MACRA: What ACOs Need to Know

Dean Stephens
July 11, 2016

Unless it gets delayed (and it will very likely be delayed), the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is just six months away from the start of the first performance year. While the potential effects are being hotly debated – opponents think it’s an unmitigated mess that’s doomed to fail, while proponents are calling it a necessary, albeit complex, step toward delivering quality, value-oriented care – what’s not in question is the fact that the legislation will have an impact on the majority of Medicare providers. Accountable Care Organizations (ACOs) in particular need to understand the legislation and the changes – financial and otherwise – MACRA will bring to their practice. Above all, high-accuracy coding and risk-adjustment performance will continue to be critically important to meet new performance guidelines and evaluation criteria.

The Basics of MACRA

First, a quick overview of the legislation:

  1. In essence, MACRA changes the way Medicare providers get reimbursed and strengthens incentives for providers to move away from traditional fee-for-service care toward higher quality, value-based care.

  2. The April Notice of Proposal for Rulemaking (NPRM) put the components of MACRA into place and established a new payment framework called the Quality Payment Program that replaces the flawed and much maligned Sustainable Growth Rate (SGR) formula.

  3. The new schedule increases baseline Medicare Part B payments by 0.5 percent per year until 2019. That same year, providers can choose one of two payment tracks: the Merit-based Incentive Payment System (MIPS) or the Alternative Payment Model (APM).

So let’s unpack each of these payment tracks:

The Merit-based Incentive Payment System (MIPS) This option could be considered a hybrid of fee-for-service and value-based care models. It provides performance-based incentives (including a bonus of up to 10 percent for exceptional performance for the initial five years) while still allowing providers to continue under the fee-for-service umbrella. MIPS consolidates the three existing quality reporting vehicles – Medicare Meaningful Use (MU), Physician Quality Reporting System (PQRS) and Value-Based Modifier (VBM) – into one streamlined system that theoretically reduces the reporting burden physicians currently labor under.

Physicians are evaluated in four weighted categories – quality (50 percent), meaningful use of EHR technology (25 percent), clinical practice improvement (15 percent), and cost (10 percent). These categories establish a Composite Performance Score of 0-100 points that determines the physician’s reimbursement levels. A provider is scored relative to other providers, so those who score higher than average will receive a positive adjustment (a reimbursement), while the worst performers will get a negative adjustment (a payment).  Physicians in their first year of Medicare billing and those with low numbers of Medicare patients and costs are excluded from MIPS reporting.

CMS will publish each provider’s composite score, as well as the individual category scores, on its PhysiciansComparewebsite, giving consumers the opportunity to see how their provider is doing and potentially comparison shop.


Alternative Payment Models (APMs) With a strong focus on value and quality measurements, this track represents a more dramatic push toward value-based care. Providers who qualify under the APM track (which CMS calls Advanced APMs) are automatically excluded from MIPS reporting. There are strong incentives for participation in the APM track, including a five percent annual lump-sum bonus payment through 2024, with the fee schedule then providing annual increases of .75 percent for qualified participants starting in 2026. To be eligible for the bonus payments (a Qualifying Participant or QP in CMS parlance), providers must have a certain percentage of their payments or patients coming in through the Advanced APM.

To qualify as an Advanced APM, providers must use certified EHR technology, adopt quality measures comparable to those in the MIPS Quality Performance category, and must bear more than “nominal financial risk” for monetary losses or be a Medical Home Model expanded by the CMS Innovation Center.

In the proposed rule, the APMs that meet MACRA’s criteria are:

  • Tracks 2 and 3 of the Medicare Shared Savings Program (MSSP) ACO Program
  • Next Generation ACO Model
  • Comprehensive ESDR Care (CEC) (large dialysis organization arrangement)
  • Comprehensive Primary Care Plus (CPC+)
  • Oncology Care Model (OCM) (two-sided model available in 2018)

Under both tracks, there’s a two-year time lag between performance year and payments, meaning the first payments made in 2019 will be based on the 2017 performance year – giving providers a very short window to qualify for the APM track, if that’s their chosen path.

What does this mean for ACOs?

The new payment structure, and CMS’ ambitious goal of tying 50 percent of payments to APM participation by the end of 2018, will likely contribute to the already rapid growth of ACOs – currently estimated at about 750 ACO organizations covering 23.5 million people across Medicare, Medicaid and commercial populations – while helping to stabilize the somewhat shaky financial ground on which many ACOs currently stand. A publication by healthcare consulting firm Leavitt Partners lays out four scenarios that predict an increase in ACO coverage anywhere from 41 million to more than 176 million people by 2020, with MACRA responsible for 37 million of those.

Critics, however, point to issues with MACRA that they say could undermine the long-term viability of ACOs. The National Association of Accountable Care Organizations (NAACOS), for example, is highly critical of CMS’ decision to exclude Track 1 MSSP ACOs from the Advanced APM definition, making them ineligible for the bonus payments. In a statement, NAACOS points out that excluding the Track 1 ACOs (which make up the majority of ACOs in the MSSP) from the physician bonus program will lead to significant decline in the total number of ACOs. As proof, the organization points to a survey of 144 of its MSSP members that found that more than half (56 percent) would likely leave the MSSP if not eligible for the Advanced APM bonus.

Being left out of the Advanced APM definition can be considered a set-back to Track 1 ACOs – though, as an alternative, they should look to take advantage of the exceptional performance bonus available under MIPS. The short time period between the release of the proposed rule and the beginning of the 2017 performance year makes it difficult for a Track 1 ACO to do what’s needed to position themselves to operate at the level that will qualify them for APM participation (plus, it’s unclear whether CMS will even allow Track 1 ACOs to switch MSSP tracks in the middle of their agreement period).

Nevertheless, MACRA underscores CMS’ strong commitment to the shift to value-based care. ACOs should be thinking through what’s needed to both qualify and successfully participate in APMs. One item they may want to add to the discussion agenda is making an investment in improving risk adjustment performance. High accuracy coding and risk-scoring are essential to not only correctly predicting costs and setting reimbursement rates but also to helping providers deliver better, more affordable care – and the stakes are only going to get higher under MACRA.

Love it or hate it, MACRA is coming. The best way for ACOs to deal with the upcoming changes is to have as firm an understanding of the legislation as possible and to have a solid strategy in place to meet the challenge head on.

Dean Stephens is the CEO of Talix.
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