The Centers for Medicare & Medicaid Services (CMS) has proposed regulations to implement major reforms of the Medicare physician fee schedule (MPFS) update framework that were mandated by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). As discussed in our client alert, MACRA repealed the longstanding sustainable growth rate (SGR) methodology for updating the MPFS. Instead, MACRA established a period of stable MPFS annual updates, after which MPFS updates will be made pursuant to either a new Merit-based Incentive Payment System (MIPS) or based on participation in qualified Alternative Payment Models (APMs). CMS’s proposed rule to implement the MIPS and APM reforms, which together CMS calls the “Quality Payment Program,” is lengthy (the advance version is almost 1000 pages) and very complex. The following is an overview of the major provisions of the rule.

Merit-Based Incentive Payment System

MIPS will consolidate and replace the following Medicare physician quality and value programs: the Physician Quality Reporting System (PQRS), the Physician Value-based Payment Modifier (VM), and the Medicare Electronic Health Record (EHR) Incentive Program. MIPS will measure provider quality and value in the following four performance categories (with their first-year performance weights):

  • Quality (50%): Clinicians would choose to report six measures from more than 200 measures intended to accommodate differences among specialties and practices.
  • Advancing Care Information (25%): Clinicians would report measures reflecting how they use technology in their practice, with an emphasis on interoperability and information exchange (formerly EHR).
  • Clinical Practice Improvement Activities (CPIA) (15%): Clinicians would select from more than 90 clinical practice improvement activities (e.g., care coordination, beneficiary engagement, and patient safety activities). Clinicians also would receive credit for participating in APMs and in Patient-Centered Medical Homes.
  • Resource Use/Cost (10%): Clinicians would receive a score based on Medicare claims for more than 40 proposed episode-specific measures (e.g., Abdominal Aortic Aneurism, Knee Arthroplasty, Colonoscopy and Biopsy, Parkinson Disease episodes) that account for differences among specialties.

Providers would be able to choose particular measures and activities that are appropriate for their practices. Measures would be updated annually.

MIPS will impact MPFS payments beginning in 2019, at which time the PQRS, VM and EHR programs sunset. Translation of quality performance into a payment adjustment is complex. CMS proposes to use 2017 as the first performance year for the MIPS. In short, eligible professionals would receive a composite performance score of 0-100 based on their performance in the four performance categories (as applicable). Their scores would be compared with a performance threshold (based on charges, previously-submitted quality/value data, and other sources). The performance threshold would be set at a level where approximately half of the eligible clinicians would be below the performance threshold and half would be above the performance threshold.

Based on the composite score’s comparison to the threshold and other adjustments (e.g., for small practices), clinicians will receive a positive, negative, or neutral adjustment to their Medicare payments. The negative adjustments are set by statute each year, with positive adjustments scaled up or down to achieve budget neutrality. The maximum negative adjustments are: 4% in 2019, 5% in 2020, 7% in 2021, and 9% in 2022 and subsequent years. The maximum positive adjustment for a year is capped at three times the annual limit on negative payment adjustments. Furthermore, MACRA authorizes a $500 million additional performance bonus for “exceptional performance” (capped at an additional 10%) during the first five years of the program.

Advanced Alternative Payment Models

MACRA authorizes a separate payment track for providers who participate in APMs (such as accountable care organizations) that coordinate care, improve quality, and reduce costs. Qualified APM participants will be exempt from MIPS payment adjustments and will instead qualify for bonuses in 2019 through 2024 equal to 5% of their prior year’s payments for Part B covered professional services. Beginning in 2026, qualified APM participants also will receive a higher MPFS update than non-participants (0.75% vs. 0.25%).

Under MACRA, qualified APMs – which CMS calls “Advanced APMs” – must: (1) use certified EHR technology, (2) use quality measures comparable to the MIPS measures, and (3) either bear more than nominal financial risk if actual expenditures exceed expected expenditures or be a Medical Home Model expanded under section 1115A of the Social Security Act (CMS’s Innovation Center authority). CMS proposes detailed rules to determine if a provider or entity with a group of eligible clinicians meets these criteria. Broadly, the proposed standards include the following:

  • Certified EHR Technology (CEHRT) – At least 50% of the eligible clinicians in each APM entity must use CEHRT to document and communicate clinical care in the first year, rising to 75% thereafter. CMS proposes an alternative criterion for determining whether a Shared Savings Program ACO meets the CEHRT requirement.
  • Quality: The entity must meet quality measures comparable to those used in the MIPS quality performance category. Payment must be based on quality measures that are evidence-based, reliable, and valid, and at least one such measure must be an outcome measure (if an appropriate measure is available on the MIPS measure list).
  • Financial Risk: To meet the “nominal” risk standard, the total risk (or maximum amount of losses possible under the Advanced APM) must be at least 4% of the APM spending target; the marginal risk rate (percent of spending above the benchmark/target price) for which the Advanced APM Entity is responsible must be at least 30%; and the minimum loss rate (the amount by which spending can exceed the APM benchmark before the Advanced APM Entity has responsibility for losses) may be no more than 4%.
  • Medical Homes. While CMS points out that medical home models have not yet been expanded under Section 1115A, CMS proposes criteria for this pathway.

CMS proposes to establish a process by which it will identify and notify the public of the APMs (including specific APM tracks or options) that would be considered Advanced APMs for a performance period. CMS lists the current Innovation Center models that it believes meet its proposed Advanced APM standard: Comprehensive ESRD Care Model (Large Dialysis Organization arrangement); Comprehensive Primary Care Plus (CPC+); Medicare Shared Savings Program—Track 2; Medicare Shared Savings Program—Track 3; Next Generation ACO Model; Oncology Care Model Two-Sided Risk Arrangement (available in 2018). CMS proposes that a number of current innovation models would not meet the criteria for an Advanced APM, including the Bundled Payment for Care Improvement Model and the Comprehensive Care for Joint Replacement (CJR) model. CMS specifically seeks comments on how it could redesign CJR to make it an Advanced APM.

There are other eligibility requirements that a clinician must meet to meet to demonstrate they are significantly participating in an Advanced APM and thus qualify for incentive payments. CMS proposes two tests – a payment amount threshold (25% in 2019) and a patient count threshold (20% in 2019) – to determine whether Advanced APM participants is a Qualifying APM Participant (QP). CMS would make a QP determination at a group level (with exceptions), so the QP determination for the group would apply to all the individual eligible clinicians in the Advanced APM. While CMS would only consider Medicare payments and patients in 2019 and 2020, in subsequent years the participation requirement may include non-Medicare payments and populations. CMS also proposes criteria for “Other Payer Advanced APMs,” which generally track the Medicare requirements. Advanced APMs participants that do not meet the requirements for the incentive payments may be considered a “Partial Qualifying APM Participant” (Partial QP) if they meet certain proposed thresholds (e.g., 20% payments or 10% payments through advanced APMs in 2019 and 2020). Such Partial QPs may opt out of the MIPS framework or they may participate in MIPS and get credit under the Clinical Practice Improvement Activities category. Nevertheless, CMS proposes that all clinicians report through MIPS in the first year.

The proposed rule is scheduled to be published on May 9, 2016, and comments will be accepted until June 27, 2016.