SGR Is Gone. Now What?

Preparing for Medicare's New Payment Paradigm

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Tex Med. 2015;111(9):62).

By Amy Lynn Sorrel
Associate Editor

Sooner than later, physicians will have to prepare for participation in one of the new quality-focused payment pathways set to replace Medicare's Sustainable Growth Rate (SGR) formula, which Congress eliminated in April via the Medicare and CHIP Reauthorization Act (MACRA). 

The key word is options, which the new payment paradigm offers, thanks to footprints left by the law's primary author and sponsor, Texas Congressman Rep. Michael C. Burgess, MD, a Republican obstetrician-gynecologist from Lewisville. Come 2019, physicians can participate in one of two major payment tracks: the fee-for-service Merit-Based Incentive Payment System (MIPS), which boosts or docks physician pay based on their quality and cost performance; or one or more alternative payment models (APMs), such as accountable care organizations (ACOs), medical homes, bundled payments, or other initiatives. 

Texas Medical Association officials caution that physicians won't be able to wait until 2019 to flip a switch, now that Medicare calculates payments based on their performance from two years earlier, in this case, 2017. Physicians also must consider the time and tools it takes to begin tracking practice data or transitioning to an APM leading up to the performance year. 

With plenty of federal rulemaking ahead to fully define and implement MACRA, early physician involvement is also critical to fine-tuning some of the law's less palatable provisions, warns a June report from The Physicians Foundation

"We are celebrating, and we needed this [SGR] victory. But we can't just sit on this victory. We are not nearly done. We are just beginning," said Joseph Valenti, MD, a member of The Physicians Foundation board and chair of TMA's Council on Socioeconomics. "Practices that don't stay on top of these regulatory changes are very likely not going to survive. That's why the foundation commissioned this report, to help physicians all over the country understand and stay active in these issues. That's where TMA PracticeEdge [TMA's physician services organization] comes in, to make sure physicians are leading these models. [See "TMA PracticeEdge."] And that's why being a part of TMA is so important. Having physician input in what is ahead is as important as getting rid of SGR itself."

Asa C. Lockhart, MD, a Tyler anesthesiologist and past chair of TMA's Ad Hoc Committee on ACOs, adds MACRA is more than likely here to stay, given the overwhelming bipartisan support for the law. The shift is approaching rapidly, he says, and goes beyond Medicare, too. 

Commercial payers generally follow Medicare's lead, many of which already have begun transitioning to value-based contracting, and in the coming years, "MACRA very quickly transcends from Medicare into the overall market" by counting private payer models toward its APM criteria, said Dr. Lockhart, an American Medical Association delegate. 

He adds the post-SGR transition "is not for the faint of heart, but the status quo is not going to be an option, regardless of any election or patient population. This is going to impact physicians' entire patient load at some point, and it's going to take an active and cooperative effort for physicians to look at what they are doing, and ask themselves: Is there a better or more cost-effective way to deliver good patient care? If not yesterday, then today would be the next best alternative to get started."

Better Footing

Medicare already implemented the first phase of the new payment legislation, a 0.5-percent increase in physician fees on July 1. Similar 0.5-percent annual increases will follow through December 2019. In a July proposal to update 2016 Medicare payment policies, the Centers for Medicare & Medicaid Services (CMS) also announced that it would start taking comments on implementation of MIPS and APMs as part of "a broader effort … to move the Medicare program to a health care system focused on the delivery of quality care and value."

Generally, TMA leaders agree MACRA represents at least a marginal improvement over what physicians faced under the old SGR regime — not the least of which was an impending 21-percent pay cut in 2015 preceded by a decade of similar payment uncertainty — and under the Affordable Care Act and other legislation, which created a slew of administratively confounding and overlapping penalty-based quality programs.

"From a political standpoint, it means the TMA and AMA no longer have to spend our political capital to avert the cut," eliminating a huge hurdle, says Donna Kinney, director of TMA's Research and Data Analysis Department. The law also somewhat streamlines Medicare's existing quality programs and offers physicians an upside for good performance. 

MACRA still has its shortcomings, Ms. Kinney says, chief among them, the fact that the annual payment updates, which freeze from 2020 to 2025, fail to keep up with health care cost inflation. 

"But we have time to fix it, and the $60 billion needed to get there, we can get in little bites," Ms. Kinney said. The big hurdle was the $144 billion needed to eliminate the SGR, "and we never have to jump that hurdle again." 

Two Pathways

In SGR's place, MACRA created two payment tracks that get rid of at least some problems with the old system, Ms. Kinney adds.

As of 2019, MIPS consolidates the multitude of existing Medicare quality reporting programs: the Physician Quality Reporting System (PQRS), meaningful use of electronic health records (EHRs), and the value-based payment modifier. (See "Your Guide to Medicare Value-Based Care," April 2015 Texas Medicine, pages 26-34.) 

Whereas the ACA shifted all of the incentives in those programs into penalties for noncompliance — up to 11 percent — MIPS replaces those with both bonuses and penalties ranging from 4 percent in 2019 to a 9-percent cap in 2022 and beyond.

Physicians will receive a single MIPS score based on quality (30 percent); resource use, or cost (30 percent); and EHR use (15 percent) standards derived from the existing programs, but with some improvements: funding to develop new quality measures with input from state and national medical organizations; potential adjustments for patients with more severe health conditions or those who don't follow doctors' orders; and quality scores based on preset targets versus peer rankings. 

A new fourth clinical practice improvement category (15 percent) gives credit for practice enhancements in several areas, including: 

  • Expanded access (e.g., providing after-hours care);
  • Population management (e.g., monitoring patient health by using registries);
  • Patient engagement (e.g., self-management training);
  • Patient safety and practice assessment (e.g., use of checklists); and 
  • Transition to or participation in an APM.

Ms. Kinney says MACRA "was written to give doctors options," and CMS' recent proposal asks for input to further define clinical practice improvement activities.

CMS also has yet to fully define APMs per MACRA. But Dr. Lockhart says bigger incentive payments strongly suggest Medicare favors participation in the models, in which practices assume some level of financial risk for their patient population, in addition to following quality, cost, and EHR standards similar to MIPS. 

From 2019 to 2024, practices can earn an annual lump-sum bonus of 5 percent of their total Medicare payments, with other incentives in 2026 and beyond.

MACRA also strives to make the APM track more accessible, Dr. Lockhart says, by allowing for a wide variety of models, including specialty-focused models, those geared toward smaller practices, and multipayer projects. Also, a certain percentage of APM patients can be covered by non-Medicare payers.

CMS' Innovation Center touts a growing list of potentially qualifying APMs that can include, but go well beyond, ACOs. Examples are: 

  • Bundled payments for care improvements.
  • Primary care transformation models, such as medical homes and coordinated care demonstrations for patients with chronic conditions.
  • Initiatives focused on dual-eligible Medicare-Medicaid patients, including a Texas demonstration project already underway. (See "Dual Dilemma," May 2014 Texas Medicine, pages 33-39.) 
  • Initiatives to accelerate the development and testing of new payment and service delivery models, such as for specific patient populations or specialties.
  • Initiatives to speed the adoption of best practices, such as the Million Hearts campaign to prevent 1 million strokes and heart attacks over five years. (See "Saving 1 Million Lives," June 2015 Texas Medicine, pages 39-44.)  

According to The Physicians Foundation report, the APM pathway is "less fleshed out in the law and provides even greater areas of debate and uncertainty, but also, perhaps opportunity."

Getting Ready

Dr. Lockhart says MACRA will hopefully "lead to a better definition of value-based care, when it hasn't always been clear how to get there." Although some predict more consolidation as a result of the new law, he says there are ways for physicians to join forces without losing autonomy. 

The MIPS and APM tracks, for instance, allow room for small physician groups to loosely join in "virtual" organizations — rather than legal entities like ACOs or professional associations — to combine the groups' performance, data, and resources, and better generate efficiencies and improvements. A virtual organization might be a regional, clinically integrated network or an at-risk independent practice association, for example, Dr. Lockhart explains. 

Small physician groups "make up a pretty high percentage of practices in Texas, and the biggest advantage they have is TMA PracticeEdge to help create those kinds of economies of scale," he said.

MACRA also provides $100 million over five years for state quality improvement organizations — like the TMF Health Quality Institute in Texas — regional extension centers, and other entities to provide small and rural practices with technical assistance to implement MIPS or transition into APMs.  

Physicians still have time to decide which pathway to choose, "but not a lot of time," says national health care consultant and BizMed cofounder Margalit Gur-Arie.

At the very least, she recommends physicians maintain their participation in PQRS and meaningful use and start tracking quality measures — not just report them — to prepare for MIPS. Even now, she says, doing nothing will result in financial penalties.  

Clinical practice improvements can help practices position themselves for MIPS or long-term APM participation, Ms. Gur-Arie adds. Achieving medical home recognition by the end of 2016, for example, "prepares you for either one," she said, adding many private payers now offer medical home incentive payments. Nor should existing medical homes let their certification expire because renewal also takes time and planning. Practices already participating in an ACO, on the other hand, are on the APM track. Those interested should start planning and researching now. 

"And if you are on the fence, get off the fence and do it now. No matter what you choose, this is how you will be expected to operate in the future," Ms. Gur-Arie warns.

"Not All Wine and Roses"

The Physicians Foundation report echoes that message, calling the enactment of MACRA "the harbinger of even deeper systemic changes to come in health care," and pointing out that "the government's work on both paths (MIPS and APMs) will proceed simultaneously, meaning that physicians must address current changes that are the building blocks for longer-term models."

The foundation and state medical societies stand ready to help physicians face the challenge, as federal regulators have a heavy hand in shaping and carrying out the policy. "However, the medical community has a shared obligation to ensure patients' health care needs and medical practice realities are reflected in new Medicare rules and requirements," report authors write.

CMS has only until Nov. 1, 2016, to complete the majority of MACRA rulemaking, which means physicians "have a lot of work to do," said Dr. Valenti, an obstetrician-gynecologist in Denton. "Getting rid of the [SGR] uncertainty was very important. But it's not all wine and roses now."

Organized medicine's vigilance and advocacy will turn to a number of key areas outlined in The Physicians Foundation's Medicare Watch List

Topping the list are long-term payment adequacy and factors used to calculate performance-based payment adjustments. From 2020 to 2025, there is no update to fee-for-service payments, "and that's no good," Dr. Valenti said. 

He points to an April finding by CMS' own chief actuary that while MACRA "eliminate(s) the significant and immediate problems with the current SGR formula approach," expiring bonus payments and fixed payment updates "do not vary based on economic conditions, nor are they expected to keep pace with the average rate of physician cost increases." The memo also expresses concern over the government's assumptions that APM participation will increase, when more physicians could choose MIPS, and how that ratio will impact future payment adequacy and access to care.  

Meanwhile, "committees are being formed, and we will want to have input on those," such as a technical advisory committee on physician-focused payment models, Dr. Valenti said. "One of the caveats here is, in value-based models, practices have to take into account risk. These models could be saving money, but that assumes everybody has the same patients, when some practices have very high-risk or noncompliant patients. 

"And a lot of physicians don't realize that Medicare data are going to be able to be bought and sold and used," Dr. Valenti warns. "These are all areas where rulemaking is going to be very important. These issues are very real. Physicians have to be aware of them and act on them. And medicine needs to put forth its best and brightest. Our job is not done." 

Amy Lynn Sorrel can be reached by phone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.


TMA PracticeEdge

TMA PracticeEdge is a new services company TMA developed to bring physicians the technology and expertise they need to take advantage of new health care payment models. TMA PracticeEdge provides Texas physicians with real options to design their future. Working with strategic partners, TMA PracticeEdge offers physicians a unique toolkit of accountable care organization services backed by the trusted TMA brand. 

For more information, visit, email info[at]tmapracticeedge[dot]com, or call (888) 900-0334.

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