Thriving Under Medicare’s Newest Pay-for-Performance Program: Making Sense of the Merit-Based Incentive Payment System and the Alternative Payment Models: Part I

This article is the first of three parts.

In January 2015, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). This long-awaited law repealed the statutes defining the Sustainable Growth Rate (SGR) formula and eliminated the accumulated shortfall in the Medicare payment budget, which had grown to approximately $150 billion. MACRA also replaced the multiple pay-for-performance programs with a single reporting program known as the Quality Payment Program.(1)

This is the first installment in a series of three articles intended to guide medical practice managers through the maze of these innovative, complex regulations that will affect the amounts paid to healthcare providers by Medicare for at least the next three years (longer unless modified by Congress). The goal of this series is to provide information to help practices optimize their payment potential from Medicare in 2019 based on their actions toward compliance for some portion of 2017 and to prepare to expand these behaviors as required in future years. This first installment covers the basics of the program based on final rules issued by CMS in the Federal Register (Vol. 81, No. 214) published on November 4, 2016. The second installment will cover the choices available to medical practices in deciding how to meet the pay-for-performance requirements in what is an incredibly flexible and, therefore, complex set of rules. The third installment will discuss tactics for success to assist practice administrators and clinicians in reporting in such a way as to have greater chances of avoiding Medicare payment reductions and possibly earning payment bonuses from 2019 through 2021.

Background

Congress passed the laws containing the SGR formula in 1997. SGR was an abortive attempt to control the growth in healthcare costs. “If overall physician costs exceed target expenditures, this triggers an across-the-board reduction in payments.”(2) The target expenditures were projected based on anticipated growth in the national economy. Political pressures forced Congress to override the annual adjustments rather than make significant cuts in physician payments driven by stagnation of the economy in the face of a recession at the beginning of the new century. With no repeal of SGR included in these annual Congressional actions, the cuts necessary to align physician payments with the SGR formula grew to alarming levels year after year. These cuts were proposed in each annual Medicare Physician Fee Schedule, only to be eliminated by last-minute Congressional action. Finally, in 2015, when the required cut exceeded 21%, it was clear that the program was, in truth, not “sustainable.”

Over the past decade, Congress has enacted laws requiring CMS to test various “pay-for-performance” initiatives to begin shifting physician payments from volume-based to quality-based. These initiatives included the Physician Quality Reporting System, the Electronic Health Record Meaningful Use program, and the Value-Based Payment Modifier program. Each was designed to provide incentives for physicians and groups to engage in behavior, determined by Congress and various think tanks, that would improve the quality of care and, hopefully, reduce the costs of care. Congress’s piecemeal approach to these experiments in pay-for-performance placed a tremendous burden on providers, because the requirements among the various programs were not aligned to allow for efficiency in operation. In addition, the deadlines for compliance were not synchronized, so medical groups often were confused about whether their actions toward these programs were likely to result in incentive Medicare payments or punitive cuts.

As a result, by 2014, many small medical practices had resigned themselves to absorbing the penalties rather than incur large costs in software and labor to try and achieve incentives. In enacting MACRA, Congress hoped to clear the books of SGR debt and provide a consolidated quality reporting program with myriad options to allow all healthcare providers in the United States to achieve success and avoid drastic payment cuts that might continue to drive small providers out of the publicly funded system.

Alternative Payment Models for Some, Merit-Based Incentive Payment System for the Rest

The underlying framework in MACRA for this new reporting program is known as the Merit-Based Incentive Payment System (MIPS). For healthcare organizations that had formed combined, cooperative Accountable Care Organizations, MACRA also provided guidance as to how these large groups could assume risk in return for larger incentives while carrying out improvement activities similar to the MIPS requirements in frameworks known as Alternative Payment Models (APMs). To qualify under the rule, these APMs must meet three specific criteria:

(1) The payment arrangement must require participants to use certified electronic health record technology (CEHRT); (2) The payment arrangement must provide for payment for covered professional services based on quality measures comparable to those in the quality performance category under MIPS and; (3) The payment arrangement must require participants to either bear more than nominal financial risk if actual aggregate expenditures exceed expected aggregate expenditures; or be a Medical Home Model.(3)

However, CMS anticipates that only about 15% of providers will be capable of APM classifications in 2017. Unless excluded, as explained later in this article, all other eligible clinicians will be expected to report under the MIPS guidelines.

The material in this three-part article focuses on guiding medical groups that will not be eligible for APM participation to achieve success (as each clinician defines the term) within the MIPS pathway. The intent is to assist these smaller independent groups to make well-informed choices among what the final rule issued in October 2016 describes as:

. . . the four pillars of the MIPS payment structure identified in the MACRA legislation – quality, clinical practice improvement activities (referred to as “improvement activities”), meaningful use of CEHRT (referred to as “advancing care information”), and resource use (referred to as “cost”).(4)

The new rules are intended to provide flexibility to medical providers as to how they report on quality as well as the other three categories of improvements rather than the “one size fits all” rules of the past. MIPS-eligible clinicians will include physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and groups that include these providers who bill Medicare Part B services. Eligible clinicians who do not exceed the Medicare “low volume threshold” are exempt from MIPS reporting. The exemption thresholds for measurement year 2017 are as follows:

• Billed Medicare Part B–allowed charges that total no more than $30,000 in the measurement year, or

• Billing for Medicare Part B beneficiaries that number fewer than 100 in the measurement year.

Medical groups will have the choice to submit MIPS measures as individual clinicians or as a group based on Taxpayer Identification Number (TIN). However, the exemption thresholds apply to the reporting entity, so if certain members of a group would qualify for the MIPS exemption while others do not, it may be prudent to report separately.

Eligible clinicians who do not have sufficient face-to-face interactions with patients are described as “Non-Patient Facing MIPS Eligible Clinicians.” The definition of a non-patient facing clinician within the rule is:

. . . an individual MIPS eligible clinician that bills 100 or fewer patient-facing encounters (including Medicare telehealth services defined in section 1834(m) of the Act) during the non-patient facing determination period, and a group provided that more than 75% of the NPIs billing under the group’s TIN meet the definition of a non-patient facing individual MIPS eligible clinician during the non-patient facing determination period.(5)

Such clinicians are not excluded from MIPS but will have alternative criteria for scoring in some of the MIPS measurement categories. Determination of clinicians who qualify as non-patient facing for the first MIPS payment year of 2019 will be made by CMS based on Medicare claims data. The criteria specified in the final rule states that clinicians and groups “are considered non-patient facing MIPS eligible clinicians based on 12 months of data starting from September 1, 2015 to August 31, 2016,” with a second data analysis to pick up new providers that may qualify spanning September 1, 2016 to August 31, 2017.(5)

Eligible clinicians will be identified for Medicare payment adjustments based on a combination of their National Provider Identifier (NPI) and the TIN on the claims. This means that clinicians who work for more than one entity may incur a penalty in one job setting based on MIPS performance while receiving a bonus or no adjustment in their other job setting. A clinician who enrolls for Medicare for the first time during the performance period and has never billed Medicare in any capacity before will not be subject for that payment year. It is important to note that a special performance period for 2017 will be any continuous 90-day period within the calendar year. A newly enrolled clinician who joins the group in July 2017 may or may not be a MIPS-eligible clinician for measurement year 2017, depending on the selection of the 90-day performance period. In future years, when the performance period is the entire calendar year, a newly enrolled clinician will not be MIPS eligible for the entire year. CMS intends to publish quarterly reports identifying new enrollees based on Provider Enrollment, Chain and Ownership System (PECOS) enrollment data.

MIPS-eligible clinicians practicing in groups of two or more may elect to report on MIPS individually based on NPIs or as a group based on NPI/TIN. To report as a group, the group must meet the definition of the group for the entire performance period. For example, a two-clinician group that breaks up in the middle of a performance period is excluded from group reporting. Group reporting requires the group to be assessed on aggregate performance data across all four MIPS performance categories. Although MACRA specified the opportunity for eligible clinicians to form “virtual groups” for purposes of MIPS reporting, CMS has deferred that option until future rule-making due to challenges in such areas as creating virtual group identifiers and devising methods for aggregating data.

Keeping Score Under the Merit-Based Incentive Payment System

MACRA requires that each of the four performance categories be assigned weights for each payment year expressed in percentages of the overall MIPS score. Eligible clinicians or groups will receive positive or negative adjustments to their Medicare payments based on a comparison with national performance benchmarks in each category. The law granted CMS discretion in assigning weights to the quality and cost categories for the first two years of the MIPS programs to provide time to fine-tune the data gathering necessary to fairly determine and publicize the cost factor to be used. The weights assigned for measurement year 2017 that will determine payments for 2019 are shown in Table 1. Although the cost category is weighted at zero for payment year 2019, the eligible clinician or group still will be scored on costs in order to help clarify the attribution process for cases and the benchmarking methodology for costs in the future.

For the initial performance year of 2017, clinicians have several options to report data that will help determine their 2019 Medicare payment rates. The minimum reporting period for each performance category is any continuous 90 days in 2017. One can select different 90-day periods for each performance category. In the first year, there is a “safety net” option that allows a short and simple way to get started in MIPS. A clinician can elect in this transition performance year to report on only one of the three weighted performance categories and still avoid a negative payment adjustment in the 2019 payment year. The number of measures that must be reported varies depending on the category selected:

• Quality: one measure;

• Improvement Activities: one measure; and

• Advancing Care Information: five required measures.

Group reporting requires the group to be assessed on aggregate performance data across all four MIPS performance categories.

Using Certified Electronic Health Record Technology

One of the objectives of this new program is to “promote innovation so that technology can be interconnected easily and securely, and data can be accessed and directed where and when it is needed to support patient care.”(6) Rather than require reporting on specific measures to affirm that eligible clinicians are using CEHRT, “using certified EHR technology is included in MIPS as part of the advancing care information component of the overall performance score.”(7) To accomplish this, MIPS “puts a greater focus on Patient Electronic Access, Coordination of Care through Patient Engagement, and Health Information Exchange.”(6) CMS contends that these three objectives are “essential to leveraging CEHRT to improve care by engaging patients and furthering interoperability.”(6) The final rule awards bonus points for the advancing care information performance category if the clinician or group used CEHRT when carrying out the activity. CMS expects that in the transition year of 2017, electronic records software certified under the 2014 or 2015 criteria will qualify for bonus usage, but they anticipate that, as was the case under Meaningful Use, the software certification criteria will expand in future years.

Conclusion

Healthcare managers face a new set of challenges in guiding their practices toward successful compliance with the MACRA law. Despite the flexible deadlines in the first reporting year, it is still critical to gather as much information as possible in order to achieve optimum results while incurring minimum costs. Carefully following guidance on the CMS website, participating in educational forums, and using qualified consultants will be helpful supplements to your reading.

The next installment in this series will provide more detail about group reporting, the performance measures available, and what actions might result in a pay increase from Medicare.

References

1. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77008.

2. A primer on Medicare physician payment reform and the SGR. Brookings. https://www.brookings.edu/blog/health360/2015/02/02/a-primer-on-medicare-physician-payment-reform-and-the-sgr/ . Accessed October 31, 2016

3. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77463.

4. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77010.

5. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77048.

6. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77201.

7. Medicare Program; Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models. Fed Regist. 2016;81:77200.