On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).  MACRA repeals the Medicare Sustainable Growth Rate (SGR) that was set to cut Medicare Physician Fee Schedule (MPFS) payment rates by 21 percent on April 1, and instead mandates annual payment rate increases along with a transition to a value-based compensation model known as the Merit-Based Incentive Payment System (MIPS) beginning in 2019.  The new legislation also includes many of the so-called healthcare “extenders” that have become common in temporary SGR delay legislation, as well as an extension through September 30, 2015 of the “probe and educate” period for Medicare Administrative Contractor (MAC) review of provider compliance with the two-midnight rule for inpatient admissions.  MACRA also provides funding for the Children’s Health Insurance Program (CHIP) through FY 2017. 

CMS had announced on April 15, 2015, that it had instituted a ten-day hold on physician claims with dates of service beginning on April 1 to avoid implementation of the 21-percent rate reduction while Congress finalized the new legislation.  These claims will now be processed pursuant to MACRA’s rate changes.  CMS also stated that MACs that had nonetheless paid a limited number of such claims at the reduced rate will reprocess those claims at the MACRA rate.

Updates to the Medicare Physician Fee Schedule

MACRA repeals the SGR effective December 31, 2014.  The law maintains current MPFS rates through June 30, 2015.  The law then mandates successive rate increases of 0.5 percent for the period from July 1, 2015 through December 31, 2015, and then annually through December 31, 2019.  There will be no regular rate update during CYs 2020 through 2025; however, payments will be subject to MIPS adjustments beginning in 2019.  CMS will also update payment rates by as much as 1 percent for physicians participating in an alternative payment model (described below). 

New MIPS Payment Methodology

The new MIPS methodology will begin in CY 2019 and will pay physicians (and certain other professionals) based on a performance-based score comprised of four categories: clinical quality, resource use, clinical improvement activities, and meaningful use of a certified EHR.  Congress delegates to CMS many of the details in how to score physician performance in these categories, but establishes some clear benchmarks. 

Quality.  The qualify component is based largely on the consolidation of the Physician Quality Reporting System and the Value-Based Purchasing Modifier (VBM).  In addition, the Secretary will be required to use notice and comment rulemaking to publish an annual list of quality measures in the Federal Register no later than November 1 of the prior year.  CMS may include quality data for such measures from both Medicare and non-Medicare patients.  CMS is also required to establish incentives for physicians to submit quality data using a certified EHR.

Resource Use.  CMS will continue to use resource-use measures from the VBM but must also solicit other measures from stakeholders.  MACRA requires that all such measures must reflect patient clinical classifications in order to more accurately evaluate resource use during different episodes of care. 

Clinical Practice Improvement Activities.  While CMS will also be required to solicit from stakeholders individual measures of clinical practice improvement activities, Congress established the following six objectives that must be part of the evaluation:

• Expanded practice access, such as the availability of same-day appointments for urgent needs and after-hours access to clinician advice;
• Population management, such as monitoring health conditions of individuals in order to provide timely health interventions, or participating in a qualified clinical registry;
• Care coordination, such as timely exchange of clinical information among providers and the use of remote monitoring through telehealth;
• Beneficiary engagement, such as the establishment of patient care plans and patient self-management training programs;
• Patient safety; and
• Participation in an alternative payment model.

Meaningful Use.  Physicians must continue to demonstrate meaningful use of a certified EHR.  Beginning in 2019, CMS will not make downward payment adjustments if a physician does not qualify as a meaningful user under the HITECH Act’s Medicare EHR Incentive Program.  Rather, meaningful use status will be one part of a physician’s overall MIPS score.

CMS will make MIPS payment adjustments—positive or negative—based on a physician’s composite MIPS score.  A composite MIPS score is based on a scale of 0 to 100.  Physicians that score above CMS’s performance threshold will receive increases to their payment rates while those physicians at or below the threshold will see their payment rates frozen or reduced.  The lowest-scoring physicians may see a downward payment adjustment as high as 4 percent in 2019 and 9 percent in 2022.  Payments reductions for poor-performing physicians will fund incentives paid to high-performers.

Alternative Payment Models

As discussed above, CMS will increase payment rates to those physicians who are also enrolled in alternative payment models (APMs) such as accountable care organizations and medical homes.  MACRA requires CMS to establish specific criteria to evaluate participation in a qualifying APM no later than November 1, 2016.  MACRA also establishes the following certain baseline requirements to determine whether a physician qualifies as participating in an APM:

• In 2019 and 2020, at least 25 percent of a physician’s Part B payments must be made through an APM;
• In 2021 and 2022, at least 50 percent of a physician’s Part B payments must be made through an APM, though that number may be reduced to 25 percent in the event that at least 25 percent of other payments made to the physician are from payers that evaluate physician performance on quality measures, use of a certified EHR, and require financial risk-sharing; and
• In 2023 and beyond, at least 75 percent of a physician’s Part B payments are made through an APM, or under the mixed-payer model described above.

Medicare Extenders

MACRA also included many of the common Medicare and other healthcare “extenders” that have become common in SGR legislation.  These include extensions of: 

• The “probe and educate” period for MAC review of hospital compliance with the two-midnight rule on inpatient admissions through September 30, 2015;
• The sole community hospital low-volume adjustment, and the Medicare-dependent hospital program, through October 1, 2017;
• The caps on outpatient physical therapy services through December 31, 2017; and
• The add-on payment for ground ambulance services through January 1, 2018.

Pay-Fors

MACRA replaces a scheduled 3.2 percent rate increase for inpatient hospitals in FY 2018 with a 0.5 percent annual increase each year for six years, beginning in FY 2018.  MACRA also limits the update factor for post-acute care providers to one percent in FY 2018, and extends the Affordable Care Act’s Medicaid DSH reductions through FY 2025.  Beneficiaries will also pay higher cost-sharing amounts including limitations on Medigap coverage for Part B deductibles and increased Part B premiums for high-income beneficiaries.

Other Provisions

MACRA amends the civil monetary penalties law (CMP) to exclude from sanction those arrangements between hospitals and physicians that reduce or limit the furnishing of medically unnecessary services.  MACRA also directs the HHS OIG to report to Congress on proposed changes to the CMP in order to promote “gainsharing” arrangements that would improve care and efficiency without reducing patient access to necessary care.

MACRA also reverses CMS’s prior decision to eliminate the 10- and 90-day global surgical package payments, and requires an entity entering the Medicare DMEPOS Competitive Bidding Program to obtain a surety bond with a value of $50,000 to $100,000 for each geographic area in which it is bidding.

A copy of the legislative text is available by clicking here.  A summary of the legislation prepared by the Congressional Research Service is available on the Library of Congress website by clicking here.

Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com.