What To Know About CMS Medicare Physician Payment Reform

On Oct. 14, the Centers for Medicare and Medicaid Services released the highly anticipated final rule implementing the Medicare physician payment reforms enacted as part of the Medicare Access and Children's Health Insurance Program Reauthorization Act of 2015 (MACRA). At nearly 2,400 pages, the enormity of the rule reflects the transformative intent of the law. It is the most comprehensive reform of Medicare since the creation of the Affordable Care Act in 2010 and takes effect Jan. 1, 2017.

MACRA repealed the Medicare sustainable growth rate (SGR) formula and directed the secretary to implement reforms to tie physician payment updates to quality, value and participation in alternative payment/delivery models. The law fundamentally changed how Medicare pays clinicians who participate in the program and established two tracks for Medicare reimbursement.

More specifically, MACRA mandates the development of the merit-based incentive payment system (MIPS) to replace existing quality programs (the physician quality reporting system (PQRS), the value-based modifier, and the electronic health records incentive (meaningful use) program. MACRA also mandates incentives for clinicians to participate in alternative payment models (APMs) that focus on coordinating care, improving quality and reducing costs.

CMS made several significant changes when promulgating the final rule to simplify requirements and provide additional flexibility for clinicians. In the final rule, CMS introduces a transition year, outlines support for smaller, independent practices and expands eligibility requirements for advanced alternative payment models.

Below are a few key highlights and takeaways from the final rule.

Key Highlights

  • The final rule removes the negative payment adjustment under MIPS in 2017 by allowing clinicians to submit one quality measure, or one improvement activity, or the required measures in the advancing care information category to avoid a penalty. Clinicians need to send in performance data by March 31, 2018.
  • Small providers are afforded relief under the raised low-volume threshold. CMS also finalized a plan to set aside $20 million per year for five years to help support and train physicians in practices with 15 or fewer doctors.
  • To accommodate smaller practices, CMS allowed for “virtual groups,” a MIPS reporting option where up to 10 clinicians combine reporting as one group. However, the agency will not implement virtual groups in the 2017 transition year.
  • CMS finalized a weight of 0 percent for the cost MIPS performance category in 2017. The cost will be calculated, but will not be used to determine payment adjustments. Thus, CMS increased the weighting of the quality component of the composite score to 60 percent (up from 50 percent in the proposed rule) for the first year. In 2018, CMS will start using the cost category to determine payment adjustments.
  • MACRA requires CMS, in specifying measures and activities for a performance category, to give consideration to the circumstances of professional types who typically furnish services that do not involve face-to-face interaction with a patient. In the final rule, CMS modified their position and increased the threshold to a clinician that bills 100 or fewer patient-facing encounters (including Medicare telehealth services), and a group provided that more than 75 percent of the national provider identifiers billing under the group's tax identification number (TIN) meet the definition of a non-patient-facing individual MIPS eligible clinicians.
  • CMS anticipates that the iterative learning and development period will last longer than the first year, calendar year 2017, of the program as we move towards a steady state; therefore, CMS envisions CY 2018 to also be transitional in nature to provide a ramp up of the program and of the performance thresholds. CMS anticipates making proposals on the parameters of the second transition year through rulemaking in 2017.
  • CMS is solidifying its stance that only APMs with downside financial risk will qualify for the advanced APM track. In determining the required nominal risk amount, CMS retracted proposals relating to marginal risk and minimum loss ratio (MLR) due to their complexity. The final rule reduces the nominal amount of financial risk for 2017 and 2018 to either (1) 8 percent of the average estimated total Medicare Parts A and B revenues of the participating entity, or (2) 3 percent of the expected expenditures for which the APM is responsible.
  • CMS is exploring an enhanced accountable care organization Track 1+ model for 2018. However, CMS has not laid out the exact requirements for how these programs will be altered in order to meet the high bar being set for qualified advanced APMs. CMS also intends to revisit the comprehensive care for joint replacement (CJR) model, Maryland all-payer model, the diabetes prevention program and others, with reopened application periods, to expand the options providers have.
  • MACRA established the Physician-Focused Payment Model Technical Advisory Committee (PTAC) to advise CMS on the development and implementation of physician-focused payment models (PFPMs) that could qualify as APMS or advanced APMs. CMS finalized the definition of PFPMs to mean an APM: (1) in which Medicare is a payer; (2) in which eligible clinicians play a core role in implementing the APM’s payment methodology; and (3) which targets the quality and costs of services that eligible clinicians participating in the alternative payment model provide, order or can significantly influence.

Key Takeaways/Implications

Industry reaction to the final regulation was generally favorable. Congressional reaction was supportive yet cautious given the size and complexity of the regulation. The House Ways and Means and Energy and Commerce Committees issued a joint statement expressing support that CMS “responded to many of our concerns and followed our recommendation to provide clinicians and practitioners more flexibility in the issuance of the final rule for MACRA.”

Some uncertainty still remains about the future of MACRA given the upcoming election and impending change in administrations. However, significant legislative changes are unlikely regardless of the election outcome as MACRA was passed in a highly bi-partisan fashion.

Clinicians: For 2017, clinicians won't need to alter their current approaches much to succeed under the quality payment program. Now is the time for clinicians to focus on developing and implementing strategies that will accelerate the transition from volume to value.

In regard to advanced APMs, CMS eased the policy defining the advanced APM to allow additional programs to qualify and has signaled it will increase the number of available models. However, the nominal risk standard remains high. These models require significant investment in redesigning care through new technologies, data analytics and additional staff. Whether enough practices will actually transition to advanced APMs in the future — which is MACRA’s overarching goal — is one of the most difficult questions facing CMS.

Manufacturers: APMs and MIPS will increasingly influence care patterns in favor of treatments that improve downstream clinical, financial and patient-reported outcomes. Industry can help physicians understand the programs, their options and how their products fit into the value equation.

Hospitals/Systems: While CMS reduced the burden for clinicians in the final rule, they did not adjust for beneficiaries’ socioeconomic status within the MIPS measures. This may impact hospitals caring for our nation’s most vulnerable patients.

Additionally, APMs and MIPs will require health systems to invest in technology and business practices. CMS requirements will change over time, so systems and processes will need to change with them. Health systems may need to build or acquire special capabilities to succeed under advanced APMs, such as integrating health information technology across clinicians and the health system to support collaboration.

—By Miranda A. Franco, Holland & Knight LLP

Miranda Franco is a senior public affairs adviser in Holland & Knight's Washington, D.C., office and a member of the firm's public policy and regulation group. She has experience in health policy and government relations, representing advocacy positions to policymakers, national physician specialty societies, state medical societies, hospitals and other health care organizations.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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