MACRA changes all of this. Starting in 2019, the meaningful use incentive program, PQRS, and value-based payment modifier will be consolidated into the Merit-Based Incentive Payment System (MIPS). Physicians who elect to remain on an FFS tract will receive a 0-100 composite performance score based on quality (30%), resource use (30%), meaningful use (25%), and clinical practice improvement activities (15%). At the start of a performance period, a composite threshold necessary to achieve incentive payments and avoid penalties will be determined. Throughout the performance period, physicians will receive timely feedback on their performance. At year’s end, those below the threshold will face penalties proportionate to their performance (as much as 4% in 2019 and going up to 9% in 2022), those at threshold will not receive a payment adjustment, and those above threshold will receive bonuses proportionate to their performance (although overall payments will be capped at $500 million).
Alternative payment models
The CMS’s ultimate goal is to move beyond FFS and have “30% of Medicare payments tied to quality or value through APMs by the end of 2016 and 50% of payments by the end of 2018.”5 MACRA supports this ambitious goal: Starting in 2019, providers who “sufficiently” participate in APMs will receive 5% across-the-board bonuses. The three main APMs are bundled payments, accountable care organizations (ACOs), and patient-centered medical homes.
A bundled payment is a single fixed price paid to cover services for a specific episode of care. Depending on how an episode is defined, the bundle may encompass all professional fees, facility fees, and medical device and supply costs for a given service, including postacute care and any complications. If costs are reduced beyond the already discounted price of the bundle and quality metrics are achieved, then participants share the savings. Conversely, if costs exceed the bundled payment amount, then participants lose money. Unlike FFS, bundling incentivizes participants to coordinate care, reduce complications and unnecessary services, and cut purchasing costs.
To date, the CMS has launched three bundling programs. The Acute Care Episode Demonstration Project provided hospitals and clinicians a bundled payment to cover orthopedic and cardiovascular procedure–related episodes of care. This program reduced Medicare costs, primarily because the bundle payment was lower than what the sum of individual payments would have been. Providers were able to cope mainly by reducing their surgical implant costs. Second, more than 6,000 providers are currently participating in Medicare’s Bundled Payments for Care Improvement Program. The results of this program have not yet been released. Third, the CMS recently announced the Comprehensive Care for Joint Replacement Program under which hospitals and physicians in 67 metropolitan areas will be required to participate. Mandatory participation signals the CMS’s strong motivation to shift away from FFS. Beyond Medicare, many commercial insurers offer bundled payment programs, primarily for cardiovascular and orthopedic conditions.6 Although these programs are promising, it is technically challenging to define what is in a bundle, and to adequately risk adjust and mitigate random variation in spending for certain episodes of care. Providers are also challenged to find ways to divide payment among participants, coordinate all care, and accept financial risk.7,8 The American Gastroenterological Association recently published a bundled payment framework for screening and surveillance colonoscopy.9 Bundling other gastroenterology services will be more challenging.
Whereas bundled-care programs focus on a discrete service (e.g., knee replacement or colonoscopy), ACOs are integrated groups of providers who jointly assume responsibility for the cost and quality of all care delivered to a defined population. The ACA requires ACOs to have formal legal, leadership, and management structures; care for at least 5,000 Medicare beneficiaries; fulfill certain patient-centeredness criteria; measure and report quality and cost data; and coordinate care. Different payment models incentivize ACOs to reduce costs and improve quality of care. ACOs operating under a one-sided shared savings model receive FFS payments for each service delivered, along with a bonus for reducing costs below a spending target and meeting quality requirements. There are no potential financial penalties. Alternatively, ACOs operating under a two-sided risk-savings model share a greater proportion of cost savings, in exchange for potential financial penalties if the cost of care exceeds target spending.
To date, Medicare-sponsored ACOs have produced mixed results. In 2014 only 92 of the 322 Medicare Shared Savings ACOs were able to reduce spending below a predetermined benchmark by a predetermined amount (2%-3%) while meeting quality scores, thereby earning a bonus ($341 million in total). Similarly, of the original 32 pioneer ACOs, which by definition are more experienced at managing population health and more willing to take on financial risk, 13 dropped out of the program, and in 2014, only 11 generated enough savings to earn a payout ($82 million in total), whereas 5 incurred financial penalties ($9 million in total) for costs exceeding target thresholds.10 In total, after paying out bonuses, the ACO program cost Medicare a net loss of nearly $3 million, far from the $10-$240 million Medicare had previously projected it would save through the ACO program.11 Clearly, ACOs are not a quick fix for all that ails health care. For many ACOs, the major start-up requirements (time, capital investments, and so forth) needed to manage a population may not be worthwhile.12 Nonetheless, the CMS recently launched the Next Generation ACO model through which 21 participating ACOs will assume higher levels of financial risk (possibly capitated payments) in exchange for greater potential rewards. Similarly, beyond Medicare, there are also many Medicaid-sponsored ACOs and hundreds of commercial payer-sponsored ACOs.13
