In April 2015, physicians finally got something they always wanted—the permanent repeal of the sustainable growth rate (SGR) formula used to determine Medicare payments.
The price?
Physicians would have to abide by unknown quality metrics under the Medicare Access and CHIP Reauthorization Act (MACRA) to be developed by the Secretary of Health and Human Services and Centers for Medicare and Medicaid Services (CMS).
On October 14, 2016, after a “listening tour” and almost 4, 000 public comments, CMS released the 2, 107-page final rule for the MACRA’s Quality Payment Program. To be fair, most of the pages constitute public comments.
You can link to it at the end of this article.
MACRA repealed the SGR methodology for updates to the physician fee schedule (PFS) and replaced it with quality payment programs called Advanced Alternative Payment Models (APMs) and the Merit-based Incentive Payment System (MIPS).
The new payment programs will apply to physicians, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists—who bill Medicare more than $30, 000 a year or provide care for at least 100 Medicare patients.
About 600, 000 clinicians are expected to be affected by the law. Dr. Patrick Conway, deputy administrator for innovation & quality, CMS CMO, said on a call for reporters at the release of the rule that 380, 000 clinicians could be exempt from the MIPS program. He added that CMS expects about 25% of physicians will be affected by the new advanced APMs by 2018. But for the first year the number will be more modest, around 100, 000.
The new merit pay program (MIPS) will put physicians into a kind of a bonus/penalty system—a “Pay-for-Value Lite.” The bonuses (and some penalties) will be layered on top of a system that still pays physicians a set amount for each medical service.
But the real action is in APMs, which offer an immediate 5% bonus on top of all the other Medicare payments to physicians as an incentive to sign up to the program.
The first performance data gathering by physicians starts January 1, 2017 with data due to CMS by March 31, 2018 for payments beginning in January 1, 2019. The payments under MIPS will be adjusted up or down by to 4%. By 2022 payment adjustments can reach up to 9%.
Small clinicians are exempt in 2017. This impacts 32% of clinicians, but only represent 5% of total Medicare spending. The small guys can band together in “virtual groups” and report.
CMS is planning to spend $20 million each year for five years to train and educate Medicare clinicians in small practices of 15 clinicians or less and providers working in underserved areas.
Merit Pay (MIPS)
MIPS represents the end of the old physician payment program but also consolidates parts of three existing physician payment programs:
- The Physician Quality Reporting System (PQRS),
- The Physician Value-based Payment Modifier (VM), and
- The Medicare Electronic Health Record (EHR) Incentive Program for Eligible Professionals (EPs), and will continue the focus on quality, cost, and use of certified EHR technology (CEHRT) in a cohesive program that avoids redundancies.
The designers of MIPS understood that there will be a transition period from the traditional, fee-for-service Medicare to the new merit pay, outcome based system.
So, physicians can pick how quickly or slowly they want to participate.
- No participation and an automatic 4% negative payment adjustment.
- Submission of a minimum amount of data ( i.e., one quality measure) and a neutral payment adjustment.
- Submission of 90 days of data for a potential small positive payment adjustment or a neutral adjustment.
- Submission of a full year of data for the potential to earn a moderate positive payment adjustment.
Physicians will earn payment adjustments based on performance in four categories linked to quality and value that will be similar to the previous quality programs.
Advanced Payment (APM)
Under APM, providers can earn a 5% bonus over standard reimbursement each year from 2019 to 2024. The model is designed for providers who are participating in specific value-based care models.
Applications to participate in qualifying advanced Alternative Payment Models (APMs) are due April 2017.
The final rule identifies the following as advanced APMs for 2017:
- Comprehensive ESRD Care Model (LDO and non-LDO two-sided risk arrangements)
- Comprehensive Primary Care Plus Model
- Medicare Shared Savings Program Tracks 2 and 3
- Next Generation ACO Model
To qualify for the APM, physicians must meet three requirements:
- Use certified EHR technology
- Base payments on quality measures comparable to MIPS
- Bear more than “nominal” risk.
Risk and Rewards
APS are typically bundled payments that require a group of physicians to join up and take a lump sum of money to care for a certain group of patients. If they can provide the care for less—and hit the quality metrics—they get to keep some of the leftover cash. Surgeons will have a financial incentive to spend less than their lump sum amount, but still spend enough to avoid costly revisions or hospital readmissions.
In short, physicians are assuming more risk for a chance to make more money. While the quality measure metrics will be determined by someone else, physicians will have more control over what they can offer patients on a case-by-case basis.
CMS intends to broaden APM opportunities for providers, including small practices and specialists. For example, a major opportunity being considered for 2018 will be the new Accountable Care Organization Track 1+ model. The agency is also reviewing reopening some existing Advanced APMs for application.
Industry Impact
So, what does this all mean for medical device makers, health systems and surgeons?
First, we’ll probably see more consolidation of practices, integrated health care systems and hospitals.
For device companies, it probably means continued pricing pressure for their products. It may also encourage device companies to provide software and other practice management services to help physicians cope with and, hopefully, thrive under the new payment programs.
In a recent online pulse survey by the Deloitte Center for Health Solutions, many of the U.S. health care executives surveyed who lead value-based care efforts predict MACRA will drive further consolidation among physicians. Many feel that it is due to physicians needing access to greater resources to bear increased financial risk, comply with reporting requirements, and invest in needed capabilities.
Game Changer
Deloitte Consulting LLP Principal Mary Cummins says the new payment system is not a “simple” replacement to the sustainable growth rate, but a game-changing development that will likely dramatically alter the delivery and financing of care.
“It is designed to accelerate adoption of value-based care practices far beyond Medicare and will impact all sectors of the industry—from providers and health plans to medical technology and pharmaceutical manufacturers.“
CMS has been moving from a volume- to a value-based payments system for the last couple years with the expansion of new payment models beyond the Medicare Shared Savings Program or Next Generation Accountable Care Organizations (ACOs) to include more bundled payment programs for procedures involving orthopedics and cardiovascular care.
“This new value-based care reality is highly disruptive to the medtech industry, ” says Cummins.
Risk of Commoditization
Cummins says successful medtech innovators should consider looking beyond unmet clinical needs to also address quality improvement and cost reduction in the holistic delivery of care—or risk being commoditized.
Many are developing services or solutions ‘beyond the product’ to drive better outcomes for patients, while improving the efficiency of care delivery for providers.
Device Makers Offering Solutions
Large device makers like Medtronic plc, Stryker Corporation and Zimmer Biomet Holdings, Inc. have been developing programs to go along with their devices to help their hospital customers navigate this new reimbursement algorithm.
For instance, during a conference call with analysts on October 31, 2016, Zimmer Biomet’s CEO Dave Dvorak noted the company had acquired new clinical solutions “that extend our reach across the continuum of care, spanning from state-of-the-art 3D range of motion simulation software, to an innovative tele-rehabilitation platform. These portfolio additions are designed to support healthcare providers in personalizing musculoskeletal treatment.”
He added, “Importantly, these assets further strengthen our Zimmer Biomet signature solutions offering, which is designed to assist hospitals and medical practices to seamlessly transition to value-based healthcare models.”
“With our end-to-end clinical services, proprietary technologies, and analytical tools, we’re enabling healthcare providers to maximize productivity and patient engagement across the entire episode of care.”
He said value-based solutions for device customers is coming at an opportune time as an increasing number of healthcare providers are striving to comply with bundled payment models, by placing a greater emphasis on the quality and cost effectiveness of knee and hip replacement service lines.
Seeking to Differentiate
What really struck Cummins, was that CMS has projected that most clinicians will begin in the MIPS rather than the APM track. She notes that under MIPS, each provider will receive a composite score between 0-100 based on performance in the following categories:
- Quality 30%
- Resource Use/Cost 30%
- Meaningful Use 25%
- Clinical Practice Improvement Activities 15%.
The big “Ah Ha” moment for her was resource use in clinicians’ composite performance score under MIPS. While resource use is weighted at zero for the “transition year” of 2017, CMS will review claims in 2017 and intends to calculate this measure and provide feedback to clinicians. And, it quickly grows to 30% of the MIPS composite score by the 2019 performance year.
“Critically, this may be where many providers seek to differentiate their MIPS composite score—and receive payment increases—since other score components may result in limited differentiation across clinicians. Put simply, utilization of health care services, particularly those that are higher cost, will become increasingly important for all industry stakeholders under MACRA, ” said Cummins.
Disruptions
Cummins says the implications are significant for the medical device industry.
“Besides intense scrutiny on medical technologies, clinician referral patterns and choices of sites of care are likely to be disrupted. Successful medtech companies will have to navigate local markets evolving at various speeds with payers and providers making different choices on risk models, network choices, and strength of supporting capabilities.
Time is Ticking
There is a little, but not much time to figure it out.
CMS Acting Administrator Andy Slavitt told reporters, “We’re not looking to transform the Medicare program in 2017. We’re looking to make a long-term program successful.”
To read the entire rule, click here.
You’ve got until December 14, 2016 to comment as CMS promises to continue to refine the final rule.
