The march to transform Medicare from a quantity-based to a value-based system continues unabated - and the pace is quickening. Over the past several months, the Centers for Medicare & Medicaid Services (“CMS”) issued several final rules to update certain Medicare reimbursement rates and quality reporting requirements that impact vast numbers of healthcare providers.

For example, in late April CMS released its proposed rules on how to tie Medicare provider payments to quality patient care.

The proposed rules implemented provisions of the Medicare Access and CHIP Reauthorization Act (“MACRA”), passed in 2015. MACRA replaced the Medicare sustainable growth rate, known as the “doc fix.”

MACRA is intended to shift the traditional Medicare payment system from a fee-for-service model to one based on value. There are two different parts of the Quality Payment Program. The first is the Advanced Alternative Payment Models. In this path, the government will provide bonus payments to doctors who participate in advanced alternative payment models, including those “under which clinicians accept both risk and reward for providing coordinated, high-quality care.”

The law also creates a new payment system for providers who do not participate in advanced alternative payment models. This program is called the Merit-Based Incentive Payment System ("MIPS"). These providers will get bonuses or penalties based on performance. The new CMS rules define the measures that will be used to evaluate their performance.

These changes are part of a larger trend to identify new healthcare payment approaches intended to lead to slower spending growth and improvements in the quality of care. The U.S. Department of Health & Human Services ("HHS") has previously stated its goal to have 85 percent of traditional Medicare payments linked to quality or value by 2016, and 90 percent by 2018. HHS also intends to have 30 percent of Medicare payments tied specifically to alternative payment models by the end of 2016, and 50 percent of payments by the end of 2018.

CMS has done significant, additional rule-making recently in furtherance of these goals, including:

  • On July 29, 2016, CMS published a final rule that would update payment rates under the Medicare Skilled Nursing Facilities Prospective Payment System in fiscal year 2017. The final rule also adopted three quality measures, including Medicare Spending Per Beneficiary for Post-Acute Care, Discharge to Community, and Potentially Preventable 30-day Post-Discharge Readmission, starting in fiscal year 2018. Click here to review the CMS explanation of this new rule.
  • In another final rule issued on July 29, 2016, CMS stated that providers in the Inpatient Rehabilitation Facilities Prospective Payment System will receive an overall 1.9 percent, or $145 million, increase in payments in fiscal year 2017. CMS also added three measures to the Inpatient Rehabilitation Facilities Quality Reporting Program that will go into effect in fiscal year 2018. The measures are Medicare Spending Per Beneficiary for Post-Acute Care, Discharge to the Community, and Potentially Preventable 30-day Post-Discharge Readmission. Click here to review the CMS news release on this new rule.
  • On July 25, 2016, CMS released new rules related to bundled payment models for cardiac care and an extension of the existing bundled payment model for hip replacements to other hip surgeries; a new model to increase cardiac rehabilitation utilization; and a proposed pathway for physicians with significant participation in bundled payment models to qualify for payment incentives under the proposed Quality Payment Program. Click here to review the CMS fact sheet on this new rule.
  • On July 7, 2016, CMS proposed updated payment rates and policy changes in the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System. Click here to view the proposed rule.
  • CMS also recently announced that hospices in the Medicare Hospice Benefit Program will receive a 2.1 percent, or $350 million, boost in aggregate reimbursements for the fiscal year 2017. It also added two quality measures to the program that will evaluate hospice staff visits to patients and caregivers in the last three to seven days of life and determine the percentage of hospice patients who received care consistent with established guidelines. Click here to review the CMS Fact Sheet on this new rule.

The government hopes that its emphasis on quality of treatment will result in lower payments under Medicare. The goal is that healthcare providers who see pay cuts and penalties under the new system will work to improve the level of care they provide, and their improvements in patient health will eventually allow them to receive incentive payments.

Medicare’s new quality over quantity focus is not without controversy. The Washington Post reported that researchers from Harvard University found that many hospitals that are experiencing high readmission rates - an important issue that CMS is seeking to address through its focus on quality - are being penalized to a large extent based on the patients they serve. In other words, readmissions may have less to do with quality of care than with variables such as patients’ “education, income and ability to bathe, dress and feed themselves.” The researchers assert that these variables explain nearly half of the difference in readmission rates between the best- and worst-performing hospitals.

The larger point is that there are bound to be other unanticipated issues that arise in a program so complex, particularly when rule-making is being done at such a rapid pace.