On April 16, 2015, President Obama signed into law the “Medicare Access and CHIP Reauthorization Act of 2015” (MACRA). MACRA repeals the widely-criticized Medicare sustainable growth rate (SGR) formula that had been enacted in 1997 to determine payment levels under the Medicare physician fee schedule (PFS). MACRA provides payment updates for the short term and establishes a new method to update payments in the future. Beginning in 2019, a new incentive-based payment program will apply for certain professionals who are paid under the PFS. MACRA also extends several other healthcare payment policies that would have ended on March 31st, adjusts payments to certain providers to offset a portion of the cost of the legislation, and revises several Medicare policies. Surprisingly, most of the cost of the bill – in excess of $140 billion – is not offset in this legislation.

MACRA transitions Medicare payments to physicians and other health care professionals paid under the physician fee schedule to payments based on value and quality. The legislation provides professionals paid under the physician fee schedule with the following updates:

  • January 1, 2015 through June 30, 2015: 0.0 percent
  • July 1, 2015 through December 31, 2015: 0.5 percent
  • 2016 and each subsequent year through 2019: 0.5 percent
  • 2020 and each subsequent year through 2025: 0.0 percent.
  • 2026 and subsequent years: Professionals participating in alternative payment models (APMs) that satisfy certain criteria would receive an annual update of 0.75 percent, while other professionals would receive an annual update of 0.25 percent.

MACRA sunsets several existing incentive payment programs, i.e., the meaningful use incentive program for certified electronic health record (EHR) technology, the quality reporting incentive program (PQRI) and the value-based payment modifier. These programs will be replaced with the Merit-Based Incentive Payment System (MIPS), under which a MIPS eligible professional would receive a composite performance score that assesses performance across four categories: (1) quality, (2) resource use, (3) clinical practice improvement activities, and (4) meaningful use of certified EHR technology. Beginning in 2019, payments to MIPS eligible professionals, including physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and groups that includes such professionals, will be adjusted based on their composite scores. Beginning in 2021, the Secretary has the discretion to expand the applicability of MIPS to other eligible professionals and to groups that include such professionals. Eligible professionals participating in APMs that satisfy specified criteria as well as eligible professionals who treat small numbers of Medicare patients would be excluded from MIPS.

MACRA extends funding for the Children’s Health Insurance Program (CHIP) for two additional years. It also extends several Medicare and Medicaid programs that are set to expire. For example, MACRA extends the therapy caps exceptions process through December 31, 2017. It also replaces the current manual medical review process with a new targeted review process, thus freeing the Secretary from the burden of having to subject every claim in excess of $3,700 to manual medical review. The Secretary has the discretion to determine which factors to use to identify the services subject to medical review. However, MACRA specifies that the Secretary may use such factors as:

  1. The therapy provider has had a high claims denial percentage for therapy services under this part or is less compliant with applicable Medicare requirements.
  2. The therapy provider has a pattern of billing for therapy services under Medicare Part B that is aberrant compared to peers or otherwise has questionable billing practices for such services, such as billing medically unlikely units of services in a day.
  3. The therapy provider is newly enrolled under Medicare or has not previously furnished therapy services under Medicare Part B.
  4. The services are furnished to treat a type of medical condition (it appears that means that the Secretary could identify specific medical conditions that warrant increased scrutiny).
  5. The therapy provider is part of a group that includes another therapy provider identified for medical review by the Secretary.

The Secretary can choose to apply other factors in addition to or in substitution of the factors listed above. The bill does not further define how these criteria would be established.

MACRA includes several changes to the Medicare program that are intended to offset part of the cost of repealing the SGR. One of the provisions reduces payment updates for post-acute care providers. As a result, Medicare payment updates for FY 2018 for skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, and hospice providers will be 1 percent, after application of the productivity adjustment. Likewise, Medicare payment updates for CY 2018 for home health agencies will be 1 percent, after the application of the productivity adjustment.

In addition, MACRA includes several other provisions that modify the Medicare program. Examples of these policy changes are listed below:

  • Competitive Bidding Program: The legislation modifies the Medicare DMEPOS competitive bidding program by requiring entities submitting a bid (1) to meet state licensure requirements and (2) to obtain a surety bond of between $50,000 and $100,000 for each geographic area in which the entity submits the bid. A supplier whose bid is at or below the median composite bid rate and which does not accept a contract would forfeit its surety bond.
  • Medicare Face-to-Face Encounter Documentation Requirement: MACRA expands the categories of providers permitted to document that a face-to-face encounter with a patient occurred prior to an order being written for durable medical equipment (DME). As a result, physician assistants, nurse practitioners and clinical nurse specialists, in addition to physicians, will be permitted to document that they had face-to-face encounters with individuals as a condition of coverage for certain DME items.
  • Chronic Care Management: MACRA codifies existing initiatives by the Centers for Medicare & Medicaid Services with respect to chronic care management (CCM) services. Thus, beginning on January 1, 2015, Medicare is required to pay for CCM services furnished by a physician, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse midwife.
  • Quality Measures: The legislation provides funding for FY 2015 through FY 2017 for the National Quality Forum’s (NQF) review, endorsement and maintenance of quality and efficiency measures, as well as for the NQF and Secretary’s pre-rulemaking process, and measure dissemination and review activities.
  • Improper Payment and Outreach Education Programs: The Act requires each Medicare Administrative Contractor (MAC) to establish an improper payment and outreach education program. The information that would be provided by the MACs under these programs may include: (1) a list of the providers’ or suppliers’ most frequent and expensive payment errors over the last quarter; (2) instructions regarding how to correct or avoid these errors; (3) a notice of new topics that have been approved by the Secretary for audits conducted by recovery audit contractors (RACs); (4) specific instructions to prevent future issues related to the new audits; and (5) other information specified by the Secretary. The Secretary of the U.S. Department of Health and Human Services is required to provide each MAC with a list of improper payments identified by the RACs with respect to providers and suppliers in the MAC’s region. This information will include: (1) providers and suppliers that have the highest rate of improper payments; (2) providers and suppliers that have the greatest total dollar amounts of improper payments; (3) items and services furnished in the region that have the highest rates of improper payments; (4) items and services furnished in the region that are responsible for the greatest total dollar amount of improper payments; and (5) other information that would assist the contractor in carrying out the program.
  • Use of funds recovered by RACs: After the Secretary has retained a portion of the amounts recovered for the purposes of activities conducted under the recovery audit program, the Secretary is required to retain a portion of the amounts recovered by RACs for each year for the purposes of carrying out: (1) incentive payments for participation in eligible alternative payment models; (2) prior authorization for repetitive scheduled non-emergent ambulance transports; (3) additional functions by the MACs; (4) improving documentation of chiropractors’ services; and (5) implementing strategies (such as claims processing edits) to help reduce the error rate of payments. The amounts retained would be limited to 15 percent of the amounts recovered, and would remain available until expended. These funds may not be used for technological-related infrastructure, capital investments, or information systems except for uses that support claims processing (including edits) or system functionality for detecting fraud.
  • Contracts with Medicare Administrative Contractors: MACRA extends the timeframe under which the Secretary has to recompete the MACs’ contracts from at least every 5 years to at least every 10 years. It requires the Secretary, to the extent possible without compromising the process for entering into or renewing contracts with the MACs, to make available to the public the performance of each MAC with respect to such performance requirements and measurement standards.