November 1, 2016 | Sarah Matousek

Updated: What is MACRA and Why Do I Need to Know?

Note: This blog is a re-release of two MACRA blogs we wrote this summer. The blogs have been consolidated into one and updated based on the final MACRA rules that CMS released on October 14th. A summary of these updates is provided here:



Before we unpack what is contained in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), we need to touch on why it is critical for providers and others to understand it.  MACRA represents the most sweeping shift in physician payment methodology in the last 25 years, marking another step along the path toward value-based payment systems and away from traditional fee-for-service reimbursement.  For many providers who bill for Medicare physician services, success in this new paradigm will require a dramatic shift in care delivery and performance reporting.  Importantly, MACRA is budget neutral, which creates a zero-sum game where some providers will gain significant financial payments at the expense of those penalized.  And rewards and penalties will be based on reports that begin in 2017.  So now is the time for providers to understand the rules to best position themselves for the change.

MACRA AT A GLANCE: MAIN COMPONENTS (Click graphic to enlarge)

Screen Shot 2016-06-29 at 10.08.14 AM


Perhaps the best-known (and long awaited) part of MACRA is the repeal of the loathed Medicare Sustainable Growth Rate (SGR) system of physician payment.  You may recall that SGR was enacted by the Balanced Budget Act of 1997 in an attempt to hold annual increases in Medicare spending for physician services below GDP growth rates.  To accomplish this, CMS compared annual expenses to target expenses and created a conversion factor to adjust the next year fee schedule to meet the target SGR.  This meant that the physician payments would actually decrease after a particularly expensive year.

The act did allow Congress to suspend or adjust the target SGR, which they did every year after 2002 to avoid physician payment rate cuts.  This ongoing and expensive task was known as the ‘doc fix’.  The chart below illustrates the cumulative effect of this practice. (Click chart to enlarge).

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Instead of a formulaic approach for calculating payment rates, the new rule institutes a 0.5% annual pay increase for the first four years of the program beginning in 2016.  For calendar years 2020-2025, there will be no automatic rate increases.  In 2026, the increase will move to 0.25%.  The new schedule can be seen in the topmost arrow on the following timeline in addition to visual representations of the Quality Payment Program, which will be described in greater detail below. (Click timeline to enlarge).



Instead of base pay increases across the board for providers, MACRA introduces two Quality Payment Programs (QPPs) that introduce opportunities and risks based on value standards.  Value data collection will begin between January and October of 2017 and will determine incentive payments and penalties beginning in 2019. The graphic below lays out the initial implementation timeline.


The two Quality Payment Programs (QPPs) of MACRA are:

  • The Merit-Based Incentive Payment System (MIPS) track and
  • The Advanced Alternative Payment Model (APM) track

Each track rewards clinicians that provide high quality, efficient care to Medicare fee for service patients.  Below are two graphics.  The first is an overview of the differences between the two tracks at a high level and the second is a flow chart describing how a clinician will know which track to plan for.  We will then offer more detailed descriptions of how each track works and the eligibility requirements for each.

MIPS vs. Advanced APM Overview (Click graphic to enlarge):


WHICH PATHWAY WILL I TAKE? (Click graphic to enlarge)

APM Flowchart v2 07062016



The MIPS track combines the Physician Quality Reporting System (PQRS), Meaningful Use (MU), and the Value-based Modifier (VM) programs together beginning in January of 2019.  Similar to the current programs, MIPS will offer payment adjustments based on performance on quality measures.  Payment adjustments are based on performance two years prior, so performance measurement that begins in January of 2017 will see payment in 2019.  The graphic below shows the four MIPS reporting options for 2017 and the consequences of each. For example, submitting no data to CMS will earn a negative payment adjustment of -4%, while submitting even a single measurement will avoid the penalty.


There are four measurement categories used to assess clinician performance for MIPS. These categories are shown in the two figures below.



Many of the measures included in the categories above are similar or identical to those in the PQRS, MU, and VM programs that MIPS is replacing.  Combined, the measures will yield a total composite performance score (CPS) of up to 100 points.  Providers who score above an annually-set threshold will receive a payment incentive (+4% for CY2019) while providers who score below the threshold will be penalized the same amount, making the program effectively budget neutral, where the penalties pay for the incentives.

Importantly, positive incentive payments can increase by up to a factor of three if the number of clinicians penalized is far greater than those receiving incentives, meaning that incentive earners could earn up to +12% for the CY2017 performance year.  A 10% “exceptional performance bonus” is also available to the top performers, making the maximum possible incentive +22%.  Incentive payments and penalties increase over time until they reach ±9% (+37% max) in CY2022.


MIPS Eligibility: Not Just Physicians

MACRA’s QPP eligibility is limited to individuals or groups that receive Medicare Part B (all called the Physician Fee Schedule) or Critical Access Hospital Method II payments.  For the CY2017 and CY2018 performance reporting years, the list of eligible clinicians includes:

  • Physicians
  • Physician Assistants
  • Nurse Practitioners
  • Clinical Nurse Specialists
  • Certified Registered Nurse Anesthetists

Who is not included?  Individuals in their first year of enrollment in Medicare, those who do not meet patient or service volume thresholds ($30,000 in Medicare claims or at least 100 patients), and most qualified participants (QPs) in the advanced APM track.  In CY2019, eligibility will expand to include many additional classes of professionals, including (but not limited to) clinical psychologists, physical therapists, nurse midwives, nutritionists, and speech therapists.  According to CMS, most eligible professionals that currently receive Medicare fee for service payments will be enrolled in the MIPS track by 2020.



The advanced APM track is fairly straightforward.  Qualifying participants (eligibility described below) will receive an annual bonus incentive payment of 5% for years 2019-2024.  In years 2026 and beyond, clinicians in this track will be eligible for a higher fee schedule update (+0.75% vs. +0.25%) compared to MIPS participants.

Not all APM participants will make it into the advanced APM qualified participants group.  However, those that do will receive the 5% bonus payments and be excluded from MIPS (with some exceptions). Once you’re in an Advanced APM, you’ll earn the 5% incentive payment in 2019 for Advanced APM participation in 2017, but only if you meet the requirement of receiving 25% of your Medicare Part B payments through an Advanced APM OR see 20% of your Medicare patients through an Advanced APM.


Advanced APM Eligibility: Not Just Any APM

Although APMs exist through multiple payers, MACRA’s definition is limited to the following Medicare-specific models:

  • CMS Innovation Center Model (other than a Health Care Innovation Award)
  • Medicare Shared Savings Program (MSSP ACOs)
  • Demonstration under the Health Care Quality Demonstration Program
  • Demonstration required by federal law

APM Circle Visual

Importantly, not all Medicare APM participants will qualify for the 5% lump sum annual bonus payment included in this track.  Those APM participants who do not meet the additional requirements for the advanced APM track will be subject to MIPS, but will have the added benefit of more favorable scoring in the Clinical Practice Improvement performance category.  The subset of APM participants that wish to be a qualifying participant in the advanced APM program must meet the following additional requirements:

  • Use of certified EHR technology
  • Payment is based on quality measured comparable to those in the MIPS Quality performance category
  • Bear more than “nominal financial risk” or the APM is a Medical Home Model expanded by the CMS Innovation Center

The 2017 advanced APMs include:

  • Medicare Shared Savings Program Tracks 2 & 3
  • Next Generation ACOs
  • Oncology Care Model (OCM) with 2-sided risk
  • Comprehensive End-Stage Renal Disease (ESRD) Care Model, Large Dialysis Organization (LDO)
  • Comprehensive Primary Care Plus (CPC+) Model

Likely 2018 Advanced APM additions include:

  • ACO Track 1+
  • New Voluntary Bundled Payment Model
  • Advancing Cardiac Care Coordination through Episode Payment Models.

For clinicians who expect to participate in one of these two pathways, the time to begin planning for the first performance measurement year is now.  Remember that 2017 reporting effects 2019 payments. For more information about MACRA and a link to the CMS Quality Measure Development Plan, click here.