Passed with bipartisan support in April 2015 and finalized in November 2016, the Medicare Access and CHIP Reauthorization Act (MACRA) repeals the sustainable growth rate formula that determined Medicare Part B reimbursement rates for physicians and replaces it with new ways of paying physicians for caring for Medicare beneficiaries.

MACRA also includes new funding for technical assistance to providers and for measure development and testing. In addition, it enables new programs and requirements for data sharing and establishes new federal advisory groups. This comprehensive legislation has the potential to significantly restructure US health care.

Reimbursement Structures
Under MACRA, participating providers will be paid based on the quality and effectiveness of the care they provide. A growing percentage of physician payment will be based on value—not on volume, like the current fee-for-service system. High-value care will be defined by measures of quality and efficiency, and providers will earn more or less depending on their performance against those measures.

“Medicare’s incentives are for providers to manage clinical and financial risk,” explains Kevin Shah, MD, medical director of Primary Care Innovation and Improvement at Duke. “For many providers, that is a dramatic shift in both their financial and operational model. Providers/systems will need to develop the analytics to measure quality and cost and then link the data to clinical programs.”

MACRA’s value-based payment programs will be based on 2 new reimbursement structures.

Merit-Based Incentive Payment System
The system combines parts of the Physician Quality Reporting System, the value-based payment modifier, and the Medicare electronic health record (EHR) incentive programs into one. Under the merit-based incentive payment system (MIPS), eligible professionals will be measured and paid based on several factors:

• Quality
• Resource use
• Clinical practice improvement
• Meaningful use of certified EHR technology

MIPS guidelines determine whether providers’ compensation for Medicare Part B reimbursements is adjusted up for superior performance or down for performance that falls short of the established mean. Based on the MIPS composite performance score, providers will receive positive, negative, or neutral adjustments to the base rate of their Medicare Part B Payment that will increase each year from 2019 (+4% to -4%) through 2022 (+9% to -9%), when adjustment levels will stabilize.

The MIPS composite performance score (0-100) is determined by performance measures established in the MACRA rules.

MIPS payment adjustments are required to be budget neutral. This means that higher reimbursement for those who score well will come from reduced payments to those with poorer performance, rather than from additional spending.

Providers who aren’t exempt and don’t submit any 2017 data will receive a negative 4% payment adjustment.

Alternative Payment Models
Alternative payment models (APMs) provide a new way for Medicare to compensate health care providers for the care they give to Medicare beneficiaries. APMs differ from MIPS because they include Medicare Shared Savings Program accountable care organizations (ACOs), all Centers for Medicare & Medicaid Services (CMS) Innovation Center initiatives except Health Care Innovation Awards, and specific demonstration programs. Most providers who participate in APMs will also be subject to MIPS but will receive favorable scoring—with correspondingly higher reimbursement rates. Providers participating in the most advanced APMs (ACOs, patient-centered medical homes, and bundled payment models) may be designated as qualifying APM participants, who are not subject to MIPS. They may be eligible for the following:

• Annual 5% lump-sum bonus payments from 2019 through 2024
• Higher annual premiums beginning in 2026 (for some participating providers)
• Increased flexibility through physician-focused payment models

Advanced APMs
The most advanced APMs will be deemed “eligible” APMs, which qualify for even higher levels of reimbursement tied to performance. These will be a subset of APMs and will not include all payment models. Eligible APMs will require use of certified EHR technology. Eligible APMs will only include payment models in which physicians bear “more than nominal” risk for financial losses or participate in patient-centered medical home models under the authority of the CMS Innovation Center.

Next Steps
Physicians will increasingly be paid based on the outcomes of their care, which will be accomplished by indicators—or measures—of good care that will be selected to evaluate performance. These measures, once selected, will be used to determine increasing percentages of Medicare payments.

“I agree with Medicare’s vision—we as a system have to provide higher-quality care, and we have to find ways to do so in a way that is more financially sustainable,” Shah remarks. “However, from CMS’s experience with ACOs like the Pioneer ACOs or Medicare Shared Savings Program, the implementation challenges cannot be understated.”

As the health care system transitions to new reimbursement models, prepare your practice by educating your staff, reevaluating your organizational structure, selecting your quality measures, identifying upcoming deadlines regarding MIPS and/or APM participation, and ensuring your EHR system is certified by the Office of the National Coordinator for Health Information Technology.