In April of 2015 President Obama signed the Medicare Access and CHIP Reauthorization Act also known as MACRA into law. CHIP stands for Children’s Health Insurance Program. Basically in a nutshell MACRA is going to change Medicare’s traditional fee-for-service method of reimbursement into a value based methodology. This could have a huge impact on how providers are reimbursed.
MACRA’s implementation will begin in 2019 but it will be based on the reporting year 2017. The problem is that many in the billing community do not understand what MACRA is or how it will impact their practice. Even though the implementation is still two and a half years away, the data that will be used to determine a provider’s fee schedule will be based on information reported in 2017 which is only six months away.
Many providers and their staff are totally unaware of the changes that will be implemented. These changes can greatly affect their cash flow and income. Ignoring MACRA could be a costly mistake.
So what exactly is MACRA? Basically the government wants to reimburse providers based on quality of care, not quantity. Currently providers are reimbursed on a fee for service basis. They see a Medicare patient and they are reimbursed for that service based on the Medicare fee schedule. The fee schedule amounts are determined by the SGR formula or Sustainable Growth Rate. MACRA will replace the SGR formula. Physicians will no longer be reimbursed based on volume of patients but on value of care.
Experts estimate that there are billions of dollars wasted due to wasteful, redundant and inefficient care. The SGR formula became too difficult to manage and needed to be replaced. MACRA will basically allow each provider to have an individual fee schedule based on their performance. Under MACRA providers will have two options:
Option 1: MIPS or Merit Based Incentive Payment System. MIPS combines parts of PQRS (Physician Quality Reporting System), VM (Value based payment modifier) & EHR (Electronic Health Records) incentive program into one program. Most physicians will be reimbursed based on MIPS.
Option 2: APM or Alternative Payment Model. APM provides ways to pay health care providers for the care they give to Medicare beneficiaries by sharing the risk. Accountable Care Organizations (ACOs), Patient Centered Medical Homes, and bundled payment models are examples of APMs. From 2019-2024 health care providers that qualify for APMs will receive a lump-sum incentive payment.
Most Medicare providers will fall under Option 1 or MIPS. There are four components of MIPS:
1. Quality – PQRS (50%)
2. Advancing Care Information (ACI previously known as EHR/meaningful use) (25%)
3. Clinical Practice Improvement Activities (CPIA) (15%)
4. Resource Use (10%)
MIPS defines the financial impact on providers by creating a composite score for each provider. The composite score will be between 1 and 100 and will be based on the four components above. This composite score will lead to each provider having their own individual fee schedule.
Composite scores will be posted on a CMS (Centers for Medicare and Medicaid Services) public website know as Physician Compare. CMS hopes that this will motivate providers by having an effect on their reputation.
Providers who are not reporting PQRS measures receive a 2% penalty for 2016. Many providers choose to accept this penalty. Once MACRA is implemented PQRS could have a greater impact on a provider’s reimbursement. PQRS counts for 50% of a provider’s composite score.
The following is a chart of possible payment adjustments for providers based on their composite score:
• 2019: +/- 4%
• 2020: +/- 5%
• 2021: +/- 7%
• 2022: +/- 9%
Based on this chart, a provider with a low composite score may receive a payment adjustment of – 9%. This could have a big impact on a provider’s income.
Currently MU or Meaningful Use is an all or nothing program. This means that a provider either passes, or meets the requirements for Meaningful Use of EHR, or they fail by not meeting those requirements. Under MACRA, MU or ACI will no longer be all or nothing. In the past, a user with 31% was just as compliant as user with 75%. Under MACRA ACI (previously MU) will account for up to 25% of a provider’s composite score. The provider will receive credit for the amount of Meaningful Use they demonstrate.
The higher a provider’s composite score, the more they will be reimbursed for services provided to Medicare beneficiaries. Provider can choose to suffer the penalties but a low composite score will result in low reimbursement for services. They can also choose to mitigate or reduce the penalties by reporting PQRS and demonstrating meaningful use to increase their composite score. They can also compete for incentive dollars to improve their fee schedule.
From 2015 to 2019 there will be an automatic 0.5% increase to the current Medicare physician fee schedule. However this increase can be offset by penalties. 2019 to 2025 the reimbursement will be determined by MIPS or APM depending on what option the provider chooses.
It is urgent that providers prepare now so that their reported information in 2017 will not hurt their income in 2019. They will have to decide how much time and energy their office will devote to the process. Software companies are trying to make it easier for providers to reduce penalties by doing back end work to help reporting PQRS and ACI.
Many providers are still not reporting through the PQRS system. The current penalty does not impact them enough to make a difference. Many are also not demonstrating meaningful use. With MACRA PQRS and MU will count for up to 75% of their composite score so it will not be so easy to ignore.
In order to limit the financial impact of MACRA providers will have to report using PQRS, demonstrate MU or ACI, and balance compliance with financial prudence. It is important to start preparing now.