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For physicians and healthcare providers trying to navigate the policies (and acronyms) that Medicare enforces, it can feel overwhelming. However, hidden beneath the policy pages, rulings, and regulations lies massively important takeaways that affect the way providers should conduct business. MACRA although especially complicated, is especially important as it fundamentally changes the ways that doctors and hospitals get paid by Medicare.

Read on as we break down what you need to know about MACRA, today.

What is MACRA?

MACRA stands for Medicare Access and Chip Reauthorization Act. The program is often referred to by CMS as the Quality Payment Program. MACRA is new legislation aimed at improving patient care, standardizing costs across regions, reducing billable care by doctors and better linking financial reward to care quality and provider performance.

MACRA (aka Medicare’s Quality Payment Program) introduces a new formula for how physician compensation will be determined. Under MACRA, there are two different tracks that physicians will fall under: Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APM). Beginning in 2019, physicians will be paid under a chosen stream and the new framework that applies. However, care providers are expected to start reporting under one of the two streams in 2017. This early reporting is said to determine what the threshold and benchmark targets for future care quality and costs will be.

MIPS and APM are both considered value-based payment models that are complex and each carry layers of nuances. In this article, we aim to simply explain how MACRA affects the way physicians will be paid; explore the difference between MIPS and APM; and help you and your practice navigate the unfamiliar terrain of MACRA with more confidence.

What is MIPS?

MIPS stands for Merit-Based Incentive Payment System. MIPS is made up of four different quality-performance measures that are used to determine physician payment adjustments. The payout physicians or physician groups receive from Medicare are tied to these four measures. An added layer to this payment system is that the performance of other physician groups in a determined area will be used to set the threshold in which your quality performance is measured against. If a physician falls short of this threshold, they will be paid less. If a physician meets or surpasses the set threshold, they will be paid more.

Three of the four performance categories that make-up MIPS were former quality reporting programs that you may recognize: the Physician Quality Reporting System (PQRS), the Value-based Payment Modifier (VBPM), and meaningful use (MU). The fourth and final measure added to the MIPS system is called “clinical practice improvement activities” (CPIA). The four categories roll into the composite performance score (CPS) used in MIPS. Essentially, MIPS is a conglomeration of smaller performance measure programs into a bigger, badder quality reporting programs.

The four different categories of MIPS (making up the composite performance score) are:

  1. Quality
  2. Resource Use
  3. Advancing Care Information
  4. Clinical Practice Improvement Activities

Each of the four categories are weighted differently. With each performance year the weights of the categories shift. For example, in 2019, Quality makes up 50% of the total CPS. In 2020, Quality makes up 45% of the score, while other categories take on more weight. A physician’s score is then compared against the CPS score of their collective peers (other MIPS eligible clinicians) to determine their payment adjustment amount (either + or – the determined, set annual percentage). Scoring is from 0 to 100 points.

Composite Performance Score

2017 Weight2018 Weight2019 Weight2020 Weight2021 Weight
Resource Use0%10%10%15%30%
Advancing Care Information25%25%25%25%25%
Clinical Practice Improvement Activities15%15%15%15%15%

The reporting that a care provider submits to CMS in 2017 will not directly affect their pay for that performance year. Pay adjustments will begin in 2019, but will use the data submitted in 2017 to determine the threshold and assign financial penalty or incentive.

Where Do Alternative Payment Models (APMs) Fit into All of This?

The second path affecting how physicians are paid under MACRA is Alternative Payment Models (APM). We asked health care policy expert, Billy Wynne, Managing Partner of TRP Health Policy, how APMs fit into the MACRA landscape. He responded, “APMs serve as an alternative path for physicians to follow under MACRA. Advanced APMs are payment models that require doctors [or hospitals] to take on risk for the cost and quality of the care they provide.” Like MIPS, Alternative Payment Models include a set of governing rules and regulations that providers must follow in order to receive top financial reward. Like MIPS, in APMs (which include Bundled Payments) clinician compensation and quality of care are directly linked and the providers adopts financial risk.

Under MACRA, majority of the physicians will ride down the MIPS stream (including orthopedic surgeons operating under CJR).

However, doctors that meet the requirements for APM (including minimum volume thresholds) can be exempt from MIPS participation. As Jeremy Brown of CF Health Advisors puts simply, “If you meet the threshold of revenue and patient population set by CMS, you get out of MIPS system”.

According to AAFP, in order to be exempt from MIPS, the APM must also meet the following eligibility requirements:

  • Use quality measures comparable to measures under MIPS
  • Use certified electronic health record (EHR) technology
  • Assume more than a “nominal financial risk” OR is a medical home expanded under the CMMI.

APMs come with their own set of challenges for physicians, but also come with some pluses. The reporting required by physician groups operating under APMs are lighter than that of MIPS. In addition, the payment structure is set up so that less emphasis is placed on “Keeping up with the Joneses”, or competing with the quality set by physician peers.MACRA offers a 5% annual lump sum payment to providers who participate in APMs (like CJR).

To receive the 5% incentive payment (starting in 2019) for Advanced APM participation, you must:

  • You receive 25% of your Medicare Part B payments through an Advanced APM


  • See 20% of your Medicare patients through an Advanced APM

What should doctors really understand about MACRA?

As experts like Billy Wynne, Jeremy Brown and Charlene Frizzera (former acting administrator of Medicare) continue to express, MACRA and its payment reform aren’t going anywhere. This means that it’s sink or swim for doctors who want to stay at the top of the game or even stay competitive. As Billy Wynne warns, “the MACRA regime is here to stay, so I encourage doctors to get educated about it and make modifications to their practice to comply.”

In addition to understanding that performance adjusted payments are here to stay, doctors should understand that staying passive won’t cut it. MIPS reporting (whether it’s for a short period before streaming into an APM) in required by most doctors in this country. As of 2017, reporting will take affect and performance benchmarks will be developed from which physicians will be paid. Building and refining reporting and performance management infrastructure is a must.

The Upside and Downside: MIPS vs. APM (CJR Bundle)

Both MACRA tracks require physicians to report more, be held accountable for beneficiary outcomes and episode of care costs, and really step up the efficiency and quality of the health care they deliver.

EligibilityProviders who meet volume minimums for patient numbers and profit (called eligible participants In 2017: MDs, PAs, NPs CNSs, CRNAs By 2020 most Medicare fee-for-service payments will be part of the MIPS track. Approx. 600,000 Part B clinicians will participate in 2017.Meet billable patient volumes for conditions, care episodes, or populations that can be defined as “Alternative Payment Models” A list of Medicare models considered to be APMs are found here
Payment StructureProviders must report on 4 different categories of measures to determine the composite performance score (0-100). Performance year threshold is determined by CMS and +/-% payment adjustments are made based on CPR score A competitive, budget neutral system with incentive bonuses delivered for highest scorers 0.5% annual baseline bonus for all participants5% annual lump sum bonus for qualified Advanced Alternative Payment Model participants Payment structure dependent on Medicare model but must have sufficient and measurable risk
DifferencesIn MIPS, doctors are in a competitive model in which their composite score is measures against the benchmark set by their peers Clinicians and clinician groups bare all risk, not the institution they work forIn APMs, participants are incentivized to join this model with a 5% bonus regardless of performance quality In Bundles (specifically CJR), the hospital bears the risk for poor performance, not the clinicians themselves

What Doctors Need to Know About MIPS

In MIPS, the composite performance score (which is made up of those four reported categories) is used by CMS to determine the threshold under which an individual physician or physician group will be measured against. It’s a very competitive model not just for performance and scoring comparisons, but because of the way the incentive and penalty structure is set up. In the model, the performance-based adjustments start at plus/minus 4% and grow each year. Physicians that fall under the threshold and underperform will be docked -4% of revenue starting in 2019. On the other end, physicians who exceed the threshold are positively rewarded an equal percentage point in an incentive payment. The payment structure is designed to be budget-neutral so that for every +4% bonus someone will be docked a -4% penalty. This payment structure is a perfect example of Newton’s third law: “for every reaction there is an equal and opposite reaction.”

To illustrate, a physician scoring at the threshold will be set at 0%. Providers who score in the bottom ¼ will be penalized 4% in the first year (this is the floor). Physicians who score in the top ¼ will be rewarded a 4% bonus, with the potential to be thrown into a generous bonus structure. If ½ of physicians earn a bonus, the other half of physicians will have to earn a penalty.

Jeremy Brown, sums it up simply, “under-performers are getting revenue decreased and may have a hard time staying in business. Over-performers are the beneficiaries of under-performers not being able to do well.” In other words, there will be winners and there will be losers. For physicians confident that they can outperform their peers, herein lies an opportunity to get performance bonuses. As Brown explains, some doctors with established practices and solid reporting systems in place see this as an opportunity: “They want to do MIPS because they think others will perform so poorly.”

This is what the MIPS penalty and incentive structure looks like:

YearMaximum -% Medicare Part B Payment AdjustmentMaximum +% Medicare Part B Payment Adjustment
2019-44 (*X +10%= 24%)
2020-55 ( *X +10%= 25%)
2021-77 ( *X +10%= 31%)
2022-99 (*X +10%= 37%)

To score the highest bonus offered by CMS, a doctor has to score in the top percentile, multiplied by X (the budget neutral factor which is capped at 3) and get the 10% exceptional performance bonus.

What Doctors Need to Know About APM

The bonus structure and payment model for APMs are less reliant on the performance of doctors or doctor groups against a determined threshold. In this sense, the competition element is very much removed. Another positive is that the required reporting is a lot lighter. This is attractive for practices and providers who are leaps behind in the burdensome reporting. However, Jeremy Brown warns against physicians or physician groups favoring APMs to avoid heavy-duty reporting. He explains, “If you can’t survive in regular MIPS reporting, jumping into the alternative payment model probably isn’t going to help you.”

How Does CJR Fit into the MACRA Picture?

As it currently stands, CJR is considered an APM, not an Advanced APM (AAPM). This means that clinicians working under CJR must abide by the MIPS stream for 2017 until further notice. To avoid MIPS and be able to stream through the APM model, CMS must determine that the primary care being delivered is in fact Advanced. In the future, it is expected that CJR will be considered an Advanced Alternative Payment Model, therefore exempting physicians from MIPS. This means less intense reporting, less competition with clinician peers, and removing the financial risk (and major incentive) from the doctor onto the hospital (the APM entity).

PMs are given 5% annual lump-sum bonuses by CMS as this stream is proving very successful for Medicare. Jeremy Brown adds, “APMs are incentivized by creating an easier adjustment period and giving providers a bigger carrot to get into these alternative payment models.”

Ultimately, regardless of the stream, you, as a care provider are headed down, the center of your success is rallying and moving quickly to adapt to the changes ahead. This means understanding MACRA, understanding where you fit in, and knowing enough about the new payment models to find the areas in which you can improve the way you’ve been doing business.

Gone are the days of simple fee-for-service payments and care quality that can slip through the cracks. The landscape is fundamentally changing. The more you prepare to weather the inevitable logistical storm ahead, the better you will fare.

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