Life Science Compliance Update

July 20, 2017

Accountable Care Organizations: Risk and Reward


In January 2015, HHS set the target of funneling 50% of Medicare payments through alternative payment models and tying 90% of fee-for-service payments to quality or value by the end of 2018. MACRA is part of that shift by changing the way Medicare pays physicians. Now, as reported by Modern Healthcare, the prospect of rewards from value-based care arrangements like ACOs is luring a “small but growing” number of ACOs into risker contracts with Medicare. However, as the article stresses, this is still a minority number of ACOs, with the vast majority in “upside-only” models where they share in savings but do not risk money if costs rise. It is also not clear that all ACOs taking on risk are prepared to be in such a structure.

ACO Models and MACRA

Under MACRA, the article points out that providers can avoid MIPS requirements if they have significant enough investments in eligible alternative payment models. However, most providers are not ready for this stage yet and CMS estimates around 10% of physicians in 2017 will qualify under MACRA as participating in an “advanced” APM.

Some of the existing Medicare models qualify as advanced APMs, but those participating in the ACO experiments are in models that do not qualify. The article notes that in 2017, only 42 of 480 ACOs in the Medicare Shared Savings Program qualify, for example. Other models are forthcoming, which should rise that number.

Investment Risk

Ultimately, the article describes, the upfront investment in infrastructure is risky enough for many ACOs, even without taking on downside risk. The average cost to participate in the Medicare Shared Savings Program was $1.62 million for 144 ACOs surveyed in the spring of 2016 by the National Association of ACOs. Forty-three percent said they'd “definitely or likely” quit the program if the CMS required them to assume risk for losses, although 84% said they would be willing in the next six years.

Revenue Loss?

According to a recent RAND survey, there are a number of scenarios under which a percentage of physicians increase their participation in advanced APMs, with the rest in the MIPS track. To project how much Medicare would spend on physician services under MACRA, the RAND researchers drew up three scenarios of physician participation in Advanced APMs. In each scenario, the percentage of physicians in these models increased from 8.5% in 2015 to 40% in 2030, with the rest in MIPS.

However, the scenarios differed by the relative riskiness — the potential upside and downside — of the advanced APMs chosen. In the lowest-risk scenario, physicians choose advanced APMs with financial risk similar to that for a CPCP medical home. In the highest-risk scenario, all the advanced APMs resembled Next Generation ACOs. The medium-risk scenario resembled a collection of medical home, Next Generation ACO, and MSSP Track 2 models. Generally speaking, the riskier the Advanced APM, the more money physicians stand to lose if they pump up the volume of services, according to the RAND study.

Results Still Questionable

CMS has promoted the cost savings of APMs, but reports from 2017 have raised doubts. Citing data from a number of APMs, a report found, for example, in 2014 CMS said the 20 ACOs in its Pioneer program, and the 333 in the Medicare Shared Savings Program, saved a total of $411 million. However, after paying bonuses to the strong performers, the ACO program reported a net loss of $2.6 million. And the fact that only nine health systems remain in Pioneer ACO program is telling, as many jumped ship over penalties tied to benchmarks deemed too high.

Even with this information, more recent research found that forty-seven percent of respondents said they don’t know which of MACRA’s two payment tracks they will fall under, indicating that most are still trying to figure out the ins and outs of the program, suggesting providers are still looking into possible ACO options that may best fit their practices.

June 30, 2017

RAND Releases Study on MACRA Implementation


According to a RAND study in Health Affairs, MACRA will slow the rate of growth for the program's spending on physician services, saving anywhere from $35 billion to $106 billion over 15 years. Over this time, the relative drop in revenue under MACRA is still better than what could have transpired under Medicare's former reimbursement system. With plenty of uncertainty surrounding MACRA's implementation, the RAND forecast is useful, but due to potential changes in MACRA, the study’s results may need to be revisited in the future.

Study Findings

Two important findings from the study: First, Medicare spending on physician services will be lower under MACRA. The RAND team estimates a drop somewhere between $35 billion and $106 billion. However, second, there is a wide range of possibilities when it comes to hospital payment changes. They could see an increase of $32 billion or a decrease of $250 billion.

Peter Hussey, a senior policy researcher with the RAND Corporation and a coauthor of the study, said the losses will result from physicians responding to payment models in ways that reduce the use of hospital care, such as avoiding admissions and readmissions.

“What we found was that physicians will be in a scenario where their Medicare payments are increasing very slowly over the next 10 years,” Hussey said in an interview. “And the only way to increase those reimbursements is through participating in APMs which, if they are successful, keep patients out of hospitals. The biggest effect from MACRA could be a decrease in hospital revenues.”

More from RAND

As described in the Health Affairs abstract, Congress repealed the Sustainable Growth Rate formula for Medicare physician payment in 2015, eliminating mandatory payment cuts when spending exceeded what was budgeted. In its place, Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA), which established a two-track performance-based payment system that encourages physicians to participate in alternative payment models. MACRA could have huge effects on health care delivery, but the nature of those effects is highly uncertain.

RAND’s model estimates MACRA’s effects under different scenarios. RAND estimates that MACRA will decrease Medicare spending on physician services by −$35 to −$106 billion (−2.3 percent to −7.1 percent) and change spending on hospital services by $32 to −$250 billion (0.7 percent to −5.1 percent) in 2015–30. The spending effects are critically dependent on the strength of incentives in the alternative payment models, particularly the incentives for physicians to reduce hospital spending and physician responses to MACRA payment rates.

Look At Risk

RAND’s assessment of alternative payment models (APMs) looked at different levels of risk. Generally speaking, the riskier the Advanced APM, the more money physicians stand to lose if they pump up the volume of services. The study then compared the riskiness levels (low, medium, and high) to a “pre-MACRA baseline” scenario where Congress continued its tradition of postponing SGR pay cuts, and instead gives physicians nominal rate hikes of 0.5% from 2015 to 2025 with a 2% annual increase when sequestration cuts to Medicare expire. In this scenario starting in 2014, Medicare spent $81 billion on physician services and the spending baseline increases to $109 billion in 2030.

Ultimately, all three MACRA scenarios trailed the pre-MACRA scenarios for Medicare spending on physician services from 2015 to 2030. The gap varied, depending on the level of MACRA risk. In the low-risk MACRA scenario, physician revenue is $35 billion lower than the pre-MACRA baseline over 15 years for a 2.3% decrease. The highest-risk MACRA scenario comes in at $106 billion, or 7.1% lower, while the medium-risk scenario is $47 billion or 3.2% lower.

Grain of Salt

The Advisory Board recommends having some caution while reviewing the study’s results. They note the study results are projections, and the authors themselves stressed that they "are subject to a high degree of uncertainty." The researchers projected Medicare spending between 2015 and 2030 under three MACRA scenarios with different assumptions about financial incentives under alternative payment models (APMs). They also made assumptions about physician participation in APMs based on those financial incentives. In addition, they acknowledged that MACRA regulations could change and that "elements of MACRA such as the definition of APMs will also change over time.

Furthermore, it may be too soon to predict the ultimate financial impact of MACRA’s APM models, since physicians and hospitals are just beginning to understand the role of value-based care. Nevertheless, regardless of the uncertain financial impact, CMS must be careful how it designs and implements new APM models, and providers and hospitals must understand the impact of their participation in such APMs.

June 22, 2017

MACRA Letters Went Out, Finally


The Centers for Medicare and Medicaid Services (CMS) finally mailed out letters to medical practices, providing clinicians with their participation status in the Merit-based Incentive Payment System (MIPS). MIPS is one of two payment tracks within the Medicare Access and CHIP Reauthorization Act (MACRA). The letters were supposed to go out in December, but that deadline came and went without any letters mailed. Roughly 419,000 providers were notified that they are participating in MIPS and must meet the reporting requirements for 2017. CMS uses historical claims data and data from the performance period to make the determination whether or not a physician/other healthcare provider is eligible for MIPS participation.

Meanwhile, there were over 800,000 providers who received the news that they do not need to participate in the MIPS program this year. Physicians are exempt from MIPS participation if they have less than $30,000 in Medicare charges and less than 100 Medicare patients per year. Additionally, physicians who are new to Medicare this year are also exempt.

Depending on whether a particular medical practice reports as a group, even physicians who do meet those exemption requirements may be required to participate. If the medical practice reports as a group all of the providers within the group’s Tax Identification Number (TIN), all providers will be included, even if an individual provider falls below the minimum thresholds above. Additionally, if providers participate in more than one TIN, they will need to verify their reporting status with each practice.

The number of clinicians who will participate in MACRA overall, however, will be higher than the estimated 419,000 participating in MIPS. The others will participate via alternative payment models (APMs). CMS expects that more physician practices will participate under MIPS as opposed to APMs, as MIPS allows the greatest financial reward, but also requires the doctors to take on more risks.

The number of MIPS participants differed from estimates made in the MACRA final rule released last fall, based on an updated eligibility formula. Under MIPS, physicians will receive Medicare payments based on quality measures and their use of electronic health records.

The letter provides instructions on what steps MIPS participants need to take, as well as reinforces deadlines to help physicians avoid a four percent negative payment adjustment for not participating. The letter also comes with an attachment with additional participation information and a list of frequently asked questions.

Physicians still unsure if they must participate in MIPS can visit, click on the MIPS Participation Look-up Tool and use their National Provider Identifier (NPI) to check their status. The look-up tool can also be helpful to practice administrators or clinicians who did not personally view the letter mailed because it was received by administrative leaders or a corporate office.


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