In March, the Medicare Payment Advisory Commission (MedPAC) released its biannual report to Congress on matters affecting the Medicare program. MedPAC is an independent congressional agency that advises Congress on issues relating to Medicare.

Though the March report includes several policy proposals, one of the most significant is MedPAC’s recommendation that Congress eliminate the Merit-based Incentive Payment System (MIPS) passed as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The report formalizes a vote the Commission took back in January to recommend repealing MIPS and replacing it with a voluntary value program (VVP) that MedPAC predicts would better achieve the goals put forth in MACRA. Continue Reading MedPAC Recommends Significant Changes to MACRA

On April 27, 2016, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that would put in place key parts of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA impacts a number of laws and government initiatives that have been implemented over the past two decades affecting physician reimbursement, and in doing so, will fundamentally change the way that Medicare reimburses physicians.

The MACRA Proposed Rule contains two key initiatives: Merit-Based Incentive Payment Systems (MIPS), which partially repeals the meaningful use program for electronic health records, and alternative payment models (APMs). In this first of three blogs we discuss the MACRA Proposed Rule generally and provide an overview of MIPS.

BACKGROUND AND OVERVIEW

Elimination of the Sustainable Growth Rate

One of MACRA’s most notable features is its elimination of the Sustainable Growth Rate (SGR) formula which was introduced in 1997 in an attempt to rein in the skyrocketing costs of physician services. Under the SGR, Medicare payments for physician services were supposed to be adjusted annually based in part on changes in the United States gross domestic product. Over the past several years, application of the SGR formula would have resulted in annual decreases to physician payments were it not for recurring legislative “patches” that implemented temporary delays in the application of the SGR formula.  MACRA permanently repeals the SGR formula and replaces it with modest increases in Medicare physician fees. The additional cost to Medicare resulting from the repeal of the SGR is to be offset in part by the increased reliance on APMs and on the implementation of other cost-saving measures.

The Current Physician Reimbursement System

Physician services furnished to Medicare beneficiaries are generally reimbursed on the basis of the lesser of actual charges or the amount determined under the Medicare Physician Fee Schedule. Currently and through 2018, physician reimbursement under this system depends on the physician’s participation in, and performance under, three separate programs: (1)  the Physician Quality Reporting System (PQRS), under which eligible physicians who do not satisfactorily report required quality measure data are subject to a reduction in their Medicare fees; (2) the Medicare Electronic Health Record (EHR) Incentive Program (also known as the “meaningful use” program), under which physicians who fail to achieve meaningful use of EHR systems will incur a reduction in their Medicare fees and (3) the Value-based Modifier Program, which provides incentive payments to physicians based on the quality of care they furnish compared to their cost of care during a performance period. Continue Reading CMS Releases Proposed Rule for MACRA Implementation – Overview and Merit-Based Incentive Payment Systems (MIPS)

On Thursday April 16th, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). Pub.L. 114-10. In two previous posts, we discussed MACRA’s repeal of the Sustainable Growth Rate formula (the “SGR”) and physician payment reform, and the payment provisions and offsets established by MACRA. This third post will detail the Program integrity and fraud and abuse provisions of MACRA.

Section 101(e)(7): Promoting Alternative Payment Models – Study and Report on Fraud Related to Alternative Payment Models under the Medicare Program

Buried within Section 101, which is the provision repealing the SGR and authorizing various reforms to physician reimbursement, Subsection (e)(7) includes a required study and report on fraud related to alternative payment models under the Medicare Program. This study will be conducted by the Secretary of the Department of Health and Human Services (the “Secretary”) and examine the applicability of Federal fraud prevention laws to the items and services furnished to Medicare beneficiaries for which payment is made under an alternative payment model defined by MACRA. In addition, this study will identify aspects of those same alternative payment models that are vulnerable to fraudulent activity and consider the implications of waivers of federal fraud prevention laws in support of such alternative payment models.

Within two years of the enactment of MACRA, the Secretary is required to submit to Congress a report providing the results of this study, which will include recommended actions to reduce the identified vulnerabilities of the alternative payment models and, as appropriate, recommendations from the Inspector General of the Department of Health and Human Services (“HHS”) regarding possible changes in Federal fraud prevention laws to reduce those vulnerabilities.

Section 104: Empowering Beneficiary Choices Through Continued Access to Information on Physicians’ Services

Section 104 requires that beginning in 2015, the Secretary make publicly available on an annual basis, through a searchable database, information regarding physicians and, as appropriate, other eligible professionals (which are defined to include physicians, physical or occupational therapists, qualified speech-language pathologists, qualified audiologists, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals) on items and services furnished to Medicare beneficiaries.

Section 104 of MACRA requires the Secretary to provide at least the following types of information:

  1. The number of services furnished to beneficiaries of Medicare Part B by physicians or other eligible professionals (which may include information on the most frequent services furnished or groupings of services);
  2. Submitted charges and payments for services; and
  3. A unique identifier for the physician or eligible professional that is available to the public (e.g., NPI number).

Additional requirements of Section 104 include that the information made available under this Section must be searchable by at least:

  1. The specialty or type of physician or other eligible professional;
  2. Characteristics of the services furnished (e.g., volume or groupings of services); and
  3. The location of the physician or other eligible professional.

Beginning in 2016, the Secretary is required to integrate the information made available under this section on the Physician Compare website hosted by the Centers for Medicare & Medicaid Services (“CMS”).

This required publication of data will be similar to the 2012 Medicare Provider Utilization and Payment Data information made public by the Secretary in April 2014. As we discussed in a previous post dated April 10, 2014, HHS’s original and historic release of Medicare payment data last year was the result of multi-year litigation, which resulted in a federal judge overturning an injunction that had been in place since the late 1970s prohibiting HHS from disclosing information about Medicare payments to individual physicians.

Even recognizing the general merits of annual publication of this type of data, the information has the potential to cause confusion. For example, certain physicians, notably oncologists and retinal surgeons, dispense drugs through their practices. Because Medicare pays these physicians directly for these drugs, without a detailed look at the CPT codes in the published data, it appears at first glance that these physicians receive disproportionately large incomes from treating Medicare patients.

Another example of problems caused by this data is the publication of charges. Only those who follow reimbursement closely understand that charge data is almost meaningless. This is because very few patients pay providers based on charges, but rather payment is typically based on a fee schedule set by third party payors. As a result, providers set their charges based on a variety of measures. In some cases charges are very close to the payment rates, and in some cases they are set well above payment rates in order to recoup from a small number of charge-paying patients losses the provider incurs from private payor reimbursement. All this appears to have been irrelevant to Congress as it has now mandated annual publication of providers’ charge data. Continue Reading MACRA: Program Integrity and Fraud and Abuse Provisions

This is the second post in our continuing series on the Medicare Access and CHIP Reauthorization Act (MACRA). Pub.L. No: 114-10. In addition to repealing the Sustainable Growth Rate (SGR), which was covered in our April 20th post, MACRA includes several other payment provisions and offsets totaling $39.5 billion in savings over ten years. This blog post highlights some of the key payment provisions and offsets in Title II and IV of MACRA:

Section 201: Extension of Work GPCI Floor

The Geographic Practice Cost Index (GPCI) adjusts Medicare payments for geographic variations in physicians’ costs of providing care. There are three GPCIs: Malpractice, Physician Work, and Practice Expense. MACRA would extend the 1.0 floor on the Physician Work GPCI until January 1, 2018. The 1.0 value represents the average across all geographic areas. By extending the 1.0 floor the GPCI extension would prevent cuts of up to 3 percent in areas with an index of less than 1.0. This would be in the localities where the labor cost would be lower than the national average or 1.0.

Section 204: Extension of Increased Inpatient Hospital Payment Adjustment for Certain Low-Volume Hospitals

MACRA also extends an inpatient hospital payment adjustment for low-volume hospitals through fiscal year 2017. A low-volume hospital is defined as a hospital with less than 1,600 Medicare discharges and more than 25 miles away from any nearby hospital. Section 1886(d)(12) of the Social Security Act requires adjustment for these hospitals, which is now extended through fiscal year 2017.

Section 205: Extension of the Medicare-Dependent Hospital (MDH) Program

Under the MDH program, Congress has provided a special payment rate to hospitals qualifying as a MDH hospital. To qualify, a hospital must be located in a rural area, have 100 beds or less, not be the “sole community hospital,” and have at least 60 percent of inpatient days or discharges covered by Medicare. They are paid on a blend of current the prospective payment system and cost. MACRA extends this favored reimbursement status through fiscal year 2017.

These provisions come as a relief to many rural hospitals and providers, which would have seen a decrease in their reimbursement if these provisions were not extended.

Section 221: Extension of Funding for Community Health Centers, the National Health Service Corps, and Teaching Hospitals

Funding for the Community Health Center (CHCs) program and the National Health Service Corps (NHSC) was set to expire at the end of September 2015. MACRA extends funding for these programs through fiscal year 2017, keeping the funding amounts for fiscal year 2016 and 2017 at the current fiscal year 2015 level. It also extends funding through fiscal year 2017 for the Teaching Health Center Graduate Medical Education Payment Program, which expanded residency training in community-based settings. It provides $60 million for direct and indirect graduate medical education (GME) payments to teaching health centers. Further, MACRA subjects the 2016 and 2017 funding to Public Law 113-235, which restricts the use of these funds for abortion services. Continue Reading Beyond SGR – MACRA Provides Additional Payment Provisions and Offsets

On April 16, 2015, President Obama signed into law, the “Medicare Access and CHIP Reauthorization Act of 2015” (MACRA), ending annual temporary patches and massive lobbying efforts since the late 1990s to prevent significant reimbursement cuts for physicians serving Medicare beneficiaries caused by the so-called Sustainable Growth Rate (SGR) formula.  At the end, 392 Members of the U.S. House of Representatives and 92 Members of the U.S. Senate voted in favor of permanently replacing the Sustainable SGR formula in favor of a new system touted as promoting quality over volume.

MACRA also contains several provisions affecting reimbursement to other Medicare providers, program integrity, and fraud and abuse, as well as a mix of other important provisions including extension of the Children’s Health Insurance Program (CHIP).  We will address these provisions in subsequent blog posts.

From the SGR “Patch” to MACRA

Health policy experts have long called for an end to the annual, or even sometime monthly, ritual of “patching” the SGR to avoid reimbursement cuts triggered by unsustainable growth in Medicare spending.  While lawmakers were concerned about the unsustainability of the Medicare program due to costs that outpaced other economic indicators virtually every year, the notion of significantly cutting physician pay put legislators in an untenable situation, especially as the potential “fiscal cliff” increased well into double digit cuts.

The inevitability of Congressional intervention to hold physicians harmless from a SGR cut rose to new heights in 2013 during the annual rate-setting exercise for Medicare Advantage plans.  The Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) was overruled amidst intense lobbying, including from senior members of the Senate, prior to the publishing the FY 2014 Medicare Advantage rule.  The Actuary’s office had taken the position that the Medicare Advantage rates should be set on the premise that a SGR cut was actually taking place because the law mandated an automatic cut and Congress had not yet stepped in to patch it.  In essence, any decision that relied on the assumption of the SGR cut actually taking place was now a matter of academics and not reality.

Although the SGR is now in the history books, it’s safe to assume that new tensions will arise as the need to control growth in Medicare spending continues amidst a rapidly evolving health care industry.  Akin to how the ACA acted as a catalyst to nationalize certain payment and delivery reform trends, MACRA is likely to accelerate the current movement in health care towards value-based systems.  Thus, stakeholders and policymakers are likely to focus even more on the evolution of payment and delivery reform initiatives due to their increasing relevance and scale.

The New Landscape for Medicare Cost Containment

The SGR tied Medicare physician spending to Gross Domestic Product growth in the overall economy, providing a benchmark that was supported at the time by health care economists.  In reality, however, this measure had little to do with costs and quality in the health care system, and was not sustainable.  MACRA replaces the SGR with a combination of automatic increases for physicians and incentives for them to participate in a variety of pay-for-performance programs and alternative payment models (e.g. medical homes and accountable care organizations).

Between 2015 and 2019, physicians in the Medicare program will receive an annual update of 0.5 percent.  The base reimbursement rate will then hold steady at 2019 levels through 2025, while giving physicians the ability to supplement their reimbursement through payment adjustments in the newly created “Merit-Based Incentive Payment System” (MIPS) and participation in alternative payment models (APMs).  Finally, starting in 2026 and beyond, physicians who receive a significant share of their revenues through an APM are eligible for one percent annual increases as opposed to 0.5 percent updates for those not participating in APMs.

New Reimbursement Pathways
 2015 – 2019  0.5% annual update
   2019 – 2025 0% annual update (MIPS)Negative payment adjustment capped at 4% – 9% (depending on year) for lowest performers.  Positive payment adjustment capped at 3x the respective cut amount for that year for highest performers. (APMs)Automatic 5% annual bonus for participation in qualifying APMs (exempt from MIPS and some EHR “meaningful use” requirements).
 2026 – 0.5% annual update (APMs)1% annual update (in lieu of 0.5% update)

One way to view the new future for Medicare physician cost containment efforts is that it better aligns with existing initiatives to control costs within the context of improving quality.  For example, from 2019 until 2025, reimbursement rates are held constant with no automatic increases or decreases.  This leaves most physicians with two choices: 1) be subject to payment adjustments through MIPS, or 2) participate in qualifying APMs.

MIPS aims to streamline three incentive programs: 1) the Physician Quality Reporting System (PQRS); 2) the Value-Based Modifier (VBM); and 3) Meaningful Use for electronic health records.  Assessments that eventually make up a physician’s composite score will be based on four categories: 1) quality; 2) resource use; 3) meaningful use of electronic health records; and 4) clinical practice improvement activities.

Those physicians with a composite score in the bottom quartile, as compared with a predetermined performance threshold (based on average of last year’s MIPS scores), will receive reimbursement cuts up to the cap set for each year (4% in 2019, 5% in 2020, 7% in 2021, and 9% in 2022).  Negative and positive payment adjustments will be ratcheted up or down in a proportional manner for those scores closer to the threshold.

For physicians with a composite score above the threshold, they will receive a positive payment adjustment up to a maximum of three times the annual cap for the negative adjustments.  Additionally, physicians receiving the top 75% of all scores above the threshold will receive an additional positive payment adjustment, allocated using a linear distribution formula.  In essence, this allows for a greater number of physicians to be eligible for incentive payments, even if the vast majority of them are above the threshold score. Continue Reading With SGR Repealed, Replacement Policy Creates New Priorities

On March 19th, Representative Michael C. Burgess, M.D. (R-TX) and Senate Finance Committee Chairman Orrin Hatch (R-UT) unveiled a bipartisan plan to repeal and replace the sustainable growth rate (SGR) physician payment system for physician reimbursement under Medicare. Without reform or another patch, physicians would face a close to 25 percent cut in payments when the current patch expires at the end of this month.

The SGR replacement plan repeals the SGR and institutes a 0.5 percent payment update each year for five years following repeal while also seeking to incentivize the use of alterative payment models (AMPs) and tweaking the fee-for-service (FFS) system. In addition to addressing meaningful use, remote monitoring, and interoperability, the SGR replacement plan deals with telehealth in several ways.

Continue Reading Proposed Replacement of Sustainable Growth Rate Addresses Telehealth

ML Strategies has posted its weekly Health Care Update. This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.

This week’s Health Care Update focuses on bipartisan Congressional efforts to permanently replace the Medicare Sustainable Growth Rate (“SGR”), commonly known as the “Doc-Fix.” A deal to replace the SGR will likely include a reauthorization of the Children’s Health Insurance Program (CHIP). The Health Care Update also highlights the recently updated health insurance marketplace enrollment numbers and the announcement by the Centers for Medicare & Medicaid Services (“CMS”) of the Next Generation ACO  model. The announcement of the Next Generation ACO model was also recently highlighted in a blog post by my colleague at ML Strategies, Andy Shin.

Click here to read this week’s Update.

 

ML Strategies has posted its weekly Health Care Update. This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.

Last week, Congressional leaders held hearings in advance of their next push to pass legislation that would permanently replace the Medicare physician payment formula known as the SGR.  In other news, the Obama Administration announced the latest Exchange enrollment numbers at approximately 7.1 million consumers.  Also, policymakers are asking the President to consider proposals in the bi-partisan 21st century cures initiative as they consider future regulatory reform measures.

Click here to read this week’s full Health Care Update.

Written By: Andrew Shin, Alex Hecht and Steve Weiner

In a significant development, the House Ways and Means Committee and Senate Finance Committee each advanced its version of Sustainable Growth Rate reform legislation on Thursday, December 12.  Thus, early next year, lawmakers in both chambers are poised to consider “Doc-Fix” legislation that, if the differences can be reconciled, would replace the Sustainable Growth Rate methodology for physician reimbursement under Medicare.

Background

Shortly following the government shutdown in October, we wrote that the chances for Congress finally to pass legislation permanently replacing the flawed Medicare physician cost control formula known as the “Sustainable Growth Rate” (SGR) were greater than at any other time in recent history. We further noted that following the government shutdown in 1996 Congress was able to come together to pass several significant pieces of legislation, including the FDA Export Reform and Enhancement Act of 1996 and the Health Insurance Portability and Accountability Act (HIPAA), among others.  With regard to SGR, this may happen again.  For full background on the SGR, please refer to our Alert published on October 24.

Thursday’s committee votes set the stage for consideration and votes on both the House and Senate floors in Q1 of 2014 – the closest both chambers have come to passing permanent SGR replacement legislation.  Another key victory for physician groups came in the form of a budget deal negotiated by Republican Paul Ryan, Chairman of the House Budget Committee and Senator Patty Murray, Chairwoman of the Senate Budget Committee.  Continue Reading Congress Moves Toward Permanent “Doc-Fix”