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Does MACRA Spell the End for Fee-For-Service?

Nov 20, 2015 11:52AM ● By MED Magazine

By Scott Leuning

In the two most recent issues of MED magazine the leadership of the major healthcare systems in South Dakota have all concurred that one of the primary issues facing the future of healthcare is the shift in reimbursement mechanisms away from fee-for-service and toward quality-based models of payment. 


The recent passage of the Medicare Access and CHIP Reauthorization Act (MACRA), a bi-partisan bill that permanently repeals the Medicare sustainable growth rate (SGR) formula, takes a significant step toward eliminating fee-for-service for physician reimbursement.  Medicare’s fee-for-service payment system had been long criticized for rewarding physicians who produced a high volume of services without taking into consideration the value received for those services.  MACRA now creates a mechanism to shift away from fee-for-service as a primary means of reimbursing physician care under Medicare Part B and it signals a significant change in the landscape for physician reimbursement.


Under MACRA, Medicare fee-for-service reimbursement for physician services will increase annually by 0.5%, starting July 1, 2015 and going through 2019.  But the focus of reimbursement takes a significant shift beginning in 2019.  Medicare’s fee-for-service will continue as a reimbursement option after 2019, but reimbursement levels will remain locked at the 2019 level through 2025. 


Beginning in 2019 physicians who want to receive higher Medicare reimbursement levels will have the option to participate either in a modified fee-for-service reimbursement program or shifting to an alternative payment model.  The details of these options are explained below.


Option 1:  Merit-Based Incentive Payments—A Modified Fee-For-Service Model


The Merit-Based Incentive Payment System (MIPS) closely resembles the existing Medicare Physician Payment System.  The MIPS option is essentially for physicians who want to continue to be paid predominantly under Medicare’s fee-for-service model, with some twists. 


The MIPS program consolidates three existing programs—meaningful use (MU), the Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier (VBPM)—into a single program.  Under MIPS, physician performance is evaluated in four categories: 


1.     Clinical quality (30%);

2.     resource use (30%);

3.     meaningful use of certified EHR technology (15%); and,

4.     clinical practice improvement activities (25%). 


Based upon those assessments, each physician receives a score generated on a 0 – 100 point scale which will be used to differentiate between the best and worst performers.


Starting in 2019, physicians participating in MIPS will be eligible for positive or negative payment adjustments from Medicare.  Physicians who achieve the mean composite score will receive no payment adjustment.  Physicians who score above the mean composite score will receive a positive payment adjustment on each Medicare claim for the following year.  Physicians who receive a composite score that is below the mean will receive a negative payment adjustment on each Medicare claim for the following year.  Starting in 2019 the best performers may be eligible for incentive payments of up to 12% of their Medicare reimbursement, while the worst performers could face up to a 4% penalty.  The bonuses and penalties get larger in subsequent years, with benefits of up to 27% being possible by 2026 and penalties of 9% being imposed on the worst performers.   


Option 2:  Alternative Payment Model


The alternative payment model (APM) option under MACRA facilitates and encourages physician participation in accountable care organizations, bundled payment programs or other performance-based contractual payment systems where physicians assume more risk for the cost and quality of the patient care that they provide.  The APM option provides the opportunity for physicians to receive larger financial reimbursement, but there are also more stringent rules that must be followed by physicians who choose this option.  Physicians who elect to take the APM pathway are guaranteed a 5% lump sum bonus on their Medicare payments for 2019 through 2024.  In addition to the 5% bonus, participants in the AMP option will have additional increases or decreases to their reimbursement, based upon performance criteria that is still being formulated.


Now Is the Time for Physicians to Plan and Prepare for Change Under MACRA.


While MACRA does not completely eliminate fee-for-service reimbursement for Medicare providers, those physicians who stay with the current system will accept flat reimbursement starting in 2019, whereas physicians who shift to the new alternative payment options of MIPS or AMP have greater opportunity for higher reimbursement, along with higher risks associated with their performance.  A major shift in physician reimbursement is now on the horizon with the passage of MACRA and now is the time for physicians to plan and prepare for that shift by deciding if they are going to participate in MIPS or AMP and by determining what steps to take to be prepared for the transition that occurs in 2019.  Strategic planning and decisions regarding partnerships between physician groups, health systems and hospitals should be examined to determine the best course of action during the transition period.


Scott Leuning is an attorney at Goosmann Law Firm.