How Will Providers Respond to MACRA and What Does It Mean for Provider Participation in Medicare Advantage?

Beyond the Affordable Care Act and related regulatory reforms, pending implementation of MACRA (the Medicare Access and CHIP Reauthorization Act) will influence or influence further physicians and other eligible professional’s decision making in participating in pay for performance or Alternative Payment Model (APM) arrangements.  That is the extent to which MACRA financial incentives cause providers to participate in CMS-defined APMs, choose to create an APM that satisfies MACRA financial risk criteria or choose to avoid or substantially avoid MACRA and contract with, or create their own, Medicare Advantage (MA) plan.

Here are five scenarios that will explain provider responses to MACRA.   

1. As of September 8, Fee for Service (FFS) Medicare providers uninterested in participating in a MACRA can choose to opt out of both MACRA’s Merit-Based Incentive Payment System (MIPS), the default MACRA program, and the Alternative Payment Model (APM) pathway in 2017.  Per CMS Acting Administrator Andy Slavitt’s September 8 blog post, providers that choose to submit “some data” can avoid a negative MIPS payment adjust in payment year 2019.1   Likely a significant percent of providers will make this decision since they have not to date participated in the MIPS’ predecessor programs, i.e., they are either unwilling or unprepared to participate.  For the 2016 payment year participation in the Value-Based Payment Modifier (VM) program, a precursor to the MIPS, was only 60 percent.  The remaining 40 percent, or 5,400 provider groups, chose not to submit their Physician Quality Reporting System (PQRS) data and incurred a two percent Part B payment cut.2   Non-participation will continue, if not increase, at least in the near term also because survey data shows 80 percent of providers either have not heard of MACRA or are not familiar with its requirements.3

2. Under the May 9 proposed MACRA rule all non-APM pathway providers would have received a MIPS score.  Since MIPS is zero sum or cost neutral, providers unwilling to submit their MIPS data would artificially inflate the MIPS scores of those that did.  That is more providers than expected would receive a positive, up to a maximum of four percent, Part B payment update in payment year 2019.  (Payment updates increase to a maximum 9 percent beginning in payment year 2022 and these maximums can triple for superior performance.)  Track 1 ACO providers, likely to be defined as non-APMs in the final MACRA rule, would have likely been advantaged under MIPS since they comparatively will have had more quality improvement and spending efficiency experience.  (In theory, these ACO providers can receive both ACO shared savings and a positive MIPS update.)  If non-participation, however, proves epidemic in 2017, participating providers will receive lower positive MIPS scores since there will be far fewer negative MIPS scores to offset them.

3. Providers that participate in a CMS approved APM and also meet an APM participation threshold level, thus qualifying to be an “Advanced APM” and also a “Qualifying Provider,” are eligible under MACRA to receive an annual five percent lump sum bonus payment.  CMS estimates four to 11 percent of MACRA eligible professionals will initially qualify as APM participants.  Congress clearly intended the bonus to incent providers to more rapidly adopt APMs.  (Though in its fourth year, only five percent of ACO program participants are in an at risk track.)  The incentive payment is particularly attractive because providers receive the bonus even if they are not financially successful APM participants, that is the bonus would effectively offset some or all repayment.

4. Providers also have the opportunity to create their own APM and thereby qualify for the five percent bonus via the MACRA-created Physician Focused Payment Model Technical Advisory Committee (P-TAC).  These alternative APMs may include non-Medicare payers and non-physician services.  What CMS will require in these APM submissions and how the P-TAC will facilitate the process will be determined in the final MACRA rule.  To what extent provider groups, particularly specialty providers, will participate and be successful is an open question.

5. The impetus for MACRA Title I was to replace the 1997-enacted Sustainable Growth Rate (SGR) formula.  As Part B reform MACRA has little to do with Part C or the Medicare Advantage (MA) program.  The legislation recognized, albeit nominally, MedPAC’s 2014 recommendation to synchronize payment and quality performance policies across Medicare program silos by requiring the DHHS Secretary to submit to Congress a study examining the feasibility of incorporating APMs in MA.  Because of the “non-interference clause,” the July report concluded that the Secretary is prohibited from dictating MA plan provider payment terms, i.e., MA plans “must be the primary drivers,” the report concluded, “for integrating APMs into the MA program.”4   In the proposed rule CMS did identify MA in its “all payer” APM model that would begin in performance year 2019.  This would mean MA beneficiaries served, or MA reimbursements received, would help providers meet their APM participation thresholds but only if the provider’s agreement with the MA plan met similar APM financial risk criteria.  Whether MA plans make known provider payment agreement terms is also an open question.

Providers Are Moving to Medicare Advantage

Regardless of whether or not the MA program becomes a part of the MACRA APM pathway, providers have been enthusiastically participating in MA.  This is made evident by the fact MA demand has increased by 50 percent, or to over 18 million beneficiaries, since the ACA’s passage.  MA enrollment now accounts for approximately one-third of all Medicare beneficiaries.  On the supply side, MA growth is more attributable to provider-sponsored plans than commercial insurers.  Between 2012 and 2016 well over 50 percent of plan growth has been attributed to hospitals or health systems.  Of all MA enrollees, 19 percent are now in provider-sponsored plans.5   Several reasons explain the provider move to MA.  They have grown sufficiently large so they can.  Compared to alternative models, for example, the ACO program, MA has advantages in financial and quality performance benchmarking, risk adjustment, beneficiary assignment, and marketing.  For these reasons success under the ACO model has been difficult to achieve.  Participation in MA also allows providers to better manage their fee for service exposure.  MA participation could mitigate financial downsides associated with mandatory demonstrations such as bundled payments, or for those providers that choose not to participate in APM-defined bundled payment arrangements.

MACRA Could Offer Providers More Choices

In sum, what MACRA does is offer, at least in theory, more choices.  Substantial non-participation will likely continue, if not be guaranteed as of September 8, since solo and practices up to nine clinicians, that make up 30 percent of MACRA’s eligible clinicians, cannot compete.  According to CMS estimates, they are four to five times less likely to score a positive MIPS adjustment than practices with 100 or more eligible clinicians.6 They are also far less likely to participate in an at risk APM.  For the remainder of clinicians, the best MACRA play, at least in the near term, is to compete under MIPS.  Compared to the APM pathway there’s comparative upside, although now likely diminished, without any downside financial risk.  For those few providers already at risk, or confident they can succeed under risk, can, under the APM pathway, qualify for the five percent bonus atop of any APM financial performance reward.  Thinking literally outside the Part B box, providers have clearly signaled the best opportunity in Medicare is in MA whether or not that is in addition to Part B participation.

Final MACRA rule is expected to be Released by November 1st.

1. Andy Slavitt, “Plans for the Quality Payment Program in 2017: Pick Your Pace,” The CMS Blog (September 8, 2016), at: https://blog.cms.gov/2016/09/08/QualityPaymentProgram-PickYourPace/.

2. See: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianF….

3. Deloitte, “Are Physicians Ready for MACRA and Its Changes?” (2016), at: http://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/artic….

4. CMS, “Report to Congress, Alternative Payment Models & Medicare Advantage,” at, https://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/Downloads/R….

5.  Avalere, “Nearly 60 Percent of New Medicare Advantage Plans Are Sponsored by Healthcare Providers,” (January 26, 2016), at: http://avalere.com/expertise/managed-care/insights/nearly-60-percent-of-….

6.  See the Table 64 in the may 9 MACRA proposed rule at page 28375, at: https://www.gpo.gov/fdsys/pkg/FR-2016-05-09/pdf/2016-10032.pdf.