MACRA’s Quality Payment Program in 2018: What Hospitals Need to Know

The recent updates to the Quality Payment Program (QPP) under the Medicare Access and CHIP Reauthorization Act (MACRA) have important implications for both physicians and hospitals and therefore require careful attention from both these stakeholder groups.

The Centers for Medicare & Medicaid Services (CMS) issued the 2018 updates to the QPP on Nov. 2, 2017. The program includes both tracks of MACRA: The Merit-based Incentive Payment System (MIPS) and the advanced alternative payment models (APMs). Although the QPP affects only physicians’ Medicare Part B payments, understanding the 2018 QPP changes, and MACRA in general, is an important matter for hospitals for two reasons. First, a portion of hospital revenue will likely be affected by MACRA. Second, the success of hospitals is intertwined with the performance of the physicians they employ.

Provider (Un)Familiarity With MACRA

Passed with strong bipartisan support in 2015, MACRA advances the transition to value-based care by tying physician payment to a set of quality measures and cost saving goals, and encouraging providers to participate in APMs. Despite MACRA’s significance, many providers remained only marginally familiar with its requirements well into 2017, the first year of the QPP. In a survey of 621 physicians conducted by Leavitt Partners in June and July of 2017, almost half (47 percent) reported familiarity only with the name MACRA, but not with its requirements.

Despite this lack of familiarity, clinicians required to participate will be subject to a downside adjustment on their Part B claims in the associated payment year (2019) if they do not submit the required measures. This survey finding suggests that many providers required continued education on the details of MACRA. 

Impact on Hospital Revenue

Although MIPS imposes an upward or downward payment adjustment on Medicare Part B claims only, hospital revenue is not exempt from this adjustment. On average, acute care hospitals only receive half (50.4 percent) of their total revenue from inpatient services. The other half of the revenue comes from everything else that is not inpatient and is therefore vulnerable to a MIPS payment adjustment if it is covered under Part B. In the first payment year of MIPS (2019), CMS will apply a 4 percent upward or downward payment adjustment to a MIPS-eligible clinician’s or group’s final score. The adjustment increases gradually until 2022 and beyond when it is capped at 9 percent. Consequently, hospitals may want to move their providers from participation in the MIPS track into advanced APMs, which are exempt from the MIPS payment adjustment and which are better tailored to different providers’ specialties.

The Case for APMs

For healthcare providers or administrators to move away from fee-for-service (FFS) and toward value, there should be a strong business case. MACRA may provide that business case, because hospital noninpatient revenue will be affected by physicians’ Part B payment adjustments. In many ways, the FFS system is an understandably more familiar, comfortable, and profitable payment system for many health systems, and pursuing both payment and delivery reform in a value-based model is less financially certain. However, physician participation in advanced APMs may allow hospitals to respond to MACRA more proactively, rather than reactively accepting the Part B payment adjustments.

Nonetheless, even though a business case exists to move more providers into APMs, the number of APMs currently available is too small to account for all types of providers. For example, emergency department physicians and audiologists currently have no APMs in which they are eligible to participate. Additional APMs tailored to a broader array of specialties are needed to give all providers, including those employed by hospitals, a meaningful way to participate in the transition to value. The Physician-Focused Payment Technical Advisory Committee (PTAC) is actively engaged in reviewing physician developed models and recommending the most promising models for CMS’s review and implementation.  PTAC’s work was applauded in recent hearings by the House Energy & Commerce Committee, but concerns were raised that the U.S. Department of Health and Human Services (HHS) has yet to launch any of these models. Participation in advanced APMs benefits providers by lifting them out of the MIPS track and placing them in models that are more specific to the demands of their specialty.

With the 2018 final rule, CMS aims to reduce provider burden, increase flexibility, and continue to help providers transition gradually to MACRA’s full implementation in 2019.

Key MACRA changes for 2018 and 2019 are described below. The list is not comprehensive; see the QPP fact sheet or final rule for more details. CMS will accept comments on the final rule until Jan.1, 2018.

QPP Changes for Year 2

For 2018, changes to the QPP were made with respect to the eligibility threshold, the cost performance category, extreme and uncontrollable circumstances, physicians based in ambulatory surgical centers (ASCs) or hospitals, new APMS, and virtual groups.

Eligibility threshold. For 2018, providers will be subject to MIPS if they have 200 or more Medicare Part B patients or if they have $90,000 or more in Medicare Part B charges. This is a higher threshold than in 2017, when providers with at least 100 Part B patients or $30,000 in Part B charges were subject to MIPS. With the new threshold, CMS expects about 40 percent of U.S. providers will participate in MIPS.

Cost performance category. Cost will account for 10 percent of the MIPS overall performance score in 2018, an increase from 0 percent in 2017 but not yet the full weight of 30 percent set to take effect in 2019.

Extreme and uncontrollable circumstances. The score for the Advancing Care Information category will be reweighted to 0 percent for MIPS eligible physicians and groups affected by hurricanes, other natural disasters, or public health emergencies.

ASC- and hospital-based physicians. In accordance with the 21st Century Cures Act, ASC- and hospital-based MIPS eligible clinicians will have the Advancing Care Information category reweighted to 0 percent of their final score.

New APMs. Two new models were added to the list of approved advanced APMs: Vermont All-Payer ACO and the Medicare ACO Track 1+. CMS also will reopen the CPC+ and Next Generation ACO applications for greater participation in 2018.

Virtual groups. The 2018 QPP update finalizes details around virtual groups for MIPS-eligible clinicians in small or independent practices.

QPP Changes for Year 3

Changes to the QPP scheduled for 2019 address the facility-based reporting option, other-payer APMs, and full implementation of the QPP.

Facility-based reporting option. Starting in 2019, hospital-based and other facility-based physicians will be able to receive a MIPS Quality and Cost score that is based on the facility’s performance in another value-based purchasing program.

Other-payer APMs.CMS will consider for APM status those APMs with payers other than Medicare.

Full implementation of the QPP. CMS referred to 2017 as a “transition year,” and 2018 continues to gradually ramp up the program. CMS expects the full implementation of the QPP to begin in 2019, including the Cost category, which will account for 30 percent of the overall performance score.

The Business Case for Hospitals

Despite MACRA’s application to Medicare Part B, hospitals are not exempt from the impacts of MACRA. The more providers and administrators understand the requirements of MACRA and the changes in 2018 and 2019, the better positioned they are to succeed under the program. MACRA makes a strong business case for a hospital’s administrators to move providers into advanced APMs, thereby relieving the providers of MIPS reporting and payment adjustments and potentially better positioning the hospital for possible savings.