A Deeper Dive on MACRA - Fixing Reimbursement for Physicians

House VoteOn March 26, 2015, the U.S. House of Representatives overwhelmingly approved the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). This comprehensive Medicare legislation will, among other things, repeal the detested Sustainable Growth Rate (SGR) formula, a statutory mechanism creating perennial headaches for both physicians and Congress. The new statute prescribes physician payment updates and incentives to replace the outdated SGR formula and encourage physicians to achieve certain quality and resource utilization metrics as well as participate in alternative payment models (APMs).

While changes to physician payment provisions were the initial driver behind the bill, it also includes dozens of other provisions of great interest and import for many other healthcare providers and interest parties including hospitals, post-acute care providers, ambulance services, payors.  Those changes will be described in greater detail in subsequent posts on this topic.

MACRA is widely expected to be approved by the Senate when Congress reconvenes from its two-week recess, and signed by President Obama shortly thereafter.

The centerpiece of the legislation is the set of provisions that eliminate the SGR formula. The SGR is a legislative mechanism established in 1997 that was intended to slow the growth of Medicare expenditures on physician services automatically adjusting individual service payment amounts when aggregate payments exceeded a prescribed target.

The SGR first became a problem in 2002, when the formula mandated a 4.8% cut to Medicare payments. Congress allowed that cut to proceed, but that was the last time an SGR-related cut was allowed to proceed by Congress. In every year since, Congress has elected to act (17 times in all) to prevent excessive cuts to physician services.

The SGR problem quickly ballooned into an annual and increasingly painful congressional headache. Every prescribed cut that Congress overrode necessitated an even larger cut the following year, as the SGR formula operated to bring physician service expenditures back in line with prescribed targets.

At its peak, the SGR formula mandated cuts approaching 30%. Because of other brakes on physician spending, the amount of the SGR mandated cuts fell in recent years, but physicians are once again facing a 21% cut on April 1, 2015.

The SGR problem became stickier for Congress as the cost of repealing the formula escalated and at times was projected to cost as much as $300 billion. In 2013, a bipartisan group of Representatives and Senators sought to take advantage of events that caused the estimated cost of a solution to drop to as little as $120 billion. This group devised a widely heralded solution to the SGR problem that would replace the SGR with statutorily prescribed updates while accelerating the amount of physician payments tied to performance measures and incentives to participate in APMs. This approach was supported by the
medical community but was unable to advance because congressional leaders still found it too difficult to agree upon other Medicare program cuts sufficient to offset the projected cost of eliminating the SGR.

As the March 31, 2015, expiration of the most recent one-year patch approached, most observers expected Congress to rally around another short-term patch. Instead, House Speaker John Boehner and Democratic leader Nancy Pelosi began a series of negotiations that resulted in MACRA. The key to their success this time was a bipartisan agreement to only partially offset the cost of eliminating the SGR. The two House leaders began with the 2013 compromise legislation and made only a few changes to the general framework.

MACRA repeals the SGR formula and replaces it with the following statutorily prescribed updates:

  • Beginning July 1, 2015, and effective January 1 of each subsequent calendar year through 2019, Medicare physician payments will be updated 0.5%.
  • Beginning January 1, 2020, and carrying through 2025, physician payments will not be updated.
  • Beginning January 1, 2026, and effective January 1 of each subsequent calendar year, physician payments will be updated 0.75% for physicians who adequately participate in qualified APMs, but only 0.25% for those who do not.

The legislation also continues the march toward aligning physician payments with performance and incentivizing physicians to enroll in APMs. Beginning in 2019, physician payments will be substantially influenced by performance under a new Merit-based Incentive Payment System (MIPS). The MIPS consolidates the three existing incentive programs (i.e., the Physician Quality Reporting System, the Value-based Modifier program and the Electronic Health Record Meaningful Use program) with a coordinated program that seeks to avoid redundancies and inconsistencies between the existing programs.

Qualified physicians and other professionals will receive a composite performance score of 0–100 based on their performance in each of four performance categories: quality, resource utilization, meaningful use and clinical practice improvement activities. Each eligible professional’s composite score will be compared to a performance threshold determined using the performance scores of all eligible professionals. Those falling above the threshold will be eligible for a payment increase, while those falling below will receive a payment cut. Poor performers will see payments cut by as much as 4% beginning in 2019, but that number will rise to 9% by 2022.

Good performers will see a payment increase using a sliding scale based on how far above the threshold they score; the sliding scale tops out at 3x the applicable negative performance cap. The MIPS is intended to be budget neutral, so poor performers will be subsidizing good performers.  Professionals who treat few Medicare patients, as well as professionals who receive a significant portion of their revenues from eligible APMs will be excluded from the MIPS.

Also beginning in 2019, physicians will be incentivized to participate in an APM. Physicians who do so will receive a 5% bonus for the years 2019 through 2024 (beginning in 2025, physicians who participate in an APM receive a higher update than those who do not). Two tracks will be available for professionals to qualify for the bonus. The first option will be based on receiving a significant percent of Medicare revenue through an APM; the second will be based on receiving a significant percent of APM revenue combined from Medicare and other payors.

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