are in Track 1.

Participation in an Advanced APM offers greater rewards (as well as risks) than participation in MIPS. Under MIPS, the potential for a payment increase is relatively small and very competitive. In order to determine whether clinicians meet the requirements for the Advanced APM track, all clinicians will report through MIPS in the first year. HHS acknowledged in its press release on the proposed rules that many physicians who participate in existing APMs will not qualify for the flat 5% annual bonus payment.

The proposed rule also further delineates how MIPS scores will be calculated in order for physicians to potentially receive bonus payments under the program. MIPS combines some features of Medicare’s current quality/pay-for-performance programs (i.e., the Physician Quality Reporting System, the Value Modifier Program, and the Medicare Electronic Health Record Incentive Program) into one program based on quality, resource use, clinical practical improvement activities, and meaningful use. MIPS allows clinicians to be paid by Medicare for providing high quality, efficient care through success in four performance categories:

  • Cost – (10% of total score in year 1; replaces the cost component of the Value Modifier Program, also known as Resource Use): The score would be based on Medicare claims, meaning no reporting requirements for clinicians. This category would use more than 40 episode-specific measures to account for differences among specialties.
  • Quality – (50% of total score in year 1; replaces the Physician Quality Reporting System and the quality component of the Value Modifier Program): Clinicians would choose to report six measures versus the nine measures currently required under the Physician Quality Reporting System. This category gives clinicians reporting options to choose from to accommodate differences in specialty and practices.
  • Clinical Practice Improvement Activities – (15% of total score in year 1): Clinicians would be rewarded for clinical practice improvement activities such as activities focused on care coordination, beneficiary engagement, and patient safety. Clinicians may select activities that match their practices’ goals from a list of more than 90 options. In addition, clinicians would receive credit in this category for participating in Alternative Payment Models and in Patient-Centered Medical Homes.
  • Advancing Care Information – (25% of total score in year 1; replaces the Medicare EHR Incentive Program for physicians, also known as “Meaningful Use”): Clinicians would choose to report customizable measures that reflect how they use electronic health record (“HER”) technology in their day-to-day practice, with a particular emphasis on interoperability and information exchange. Unlike the existing Meaningful Use program, this category would not require all-or-nothing EHR measurement or quarterly reporting.[1]

III.  Next Steps

HHS will accept comments on the proposed rule until June 26, 2016. Comments may be submitted electronically through CMS’ e-Regulation website at http://www.cms.gov/Regulations-and-Guidance/Regulations-and-Policies/ eRulemaking/index.html?redirect=/eRulemaking.

If you have any questions about the proposed rules discussed in this Client Alert, please do not hesitate to contact Daphne Saneholtz in BMD’s Columbus office at (614) 940-4543.

[1] Notice of Proposed Rule Making. Medicare Access and CHIP Reauthorization Act of 2015. Quality Payment Program. CMS.

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