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May 25, 2016

Understanding the CMS Proposed Rule for the Medicare Access and CHIP Reauthorization (MACRA) and Alternative Payment Model (APM’s)

After reviewing the Merit-based Payment System (MIPS) in detail, we now focus our attention on the alternative payment model (APM) track of the new Quality Payment Program. This stems from the Centers for Medicare and Medicaid Services' (CMS) recently proposed rule to implement the Medicare Access and CHIP Reauthorization Act (MACRA).

Advanced APMs

Beginning in 2019, eligible clinicians who participate in Advanced APMs may become qualifying participants (QPs) each year by meeting certain thresholds; upon becoming QPs, they are excluded from the MIPS program for any years in which they qualify as QPs. For 2019 and 2020, eligible clinicians may become QPs only by participating in Advanced APMs; Medicare is the payer for all Advanced APMs. For 2021 and beyond, eligible clinicians may continue to become QPs by participating solely in Advanced APMs, but they also can achieve QP status by participating in a combination of Advanced APMs and APMs with other payers (Other Payer Advanced APMs). For 2019 through 2024, while the Medicare annual physician fee schedule (PFS) conversion factor update is zero (0.0%) for QPs and for MIPS clinicians, each QP receives a lump sum incentive payment (5 percent of the QP's prior year Part B covered professional services payments). Starting in 2026, the PFS annual update will be set higher for QPs (0.75%) than for eligible clinicians who are not QPs. A tremendous article that breaks down the specific requirements of Advanced APMs can be found here.

In the proposal, CMS revised or clarified key terms include the following: "Eligible" APM is replaced by "Advanced" APM; APMs for which CMS is not the payer are termed "Other Payer APMs"; "APM entity" is defined as any entity participating in an APM; "Eligible alternative payment model entity" is replaced by "Advanced APM entity"; "Advanced APM entity" is one participating in an APM determined to be an Advanced APM by CMS; and "Medical homes" are APM entities that are associated with their respective APMs; such APMs are termed "medical home models". CMS seeks comments on the proposed terms including their definitions and their naming.

CMS proposes two mandatory elements for a Medical Home Model. First, participants include primary care practices or multispecialty practices containing primary care practitioners and offering primary care services. Second, each patient is assigned to the panel of a primary clinician. Additionally, a Medical Home Model must have at least four additional elements chosen from the following seven:

  • Planned coordination of chronic and preventive care
  • Patient access and continuity of care
  • Risk-stratified care management
  • Coordination of care across the medical neighborhood
  • Patient and caregiver engagement
  • Shared decision-making
  • Payment arrangements in addition to, or substituting for, FFS payments (e.g., population-based).

CMS proposes that these mandatory and discretionary elements are consistent with medical home standards and accreditation across the health care market. CMS seeks comments on these elements and which ones should be required rather than optional. CMS further proposes that a Medical Home Model must demonstrate a primary care focus through model design elements related to eligible clinicians.

CMS continues by discussing Advanced APMs in great detail. First, an Advanced APM must meet the MACRA criteria to be an APM. An APM is any of the following:

  • a CMMI model (other than an innovation award)
  • a MSSP
  • a demonstration under section 1866C, the Medicare Health Quality Demonstration Program (e.g., Acute Care Episode Demonstration)
  • a demonstration required by federal law (e.g., Physician Hospital Collaboration MMA 2003).

In the proposed rule, CMS further specifies that a demonstration required by law will be an APM only if the demonstration is compulsory under the statute, has a "thesis" to be evaluated, and requires the participating entities to be governed by a CMS agreement or statute or regulation. CMS seeks comments on this additional specification proposal.

To be an Advanced APM, an APM through its payment entity must also meet all three MACRA criteria:

  • Require participants to use certified electronic health record technology (CEHRT)
  • Provide for payment for covered professional services based on quality measures comparable to those in MIPS
  • Require that the participating APM entities bear more than nominal financial risk for monetary losses under the APM or that the APM be a medical home expanded under CMS Innovation Center authority.

An APM Entity holds primary responsibility for healthcare cost and quality provided to beneficiaries as governed by its direct agreement with CMS. All entities participating in Advanced APMs are Advanced APM Entities.

CMS Examples of Advanced APM Tracks within an APM

CMS plans to identify those APMs that have been determined to be Advanced APMs, posting the list on its website. This list will expand over time. No later than January 1, 2017 the Advanced APM list applicable to the first QP Performance Period (2017) will be released. Subsequently, CMS will update the list on a rolling basis, including its Advanced APM determination as part of the first public notice of each new APM. The list will be updated at least annually. CMS seeks comment on the proposed process for release of Advanced APM determinations, especially suggestions for promoting clarity for users concerning which Advanced APMs are operating within a particular QP Performance Period.

Continuing, Advanced APMs must provide payment for covered services based upon quality measures comparable to those described for use in the MIPS performance category. CMS proposes the following principles for selecting Advanced APM measures to enhance comparability to MIPS measures:

  • Measures chosen should have an evidence-based focus
  • Measures chosen should harmonize high priority measures with those of MIPS (e.g., clinical outcomes)
  • Measures chosen should be those most appropriate to an APM's population, as determined by the APM participants
  • Some, but not all, quality measures for which an APM is assessed must be MIPS-comparable
  • Some, but not all, quality-based payments made to Advanced APM entities must be contingent upon MIPS-comparable measures
  • Payments not tied to quality measures are not required to be MIPS comparable.

Consistent with these principles, CMS proposes that the Advanced APM quality measure set upon which payment will be based must include at least one of the following measure types:

  • Any of the measures on the proposed annual list of MIPS quality measures
  • Quality measures endorsed by a consensus-based entity (e.g., National Quality Forum)
  • Quality measures developed under 1848(s) of the Act
  • Quality measures submitted in response to the MIPS Call for Quality Measures
  • Any other quality measures determined by CMS to have an evidence-based focus.

Each measure chosen for inclusion in the payment-linked set must be evidence-based, reliable, and valid. CMS invites comment about whether all MIPS comparable measures should be required to be reliable, valid, and have an evidence-based focus.

Qualifying APM Participant (QP) and Partial QP Determination

MACRA defines a MIPS-eligible professional for 2019-2021 as a physician, physician assistant, nurse practitioner, clinical nurse specialist, certified registered nurse anesthetist, or a group containing such professionals. In 2021 and beyond, the Secretary of HHS may expand and revise this list. In the proposed rule, MIPS-eligible professional is replaced by MIPS-eligible clinician or simply eligible clinician. An eligible clinician may become a Qualified Professional (QP) or a Partial QP by participating in an Advanced APM in which the eligible clinicians as a group meet specific payment or patient thresholds.

The QP and Partial QP determination payment thresholds change over time. QP for 2019 and 2020: at least 25 percent of the eligible clinician group's Medicare Part B fee-for-service (FFS) covered professional services payments. QP for 2021 and 2022: at least 50 percent of Medicare Part B FFS covered professional services payments or at least 50 percent of All-Payer payments (with at least 25 percent of Medicare payments). QP for 2023 and beyond: at least 75 percent of Medicare payments or 75 percent of All-Payer payments (with at least 25 percent of Medicare payments)

The Secretary of HHS may choose to base the QP/Partial QP determination upon patient count thresholds rather than payment thresholds. Therefore, CMS will also make QP and Partial QP determinations each year using patient counts. Preliminary analysis by CMS shows that the proposed QP/Partial QP payment and patient count thresholds yield results that are very similar.

Like the payment thresholds, the patient count thresholds change over time. QP for 2019 and 2020: at least 20 percent of the eligible clinician group's attributable beneficiaries. QP for 2021 and 2022: at least 35 percent of the eligible clinician's group's attributable beneficiaries or at least 35 percent of All-Payer attributable beneficiaries (with at least 20 percent of Medicare attributable beneficiaries). QP for 2023 and beyond: at least 50 percent of the eligible clinician's group's attributable beneficiaries or 50 percent of All-Payer attributable beneficiaries (with at least 20 percent of Medicare payments)

Finally, an eligible clinician determined to be a QP receives the following benefits:

  • For 2019 through 2024, while the Medicare annual physician fee schedule (PFS) conversion factor update is zero (0.0%) for QPs and for MIPS clinicians, each QP receives a lump sum incentive payment (5 percent of the QP's prior year Part B covered professional services payments)
  • Starting in 2026, the annual PFS annual update will be set higher for QPs (0.75%) than for eligible clinicians who are not QPs
  • A QP is excluded from MIPS payment adjustments.

The benefit of Partial QP status for an eligible clinician is the option to choose whether or not to report MIPS data and thereby be subject to a MIPS-related payment adjustment. CMS seeks comment on the proposed patient count thresholds and on using sequential calculations for QP determination.

CMS proposes that identification of eligible clinicians for each Advanced APM Entity be a single point in time assessment. CMS proposes December 31st of each QP performance period as the best single opportunity to comprehensively assess active participation by eligible clinicians in their Advanced APMs. CMS invites comment on this approach. CMS further proposes a single exception to collective group-level QP determinations. This exception would accommodate the eligible clinician who participates in multiple Advanced APMs. CMS also proposes to require that each Advanced APM Entity make an election annually on behalf of all of its identified eligible clinicians on whether to report to MIPS should the clinician group be determined to be Partial QPs for a given year. CMS wishes to notify Advanced APM Entities and their member clinicians about their QP/Partial QP status determinations as soon as determinations have been made and validated.

CMS QP Determination Tree, Payment Years 2019-2020


CMS QP Determination Tree, Payment Years 2021-2022

CMS QP Determination Tree, Payment Years 2023 and Later

Risk in Advanced APMs

To become an Advanced APM, MACRA mandates that an APM must meet what CMS terms the "financial risk criterion." Meeting this criterion means that a) the APM is an expanded medical home model or b) the APM Entity "bears more than nominal financial risk if actual aggregate expenditures exceeds expected aggregate expenditures." The financial risk criterion is addressed by structuring the design elements of the APM financial risk arrangement to meet the proposed requirements. Meeting the criterion is not dependent upon actual savings achievement or other APM success metrics. No additional financial risk performance criteria would be applied by CMS for the purpose of meeting the criterion.

Although CMS prefers to prioritize consistency of standards across the APM structural spectrum, two separate standards are proposed in this rule, a Generally Applicable Advanced APM Standard and a Medical Home Model Standard. CMS therefore proposes distinct Medical Home Model standards for financial risk and nominal loss that apply only to Medical Home Models whose medical home APM entities have 50 or fewer eligible clinician participants in the organization through which the medical home entity is owned and operated. Comment is specifically invited about an alternative limiting the Medical Home Model standard to APMs within which 10 percent or fewer of eligible clinicians are part of parent organizations with more than 50 clinicians.

The Generally Applicable Advanced APM standard applies if actual expenditures for which an APM entity is responsible under the APM structure exceed expected expenditures. For an Advanced APM, in such situations CMS can:

  • Withhold payment for services to the APM Entity and/or the entity's eligible clinicians
  • Reduce payment rates to the APM Entity and/or the entity's eligible clinicians
  • Require the APM Entity to owe payment(s) directly to CMS

Reductions in bonus payments not be allowed. One-sided risk arrangements would not meet the above standard. Expenditures of time and money incurred to become and remain an Advanced APM would not be counted towards APM entity losses; such losses are not tied directly to performance and are difficult to objectively and consistently quantify. CMS expresses belief that the Advanced APM financial risk criterion should be designed to be met only by APMs truly committed to transforming care by challenging all participants. CMS welcomes comment on alternative specifications for a financial risk criterion that would be objective and meaningful.

The Medical Home Model standard applies if actual expenditures for which the APM entity is responsible under the APM structure exceed expected expenditures or if APM Entity performance on specified measures does not meet or exceed expected performance on such measures. For a Medical Home Model to be an Advanced APM, in either of these situations CMS can:

  • Withhold payment for services to the APM Entity and/or the entity's eligible clinicians
  • Reduce payment rates to the APM Entity and/or the entity's eligible clinicians
  • Require the APM Entity to owe payment(s) directly to CMS
  • Lose the right to all or part of an otherwise guaranteed payment or payments.

This standard differs from the Generally Applicable Advanced APM Standard primarily through the last provision above, which allows for reductions of "bonus-type" payments. CMS seeks comment on the proposed standards for both Advanced APM Medical Home Models and all other APMs and on types of financial risk arrangements not clearly captured by the risk standard proposal.

Once an APM risk arrangement is found to meet the applicable proposed standard, CMS next considers whether the amount of the risk exceeds a nominal amount, in which case the Advanced APM financial risk criterion is met. The "nominal amount standard" links to a specified quantitative risk value at which potential losses under the risk arrangement are deemed more than nominal. As for the financial risk standard, CMS again proposes a bifurcated structure. For most APMs, a generally applicable nominal amount standard will apply while a separate standard will apply to Medical Home Models.

Under the generally applicable nominal amount standard, total risk percentages represent the Medicare expenditure amount above which an APM Entity owes losses and below which an APM Entity earned savings. Total risk percentages are based upon the target price (episode payment models) or the APM Entity benchmark (other models). The contributions of Part A and Part B to Medicare expenditures vary across APMs. Further, the ratio between entity revenue and expenditures captured in an APM benchmark varies across different types of APM entities. CMS attempts to define a generally applicable nominal amount standard that can be applied to all types of APM entities. Medical Home Models have a separate nominal amount standard, under which total risk percentages are based on Part A and Part B revenue.

To set the generally applicable Advanced APM nominal amount standard, CMS looked for amounts that would be meaningful but not excessive to APM entities. CMS derived reference points for the nominal amount standard from MIPS adjustments under MACRA and existing APM risk arrangements (e.g., MSSP, Pioneer ACO, and the Bundled Payments for Care Improvement (BPCI) Initiative). CMS believes the potential losses and marginal risk rates of its reference programs to be optimal, having undergone extensive, careful review during the development process for each APM. CMS identified three dimensions of risk to incorporate into the proposed generally applicable nominal amount standard:

  • Marginal risk: the percentage of the amount by which actual expenditures exceed expected expenditures for which an APM Entity is liable under its APM
  • Minimum loss rate (MLR): a percentage by which actual expenditures may exceed expected expenditures without triggering financial risk
  • Total potential risk: the maximum potential payment for which an APM Entity could be liable under the APM structure.

Based upon the dimensions of risk, an APM can meet the generally applicable Advanced APM nominal amount standard when all of the following conditions are met:

  • The specific level of marginal risk must be at least 30 percent of losses in excess of expected expenditures
  • The minimum loss rate must be no greater than 4 percent of expected expenditures
  • Total potential risk must be at least 4 percent of expected expenditures.

Expected expenditures are defined to be the level of expenditures reflected in the target price for episode payment models and in the APM benchmark for other models. Marginal risk is calculated as a percentage by which actual expenditures exceeded expected expenditures. Including a marginal risk standard helps maintain a more than nominal level of average or likely risk under an Advanced APM.

Setting a maximum allowable minimal loss rate accommodates APMs that include zero risk for small losses but otherwise satisfies the marginal risk standard. When actual expenditures exceed expected expenditures by an amount exceeding the MLR, then all excess expenditures (including those within the MLR) become subject to the marginal risk requirements. For the occasional circumstance in which an APM can satisfy the marginal risk requirement despite a high MLR, CMS will review the risk arrangement and possibly grant an MLR exception though such exceptions will be rare. The MLR is set by the APM as part of the APM entity agreement with CMS.

To assess the total potential risk dimension of the nominal amount standard, CMS would identify the maximum potential payment an APM could be required to make as a percentage of expected APM expenditures. When this percentage is four or more, the total risk standard is met.

CMS Example of Risk Arrangement that would meet the Nominal Amount Standard (75% marginal risk rate, 2% minimum loss rate, 10% total risk, and non-episode payment model)

CMS Amounts of Risk Sufficient to Meet the Nominal Amount Standard

CMS seeks comment on appropriate levels for allowable MLR and on parameters to consider that might warrant an exception in a risk arrangement from the MLR portion of the nominal amount standard. CMS also seeks comments on the generally applicable Advanced APM nominal amount standard in general and with regard to the specific provisions, especially the MLR component.

CMS proposes that full capitation risk arrangements would automatically meet the Advanced APM financial risk criterion relative to both risk-bearing and nominal risk amount. Continuing, no CMS Medical Home APMs have been expanded as yet under section 1115A(c) of the Act. CMS has reviewed its sponsored APM portfolio and identified those anticipated to become Advanced APMs for the first QP performance period that begins in January 2017. The following six APMs of the twenty-four reviewed by CMS met all of the criteria to be Advanced APMs.

  • Comprehensive End Stage Renal Disease Care (Large Dialysis Organization arrangement)
  • Comprehensive Primary Care Plus (CPC+)
  • MSSP Track 2
  • MSSP Track 3
  • Next Generation ACO Model
  • Oncology Care Model (OCM) two-sided risk arrangement.

Many APMs did not meet all of the proposed Advanced Payment APM criteria including the Comprehensive Care for Joint Replacement (CJR) model, the Bundled Payment for Care Improvement Models, and Track 1 participants in the MSSP. As you can see from the following charts CMS has created a very high bar to climb.

CMS APM List Based on Proposed Criteria

Physician-Focused Payment Models

Section 101(e)(1) of MACRA adds a new section 1868(c) to the Act which establishes the Physician-Focused Payment Model Technical Advisory Committee (PTAC) and sets forth requirements for criteria and a process for stakeholders to propose physician-focused payment models (PFPMs) for review by the PTAC. After review, the PTAC provides comments and recommendations to CMS on the PFPM for a detailed response from, and possible testing of the PFPM by, the agency. You can see meeting minutes from the PTAC here.

CMS proposes to define a PFPM as an alternative payment model that meets all of the following requirements:

  • It has Medicare as a payor.
  • It includes APM entities (i.e., physician group practices or individual physicians).
  • It targets the quality and costs of physician services.

Stakeholders may propose an APM or an Advanced APM to the PTAC; CMS recommends that a PFPM proposal include information about whether it might qualify as an Advanced APM.

CMS proposes criteria that it believes are sufficiently broad to encompass all physician specialties and provide flexibility in designing PFPMs. It proposes to organize the criteria in three categories: (i) payment incentives for higher-value care, (ii) care delivery improvements, and (iii) information enhancements. For each criterion, CMS encourages stakeholders to provide detailed and specific information on how the PFPM meets the goals of the criterion. The PFPM criteria for payment incentives include (i) value over volume, (ii) flexibility, (iii) quality and cost, (iv) payment methodology, (v) scope, and (vi) ability to be evaluated.

A PFPM should incentivize practitioners to deliver high-quality care; a PFPM should indicate the specific payment incentives (or adjustments) and explain how they will incentivize quality. A model should demonstrate that it has the flexibility needed for practitioners to deliver high-quality health care (e.g., is it operationally feasible to adapt to clinical differences in different patient subgroups or to adapt to changing technology, such as new drug therapies). The PTAC would assess the extent to which a PFPM is expected to meet the goals of improving health care quality at no additional cost, maintaining health care quality while decreasing cost, or both. Stakeholders should include information on specific quality measures, including prior measure validation and whether the measures are patient-reported outcomes or beneficiary experience of care measures.

A PFPM would also be assessed based on its payment methodology and how the methodology would achieve the goals of the PFPM criteria. Stakeholders must explain how their model is different from current payment methodologies, and why the model cannot be tested under current payment methodologies. CMS also proposes that a PFPM must either (i) directly address an issue in payment policy that broadens and expands the APM portfolio or (ii) include APM Entities whose opportunities to participate in APMs have been limited. A model should either address a new issue or include a new specialty; a PFPM that includes multiple specialties would meet this criterion if at least one of the specialties is not currently addressed by another APM.

Finally, a PFPM must have evaluable goals for quality of care, cost, and any other goals of the proposed model. CMS seeks detailed information explaining how the impact of a proposed model would be evaluated, which could include a description of potential approaches for evaluation, such as study design, comparison groups, key outcome measures, level of precision of the evaluation, and the extent to which the impact of each element can be evaluated.

The Comptroller General of the United States appointed the 11 members of the PTAC on October 9, 2015. CMS does not propose to evaluate PFPM proposals before their submission to the PTAC, and CMS states that it cannot commit to test all models that the PTAC recommends, in part due to available resources and competing priorities. CMS also clarifies that there is no need for a second application to CMS to test a PTAC-recommended model.

CMS declines to set deadlines for PTAC recommendations and comments on a proposed PFPM; it also declines to set deadlines for the CMS response as well as the testing of the model. CMS notes that it normally takes the agency 18 months to develop an APM, and additional time is needed for a number of actions, including for the entities to complete applications, for CMS to review applications and prepare participation agreements, for entities to review the agreements and to begin planning to implement the model. CMS also believes that the PTAC should determine the process for submitting proposals to the PTAC; for this reason, CMS does not propose to define what "on-going basis" means for purposes of the statutory mandate that proposals may be submitted to the PTAC on an on-going basis

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Feed You can follow this conversation by subscribing to the comment feed for this post.

Great article, but shouldn't the last line in the first table say that it is an eligible clinician? Table 27 here is the same table, right?

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