Editor's Note: On October 7, 2016, the Centers for Medicare and Medicaid Services (CMS) issued a final rule implementing the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Model (Advanced APM), as required under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Based on comments from more than 4,000 stakeholders, the final rule was published in the Federal Register on November 4, 2016, with final comments due no later than 5:00 p.m. on December 19. Below are some key takeaways. Manatt also has prepared a detailed summary, available as part of our subscription-based regulatory summary series. To learn more about subscribing to the series or to discuss any questions your organization has around MIPS and Advanced APMs, please contact Edith Coakley Stowe at estowe@manatt.com, Brenda Pawlak at bpawlak@manatt.com or Annemarie Wouters at awouters@manatt.com.

The authors would like to thank Jonah Frohlich, Edith Coakley Stowe and Jennifer Eder for their contributions to the final MACRA rule summary.



MACRA was signed into law on April 16, 2015, permanently repealing the flawed Sustained Growth Rate (SGR) formula, which linked Medicare annual payment updates for physicians and other professionals to prior-year spending and gross domestic product (GDP) growth. MACRA replaced the SGR formula with a stable Medicare payment system that rewards physicians for providing high-quality, high-value healthcare. In place of the SGR formula, MACRA Section 101 implements positive rate increases for 4.5 years and a long-term Medicare value-based payment approach.

Under MACRA, healthcare professionals reimbursed through the Medicare Physician Fee Schedule (MPFS) will be guaranteed a 0.5 percent update from July 2015 through 2019. From January 2020 through 2025, the law includes a zero percent update—i.e., the rates will remain at the 2019 level, but eligible clinicians (ECs) will be subject to adjustment through one of two mechanisms, depending on whether the clinician chooses to participate in an APM or the MIPS.

APMs are payment approaches developed in partnership with the clinician community that provide added incentives for delivering high-quality, cost-efficient care. MIPS is a new program for certain Medicare-enrolled practitioners that consolidates components of three existing 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. The MIPS will continue the focus on quality, cost and certified EHR technology in a cohesive program that avoids redundancies.

Key Takeaways

The final rule significantly reduces the complexity of the MIPS that was included in the proposed rule by softening measure-reporting requirements, adding flexibility to performance scoring and reducing performance thresholds. CMS wants to give healthcare professionals more time to prepare for pay-for-performance. Anticipating that most ECs will fall into the MIPS in the first year of implementation, CMS makes only modest changes to pay-for-performance through Advanced APMs. In addition, the rule maintains for now the proposed list of Advanced APM models. (The agency will provide a final list of Advanced APMs by January 2017.)

Key takeaways from the final rule include:

  • CMS is establishing 2017 as a transitional year, meaning that some policies are transitional and open for comment. Additionally, for 2017, the MIPS performance threshold for receiving a positive payment adjustment will be lower.
  • ECs will have three flexible options to submit data to MIPS and a fourth option to join Advanced APMs, each of which would ensure they do not receive a negative adjustment in 2019.

    1. Option 1—maximize opportunity to qualify for a positive MIPS adjustment: Report under MIPS for a full 90-day period (ideally one year).
    2. Option 2—avoid a negative MIPS adjustment and possibly receive a positive adjustment: Report under MIPS for a full 90-day period at a minimum, and report more than one quality measure, more than one improvement activity, or more than the required measures in the advancing care information (ACI) performance category.
    3. Option 3—avoid a negative MIPS adjustment: Report one quality measure, one clinical improvement activity, or the required measures of the ACI.
    4. Option 4—5 percent bonus: Participate in Advanced APM.
  • The cost performance threshold will have a zero weight for the transition year (CY 2017). Starting in performance year CY 2018, the weight for the cost category will increase from 0 to 30 percent by 2021.
  • CMS will collect information on cost measures through claims data and report the following information back to ECs for the CY 2017 performance period:

    1. Medicare spending per beneficiary
    2. Total per capita costs for all attributed beneficiaries
    3. Ten episode-based measures (mastectomy; aortic/mitral valve surgery; coronary artery bypass surgery; hip/femur fracture or dislocation treatment [inpatient-based]; cholecystectomy and common duct exploration; colonoscopy and biopsy; transurethral resection of the prostate for benign prostatic hyperplasia; lens and cataract procedures; hip replacement or repair; and knee arthroplasty)
  • CMS will continue to "investigate ways to account for the costs of drugs under Medicare Part D in the cost measures in the future, as feasible and applicable." CMS recognizes that Part D costs are a growing component of the overall costs for Medicare beneficiaries; however, not all patients covered by Medicare Parts A and B are covered under a Medicare Part D plan. "In addition, Medicare Part D is provided through private plans which independently negotiate payment rates for certain drugs or drugs within a particular class."
  • In 2017, ECs may earn a 5 percent incentive payment through sufficient participation in the following Advanced APMs: Comprehensive End Stage Renal Disease (ESRD) Model (Large Dialysis Organization (LDO)), Comprehensive ESRD Care Model (non-LDO arrangement), Comprehensive Primary Care Plus (CPC+) Model, Medicare Shared Savings Program (Tracks 2 or 3), Next Generation ACO Model, and the Oncology Care Model (two-sided risk arrangement).
  • CMS also finalizes requirements to qualify as an "Other Payer Advanced APM" which is a payment arrangement with a payer (e.g., a Medicaid commercial payer).

Click here to download copies of the following CMS documents related to the final rule, for your reference: the CMS Executive Summary, the CMS List of APMs, and the CMS List of Clinical Improvement Activities.