MACRA Final Rule: Key Implications

and Strategies for Success

November 10, 2016

Bruce Johnson, Shareholder brucejohnson@polsinelli.com Sidney Welch, Shareholder and Chair, Healthcare Innovation swelch@polsinelli.com

Agenda

MACRA background and policy objectives

Key changes and implications of final rule

Alternative Payment Models (APM)

Merit-Based Incentive Payment System (MIPS)

Strategic implications, opportunities and challenges

Q&A

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Sustainable Growth Rate

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Medicare fee for service payment:

– RVUs per CPT x Conversion Factor, with adjustments e.g., “Sustainable Growth Rate” to limit Medicare expenditures to a budgeted amount

For the first few years of SGR, Medicare expenditures did not exceed targets and doctors received modest pay increases

In 2002, doctors faced a 4.8% pay cut

Every year since 2002, Congress passed legislation to temporarily defer pay cuts

Too Many Payment Patches

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Law Cut Year Score (bil.)

PL 108-7 2003 $54.0

PL 108-173 2004, 2005 $0.2

PL 109-171 2006 -$0.4

PL 109-432 2007 $3.1

PL 110-173 2008 (6 mos) $6.4

PL 110-276 2008 (6 mos), 2009

$9.4

PL 111-118 2010 (2 mos) $2.0

PL 111-144 2010 (1 mo) $1.0

PL 111-157 2010 (2 mos) $2.0

Law Cut Year Score (bil.)

PL 111-192 2010 (6 mos) $6.0

PL 111-286 2010 (1 mo) $1.0

PL 111-309 2011 $14.9

PL 112-78 2012 (2 mos) $3.6

PL 112-96 2012 (10 mos) $18.0

PL 112-240 2013 $25.2

PL 113-67 Jan-Mar 2014 $7.3

P.L. 113-93 Apr 2014-Mar 2015

$15.8

Total Cost $169.5

Source: Congressional Budget Office 2015

Pre MACRA Goals

5 Source: Centers for Medicare & Medicaid Services (CMS)

CMS Payment Model Framework – 2015 and MACRA

Category 1 Fee for Service – No Link to Quality • 100% volume

Category 2 Fee for Service Link to Quality • Linkage to quality

and/or efficiency

Category 3 Alternative Payment Models using FFS Architecture • Track 1 MSSP ACO

Category 4 Population-based Payment • At risk Pioneer ACO

and others • “Advanced APMs”

CMS View of the Future

85%

90%

30%

50%

2016 2018

All Medicare FFS All Medicare FFS 6

MACRA’s Major Changes

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Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) – Enacted April 2015 (bi-partisan support) – Final rule published November 4, 2016

MACRA’s Major Changes:

– Repealed Sustainable Growth Rate – Modifies/consolidates Medicare quality programs

(Meaningful Use, PQRS, Value Based Modifier) – Continues fee-for-service payments, but with potential

payment adjustments via: • “Merit-Based Incentive System” (MIPS) • “Alternative Payment Models” (APMs)

Final Rule Under MACRA

Notice of Proposed Rule Making -- May 9, 2016

Over 4,000 comments received

Final rule released Oct. 14, 2016, published in Federal Register Nov. 4, 2016

Comments received through due Dec. 19, 2016 – Final Rule Federal Register (81 FR 77008)

– https://www.federalregister.gov/documents/2016/11/04/2016-25240/medicare-program-merit-based-incentive-payment-system-mips-and-alternative-payment-model-apm

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MACRA, MIPS, APMs – Oh My!

MACRA Merit-Based Incentive Program

Systems (MIPS) – PQRS – VBPM – EHR Incentive Program

Alternative Payment Models (APMs) – Accountable Care Organizations – Medicare Shared Savings Program – Qualified APM Participant (QP) – Partial Qualified APM Participant (Partial

QP)

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Key Changes and Implications

1. Bi-partisan legislation

2. A “kinder and gentler” final rule

3. More “MIPS eligible clinician” exclusions, benefitting solo and small practices

4. Alternative Payment Model encouragement

5. Participation strategy choices and timing

6. Population vs. episode based APM participation options

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Key Changes and Implications

7. Temporary reduction of excess of “nominal risk” standard applicable to APMs

8. Living in two worlds -- MIPS APM and MIPS eligible clinician

9. CEHRT expectation (and effective mandate)

10. Fairly minimal reporting requirements for MIPS participation in 2017 transition year

11. More eligible clinicians excluded from MIPS obligations (i.e., low-volume threshold)

12. MIPS requirements adjusted, but still complex

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2019 2020 2021 2022 + beyond

Merit-Based Incentive Program (MIPS)

Medicare FFS payment adjusted based on performance score linked to: 1. Quality 2. Cost 3. Improvement activities 4. Advancing care information

+-4%* +-5%* +-7%* +-9%*

*$500M for “exceptional performance” adjustment through 2024

Alternative Payment Models (APM)

New payment approaches that incentivize quality and value: • CMMI Innovation models • MSSP ACO (Track 2 & 3) • Oncology Care Model • Comprehensive Primary Care

Plus • Other demonstration programs

Advanced APMs: • Not subject to MIPS +/- payment • 5% lump sum incentive payments

(2019-2024)

• Higher (.75%) Medicare Physician Fee Schedule update in 2026 and beyond compared to MIPS (.25%)

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MACRA Payment Model

Source: Medicare Access and CHIP Reauthorization Act of 2015, Path to Value (CMS)

MACRA Implications as of November 10, 2016

Bottom Line: During 2017 performance year, most physician practices will be subject to MIPS, with potential impact on 2019 Medicare FFS reimbursement

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Advanced APM Possible? (e.g., MSSP Track 2 or 3)

Yes – Subject to APM reporting requirements

No

APM (e.g., MSSP Track 1)?

Individual Reporting

APM Required Group/TIN Reporting

Stay

Group/TIN Reporting

“Pick Your Pace” -- 2017 Transitional Reporting Flexibility

2017 Participation Strategy MACRA Payment Implications for 2019

• Report all required MIPS measures

• For full 90-day performance period and up to the

full year

• Avoid up to the -4% MIPS payment adjustment

• Qualify to receive up to +4% payment adjustment

• Eligible for additional “exceptional performance”

adjustment

• Report for 90-day period (but less than full year)

• Report more than one quality measure, more

than one improvement activity, or more than the

required measures in the ACI performance

category

• Avoid up to the maximum -4% MIPS payment

adjustment

• Become eligible to receive up to the maximum

+4% adjustment

• Report one measure in each of the quality and

improvement performance categories, or report

the required measures of the ACI performance

category

• Avoid up to the maximum -4% MIPS payment

adjustment (but not eligible for +4% adjustment)

• Fail to report one MIPS measure or activity • Maximum -4% MIPS payment adjustment in 2019

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Alternative Payment Models (APMs)

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1

Advanced Payment Model Alternative to MIPS

Eligible Clinicians who participate in certain Advanced APMs are exempt from MIPS

Medicare (only) Option

(2019 and beyond)

Other Payer Combination Option (2021 and beyond)

Advanced APMs FFS Reimbursement Implications

(2019-2024) • Not subject to MIPS • +5% Lump Sum Additional

Incentive Payment for Part B Prof. Svs. during Base Period

(2026 and beyond) • Not subject to MIPS • Higher Medicare Fee

Schedule updates (.75% vs. .25%)

Participation in Advanced APM sufficient (regardless of whether performance goals achieved)

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Advanced APM Requirements

Advanced APM requirements:

1. Use Certified EHR technology (CEHRT)

2. Professional service payments linked to quality measures

3. APM must bear financial risk or involve a medical home model (e.g., MSSP ACO, Track 2 or 3, NextGen ACO, CPC+ etc.), with other payers in 2021.

4. Advanced APM must meet payment or patient count thresholds

^Additional “All Payer Combination” Options begin in 2021

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Eligible Advanced APM Entities 2017

– MSSP ACOs in Tracks 2 & 3 (not Track due to absence of financial risk)

– Next Generation ACOs

– Comprehensive Primary Care Plus Program

– Comprehensive ESRD Program arrangements

– Oncology Care Model (2-sided risk)

– Not Medicare Advantage organizations

2018 (expected)

– ACO Track 1+ (with risk TBD)

– Voluntary bundled payment model

– Comprehensive Care for Joint Replacement (CEHRT Track)

– Advancing Care Coordination through Episode Payment Models (CEHRT Track)

– Not MA -- except under All-Payer Combination Option beginning in 2021

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Advanced APM Timeline

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2017 Performance

Period for 2019

2018 Performance

Period for 2020

2018 Base Period for

2019 Bonus

2019 APM Bonus

2019 APM Bonus

2019 Base Period for

2020 Bonus

2020 APM Bonus

2019 Performance

Period for 2021

2020 Base Period for

2021 Bonus

2021 APM Bonus

2020 APM Bonus

2021 APM Bonus

2021 on

All Payer APM

Option Begins

2026 on

Higher FFS

Payment update to QPs

(.75% vs. .25% under MIPS

• APM “Performance Period” 2 years pre year of APM bonus payment

• Bonus based on Part B Professional Services in Base Period

Physician-Focused Payment Models (PFPM)

Additional APMs defined over time in which:

– Medicare is a payer

– Eligible clinicians play core role in implementing the methodology

– Targets cost and quality of services influenced by eligible clinicians

PFPM Technical Advisory Committee

– Review of proposed PFPMs

– Comments/recommendations to HHS Secretary

– Testing to be determined

– Typical 18 month APM review/development cycle

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APM Strategic Considerations

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Source: “How the Money Flows Under MACRA,” https://www.brookings.edu/research/how-the-money-flows-under-macra/

Merit-Based Incentive Payment System (MIPS)

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MIPS Generally

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MIPS consolidates and streamlines several existing Medicare penalty programs with consolidated reporting and timelines

MIPS eligible clinicians are: - Physicians - PAs - NPs - CNS - CRNAs - Groups that include such professionals

MIPS Excluded Providers

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Some providers are excluded from MIPS: Qualifying APM participants Partial qualifying APM participants who report data under MIPS Low-volume threshold clinicians (billing ≥ $30,000 & for > 100

beneficiaries) Newly-enrolled Medicare participants (report following 1st year

enrolled)

Excluded clinicians may “voluntarily report” to gain experience with MIPS (like eligible clinicians who are new to Medicare program, for example).

CMS defines “non-patient-facing MIPS eligible clinicians” as an individual or group that bills 100 or fewer patient-facing encounters during a performance period.

MIPS Methodology

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CMS will assign a composite performance score (CPS) based on performance over a year in:

– Quality (replaces PQRS and some parts of VM)

– Cost (replaces cost portion of VM)

– Clinical Practice Improvement Activities (new!)

– Advancing Care Information (formerly EHR meaningful use)

Publishes clinician’s results on Physician Compare

Penalty for every clinician scoring below median except for 2017, which has a 3 point threshold

MIPS Composite Score

0%

20%

40%

60%

80%

100%

120%

2019 (±4%) 2020 (±5%) 2021 (±7%) 2022 (±9%)

Quality

Cost

ACI

CPIA

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MIPS Payment Adjustments

CY Max % Gain Max % Loss

2017 - -

2018 - -

2019 +4% -4%

2020 +5% -5%

2021 +7% -7%

2022 & beyond +9% -9%

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MIPS Payment Updates

Zero for 2020-2025 but +5 percent incentive payment if in an Advanced APM from 2019-2024

2026+, 0.75 percent if in an APM, 0.25% for all others

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Alignment of Strategy and Money

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Medicare Physician Fee Schedule Updates

0.5% 0.5%

0.5%

0.5%

0% 0% 0% 0% 0% 0% 0./75% or

0.25%

Merit-Based Incentive Payment System (MIPS)

• Quality • Resource use • Clinical practice

improvement • EHR meaningful

use

+-4%

+-5% +-7% +-9% +-9%

+-9%

+-9%

+-9%

Alternative Payment Models (APMs)

Excluded from MIPS

Source: Medicare Access and CHIP Reauthorization Act of 2015, Path to Value (CMS) 29

5% Incentive Payment

FFS UD

MIPS Measures for 2017

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MIPS Reporting

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MIPS eligible clinicians may elect to report data for the

four performance categories as an individual clinical, part of a group, or an APM group (consistent method must be used to report data across performance measures)

MIPS eligible clinicians may also report certain required data via third-party data submission entities (i.e., health information technology vendors, qualified registries, Qualified Clinical Data Registry, and CMS approved survey vendors) – If reporting as a group, all MIPS eligible clinicians must agree

to outsource reporting of same data categories

MIPS Data Submission Mechanisms

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MIPS Performance

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Top MIPS Performers

Score above the threshold, get a bonus

– Funded by those paying penalties to make it budget neutral

– Base bonus cannot exceed 300% of max penalty

– Exception for Exceptional Performance Bonus

• Additional $500 M/year

• From the 25th % above threshold (70 points in 2017)

2019 Max = 12% (3x4%) MIPS + 10% Exceptional Performance = 22%

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Quality Measures Generally

Improvements to existing quality programs:

– Key change from 9 measures to 6; allows partial credit for measures.

– CMS tried to address concerns about wading through too many measures in the PQRS program to find applicable measures by developing measure sets by specialty.

– By Nov. 1 of the immediately preceding year, CMS will publish a final list of the quality performance measures.

– Acknowledges issues for sub-specialties.

– Provides bonuses for reporting through QCDRs.

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Quality Measures Examples

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Quality Measures Sample Tally Measure Type Submission

Method Points Total

Possible Points

High Priority Bonus Points

CEHRT Bonus Points

Title 1 Outcome Registry (1-10) 10

Title 2 High priority

EHR (1-10) 10

Title 3 High priority

Registry (1-10) 10

Title 4 Outcome Registry (1-10) 10

Title 5 (1-10) 10

Title 6 (1-10) 10

Title 7 (1-10) 10

Total ------------ ------------------ ? 70 ? ?

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Cost Measures Generally

CMS proposes to use episode-based measures in this category, many of which are specialty specific, building off of CMS’s QRUR reports.

CMS analyzes Medicare administrative claims data rather than require reporting by provider to determine score

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Cost Measure Examples

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CPIA Measures Generally

MACRA specified that the CPIA performance category must include the following activities: Expanded practice access Population management Care coordination Beneficiary engagement Patient safety and practice assessment

By statute, CMS must give at least a 50% score to APM participants and 100% score for patient-centered medical home participants.

CPIA measured on a “60 point” scale – different CPIAs have different weights (e.g. “high-level” or “medium-level” activities) that contribute to an overall score.

CMS proposed more than 90 improvement activities Clinicians must perform CPIAs for at least 90 days of the reporting

period (which period may be increased in future performance years).

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CPIA Examples

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ACI Measures Generally

ACI replaces EHR Meaningful Use for Medicare physicians only

Goals:

– Simplify requirements (from 18 measures to 11)

– Increase flexibility (i.e., not “all or nothing”)

– Ease burden

– Facilitate exchange of information, emphasizing interoperabilitiy

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Extends application to PAs, NPs, CNSs, CRNAs

CMS may reweight ACI portion of MIPS to 0% for some EPs

– Some hospital-based EPs

– EPs facing significant hardship: (1) Insufficient internet access; (2) Extreme and uncontrollable circumstances; (3) Lack of control over availability of CEHRT; (4) Lack of face-to-face patient interaction

– NPs, PAs, CRNAs, CNSs who submit no data

ACI Application

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Use CEHRT

Report according to objectives and measures

Support information exchange and prevention of health information blocking, and cooperate with authorized surveillance of CEHRT

ACI Requirements

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In 2017 reporting year, flexibility to use 2014 or 2015 edition CEHRT – EPs using only 2015 CEHRT, or a combination of 2014 and

2015 CEHRT can choose between objectives/measures corresponding to Meaningful Use Stage 3 OR those corresponding to Meaningful Use Modified Stage 2

– EPs using only 2014 CEHRT should comply with objectives/measures corresponding to Meaningful Use Modified Stage 2

Starting in 2018 reporting year, all must use 2015 edition CEHRT, Stage 3 objectives/measures

ACI Reporting

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One-year reporting period

– Different than Meaningful Use 90-day reporting period for all participants in 2015 and new participants in 2015 and 2016

– MIPS EPs can submit data even if they do not have a full year’s data

Group reporting now available

– Not batch reporting with individual assessment, but assessment as a group

ACI Changes

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ACI Scoring

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MACRA requires CMS to provide technical assistance to MIPS eligible clinicians in small practices (i.e., 15 or fewer eligible clinicians), rural areas, and practices located in geographic health professional shortage areas

Details of the technical assistance programs to be developed by separate future rulemaking

Technical Assistance

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Implications, Opportunities and Challenges

Complexity – MIPS replaces existing programs with new

– APMs limited, and build on other programs

Still fee for service – Financial incentives could increase spending

Choices – MIPS vs. APM participation and timing

– Single vs. Multispecialty strategies

– FFS and at-risk incentive structures

– Group vs. individual reporting

– What sources to use for reporting

Select Implications for Practices

Behavioral and operational “volume to value” changes

Potential “death knell” for small practices

Potential increased acquisitions/collaborations (health system employment, ACOs, CINs, large groups)

CEHRT essential and need for customized Health Information Technology

Technology/internet/data gathering capabilities

Potential impact and revisions to commercial payer contracts linked to MFPS

Commercial payer data reporting under All-Payer APMs

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Select Implications for Health Systems

Complex financial models – inpatient, outpatient, ambulatory – shift from FFS to risk

Need to customize HIT to fit needs under new models, let alone interoperability

Alignment of hospitals meaningful use to physicians’

Addressing resource utilization in hospital-owned physician practices

Shift to lower cost ambulatory settings – decrease to hospital bottom lines?

Potential “downstream changes” (e.g., revisions in malpractice policies, premium shifts)?

MACRA reimbursement impact on “fair market value” in employment, service and purchase arrangements

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Challenges: MIPS

If specialty physician doesn’t have outcome or high priority measure, they may be disadvantaged in MIPS

MIPS Quality measures propose administrative claims based on population health measures part of VBM, but they are hospital-focused, not physician focused

MIPS resources measures are based on VBM cost, so not translated to physicians

MIPS Advancing Care changes scoring but not measures

What happens to physicians who do not qualify as MIPS eligible clinicians? Impact of fact that APM bonus is based on Part B billings?

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Challenges: APMs

Physician participation in more than one APM

Track 1 ACO withdrawal and migration to risk

“Other Entities” in ACOs do not count for attribution

Living in two worlds -- MIPS reporting due prior to QP determination

“Nominal risk” definition evolution

Physician ability to control risk in APMs

Operational details of APM and downstream relationships (e.g., what parties bear risk, relative amounts and mechanics)

APM-specific requirements/restrictions (e.g., MSSP single-purpose entity requirements, role in relation to episode-based APMs)

Dartmouth Hitchcock example -- Difficult to continue to achieve cost savings over time due to relatively low cost of care

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MACRA Strategic Implications

Assume: Small/medium sized practice

Too late to participate in APM beginning on Jan. 1, 2017, so practice has reporting and participation options

– Uniform (individual or group) reporting required • Quality – individual or group

• Improvement Activities – individual or group

• Advancing Care Information – individual or group

• Resource (no action required)

Options: Invest, align or plan to hang it up? – Cost projections based on IT and other compliance requirements

– Potential alignment partners and/or relationship strategies

– Hang it up? (i.e., 25% of solo practice physicians age 55+)^

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^Source: Physician Group Practice Trends: A Comprehensive Review, J.Hospital & Medical Management, Vol. 2, No. 1:3 (2016).

MACRA Strategic Implications

Assume: Current participant in MSSP Track 1 ACO, with performance period ending 12/31/18

Unless terminate MSSP ACO participation before Oct. 28, 2016, practice will report and be evaluated under APM/ACO rules – Quality measured at MSSP ACO entity level – Resource measured at ACO (under MSSP) – CPIA measured at APM entity level – Advancing Care Information at TIN level

1-2 years of existing participation and linkage to ACO provides (some)

time for strategic decision-making and action

MACRA fee-for-service realities (and limits) Growth of Medicare Advantage and other at-risk programs

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Key Takeaways

• Affordable Care Act not repealed; MACRA was bipartisan

• ACA may be the appetizer; MACRA is the main course

• Significant “volume to value” changes in payment, which

require significant behavioral and operational changes

• Future changes to operations, performance and

relationships

• Keys to success and/or survival:

• Future Strategy

• Collective (organization-wide) performance

• Innovation (trial and error)

• Opportunity to shape own destiny

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Resources

Seminars & Webinars: – http://sftp.polsinelli.com/publications/events/webinar/ri/1116/ri1116i.htm

– http://shop.americanbar.org/ebus/ABAEventsCalendar/EventDetails.aspx?productId=261978136

Articles

– http://www.polsinelli.com/intelligence/ealert-making-sense-of-macra-final-rule

– http://www.polsinelli.com/intelligence/ealert-macra-final-rule-part-2

– http://www.polsinelli.com/intelligence/ealert-macra-part-3

CMS

– https://qpp.cms.gov/

AMA “STEPS Forward”

– https://www.stepsforward.org/

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Questions?

Sidney Welch Shareholder | Polsinelli PC Atlanta, GA 404.253.6047 swelch@polsinelli.com

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Bruce A. Johnson Shareholder | Polsinelli PC Denver, CO 303.583.8203 brucejohnson@polsinelli.com