MACRA – The Essentials of the New Legislation

05 Jun 2017

The Medicare Access & CHIP Reauthorization Act (MACRA) was introduced in 2015 to replace the Standard Growth Rate in the Medicare Part B Reimbursement Rates.

The precedent for the MACRA program is to incentivize health care providers to adopt the Advanced Payment Model. The standards proscribed by the law are intended to increase the quality of care given to Medicare patients, and to digitalize medical records.

The MACRA program is estimated to cost $210 billon, yet, only a third of the funding has been acquired. Despite the addition to the federal deficit, the bill went into effect January 1, 2017. Health care providers will have until October 2, 2017 to adopt its provisions.

The new legislation provides for two models for payment:

1) Merit-Based Incentive Payment Program (MIPS)

The majority of providers, 96%, will qualify for the MIPS payment model. This model most closely resembles the traditional fee-based model; however, now it has a qualitative component. There are four weighted dimensions that are utilized to assess the inherent value of the service provided:

  • Quality (60%)
  • Cost (0%)
  • Improvement Activities (15%)
  • Advancing Care Information (25%)
The weighting of each category will be subject to nominal adjustments as the program advances. After your score is calculated, your score will be used to ascertain what your Medicare payment rate will be. In the year 2017, your score could place you at a 4% increase, or 4% decrease in Medicare payments. The boundaries of the aforementioned dimensions will be exposed to increases annually. In 2021 a rate of ± 9% is anticipated. The Centers of Medicare & Medicaid Services (CMS) have sanctioned a pool of $500 million to pay the top performers of the MIPS program additional bonuses of up to 14.5%.

2) Advanced Payment Model (APM)

In the APM model, the provider is not subject to the stipulations of the MIPS model. Although, CMS estimates that no more than 4% of physicians would qualify for the APM track by 2023, congress has mandated that 75% of all Medicare revenue must come from APMs.

The APM structure is projected to yield a guaranteed 5% increase in payment growth annually; however this model of payment shoulders a significant amount of risk.

In order to qualify for the APM model you must be receiving Medicare payments from an Affordable Care Organization (ACO). Although the provider has the freedom to select an ACO, it is important to understand that if the provider fails to meet the metrics designated by the ACO, they will not be rewarded with their shared savings on top of their CMS updates.

Looking Forward:

The MACRA program is inherently unfavorable to small practices. Statistically, their likelihood of qualifying for the APM model is essentially zero. The APM model is targeted towards larger practices that are technologically advanced. Therefore, a small or individual practice is designated to the MIPS model. In interacting with the MIPS model the provider is exposed to a crippling competitive disadvantage, they are being scored against larger practices. It is a reasonable assumption that a larger practice will have access to superior resources, which subsequently produces greater quality. In essence, a smaller practice could score well according to MIPS, yet be grossly outperformed by larger practices, resulting in a decrease in the Medicare payment rate. The MIPS model is able to award high performers increased rates because it is reallocating those funds away from other providers based upon their assessed value.

Furthermore, considering the structure of the MIPS model it is apparent that the CMS is trying to drive providers towards the APM model. The MIPS system will undermine smaller practices with decreases in rates that will grow in detriment annually, until they inevitably cannot sustain themselves, or are absorbed by another company. As companies that perform better grow, they will eventually qualify for the APM payment model, and thus will be obligated to comply with those stipulations.

The MACRA program will succeed in centralizing the medical practice into ACOs at the expense of smaller providers. Through this centralization, the influence of the CMS on private practices will grow more prominent. The MACRA program has prejudices against small private practices, thus encouraging further consolidation within the healthcare marketplace.

This article was also featured in our newsletter Best Practices Vol. 13