MACRA: A Step Forward in the Transition to Value-based Care by Aligning Hospitals & Physicians

In January 2015, the Department of Health and Human Services announced two major goals for value-based payments: 1) 30 percent of Medicare payments tied to quality or value through alternative payment models by the end of 2016, and 50 percent by the end of 2018; and 2) 85 percent of Medicare fee-for-service payments tied to quality or value by the end of 2016, and 90 percent by the end of 2018.
How does the Medicare Access and CHIP Reauthorization Act, or MACRA, address these goals? Similar to other payment models from the Centers for Medicare and Medicaid Services (CMS) (i.e. bundled payments and Accountable Care Organizations) MACRA includes two paths: the Merit-based Incentive Payment System (MIPS) and Advanced Payment Models (APMs). MIPS will likely be the route most practices take because it requires less investment in new technology and process changes than APMs, and it does not generate financial risk beyond penalties.
Through MACRA, CMS is putting clinicians on the path to value-based care in the same vein of hospitals and post-acute care providers. MACRA is not a change in direction, but rather a step forward in the evolution of tying provider reimbursement to performance. The good news is that the MACRA Final Rule provides some flexible options for participation in 2017 (the first performance year). There are three options under MIPS: 1) submit some data, avoid penalties; 2) submit 90 days of data, have the opportunity for small upside; or 3) submit a full year of data, have the opportunity of a potential bonus for high performance. These options allow practices to operate in accordance with their ability to comply with the regulations. Given the flexibility, it’s hard to formulate a good reason why eligible providers would elect not to participate in the new payment programs in 2017. As long as providers participate at some level, they can avoid penalties in 2019.
For hospitals, MACRA is an opportunity to strengthen relationships and capture market share by engaging physicians in a partnership as they transform their business model towards more value-based care. Hospitals have a vested interest in helping their clinicians, which include community physicians, succeed under MACRA. In fact, because hospitals are the largest employers of physicians in the United States, the reality is that physicians’ performance under MACRA has a direct financial and reputational impact on hospitals. (According to analysis released by the Physicians Advocacy Institute in September 2016, 38 percent of U.S. physicians are employed by hospitals and health systems.)
Hospitals that have a strategic approach to MACRA will have a distinct edge with the physician community. During a recent meeting with a health system CFO, I inquired about the organization’s MACRA strategy and asked how it was handling physician concerns. He responded that the organization was using MACRA as a “recruiting strategy.”

“We tell practices that we can relieve the cost and administrative burdens of MACRA compliance and help them increase their income by participating in our ACOs and allow them to qualify for APM,” he elaborated.
How can hospitals struggling to transform their own business models help physicians change theirs? Hospitals will need to up their game by developing internal expertise and concrete ideas to make improvements, including understanding cost structures, establishing evidence-based care paths and managing variation in cost and quality–not only internally, but across the care continuum. For hospitals with large physician practices, MACRA could be the mechanism to transform their organizations since it provides the opportunity to engage physicians in measurement, data and transparency efforts.

MACRA presents a significant opportunity for hospitals to create greater alignment with physicians, or risk losing market share to their competitors. For hospitals that are willing and able to invest in technology and infrastructure, MACRA represents an attractive, strategic opportunity to develop a clinically integrated network (CIN). As reimbursement continues to evolve, physicians will increasingly feel that they need the support of larger organizations to maintain their income. Small and midsize physician practices will likely be unable or unwilling to invest in the expensive information technology and infrastructure necessary to support data reporting and other requirements of MIPS and APMs. Hospitals can either offer options to help these physicians move towards value-based payments or risk them aligning with a competitor who does. Enabling physicians to join together to improve quality, reduce overall costs and earn more revenue through MIPS and APMs while remaining independent would definitely fill a market void, as private practice physicians realize the need to align with other providers to survive.

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