Tuesday, 26 May 2015 21:42

The Permanent Doc Fix: Doubling Down on VBP

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p nathansonWhen the President signed the Medicare Access and CHIP Reauthorization Act (MACRA) last month, what captured the headlines was that Congress had finally dealt head-on with the sustainable growth rate (SGR) formula, which it had refused to enforce or repeal for 17 straight years. But there's another story within MACRA, one destined over the next decade to become bigger than the SGR repeal. Beginning in 2019, the new law will impose strong positive and negative incentives for physicians and other eligible healthcare professionals based on the value of the care they provide. How strong? Definitely strong enough to change behavior, and probably strong enough to stimulate more than a few retirements. As the American Medical Association's official analysis of MACRA optimistically puts it, the new law "presents the first real opportunity for physicians to earn substantial bonuses for providing high quality of care."

Briefly, in addition to repealing the SGR and setting specific fee updates for eligible professionals from now through 2026 and beyond, MACRA doubles down on value-based purchasing (VBP) by replacing the current physician pay-for-performance (P4P) programs with two new and more robust P4P tracks. The law also includes provisions for a cornucopia of studies, reports, mandates, and funding intended to improve the tools and techniques of physician accountability. Here is an overview of MACRA's key VBP-related provisions:

  • Track 1: A consolidated, expanded P4P program within the fee-for-service system. The Merit-Based Incentive Payment System (MIPS) incentivizes value-based performance by eligible professionals even if they stick with the traditional payment model. Starting fairly small in 2019, with maximum bonuses and penalties of 4 percent of revenue from Medicare services, MIPS ramps up in 2022 to a maximum penalty of 9 percent and bonuses that could run up to 27 percent.

    Each year MIPS participants will earn a "composite score" built on performance within four assessment categories: quality, resource use, meaningful use, and a new category called "clinical practice improvement activities" that includes expanded practice access, population management, care coordination, beneficiary engagement, safety, and other patient-focused initiatives. The design of these categories will rely heavily on measures and concepts from the current physician P4P programs at the beginning, and the law specifies initial weights of 30 percent for both quality and resource use, 25 percent for meaningful use, and 15 percent for clinical practice activities. But the new law gives the U.S. Department of Health and Human Services (HHS) funding and a mandate to continue to modify both the measures and the weighting of the categories based on experience and the emergence of new and better measures.

    MACRA's drafters clearly had listened to complaints about some current VPB scoring features. By Nov. 1 of each year, the HHS secretary will publish a list of quality measures in each category for the upcoming year, and MIPS participants will select measures from the list for inclusion in their composite score for that year. Topped-out measures will be removed from the list and new and better measures added. MIPS scores will reflect both attainment (how well did you do compared to others?) and improvement (how much better did you score during this performance period than during the last one?).

    Each year, the secretary of HHS also will set a prospective numerical performance threshold based on average scores from the previous year, and MIPS participants will know the threshold in advance. Bonuses and penalties will be given on a sliding scale based on distance from the threshold. The maximum penalties and bonuses described above will apply, except that there will be the usual VBP zero-sum game proviso that penalties and bonuses must balance out. However, there will also be a special, separate pool of up to $500 million per year from 2019 through 2024 for "exceptional performance" bonuses of up to 10 percent. That ensures that some participants will receive bonuses even in the unlikely event that everybody scores above last year's averages.
  • Track 2: Incentives to join "alternative payment models" (APMs). APMs are intended for physicians and other eligible professionals willing to embrace "more than nominal" risk. To qualify, APMs must come from the ranks of Medicare ACOs or other organizations approved under Medicare's various demonstration project authorities. They must report quality measures and use certified electronic health record (EHR) technology. The law strongly encourages individuals and stakeholder entities to develop new ideas for physician-focused APMs. The secretary of HHS must establish through rulemaking a process for the orderly submission, review, and evaluation of innovative APM concepts by no later than Nov. 1, 2016.

    MACRA incentivizes eligible professionals to participate in APMs in two ways. First, it allows APM participants to opt out of MIPS reporting and revenue adjustments; the only performance requirements that apply to APM participants are those of the APM itself. Second, for the years 2019-2024, MACRA rewards APM participants with an annual bonus of 5 percent of their total payments for Medicare services, regardless of how well the APM itself does financially.

    To earn these incentives, participants will need to meet APM revenue thresholds as follows:
    • For 2019 and 2020, 25 percent of the participant's total Medicare payments.
    • For 2021 and 2022, either 50 percent of total Medicare payments or a combination of Medicare payments and payments from other payors that meet quality measure, EHR technology, and other requirements.
    • For 2023 and later years, 75 percent of total Medicare payments or a combination of Medicare and other payor payments.

Of course, the more providers and the more risk an APM takes on, the more it looks and behaves like the original "alternative payment model:" a capitated HMO. Significantly, by July 1, 2016, HHS is required to submit to Congress a study on the feasibility of integrating APMs into Medicare Advantage.

  • Some other VBP-friendly provisions include the following:
    • Low/zero/low annual fee schedule updates. To replace the SGR formula, the law sets annual fee update increases as follows: .5 percent for July–December 2015, and then .5 percent per year through 2019. For 2020 through 2025, the annual update will be zero, but professionals can receive MIPS incentive payments. Beginning in 2026, the annual update will be .75 percent for services performed within an APM, and for services performed outside of an APM, .25 percent.

      This approach to fee schedule updates is indeed VBP-friendly. Figuring in inflation, ICD-10, ever-more-burdensome reporting requirements, and potential penalties under the Patient Protection and Affordable Care Act, over the next four and a half years the .5-percent increase will actually be a pay cut for many practices. Physicians will continue to lose ground to inflation over the following five years, when there will be no increase at all. This should stimulate physicians to move away from traditional fee-for-service models toward more efficient and effective practice arrangements like APMs – or at least toward value-focused, fee-for-service practice styles that will earn them MIPS bonuses. Finally, the ongoing annual fee increase for APM-generated physician services starting in 2026, though less than 1 percent, is three times as large as the rate for non-APM services.

    • Priorities and funding for measures development. To feed the measures-refreshment process set up in MIPS, MACRA sets aside up to $15 million per year from this fiscal year through 2019 for developing new and better physician performance measures. These funds could be awarded to individual physicians, physician groups, and the Physician Consortium for Performance Improvement, an American Medical Association (AMA)-backed measures-development initiative. The HHS must come up with a final, stakeholder-vetted plan for developing the new measures by May 1, 2016, and the first new list must be published by Nov. 1, 2016.

    • Technical assistance to small practices. The law sets aside $20 million each year from fiscal years 2016 through 2020 to help small practices (up to 15 professionals) participate in MIPS or transition to, or affiliate with, an APM. A question to ponder: what would ICD-10 implementation have been like if instead of simply mandating it, the federal government had set aside $20 million per year to help small practices implement the new coding system for the first few years?

    • Promoting interoperability. MACRA prohibits the blocking of information by meaningful use professionals and hospitals, effective April 16, 2016, and declares a national objective of achieving "widespread" EHR interoperability across the country by the end of 2018. If that goal isn't met, the secretary of HHS must report to Congress what the barriers are and recommend ways to overcome them.

    • Promoting transparency and beneficiary empowerment. Physician claims data will be published annually. Beginning in 2016, claims data will be integrated into physician profiles on the Physician Compare website.

To sum up: MACRA hardwires for physicians the recently established HHS goal of transitioning Medicare to value-based payments. The ship has sailed on this. Or more precisely, it is scheduled to leave the dock on Jan. 1, 2019.

About the Author:

Philip Nathanson is the president of Nathanson Consulting LLC. Phil has held quality leadership positions at CMS, Aetna, and NCQA. His consulting clients include hospital systems, HIM firms, and biotech companies. His articles on quality and healthcare management have appeared in Becker's Hospital Review, H&HN Online, Topics in Healthcare Financing, and other journals.

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Last modified on Tuesday, 26 May 2015 21:57

Philip Nathanson is the President of Nathanson Consulting LLC.  Phil has held quality leadership positions at CMS, Aetna, and NCQA. His consulting clients include hospital systems, HIM firms and biotech companies. His articles on quality and healthcare management have appeared in Becker’s Hospital Review, H&HN Online, Topics in Healthcare Financing and other journals.