June 28, 2016 | Sarah Matousek

What is MACRA and Why Do I Need to Know?

Part 1 in a Two-Part Series

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 just six months.  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 to enlarge)

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1. SUNSET FOR SGR

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 affect of this practice. (Click chart to enlarge).

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2. THE NEW PHYSICIAN FEE SCHEDULE 

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).

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3. INTRODUCTION OF QUALITY PAYMENT PROGRAMS

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 measurements will begin in January of 2017 and will determine incentive payments and penalties beginning in 2019.  We’ll introduce these QPPs briefly here and then dive deeper into the specifics in the next blog post. (Click image to enlarge).

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