Last Sunday, Congress released the text of a minibus package, which will likely be signed into law by tomorrow. While the bill’s primary purpose is to keep the government open, it also includes healthcare extenders through the end of the calendar year, as well as several notable healthcare policies. Here is a press release and a summary of the package from the US House of Representatives Appropriations Committee.
The bill’s myriad of healthcare policies include several with significant regulatory implications. I will focus on two such policies here, but others are worth digging into as well (perhaps in a future Regs & Eggs blog post).
Doc Fix
I’ve often used the Yogi Berra phrase “it’s déjà vu all over again” to describe the “doc fix,” because it perfectly describes the situation going on with Medicare physician payments year after year.
The minibus includes a 1.68% reduction to the 3.37% cut to the Medicare Physician Fee Schedule (MPFS) conversion factor (CF) that physicians and other clinicians are currently facing. The 3.37% CF cut went into effect on January 1, 2024, and this provision would effectively reduce that cut to 1.69% for the rest of the calendar year (3.37%-1.68%). It will be in effect as of March 9, 2024, and will not impact payments for services delivered between January 1 and March 8, 2024. In other words, the fix is NOT retroactive, but will apply prospectively.
As background, the 2024 CF was initially set to be reduced by 2.5%, but Congress offset half that reduction (1.25%) in the Consolidated Appropriations Act (CAA), 2023. The current 2024 CF includes the remaining 1.25% reduction and an additional 2.1% cut due to budget neutrality (for a total of 3.37%). This minibus legislation would provide relief in addition to that provided in the CAA, 2023 2023 (1.68% in relief in addition to the 1.25% already provided, for a total of 2.93%), but would not fully offset the cut to the CF.
The charts below show the final impact of congressional fixes from the last several years. As you can see, the CF has been cut every year, even after Congress intervened.
Cuts
Conversion Factor
So, what does this mean going forward?
It’s a little tricky to predict what the 2025 CF will be since the 1.68% fix only applies for part of the year. However, like the previous congressional fixes, it is only a temporary fix that will “expire” at the end of the year. Therefore, when the Centers for Medicare & Medicaid Services (CMS) calculates the CF for next year, the agency must reduce the CF by the amount of the fix. Thus, going into 2025, the physician community will again be facing a scenario where Congress will need to take action in order to avoid another payment reduction.
Advanced APM Bonus
To encourage participation in Advanced Alternative Payment Models (APMs), the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) provided incentive payments to clinicians who were able to tie a certain percentage of their payments or patients to these models. Clinicians who meet the thresholds for participation in Advanced APMs are called qualifying APM participants (QPs) and are exempt from the Merit-based Incentive Payment System (MIPS) reporting requirements. QPs receive these incentive payments two years after they actually participate in the model (for example, QPs received bonus payments for the 2018 performance year in 2020). Under MACRA, a 5% incentive payment was available from performance year 2017 (payment year 2019) through performance year 2022 (payment year 2024). Starting in payment year 2026, QPs become eligible for a higher CF update than other clinicians: 0.75% compared to 0.25% (a payment differential of 0.5%). There were no bonus payments or higher updates for performance year 2023 (payment year 2025) in MACRA.
To address this gap in incentives, Congress provided a 3.5% incentive payment for performance year 2023 (payment year 2025) in the CAA, 2023. Clinicians who participated in an Advanced APM in 2023 and were able to meet the QP thresholds knew that they were eligible to receive an incentive payment in 2025 for their performance.
As noted, there is a higher CF update for QPs in performance year 2024 (payment year 2026), albeit only 0.75%. In other words, MACRA built in a very small incentive for 2024 participation in an Advanced APM, unlike 2023, for which MACRA provided nothing. Still, a 0.75% payment update may seem negligible to clinicians and healthcare organizations when they are determining whether it makes sense financially to participate in an Advanced APM. It takes a significant amount of upfront investment and capital to meet the requirements of participation in Advanced APM and to take on financial risk.
To continue to encourage more clinicians to participate in Advanced APMs, the minibus bill provides a 1.88% incentive payment for QPs for performance year 2024 (payment year 2026). Thus, the total additional financial incentive for participation in an Advanced APM in 2024 (beyond shared savings payments and any bonuses available in the model itself) is an approximately 2.63% increase to Medicare payments in 2026 (the 1.88% incentive payment plus the 0.75% CF update).
Even with this additional incentive, some stakeholders may wonder whether the total incentive will be enough to spur participation in Advanced APMs. First, as one friend and former colleague noted to me, it may be too late. Many organizations have already made their decisions about whether to participate in an Advanced APM this year. Further, the incentive payment is less than the previous levels of payments that Congress provided, and more importantly, it could be less of a financial incentive than the other option available to these organizations: participation in MIPS.
Under MIPS, clinicians are theoretically eligible for an incentive payment of up to 9%. However, MIPS is a budget-neutral program, and CMS uses the penalties it collects from poor and non-performers to pay out incentive payments. As shown in the table below, the maximum incentive payment for a 100% performance score in MIPS has been relatively low.
With respect to 2022, the most recent year from which we have actual results, the maximum incentive payment of 8.25% was much higher than previous years. However, as explained in this Regs & Eggs blog post, several unique factors in 2022 led to this result, which may not occur again going forward. Therefore, it is hard to project what the maximum MIPS incentive payment will be in performance year 2024 (payment year 2026). Still, as CMS continues to increase requirements year after year, the available pool of penalties used to pay out the incentive payments will likely grow, and high performers will likely see higher payments each year going forward. Without the guarantee of receiving incentive payments that are anywhere close to the 5% bonuses that MACRA initially provided, MIPS may seem like a more attractive option going forward.
These are just two of the many healthcare provisions in the minibus bill. Stay tuned for further updates on these and other major healthcare issues as we continue forward in 2024.
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
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