While the major terms and conditions of the Medicare Access and CHIP Reauthorization Act (MACRA) are becoming more well-known during the first performance year, some aspects of the new physician payment law still can be elusive for physician practices and other healthcare organizations.
HFMA recently spoke with Pamela Pelizzari, MPH, healthcare consultant with Milliman, about details that may be overlooked regarding participation in the Merit-based Incentive Payment System (MIPS) track and the advanced alternative payment model (APM) track of MACRA.
Editor’s note: The following is an abbreviated transcript of the conversation, which will appear in an upcoming edition of HFMA’s “Voices in Healthcare Finance” podcast.
Q: How significant do you expect the impact of MACRA to be on a typical physician practice?
A: From a financial standpoint, physician practices can expect to experience fairly substantial increases or decreases in their payment based on the MIPS adjustment system. Starting in the first year, the positive adjustments can be up to 4 percent, and they increase to 9 percent over multiple years.
It’s an incredible incentive because that percentage is actually on all billings throughout the practice. You could be receiving 9 percent more on every service that you render to a Medicare fee-for-service beneficiary. And those positive adjustments can be scaled upward by up to three times. If we take that to its logical extension, people could increase their billings by nearly 30 percent.
There’s a corresponding negative adjustment of negative-4 percent to negative-9 percent. That one doesn’t scale, so the maximum negative adjustment is 9 percent. But as you can imagine, that range of negative-9 percent to positive-20 or 30 percent is really motivating people to think about what they’re going to do about this new payment system.
Q: What are some overlooked considerations regarding participation in the advanced APM track?
A: When we talk to practices that are considering whether they should participate in the advanced APM track, we try to frame it as a cost-versus-benefit scenario. Participating in an advanced APM obviously has some benefits. You might be exempt from MIPS measurement, and you get potentially a guaranteed 5 percent payment instead of having the uncertainty associated with the MIPS adjustment.
But there are also costs. There are costs simply in collecting quality metrics—which you have to do under MIPS as well—but usually advanced APMs represent Medicare saying, “We’re going to test a change in the way we pay for something.” To make sure there’s not unintended consequences to that, there are usually associated monitoring and evaluation costs. So, you might have to report more metrics, you might have to meet some practice requirements to participate in those advanced APMs. You could incur some costs in terms of doing that.
The other cost we see people underappreciating is the potential losses. Advanced APMs by definition have some kind of downside financial risk—it’s one of the requirements of being an advanced APM. That means that if you’re not able to meet the financial construct of whatever that advanced APM is—if you don’t meet your benchmark or your target—you might have to pay CMS [the Centers for Medicare & Medicaid Services] back.
Those downside risks are oftentimes not just on Part B services; they could also be on Part A services. So, while MIPS measurement can decrease the amount you get paid by 4 to 9 percent, that decrease is only on Part B costs. Whereas if you’re in an accountable care organization, for example, you’re taking risk also for inpatient stays and things that can be much more costly. If you have that downside risk, that’s a substantial potential cost of participating in an advanced APM.
Q: What are some of the difficulties practices seem to be facing in modeling or forecasting MACRA performance?
A: Assuming you’ve selected some metrics and you’re reporting information, you still don’t know how well you’re going to do. You don’t know where you’re going to fall in terms of the national percentile, especially on some of the new metrics where there really isn’t a lot of information available.
Some things that make this even trickier are the amount of the scaling factor and the budget neutrality provision that we expect to be having an effect. When CMS is saying, “Here are the people who have negative adjustments, here are the people who have positive adjustments,” they’re only allowed under the statute to adjust the positive people in that equation.
The negative adjustments will be whatever is earned, based on the statute. Maybe you’ll have a negative-4 percent adjustment because you had very poor quality performance in the beginning of the program. But if lots of people have those negative numbers, then that’s going to affect the upward scaling of those who got positive adjustments, and that’s a huge unknown right now. We don’t know how many practices are going to meet the thresholds and how much they’re going to exceed them by. Thinking about how big that scaling adjustment could be—it can’t be more than 3, but that is all we know.
There’s a similar construct for extremely high-performing MIPS practices, an exceptional-performance adjustment. It could be up to 10 percent of payment, but it has a set pool of money. It’s not budget-neutral, it’s extra money that’s available, but there’s only a certain amount available. The number of practices that hit that threshold is going to determine in part how much money each practice can get. That’s something that we think is also worth considering in terms of modeling the impact of MACRA on individual practices.
When we are working with practices to model these effects, we try to show the entire range of possible financial outcomes. Even though you might want to say, “We are the best practice in the world, we are doing so well on all these measures,” it’s really difficult in this new program to be totally confident that that will continue. We recommend that people consider the possible variability in outcomes and how it would affect them if things didn’t go that way in perpetuity.
Nick Hut is managing editor of Leadership.
Interviewed for this article: Pamela Pelizzari, MPH, healthcare consultant, Milliman.