The MACRA Proposed Rule Explained

CMS released a proposed rule on April 27^th which specifically addresses the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive as components under the Quality Payment Program. The Medicare Access and CHIP Reauthorization Act of 2015 repealed the Medicare sustainable growth rate over a year ago, but to date, the recently released proposed rule provides the most concrete guidance on the likely trajectory of physician payment under Medicare Part B for the next decade. While receiving such information is important and exciting for market participants, frankly CMS did not leave much time for physicians and health systems to consider this information, update strategic plans and execute accordingly. That’s because the first performance period begins in less than seven months on January 1, 2017.

Under the proposed rule, physicians will be benchmarked against their peers and allocated a MIPS composite performance score which will affect the reimbursement the physician ultimately receives under Medicare. Employed physicians are commonly paid on work relative value units (“WRVUs), which means historically most physicians’ compensation was not been subjected to a comparative evaluation to peers – it was seemly based on production as defined by WRVUs. Obviously, that payment structure does not incentivize concern for patient costs or quality outcomes, but instead encourages the provision of more services. As CMS moves to deal with the coming influx of baby-boomers to the Medicare program, CMS absolutely must reduce the cost of care per beneficiary so that more beneficiaries can receive care without a corresponding explosion of aggregate beneficiary expenses.  

This proposed rule is yet another concrete action demonstrating the on-going evolution of what the practice of medicine means for physicians. MIPS introduces a framework that emphasizes the MIPS composite performance score and will focus physicians attention on undertaking various value-enhancing tasks that will help generate a higher performance score. Therefore, physicians who educate themselves on the new rules of the road will have the knowledge to act and hopefully strategically position themselves to improve their practice in a way that will bring additional revenue dollars based on superior performance compared to their peers. Physicians can no longer take a passive position and ignore the barrage of regulatory change due to the coming magnitude of the reimbursement changes. Sooner or later, all physicians will have to formulate a strategic plan that determines where resources will be invested in order to interact and compete in this new era of practicing medicine.

Early consensus holds that most physicians will participate under MIPS initially due to the very narrow group of approved APMs. The MIPS composite score is a 0 to 100 point system that is based on the following four categories:

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

CMS crafted the proposed rule with a focus on flexibility that will allow physicians to pick amongst a litany of approved options under each category. Many pundits have offered support for CMS’s approach as physicians will be able to choose the measures and activities that they believe have the most potential to help their patients, while the Medicare program’s overarching concern for cost and quality is being pursued. Physicians and administrators would be wise to become familiar with the options under each category immediately.

Physicians and health systems must quickly develop familiarity with the options and determine which of those options they believe they have the best chance to succeed in pursuing. Once the target options are chosen, targeted investment in the infrastructure and process reengineering will need to commence shortly thereafter. With less than seven months until the initial performance period begins, first movers may have the potential to differentiate themselves from their peers in a meaningful manner. Given that the MIPS composite performance score will likely tip physicians into the winner or loser column and leave very few physicians with neutral affects to revenue, the mandate to act, and act now is clear. The Quality Payment Program will likely be a difficult road to navigate with a few surprises along the way; having a trusted valuation expert along for the ride is always a solid decision.

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