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August 10, 2017

Deep Dive Into Proposed MACRA Rule


As we recently reported, CMS published their proposed rule to update the MACRA Quality Payment Program (QPP). The QPP is a part of a fundamental shift from fee-for-service to a more value-based health care system. Below, we offer a more in-depth look at the proposed rule. 

Some Major Points

MACRA eliminated the sustainable growth rate formula and replaced it with a 0.5% rate increase through 2019. Physicians are encouraged to pick one of two Quality Payment Programs: 1) the Merit-based Incentive Payment System (MIPS) or 2) Alternative Payment Models (APMs). MIPS folds together CMS legal programs of Meaningful Use, the Physician Quality Reporting System, and the Value-based Payment Modifier. Under MIPS, physicians receive positive, negative, or neutral payment adjustments based on quality, cost, improvement activities, and the use of electronic health records.

One of the biggest take away points from the rule is the note from CMS that only 36% of clinicians will be eligible for MIPS after all exclusions, although they make up 58% of Medicare Part B charges. Flexibility is another major component in the proposed rule. For example, CMS increased the low-volume threshold to $90,000 or less in Medicare Part B charges or 200 or fewer Medicare patients annually. The original threshold was $30,000 in Medicare Part B charges or 100 Medicare patients.

Between this year's exemption and the proposed one for next year, the move will exclude a total of about 834,000 more clinicians from complying with the quality reporting program under the Medicare Access and CHIP Reauthorization Act of 2015.

As Table 85 on page 721 of the proposed rule shows, 36% of eligible clinicians will remain eligible for MIPS after exclusions and APMs are taken into consideration:

Another new part of the QPP is the reporting option of virtual groups. The proposed rule defines these groups as a combination of a solo practitioner or a group with 10 or fewer eligible clinicians working together with at least one other solo practitioner or group for a performance period of a year. An agreement, in writing, must be submitted to CMS by December 1 prior to the stat of the applicable performance period. Participants will be assessed as a group on all MIPS categories. This will be discussed more in-depth later.

Continuing, hospital-based clinicians in the 2018 MIPS performance period now have an opportunity to be assessed on quality and cost in the context of the facilities where they work. Such clinicians can submit their facility's inpatient value-based score to help calculate an individual score.

The proposed rule scores MIPS with 60% counting in the quality category, 25% in the advancing care information (EHR) category, 15% in the improvement activities category, and cost remaining at 0%. CMS is legally required to increase the cost amount to 30% in 2019, so that is something to watch in next year’s proposed rule.

Advanced APM participants are also expected to increase, according to CMS. While most eligible clinicians will likely be in MIPS, because of the availability of the Medicare Track 1+, Next Generation ACO and Comprehensive Primary Care Plus programs allowing new entryways to Advanced APMs, CMS estimates Advanced APM participants to double from 70,000-120,000 clinicians to 180,000-245,000 clinicians. 

CMS is also easing the burden on electronic health record technology. This is in the advancing care information category (ACI) which aims to reduce some of the previous meaningful use requirements. Now, for the second year, CMS is proposing that MIPS eligible clinicians may continue to use EHR technology certified to the 2014 Edition for 2018's performance in the ACI calculations. However, clinicians implementing a certified 2015 Edition product may receive a bonus of 10 percentage points under the ACI category for 2018's performance period. The proposed rule did not address 2015 Edition timelines for hospitals.

The agency is also proposing a one-time consideration for MIPS eligible clinicians who care for complex patients in 2018's performance period (2020 MIPS payment year). Physicians who care for sicker patients do not want their scores to be hurt for conditions that are out of their control. CMS recognized this and wishes to "protect access to care for complex patients and provide them with excellent care." The agency proposed that complex patient bonus points will not exceed three percentage points.

In general, the proposed rule is the first look at how CMS, under President Trump, views MACRA and the QPP. The proposed rule takes the previous administration's tendency toward provider flexibility over MACRA and slightly ups the dial. Secretary Price is known for wanting to ease administrative burdens for providers and this document mirrors that.

“We’ve heard the concerns that too many quality programs, technology requirements and measures get between the doctor and the patient,” said CMS Administrator Seema Verma on the rule's arrival. “By proposing this rule, we aim to improve Medicare by helping doctors and clinicians concentrate on caring for their patients rather than filling out paperwork.”

The program may continue to change depending on how the administration views the goal of quality-based payments. "[W]e expect the Quality Payment Program to evolve over multiple years in order to achieve our national goals," the rule stated.

What are Groups Saying?

As reported, health organizations were, for the most part, supportive of the QPP proposal and its flexibilities for small and solo practices.

Additionally, six healthcare groups reacted to the proposal's health IT changes.

American Hospital Association: "We … applaud CMS's proposal to provide much-needed relief from unrealistic, unfunded mandates for EHR capabilities by extending the use of modified stage 2 meaningful use requirements through 2018. We will encourage CMS to provide the same relief to hospitals”.

American Medical Informatics Association: "This approach helps credit clinicians for using health IT within a care improvement context, and we see this as a more outcomes-focused approach to measuring health IT use," President and CEO Douglas B. Fridsma, MD, said.

College of Healthcare Information Management Executives: "CMS largely heeded our advice," wrote Mari Savickis, vice president of federal affairs, in a statement. "[But the proposed rule] does not address the 2015 CEHRT timelines for hospitals," she added.

Health IT Now: The proposed rule "strikes a balance" between quickly implementing MACRA and offering providers time to comply.

Healthcare Information and Management Systems Society: "The approach taken by CMS to encourage successful participation in Quality Payment Program while reducing burden aligns with our vision for how the program should proceed in 2018," reads the HIMSS statement.

The App Association's Connected Health Initiative: "The MACRA rules make minimal meaningful changes to reimbursement policies for telehealth or remote monitoring services, which is a disincentive to doctors and healthcare providers to leverage current, and future, innovations provided by app developers and telehealth companies," said Executive Director Morgan Reed.

More on the Low Volume Threshold

As previously stated, for 2018, that low-volume threshold was raised significantly, from $30,000 in Medicare Part B charges to $90,000; and from having less than 100 Medicare patients to fewer than 200. Now, 200,000 more clinicians will be excluded from MIPS in 2018. CMS has estimated that some 80 percent of qualifying small practice clinicians (15 or fewer) will get either a positive or neutral MIPS payment adjustment in 2018. That might make some stakeholders reflect back to the proposed MACRA rule from last spring which predicted that the overwhelming majority of these small practices would be dinged with Medicare negative payment adjustments. CMS then made modifications for the final rule it released in October, such as excluding many more clinicians from MIPS with low-volume thresholds, a move which seemed to satisfy concerned clinicians.

Congress pushed back against CMS’ original proposed MACRA rule last year, and as a result, the government has continued to increase the number of exclusions for clinicians in the MIPS track. Some of these include: allowing virtual group reporting for the first time; giving [small practices] five bonus points for participating in MIPS; and giving regulatory relief on the Advancing Care Information category with a hardship exemption

Anders Gilberg, senior vice president of government affairs with the Englewood, Colo.-based Medical Group Management Association (MGMA), says that while the 80 percent estimation sounds good on the surface, CMS also predicts that 99 percent of practices with 100 or more clinicians are expected to get a positive or neutral MIPS adjustment. “So even with the low- volume threshold going up, CMS’ own predictions are that clinicians in these small practices are much more likely to get penalized than a very large practice who can deal with the complexity with the rule. A 20 percent difference is [meaningful],” says Gilberg.

What’s more, he notes, is that even with these modifications made by CMS, the government’s aggregate estimations predict that $224 million will be taken out of the MIPS payment adjustments in 2020 for practices with 15 or fewer clinicians, while just $10 million will be taken from groups of 100 or more.

Virtual Groups

As previously noted, the proposed rule defines a virtual group as a combination of two or more taxpayer identification numbers (TINs) composed of a solo practitioner or a group with 10 or fewer eligible clinicians under the TIN that elects to form a virtual group with at least one other solo practitioner or group for a performance period of a year. A representative for the group must submit written notice by December 1 of the calendar year prior to the start of the applicable performance period to submit an agreement amongst virtual group participants. The low-volume threshold will not be granted at the virtual group level. "[S]olo practitioners (individual MIPS eligible clinicians) or groups with 10 or fewer eligible clinicians that are determined not to exceed the low-volume threshold at the individual or group level would not be eligible to participate in MIPS as an individual, group or virtual group," the rule stated.

However CMS doesn't expect the virtual group option to go gangbusters. Recently, Modern Healthcare reported the agency is anticipating just 16 virtual groups comprised of 765 clinicians to participate in MIPS in 2018. By contrast, 418,000 doctors will be reporting 2017 MIPS data in the first full year of the program.

Additionally, as reported, Kelly Kenny, JD, chief executive officer for the nonprofit Physicians Advocacy Institute, told Medical Economics the concept of virtual groups has potential to provide greater flexibility and opportunities for solo and small practices, regardless of location and specialty.

“The virtual groups option allows solo physicians and small practices to participate in [the Quality Payment Program] while maintaining their independence, providing an opportunity to achieve meaningful cost savings and quality improvements, while also adding the potential for additional funding opportunities for these practices and physician,” Kenny said.

However, not everyone is as optimistic. David J. Zetter, PHR, SHRM-CP, founder and lead consultant for Zetter Healthcare Management Consultants in Mechanicsburg, Pennsylvania, said he simply does not see the benefits of practices essentially “getting into bed together” to determine how they are paid and rated.

“I have clients all over the country and have not had one client interested or mention forming a virtual group at this point,” he told Medical Economics.

Zetter finds several flaws with this process, from locating and trusting physicians who may be across the country to feeling comfortable enough to then create a legal entity to determine compensation.

“I just do not see that many solo physicians, operating under a TIN, and small groups having the time to discuss this and getting to know each other to organize this and then choosing an individual to spearhead this for them,” he said.

Another uncertainty in the proposed rule is whether physicians are essentially stuck in their virtual group for an entire performance period. While that may be one of the “changes” in the group that requires CMS notification, the proposed rule isn’t clear on the ability or consequences of leaving a virtual group. The rule notes that fluctuations will occur in virtual groups (such as a practice closing) but appears to keep the physician in that group for reporting purposes for the entire reporting period.

One week prior to releasing the 2018 MACRA proposed rule, CMS issued a report on virtual groups, assuming low participation next year, due to many of the factors noted above. The agency estimates that only 16 virtual groups would participate, made up of 765 MIPS-eligible physicians across the nation. That’s 0.1% of all eligible Medicare physicians nationwide.

“We assume that virtual group participation will be relatively low in the first year because we have heard from stakeholders that they need at least three to six months to form groups and establish agreements before signing up,” the document noted. “We are not able to give them that much time in the first year, rather closer to 60 days or potentially less.”

CMS estimates that those 765 physicians would be ones who participated in MIPS this year, hence familiar enough with the structure and requirements to find potential partners. The report also estimates the financial burden for virtual groups, at an annual total of $832 per group, including cost to prepare the formal written agreement and to undergo analysis of the group post-election to verify eligibility.

“Given that only solo practitioners and groups of 10 or fewer may combine with another group to form a virtual group, I am not sure why a few solo practitioners, that aren’t of the same specialty would want to form a virtual group,” Zetter said. “Even if they were the same specialty, why would they form a virtual group if they didn’t want to be part of the group in a legal way?


The amount of Medicare Part A and B revenue that must be at risk to qualify as an advanced Alternative Payment Model — set at 8 percent in 2017 —was extended for two years. Clinicians must bear more than "nominal" financial risk for financial losses to qualify as an advanced APM. The proposed rule extends the revenue-based nominal amount standard of 8 percent to the 2020 performance year.

The required risk for medical home models will increase more slowly as proposed in the rule. Clinicians can also qualify as an advanced APM if they participate in a medical home model created under the Center for Medicare and Medicaid Innovation. The 2018 proposed rule increases the risk required for medical home models more slowly. In 2017, medical home models were required to have at least 2.5 percent of estimate average Parts A and B revenue at risk, and this was expected to increase to 3 percent in 2018, 4 percent in 2019 and 5 percent in 2020. However, CMS proposes decreasing the amount of risk for medical homes to 2 percent of Medicare Parts A and B revenue in 2018 and increasing this by one percentage point per year going forward.

MACRA is pushing ACO Growth

The number of ACOs has risen 11 percent since early 2016 and other alternative payment models are also growing, as MACRA implementation pushes the trend, according to a new Health Affairs study.

Since early 2016, 138 new ACOs have began operating and 46 dropped their accountable care contracts, representing a net increase of 92 organizations, according to authors David Muhlestein, Robert Saunders, and Mark McClellan. By early 2017, there were 923 public and private ACOs covering more than 10 percent of the population. The number of contracts has grown to 166 and the pace of growth has been similar for all payer types.

Commercial represents the largest at 59 percent.  Of 1,366 contracts, 715 are in commercial insurance, 563 are in Medicare and 88 are in Medicaid. Although fewer providers participate in ACOs than in any other type of alternative payment model, the majority of dollars paid through APMs flow through ACOs that cover patients' total cost of care, the study said.

In 2016, 25 percent of healthcare dollars were in shared-savings and shared-risk ACOs, episode-based models and partially and fully-capitated payments, for commercial plans, Medicare Advantage and Medicaid, according to information used from the Health Care Payment Learning and Action Network. For Medicare, these APMs represented over 30 percent of payments in 2016.

State Medicaid plans and commercial payers also expanding APMs. This upward trend is projected to continue, depending on the direction of payment reform based on administrative and legislative action, according to Health Affairs. Reinforcing the trend is passage of the Medicare Access and CHIP Reauthorization Act, which gives physicians a choice of participating in one of two tracks for payment, or face penalties.

While CMS provided physicians with administrative relief from penalties in 2017 under the Merit-Based Incentive Payment System, or MIPS track, physicians must decide whether to report under MIPS or try to participate in an APM in 2018.

As Medicare Shared Savings Program Track 1 participants are not eligible for the MACRA advanced APM bonus, it is likely that more organizations will move toward greater risk sharing arrangements, such as the new MSSP track 1+, MSSP track 3, Next Generation model, or other advanced APMs, the study said.

The expanding Comprehensive Primary Care Plus program, or CPC+, also counts as an advanced APM for primary care providers, and CMS has indicated it aims to make additional APM options available for specialized care in the coming months, the authors said.

For many clinicians, though, there are no existing Medicare APMs that cover the services for which they are responsible. To address this challenge, MACRA authorized the creation of the Physician Focused Payment Model Technical Advisory Committee, charged with recommending potential APMs to CMS. To date, many of the submissions have focused on specialized care, reflecting the interest in such models.

Episode bundled payments may help address one weakness of population-based payment models, namely that many clinicians--such as surgeons or other specialists--can have an important impact on quality and costs for specialized groups of patients, but are not well-positioned to help manage the total care of a population.

The expansion of multiple payment models has raised concern about how they interact.

One common overlap is the use of bundled episode payments for specific services within an ACO arrangement. This could be a positive combination because evidence suggests that bundles improve efficiency within a defined episode, while ACOs can help improve population health and lower overall spending, the authors said. However, there are challenges with operating both models for the same patient, such as how to attribute cost savings within the organization or across an ACO and specialist group, if different provider organizations are involved in care for a given patient.

To avoid over-burdening physicians, it is essential that providers align non-competing interests and minimize the administrative burden of multiple payment models, the authors said.

The study shows that in general, the more populous the state, the greater the number of ACOs. The two largely rural states of Wyoming and West Virginia have less than 2 percent of their population covered under ACOs, while two states, Rhode Island and Maine, have over 30 percent covered, even though Maine's population is less than that of West Virginia. Rhode Island has even fewer people, but is more densely populated.

Interestingly, the most populous states of California, Texas, Florida, New York, and Pennsylvania have a lower percent of lives covered than the national average, despite having some of the highest counts of ACOs, the authors said.

Winners and Losers of MACRA

There will be losers and winners under MACRA as the program inherently sets up physicians to compete with one another. As has been reported, it is suggested that providers look toward qualifying for the Advanced Alternative Payment Model track, according to Erik Johnson, vice president of Optum's value-based care practice. Advanced APMs, which offer physicians the potential to earn a 5 percent bonus on top of shared savings, provide a more stable path than MIPS and greater opportunity for financial rewards.

"MIPS is inherently unstable. It already has physician groups nervous," he says. "Our recommendation is to move into the Advanced APM world, but that takes time. Quality is hard. Advanced APMs are hard. Otherwise everybody would already be doing it."

Currently, most physician practices do not qualify as advanced APMs and are subject to MIPS reporting requirements for the 2017 performance year. Even if MIPS is only a temporary challenge, it is a significant one. Positive payments awarded to physicians with stronger performance are funded by payment reductions other physicians incur, meaning it's all relative — the program is designed to be budget-neutral, ranking physicians on a curve. This poses both an opportunity and a threat to physician Medicare revenue, depending largely on three factors, according to Mr. Johnson — the measures physicians choose to report on, how well they perform on those measures and how well their peers perform in comparison.

Implementation of the QPP will not only impact physicians, but also the hospitals and health systems with whom they partner. Hospitals that employ physicians directly may bear the cost of ongoing compliance requirements and additional physician performance reporting, as well as be at risk for payment adjustments. Moreover, hospitals' inpatient revenue may be in danger as MACRA encourages physicians to lower the costs of care. In fact, Jay Hazelrigs, vice president of Optum's provider risk advisory consulting practice, urges hospitals to think about MIPS as a large, informal ACO.

To succeed in the program, physicians will be increasingly pushed to manage not only the quality of care, but also the cost of care through one of the track's four performance categories — resource use. In the first performance year, resource use will not be a factor in MIPS composite scores, but its weight is expected to increase to 10 percent in the 2018 performance year and then up to 30 percent in the 2019 performance year. Increasingly, physicians will be looking to eliminate inefficiencies and excess costs throughout the care continuum in ways that could reduce the use of hospital care, such as avoiding hospital admissions and readmissions and moving patients to lower-cost settings, thereby putting hospital revenue at risk, according to Mr. Hazelrigs.

Despite the many challenges of participating in MIPS or an AAPM, physicians, hospitals and even payers can come out on top in a MACRA world with careful planning and strategy. Four recommended tactics include evaluating past performance metrics, consider market peers as quality and cost vary regionally, increase hospital consolidation and employment, and plan for MACRA’s impact on commercial businesses.

Physicians trying to avoid MIPS reporting may also try to refocus their patient base in Medicare Advantage — a trend payers need to be aware of and prepared for, Mr. Dolstad says. However, beyond the initial shift to Medicare Advantage, payers should tune in and consider how MACRA will shape future commercial business. "As we think about Medicare and what it's done historically — DRGs and risk adjustment — ultimately all of those concepts made their way into commercial plans and Medicaid," Mr. Dolstad says. "As a result of that, we think it's likely MACRA has the potential to have that same cascading impact into commercial business." In particular, Mr. Dolstad believes MACRA, "There is that natural friction right now. This could bring the wheels to a halt, or be the lubricant that streamlines everything," he says.

Tom Price Comments

The Trump administration won't impose a one-size-fits-all strategy on doctors in their transition from volume to value, U.S. Health and Human Services (HHS) Secretary Tom Price, MD, told a conference of physicians in accountable care practices.

While payment reform efforts under MACRA, the Medicare Access and CHIP Reauthorization Act of 2015, are "truly laudable," many challenges remain in standardizing measures of value "when every patient is unique," and doctors practice in widely varying settings and circumstances, he said.

Price stressed that for certain settings and procedures, maintaining "fee for service may not be the end of the world." Traditional payment systems could work for some solo and rural practices, in concert with capitated systems, in certain specialties such plastic surgery, dermatology and ophthalmology.

The administration's job "isn't to dictate to docs and others providing care what kind of payment models to use or must use," Price said. "Our job is to make it easier for physicians to use the payment models that work for them, and to put in place a system that incentivizes and accommodates innovation."

"How do we standardize measures of value and efficiency when every patient is unique?" Price said. "One patient has the same diagnosis as another patient, yet that same diagnosis may be treated differently. It's tough for us to put that in an equation."

"You might think that because HHS is responsible for implementing MACRA -- that, as secretary, I'm the one who needs to answer the question, 'What now?' That's why you're all seated. What are you going to do?"

Price said he prefers to ask another question, "who decides?" adding that he believes "physician payment innovation should be in the hands of physicians and healthcare providers across the country. It shouldn't be in the hands of Washington, D.C. We need to facilitate it, yes. But you're the ones with all the good ideas of how we can make our system work better for patients."

Price also mentioned Medicaid, which covers 74 million low-income adults and children, only once as one of the nation's six healthcare systems, along with the VA, Medicare, employer-based coverage, Indian Health and the individual small group market. He did not address the current proposals to cut projected Medicaid spending by nearly $1 trillion over the next decade.

Study: Most doctors are unprepared

According to a report based on responses from 1,000 physicians, an AMA-KPMG survey conducted between April 26 and May 1, 2017 shows that all respondents had "some awareness of MACRA and are involved in practice decision-making related to QPP."

About 30 percent of respondents were in a solo practice or a group practice with fewer than five physicians, nearly 40 percent were in a practice with between five and 24 physicians, and fewer than 25 percent were in a practice with 25 or more physicians.

Fifty-six percent of respondents expected to participate in MIPS in 2017, 18 percent expected to participate in the APM track, and 7 percent expected to participate in the MIPS APM option, while the remainder were unsure and did not expect to participate in QPP.

According to the report, less than one in four respondents said they felt "well prepared" to meet QPP requirements in 2017, while 65 percent said they felt "somewhat prepared."

More than half of the physicians said they felt at least somewhat knowledgeable about MACRA or QPP, but only 8 percent said they felt "deeply knowledgeable" about QPP and its requirements. Knowledge of MACRA and QPP were roughly similar across different practice types, according to the report.

An overwhelming majority—90 percent—of respondents felt the reporting requirements were somewhat or very burdensome. In particular, physicians in small practices were more likely to view the reporting requirements as very burdensome, compared with those in large practices.

The scoring of MIPS performance. A vast majority of physicians said they needed additional educational opportunities to understand MIPS requirements.

According to the report, among the physicians who planned to participate in MIPS, 3 in 10 intended in 2017 to report the minimum amount of data required to avoid a negative payment adjustment—which is to report one quality measure, one improvement activity, or the set of required ACI measures at some point in 2017. Another 25 percent intended to report partially, which is to report one quality measure, one improvement activity, or the set of required ACI measures for at least 90 consecutive days in 2017. Another 30 percent said their practices planned to do full reporting. About 75 percent of physicians who planned to participate in MIPS said they would report as a group, instead of as individuals.

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