The Journey from Volume to Value-Based Reimbursement Continues

Since the Affordable Care Act was enacted, many providers have been shifting away from traditional fee-for-service, volume-based reimbursement models to payment mechanisms that take a data-driven approach to managing patients across the care continuum and that reward providers for value in the care they deliver. 

Instead of providing care in the traditional siloed approach, providers now focus on coordinating patient care and building long-term patient relationships. The goal is to ensure not only loyalty to the provider network, but to empower patients to take charge of their health and manage their chronic conditions.

With the continued release of guidance and regulations from the Centers for Medicare and Medicaid Services (CMS), providers are finding that this shift away from volume-based reimbursement means they must now approach care delivery that relies on data from multiple sources, e.g., claims and electronic health records, and collaborating with payors and other providers to support and foster health care with a high-quality, cost-effective provider network. CMS recently provided two sets of rules that provide further guidance on CMS’ value-based reimbursement initiatives and their impact on providers.

CMS Rule #1

The first, a proposed rule, came out in April 2016 implementing key provisions of the new physician payment system required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA repealed the Medicare sustainable growth rate methodology for updates to the physician fee schedule and required CMS to establish new physician quality and value-based payment programs to start in calendar year 2019. Under MACRA, eligible clinicians will participate in one of two tracks: the Merit-based Incentive Payment System (MIPS) or advanced payment models (APMs). 

For providers who participate in advanced APMs, there will be incentives, such as exemption from MIPS reporting requirements and potential payment cuts, and higher base payment updates to begin in 2026.  On the other hand, APMs are restricted to certain programs that require clinicians to take an amount of risk for the cost and quality of patient services. CMS proposes two standards for financial risk; one generally applicable to entities participating in advanced APMs and another that applies to medical home models. The generally applicable financial risk standard CMS proposes would require that an APM entity incur some of the financial loss when actual expenditures exceed projected expenditures through withheld payments for services, reduced payment rates, or required repayment to CMS. For medical home models, CMS proposes potential withholding of payment for services, reduced payment rates, required repayment to CMS, or the loss of the right to all or part of an otherwise guaranteed payment if either actual expenditures for which the entity is responsible exceed expected expenditures, or the entity’s performance on specified performance measures does not meet or exceed expected performance.  

Currently, the only models that will qualify as advanced APMs are Medicare Shared Savings Program (MSSP) Tracks 2 and 3, the Next Generation Accountable Care Organization model, the Comprehensive End-Stage Renal Disease Care model, and the two-sided risk model in the Oncology Care program. The Comprehensive Primary Care Plus initiative, once launched, would qualify as a medical home. CMS indicated that additional programs may qualify in the future, including Medicare Advantage. 

The MIPS track, on the other hand, sunsets and consolidates the  physician quality reporting system (PQRS), Medicare electronic  health record  incentive programs for eligible professionals (also known as Meaningful Use), and the value-based payment modifier. The rule as proposed would apply the calendar year 2019 MIPS to certain providers, i.e., physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists.

CMS proposes to exempt several categories of clinicians from the MIPS, including qualifying APM participants, partially qualifying APM participants, clinicians in their first year of accepting Medicare patients, and clinicians who fall below a low-volume threshold during the performance period. Similar to the PQRS and value-based modifier programs, CMS proposes allowing eligible clinicians to participate in MIPS as individuals or as group practices. Notably, CMS proposes to use calendar year 2017 as the performance period for calendar year 2019 payment adjustments under MIPS for all measures and activities for each category under MIPS. CMS notes that providers will have multiple options for submitting data; including registries, attestation, and electronic health record reporting, but asks that providers choose only one submission mechanism for each MIPS performance category.

Beginning in 2019, eligible clinicians will be measured on four performance categories: quality measures, cost measures, clinical practice improvement activities, and meaningful use of electronic health records. Based on their MIPS performance, eligible clinicians will receive positive or negative payment adjustments of four percent in CY 2019, rising gradually to a maximum of nine percent in CY 2022 and beyond.

In addition to proposing the measures, activities, and data submission standards for each of the four MIPS categories, CMS proposes the weight it would assign each category in determining a Composite Performance Score (CPS). Rather than taking an all or nothing approach, the CPS would be used in determining payment adjustments. CMS’ proposes the following weight for each category for CY 2019:

  • Quality: 50 percent
  • Cost: 10 percent
  • Clinical practice improvement activities: 15 percent
  • Advancing care information: 25 percent

Meaningful use will fall under the advancing care information performance category and move away from an “all or nothing” scoring approach to a scoring methodology that recognizes multiple paths to success. Eligible clinicians and groups with a CPS above a designated “performance threshold” would receive positive adjustments, while those below would receive negative adjustments. Since the MIPS must remain budget neutral, CMS proposes applying a sliding scale to ensure that it does not pay out more in incentives than it recoups in penalties. CMS estimates that the MIPS will result in over $1.6 billion in incentives and penalties in CY 2019. CMS would also pay out up to $500 million in “exceptional performance bonuses” to high performers on the MIPS, which payment adjustment is above and beyond the budget-neutral adjustment.

CMS Rule #2

The second rule came out in June 2016 and made several changes to MSSP. This final rule revises the approach CMS uses to rebase an ACO’s benchmark for a second or subsequent agreement period beginning on or after January 1, 2017 by utilizing factors based on regional FFS expenditures, instead of national FFS expenditures, to trend benchmark expenditures, and annually updating the benchmark. The final rule also provides for an adjustment when establishing the ACO’s rebased historical benchmark to reflect a percentage of the difference between the regional FFS expenditures in the ACO’s regional service area and the ACO’s historical expenditures. 

Further, the final rule revises the methodology for national FFS calculations to use assignable Medicare FFS beneficiaries (a subset of the broader FFS population) instead of all FFS beneficiaries. Assignable Medicare FFS beneficiaries are identified based on the 12-month period corresponding to the calendar year for which the calculation is being made. The final rule also adds a participation election to encourage ACOs to transition to performance-based risk arrangements, by allowing Track 1 ACOs to renew participation in Tracks 2 or 3, but extend participation in the initial agreement period for a fourth year and defer benchmark rebasing. The final rule also limits reopening determinations of shared savings or losses to no more than four years after the date of the notification to the ACO of the initial determination of shared savings or shared losses for the performance year for good cause. 

Given the depth and breadth of changes and associated impact on revenue, providers should be planning how they intend to move forward. While it is expected that the vast majority of providers will initially participate in MIPS, providers will need to ensure that they have the long-term resources and capabilities to thrive in a value-based reimbursement world.  From data analytics capabilities to monitor performance under risk models through a combination of claims and electronic health records data, to utilizing the data to proactively identify opportunities and improve patient care, participation in high-quality networks will be essential. Navigating the guidance and strategically planning for a future where the patient is a consumer, and a savvy consumer at that, will help to ensure success - whether that means closer alignment to or employment by a hospital or health system, or expanding the existing provider network. The transition to value-based reimbursement requires careful planning and rethinking the manner in which care is delivered, with a focus on cost containment and reduction, patient loyalty, and high-quality care.