Sidebar: Small Physician Practices and the Merit-based Incentive Payment System (MIPS)

Small practices and those in rural or underserved areas will struggle to succeed under the Merit-based Incentive Payment System (MIPS), as defined in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). They will do so despite the efforts of the Centers for Medicare & Medicaid Service (CMS) to soften the impact of MIPS for such practices. In financial modeling of the effect of MIPS, it is reasonable to assume the cost of significant value-based payment infrastructure requirements (e.g., EHR, additional staff time) outweighs the potential payment adjustments from MIPS success.

Initially, negative MIPS adjustments will not be as great as pre-MACRA value-based program penalties on small practices that are not currently reporting on PQRS and lack a certified electronic health record technology (CEHRT). In the longer-term, however, MIPS adjustments, which increase to up to negative 9 percent, will exceed the value-based payment penalties, with the result that most small practices will likely be penalized under MIPS.

This effect will not be universal. Some small practices with a solid value-based payment program foundation in place (e.g., practices that report on PQRS, attest to CEHRT, and receive neutral or positive value-based payment modifier [VBPM] adjustments) are well positioned to compete for favorable MIPS adjustments. However, the majority of small practices are likely to be harmed by MIPS in the long term.

As a result, many independent physicians may seek employment or strategic affiliations with health systems or ACOs to help succeed in MIPS. Small practices may be able to boost their final score and related payment adjustments by partnering with a larger organization and accessing preferred scoring in ACOs.

The small physician practices that will be most challenged to succeed in MIPS will be those lacking significant investment to report on MIPS measures, including a CEHRT and clinical and administrative personnel to support MIPS-related improvement activities and report performance on selected measures to CMS. These smaller practices will need to evaluate whether to invest alone, forgo investment, or seek a strategic partnership in the form of an ACO or employment by a larger practice or health system.

As with larger physician practices, the annual MIPS adjustment and additional adjustment for exceptional performance will allow for a 31 percent difference in potential Medicare payment between top-performers and bottom-performers, as shown in the exhibit below.

Small Practice MIPS Options

The exhibits below compare financial impacts of two scenarios for a small, independent practice with three physicians and approximately $500,000 in Medicare revenue in 2017. The options are to invest in MIPS (maintain status quo) and to invest in MIPS without a partner.

Because smaller practices are less likely to report on the Physician Quality Reporting System (PQRS) and attest to use of an EHR, our analysis assumes that this practice would be penalized approximately 7 percent annually for PQRS, meaningful use and the VBPM scores. 

Assuming the practice does not submit any data during measurement periods, an automatic negative 4 percent payment adjustment is applied in 2019. Interestingly, as noted previously, this adjustment is less than the aggregate penalties for pre-QPP value-based payment programs. However, by 2022, a maximum MIPS penalty of negative 9 percent exceeds that of pre-QPP programs.

As outlined in the exhibit below, if a practice is able to invest in an EHR in 2017 and attest to 2018 meaningful use, it can increase its Medicare revenue by 3 percent in 2018. Further, investment in and dissemination of an EHR, coupled with hiring of additional clinical (0.5 FTEs) and administrative/information technology staff (0.5 FTEs) to support clinical practice improvement activities and report quality data are likely to help this hypothetical practice receive a modest positive adjustment each year. In this model, we estimate positive adjustments to be approximately one-third of the maximum and assume a sliding scale factor of 1.0.

These modest positive adjustments represent revenue increases of approximately $27,000 in 2019 and $61,000 in 2022 (relative to the status quo scenario presented in the “Status Quo With No Investment in Merit-based Incentive Payment System (MIPS)” exhibit, above. However, these revenue gains are insufficient to offset MIPS-related costs ranging from $122,000 to $129,000. 

Small Practice MIPS Implications

For small practices participating in MIPS that neither report to the PQRS nor have a CEHRT in place, these two scenarios have two important strategic implications. The first is, as noted previously, that MIPS adjustments will not initially be as drastic as pre-MACRA value-based programs. The second implication, however, is more significant: MIPS investment for these practices simply does not generate a positive ROI (i.e., risk is greater than the reward).

This implication for ROI means that these practices should consider employment or strategic affiliations with hospitals, health systems, or ACOs or clinically integrate networks to achieve economies of scale when investing in MIPS. Partnering with a larger organization with existing infrastructure to report, measure, and monitor MIPS metrics, and implement performance improvement can help small practices boost their final score and related payment adjustments.

Small practices can consider the advanced APM track, therefore avoiding MIPS altogether, by joining a risk-bearing ACO or by participating in a medical home initiative, like Comprehensive Primary Care Initiative Plus (which will reopen for applications). Although less likely alternatives, some small practices may just take the revenue hit and try to increase productivity, shift payer mix toward more self-pay patients, and/or consider not taking Medicare.