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The Future of MACRA in 2017 [PODCAST]

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In this episode, Dr. David Perrott, Senior Vice President and Chief Medical Officer at the California Hospital Association, discusses what MACRA is, how it affects providers, and what the future of MACRA might look like in 2017.
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Michael Passanante:  Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast.

Today, I am joined by Dr. David Perrott. Dr. Perrott is the Senior Vice President and Chief Medical Officer at the California Hospital Association. He serves as CHA’s resource for medical staff issues, accreditation and licensing and policy issues regarding patient safety and quality.

He oversees CHA’s Center for Hospital Medical Executives, Joint Committee on Accreditation and Licensing and the California Alliance of Hospital Physician Organizations.

He also serves as board chair for the Hospital Quality Institute and is a member of the Board of Commissioners of the Joint Commission.

Dr. Perrott has joined us to help us understand more about what MACRA is, how it affects providers and what the future of MACRA might look like in 2017.

Welcome to the program, Dr. Perrott.

Dr. David Perrott: Hello, Michael. It’s good to be here.

Mike: So, let’s jump right in. The term “MACRA” or “quality payment program” should be known to our audience. But briefly, can you explain what MACRA is and why it exists?

Dr. David Perrott: Sure! MACRA, first of all, I think probably is the most transformative regulatory change that has happened with regards to physicians probably in the last 20 or 25 years.

MACRA itself stands for the Medicare Access and CHIP ReAuthorization Act. The CHIP is the children’s health insurance program. And this MACRA was passed within the last year by Congress with overwhelmingly bipartisan majority. Actually, it was a 392 to 37 vote in the House including Dr. Price who will be the new HHS director.

MACRA was really put into place to repeal the SGR, the Sustainable Growth Rate Program that had been in place for almost 20 years that had required Congress really to pass a last minute [patches] for many years to try to address the potential cuts that physicians would have.

So, after that, SGR was passed in 1997. There’s always called the “doctor fix” that occurred every year. So MACRA was passed last year, this past year, to address the issue of that “doctor fix.”

And what it really does is it provides a stability and some type of predictability in the payment update that physicians can sort of plan to the future what opportunities they have based on providing quality care.

It provides really a number of opportunities for physicians and hospitals for their physicians to work together in improving quality of care. But it really changes the dynamics, so that quality of care is an important component to the rate increase that physicians will see into the future.

Mike: There are two pathways available for program participation, MIPS and APM, along with several options under each. Can you explain what these options are, how they work and the relative advantages and disadvantages of each?

Dr. David Perrott: Sure! I will do this at sort of a 30,000 ft. view because there are a lot of little nuances in the regulatory components of these. But there really are two components for MACRA.

There’s a MIPS, a Merit-Based Incentive Payment System (that’s what MIPS stands for), and then the APM which is the Alternate Payment Model.

The MIPS track, with the one track, is one that provides physicians with pay adjustments based on their performance in four categories: quality, cost, advancing care information and what CMS now refers to as “improvement activities.”

This new program combines the aspects of what physicians have been doing in the past in the reporting programs from the PQRS (the Value-Based Modifier Program that many physicians are well familiar with) and their Electronic Health Incentive Programs that were classified under the Meaningful Use, so that physicians now have a new terminology where these are all grouped together called MIPS.

That’s the one track that many physicians will participate in immediately as it begins to roll out and probably into the future.

The other track is called, as I’ve mentioned earlier, the APM track which really is a different approach. It incentivizes physicians to provide a significant amount of care through the Advanced Alternative Payment Models which are really value-based payment models rather than a fee-for-service.

The differences between these two programs is one requires a lot of reporting of data (as I mentioned in the MIPS). The Alternative Payment Model assumes that you are in the process of taking on risk—it could be upside or downside risk. Primarily, it’s a downside risk that physicians will assume. Therefore, your pay increases will be different.

In the MIPS program, there is a scheduled roll-out in which, over the transformation of this roll-out until 2023, there is an increasing amount that you have in terms of being able to make additional dollars. It starts out at 4%. And by 2021, it goes up to a ±9%. So, it’s ±4% in the beginning years up to ±9%.

The difference is in the APM, the physicians who participate in the APM model automatically have a 5% increase. And therefore, the assumption is that while they don’t have that wide range of up to ±9% at the end of the MIPS program or towards the end of the program roll-out, the difference is that the physicians have taken on risk and are being able to capture the additional improvement activities and make the differences that way.

So, the payments are different. A lot of the information that’s collected is different between the two models. And the risks are different too.

So, those are the real two types of programs that physicians now have. They have a pathway to choose upon.

Mike: Does every provider that bills under Medicare have to enter MACRA at some point?

Dr. David Perrott: They do, except for a few exceptions. Just like everything, there are exceptions.

So, first of all, the physicians just starting their practice, in their first year of Medicare A & B do not have to participate in the MACRA program.

Second of all, the MACRA applies only to Medicare Part B. And it provides providers that are deemed eligible for MIPS if they have—

And this is an adjustment that was done in the most recent rulings. So this is a change for those that may have been looking at this earlier.

So, originally, the cut-off was that if you had $10,000 a year in fees or less, you were excluded from the program. They upped that to $30,000 or at least see less than a hundred patients of Medicare Part B a year.

So, there’s a group of physicians that see a limited amount of Medicare patients that are excluded from the program.

Interestingly enough, when the AMA has looked at this, they said that there is a fairly significant number. The numbers range anywhere from 16% to 30% of physicians that will probably be excluded because they meet those criteria of less than $30,000 a year or fewer than a hundred Medicare patients.

And then, of course, as I mentioned earlier, in the first year of coming out of your training program, you’re excluded. And then, for the first year, MIPS itself, as it begins to  roll out, it’s only limited to physicians, physicians’ assistant, nurse practitioners, clinical nurse specialists and certified nurse anesthetist.

We anticipate and probably can expect that Medicare will extend to other clinicians somewhere later on in the program as they reach that 2021 timeframe.

Mike: What is the pace at which providers must enter the program?

Dr. David Perrott: Well, this is a major change. Initially, the plans were that by this time, physicians should’ve been collecting their data to have their data submitted in 2018, affecting their payments in 2019. There was a significant amount of pushback from the industry stating that this is too rapid and too quick of an approach and implementation.

So, what they did was that they implemented what they called their Pick Your Pace Program.

Now, the Pick Your Pace Program is different for physicians starting next year. The difference is that in the Pick Your Pace Program, you have some alternatives in which to begin to implement that.

If you don’t participate at all—you do nothing, you do not report any data or you do not submit any other information that they require, you’re basically a non-participating qualified provider, a QPP—you’ll really see a negative decrease of payment by 4%.

If you submit at least a minimum amount of data to Medicare—for example, if you just submit one quality measure or improvement activities—remember I mentioned those four categories—if you submit at least information in one of those areas in the quality, you’ll get a 0% increase.

So essentially, you can do a very minimal amount and still have no decrease in the amount of reimbursement for your payment fees for Medicare.

If you submit a partial year, that means you submit 90 days of data in 2017 to Medicare of the information that they request, you’re going to receive either a neutral or a potential for a small positive payment increase.

Or if you then submit a full-year data with all the data points that are necessary in the metrics that they request, you can have the potential to a moderate positive increase of adjustment.

So, essentially, there’s a wide range. If you do nothing, you’ll probably see a decrease. If you do a very minimal, you’ll probably see zero. And then, of course, there are wide variations from there to the full participation of submission of data over a full year.

That was a change to what was originally proposed. Originally, it was stated that you needed to have all the metrics submitted to participate.

That’s the Pick Your Pace Program. It’s a much more flexible approach to implementation. We advocated on behalf of our physicians that work for hospitals and with groups, and we think that this is a significant improvement.

So, rather than reporting a full year data, they can report as little as one measure. It gives those three options as I’ve mentioned and a 90-day period of time (so a much smaller period of time to) participate and still receive possible reimbursement increases.

Mike: And earlier, you mentioned Rep. Tom Price, who is slated to become the next HHS Secretary. In the past, he has voiced concerns about MACRA. Can you speak to some of the issues he’s pointed out and how he might be inclined to address MACRA implementation?

Dr. David Perrott:  Yes. Well, as I’ve mentioned in the beginning of this presentation, Dr. Price did vote for MACRA, number one. Number two, he did submit a letter. And it can be found online if you look at

And if you read the letter and the doctors’ caucus letters to CMS on the proposed rule, what you’ll find is that many of the concerns that they put forth in that letter were addressed in their final rule including the reduction of measures across all the performance categories. They also wanted a flexible start date and a shorter period of reporting during the first year (which occurred).

And particularly, they asked for a 90-day period for the initial ACI categories (which CMS did include in the finalized rule). And they also argued that the CMS should increase the low volume threshold from $10,000 to $30,000 (which I mentioned earlier which CMS did).

And finally, they had asked CMS to make the resource use cost category optional on the first year (which CMS did).

So, the issues that he brought forth and his concern in the letter were addressed in the direction that they had requested.

Now, we don’t know what Rep. Price will argue with regards to the MIPS scoring process. It’s complicated. And the burden may be too high for small groups especially in the rural areas which he’s represented so well in Congress during his time in Congress. We don’t know how that may affect his potential changes for rules because he’s been very concerned about these small, rural physicians being able to collect all these data or have the infrastructure to do it. So, that may be an area which he may have concern.

And then, of course, we know that the Trump administration has campaigned heavily on the priority for repeal and replacing the ACA and other entitlement reform which may be on the agenda. We don’t know where that may lead to in the future.

But it is pretty unlikely, we think right now, that MACRA is going to be touched in any significant way simply because the numbers are overwhelmingly bipartisan supportive in the beginning. And if you look at Rep. Price’s initial letter, the majority of his concerns were addressed.

If you look then into his concerns about the complexity of the program’s impact, he may be inclined to address it in some way with more regulatory flexibility. But again, it’s not a repeal of MACRA itself.

And then, finally, the other issue that may be of a little concern for MACRA is that Rep. Price has indicated in the past, he’s been very outspoken on the Mandatory Payment Models. He stated in the past that the CMMI models were intended to be implemented on a voluntary basis and a limited basis where no state or healthcare providers or insurer had obligation to participate in—and I’m taking that as a quote out of one of his letters—basically suggesting that the advanced APM expansion of the Trump administration could be limited to voluntary programs (much more like the Bundled Payments for Cancer Initiative rather than the mandatory models such as in the CJR).

What we don’t know is how he will respond when he becomes secretary of HHS with regards to the complexity of the MIPS program, especially for the small, rural practitioners (limited, small practice and the rural practitioners).

And then, finally, the CMMI which is the source for the development of new APMs.

So, that could be an area which there could be some changes still coming forth.

Mike: In a talk he gave December 1, 2016, at the MACRA/MIPS/APM Summit in Washington DC, CMS Acting Administrator, Andy Slavitt expressed concerns that MACRA won’t work as well without a CMS Innovation Center.

If the Centers for Medicare and Medicaid Innovation were to be curtailed or eliminated going forward, how that might affect MACRA implementation?

Dr. David Perrott: That’s a great question. It’s sort of a follow-up to what I was speaking to with one of his concerns.

Much of the MACRA law is very specific in how the statute must be implemented. But short of a legislative change, most of the implementation probably will go forward as described in the final rule—at least that’s where we think this will move.

If they curtail or eliminate the CMMI, it could have the effect on the availability, as I’ve mentioned earlier, of advanced APMs for clinicians to choose from. And it could shift the focus more from a value-based payments to the MIPS track, which was obviously the APM track is really dependent upon, whereas the MIPS is not (MIPS again depended much more upon data submission, whereas the Alternative Payment Models have to have those advanced alternative payment models chosen).

And as I’ve said earlier, Cong. Price has been really outspoken against the mandatory payment models and much more in support of a voluntary model.

So, if they go forward with eliminating or reducing the CMMI, it could have an effect upon especially the APM side of the MACRA law.

Mike: I’d like to switch gears and look at the provider side. A study published by Deloitte in July 2016 found that half of the physicians they surveyed had never heard of MACRA.

With such a major payment model shift about to happen, how can stakeholders in healthcare prepare physicians for what is about to come?

Dr. David Perrott: Well, that’s a great observation. As I went across the State of California when MACRA first came out, it was interesting that we would speak at medical staff retreats or board retreats for hospitals and there’d be physicians in attendance. And I would tell you that as time went on, the hands began to increase.

When it first came out, you mention MACRA, they look like I was speaking in some foreign tongue or language. But as time went on, they began to hear more and more about it.

I think the word has gotten out there because it’s imperative of the hospitals and physicians to work together on this to be really effective. Especially if they’re going into the APM side of the equation, there has to be some type of engagement and collaboration between physicians and the hospitals to effectively do this, so that they can realize the most.

Remember, they only get the 5% increase per year. The rest of it is dependent upon how they drive efficiency and quality into the systems and the next gen ACO’s and other alternative advanced payment models.

So, I think that it’s going to be imperative upon all of us that speak to it. The AMA and other professional associations have really been very vocal in trying to engage their members. I think that has been successful.

But there are still the groups of physicians that really do not understand this. It’s going to require just further education on everyone’s behalf to bring this forward.

Otherwise, my concern is that we will have a number of physicians that, if they continue to participate in Medicare, they will have a significant decrease as time goes on in their Medicare reimbursement—as I’ve mentioned, up to a potential 9% by the time we hit 2021—or we could have physicians just deciding not to participate in Medicare itself. And I don’t think that’s where we want the service to go for our patients.

Mike: In the same study, 8 in 10 physicians said they prefer traditional fee-for-service or salary-based compensation as opposed to value-based payment models. Why do you think this is?

Dr. David Perrott: Well, I’m a baby boomer physician also, and I grew up in the fee-for-service world. That’s what I know best, that’s how I functioned since I’ve been in practice. And I understand that if I produce a widget, I get paid for it.

To move to a payment model in which there has to be value associated with this (that is the issues of cost and improvement activities and outcomes) and they’re all part of how you are paid, there has to be a need for what you’re doing, that’s a real shift in the way we, as physicians, do things than the way we’ve done it in the past.

So, like anything else, it’s a significant change in the way they think.

And I think that there is the feeling that if I just go and work for a straight salary, that that’s going to solve the problem. It isn’t because the person or organization (whether it’s a foundation model or a hospital or a large group, an IPA or whatever that happens to employ you that provide the salary), they’re going to be facing the same pressures from Medicare in the reimbursements that they receive for services that you provide as a physician.

You can’t continue to be in the fee-for-service world, and then assume that you’re going to be reimbursed in the value-based world.

Recently, I was at a presentation and there has been the analogy made. I’ve heard it so many times in the last year, that we really have one foot in the boat of fee-for-service and we have one foot on the dock for the value-based payment. And this person made, I think, a very valid point. We either have to get in the boat all the way or get off that point and move onto the dock and say, “We’re going to walk this pathway to value-based or we’re going to stay fee-for-service,” which, truthfully, unless there’s a dramatic change in Congress and the way they look at things in terms of payment, I don’t think the fee-for-service as we know it today is going to continue.

I think this is going to continue to be a struggle. The younger physicians, what I’m seeing is that the younger physicians understand it and are much more willing to adapt the new processes that are necessary for advanced APMs. I think that it’s also a generational thing. But also, there are just a lot of unknowns.

And as we move forward in this new payment reform model, we’ll begin to bring physicians that feel much more comfortable in the fee-for-service to have an understanding how they can adequately be reimbursed for the services they provide and still be able to practice medicine as they have done in the past.

Mike: And we know that MACRA is going to require quality data to be collected. Practically, how can doctors collect quality data that they must submit by March 2018 if they’re not already collecting it?

Dr. David Perrott: That’s a really good question. My first answer to when I’ve had this question brought to me before, the first thing they need to do is most physicians have moved on to an electronic health record system. And included in that will be a need to have from the vendor of that software to ask them how they can assist you in collecting this data. That’s number one.

And what I’m hearing is there are well over 200 different physician vendors for electronic health records or electronic office records. And some of those, I think, will have a real struggle to meet the demands that require the data.

And what I’m hearing, Michael, in the field is that many physicians are coming to the hospitals asking how they can assist them to collect the data. And oftentimes, this will require differences, changes in IT, they may require additional assistance.

So, I would say that, first of all, the physician needs to sit down with their vendor.

And vendors know about this. IT vendors, they know about it. They can work with assisting the physicians on how to collect the data.

If they do not, there’s going to be a need for them to have some difficult decisions, how they can either overlay additional software upon their IT systems that can collect it or find a change of vendor system or probably work with the hospital in some way to achieve the ability to collect this data.

Mike: And how will MACRA affect hospitals and other healthcare providers that employ physicians and healthcare professionals that fall under the rule?

Dr. David Perrott: Well, MACRA itself is really one that will require closer alignment to have looked at additional opportunities and incentives to work together regardless of their employment status.

So there are still going to be groups of physicians that are independent, large groups that will work with a hospital or hospitals. And to be effective, especially in the APM track, they will need to work closely with hospitals.

Part of the APM track is really to begin looking at the cost of care, the continuum of care, whether from the ambulatory setting to the post-acute care. All of that is going to figure into their ability to effectively capture those efficiency savings as in the alternative payment model.

And so therefore, there’s going to need to be the alignment and discussions in a much closer way.

Likewise, on the MIPS side, remember, during this first year, there was a lot of pushback to not have the cost component of it be measured in this first year. But that begins to roll out in subsequent years.

And so, costs are going to continue to be a part of either the APMs or the MIPS. But on the APM, it is a significant, important aspect for a successful next gen ACO, for example, to take on that downside risk that they would be assuming.

So therefore, I think that the alignment, no matter if they’re employed or not employed, is going to be much greater than it ever has been in the past simply because there are ways in which the cost structure will drive efficiencies, drive the quality of care to effectively manage patients in this whole spectrum of care from the ambulatory setting to post-acute and to continue ambulatory afterwards.

Physicians are going to look at ways in which they can effectively choose the most cost-effective way to provide that care. And some of that will be done probably outside of the hospital’s four walls where it has been accustomed to being done in the hospital.

So, alignment is going to be the critical part.

Mike: And one final question for you. Do you see any components of MACRA or QPP that might end up in other CMS bundled payment programs?

Dr. David Perrott: That’s really a difficult one to respond to. MACRA and the QPP itself are not bundled payment programs. The advanced APM incentives do not actually do anything to change the bundled payment progress, rather they encourage clinicians to provide care in this way.

I think that, as I’ve mentioned earlier, Cong. Price does not like mandatory requirements. And that was indicated in the letters. And the mandatory, such things as CJR, probably will receive greater scrutiny. That’s what we’re assuming.

But again, this is pure speculation on our part as to what he may do.

But I think the issue of bundled payments is just one potential approach to it. That’s not mandated in the MACRA, but it is a tool or a mechanism that can effectively work.

I think you may see it move from mandatory to voluntary. And physicians and hospitals and other providers in that continuum may find ways in which they can work in the concepts of bundled with ways to improve efficiency and provide that value and quality of care.

Mike: Dr. Perrott, it was a pleasure speaking with you. Thank you for stopping by and sharing your expertise with us around MACRA.

Dr. David Perrott: Thank you very much, Michael. I’m glad that we’ve been able to speak with you this morning on this topic.

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