The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) set in motion new provider payment rules that are scheduled to go into effect January 1, 2017. MACRA has obvious and significant implications for clinicians; but they are not the only ones who will be affected. MACRA will have a broad impact on the entire industry, including integrated health systems, insurers, and health information technology vendors. Here, Oliver Wyman’s Chief Medical Officer Dr. Bruce Hamory and Engagement Manager Rohit Singh provide an overview of the key implications for each of the stakeholder groups:
In April 2015, a bipartisan majority in Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA sets the stage for how provider payments will work in the future, linking payments to quality and cost efficiency. The Centers for Medicare & Medicaid Services (CMS) has stated that by 2018, it aims to have 50 percent of Medicare fee for service (FFS) payments made through alternative payment models (such as ACOs) and 90 percent tied to quality or value. MACRA will hasten this transition with the establishment of two new, value-oriented payment tracks for Medicare physicians: The Merit-Based Incentive Payment System (MIPS) track and the Advanced Alternative Payment Model (APM) track.
Most Medicare physicians will fall into the MIPS track (at least to start). MIPS will replace the Sustainable Growth Rate Formula for physician reimbursement and establishes annual updates to payments for the next 10 years, and beyond. Under MIPS, Medicare providers will see payment rates adjusted based on their performance on four new quality measures. To encourage the transition to alternative payment models, physicians who participate in enough qualifying APMs will be exempt from MIPS and will instead receive a lump-sum incentive payment.
The first performance-reporting period begins January 1, 2017 – that is, physicians’ 2019 Medicare compensation will be based on their 2017 performance. Andy Slavitt, CMS’ Acting Administrator, recently stated that the agency might delay the start of MACRA. However, even with a possible delay, the massive changes that MACRA will bring to payment models, practice habits, and system organization require stakeholders to take immediate action.
Here are key considerations for health systems, clinicians, payers, and health information companies as they begin their MACRA preparation.
Key Considerations: Health Systems
- The clock is ticking: CMS has clarified a tentative timeline for MACRA implementation with a mandate to begin new payments in 2019. While the program may have a slight delay, we still expect the first assessment period to start in 2017.
- Advancing Care Information (previously Meaningful Use) will account for 25 percent of the payment score. Large investments in refining EHR technology to make it easier to use and to transmit data to CMS will be required and will take time to implement.
- Physician performance will drive outpatient/clinic revenues (or losses) and will mandate careful review of each individuals’ performance in both hiring and retention decisions.
- Physician compensation and performance expectations will need to be tightly aligned with MIPS performance expectations, and the risk for success or failure included at a clinic/individual level.
Key Considerations: Clinicians
- MACRA clarifies a timeline and structure for reimbursement policy to continue to shift toward value, while also removing the uncertainty that has existed for many years (e.g., sustainable growth rate delays). The parallel tracks of MIPS and Advanced APM for 2019 and forward are outlined by the regulation. Clinicians need to start preparing for a 2017 start.
- Changes come with large financial risk to clinicians through the increasing downside and upside swings in payment. Because the physician payment changes are mandated to be budget neutral, there will be “winners” and “losers” – CMS estimates that approximately 54 percent of clinicians will receive a bonus, while 46 percent will be penalized.
- Increasing financial rewards for participation in Advanced APMs will likely drive consolidation of practices, or lead to the creation of new risk-bearing structures to ensure physicians have a diversified risk base and supporting infrastructure as they take on downside exposure. The ability to participate in these groups will increasingly be driven by individual’s performance against the key metrics, as each physician’s performance impacts overall group financials.
- MACRA adds additional complexity and puts increasing pressure on the longer-term viability of small practices and independent clinicians. Practices will need to track, monitor, and report on a number of metrics. Investments in technology will be required, with uncertain returns. CMS analysis suggests 87 percent of the nearly 103,000 solo practitioners will face penalties; and 70 percent of small groups (10 or few providers) will face penalties. CMS has promised to help smaller practices manage the transition, but the exact mechanism remains uncertain. This may cause smaller practices to wait before deciding to invest as they assess alternative options (e.g., joining larger systems).
Key Considerations: Payers
- Payers will want to ensure that all risk-based contracts (both current contracts and those in development) qualify as Advanced APMs by 2021 – providers aiming for the Advanced APM track won’t be considered qualifying participants if their contracts don’t meet Advanced APM criteria. Providers will be particularly sensitive to this as the Advanced APM criteria increases to 75 percent of claim dollars, or 50 percent of patient count.
- Aligning existing value-based incentives and metrics with MIPS metrics may simplify and improve the physician experience. In addition, aligning incentives and metrics will reinforce an overall focus on improvement on a core set of critical measures that can impact cost performance, STARS quality ratings, and other critical health plan priorities.
- There is a risk the increased focus on MIPS metrics will keep physicians from focusing on other measures that may be critical to younger commercial populations, but are not a focus for CMS. A growing body of evidence demonstrates that there are a limited number of measures physicians can reasonably focus on, and that variation in measurement and evaluation methodologies is a key hassle. To combat this risk, at the very least payers should continue to align quality and outcomes measurements with national standards, such as the Core Quality Measures recently released by AHIP and CMS.
- Payers should consider how their own quality and technology-use incentives align to MIPS standards. In particular, payers should evaluate whether the collective initiatives and programs will create sufficient financial incentive for providers to make more substantive steps toward the most challenging, but highly valuable, aspects of practice transformation.
Key Considerations: Health IT Companies
- The industry is shifting from pay for reporting to pay for performance. Buyers will look for systems that provide easy reporting capabilities, but also provide actionable insights that help physicians manage their performance.
- Short timeframe for provider implementation of conforming technology creates large sales (and implementation assistance) opportunity, including potential disruption in the traditionally “sticky” technology space for practices. These will likely be driven by larger practice groups; smaller groups are likely to wait on investing as they assess their likely future.
- Increased standards for data sharing and inter-operability will increase pressure on the industry as a whole, requiring significant investments in capabilities that may be challenging for some legacy players.
- New opportunities may emerge for third parties that are able to aggregate and report required data to CMS, thereby simplifying the additional administrative burden for smaller physician practices.