If you could time travel to witness one event in history of the U.S. health care system, which would you choose? The first modern group health insurance plan in 1929? The creation of Medicare and Medicaid in 1965? The Health Insurance Portability and Accountability Act in 1996? The Affordable Care Act in 2010?
What’s that you say? April 16, 2015, to witness President Barack Obama using 10 pens1 to sign into law the “Permanent Doc Fix” that inscribed the acronym MACRA into the common vernacular of health policy wonks across the country?
No? Well, maybe not any time soon.
But an event’s impact is sometimes only visible in hindsight. Some are significant, some not so much - some events simply clear the way for something greater to come - and at the exact moment, it may not be clear which is which. Many predict MACRA rang the death knell for fee-for-service in health care. Some more boldly predict perhaps the end of the small independent physician practice, as well. What we can say, at a minimum, is MACRA holds promise to fundamentally change the way the U.S. evaluates and pays for health care.
Health Care in Crisis
The U.S. government spends more on all federal health programs, including Medicare and Medicaid, than on Social Security, defense, or anything else. A key driver of the growing national debt, health care spending is one of the most significant projections in the Congressional Budget Office’s recent long-term budget outlook, which projects spending on federal health care programs will rise substantially over the next 30 years. Medicare spending alone is expected to increase from 3.2 percent of gross domestic product in 2016 to 5.7 percent by 2046.
Some contributing factors cannot be controlled. More Americans are living longer. Research and innovations in medicine and technology are costly. But there are feasible options for curbing the cost of health care while improving overall value, and many of these start with paying for value as measured by quality and efficiency, not quantity. As the largest payer in the U.S. health care system, the federal government wields a huge influence on how health care is paid for and delivered. For example, a 2013 National Bureau of Economic Research study suggests an average $1 change in Medicare payments results in a $1.30 change in private payments. Changes made through the government-as-payer vehicle are expected to trigger larger changes that ripple throughout the entire health care system.
Changing How Health Care is Paid for
Before the rise of the modern health insurance system, health care was paid or bartered for directly by the patient. This was much less complicated when the choices for medical care involved bloodletting and questionable potions. Yet, even after the evolution of health care and insurance in the early 20th century, fee-for-service has remained the dominant payment model in the U.S., notwithstanding that fee-for-service rewards the quantity (volume), but not the quality or efficiency (value), of care. When the primary descriptor of the U.S. health care system became “in crisis,” the nation collectively and definitively agreed that fee-for-service was the single biggest obstacle to improving health care.
Through the years, we’ve seen payment models other than fee-for-service. Mark Twain commented that his family paid the local doctor $25 a year for their health care. This form of payment, called capitation or population-based payment, was introduced in the 1990s as “managed care.” It fell out of favor quickly as it, like fee-for-service, created the wrong incentives. Without tying outcomes to individual patients or providers, the system wasn’t producing better or more efficient care but managing down utilization to operate within financial targets.
We’ve seen some payment models based on outcome. Legend has it the ancient Chinese beheaded doctors whose patients did not recover. Other, less-violent value-based-payment models have been—and continue to be—explored. Established by the ACA in 2010, the Center for Medicare and Medicaid Innovations (CMMI) develops new payment and service delivery models and conducts several demonstrations as mandated by law. CMMI organizes its innovation models into seven categories: accountable care, episode-based payment initiatives, primary care transformation, initiatives focused on the Medicaid and CHIP population, initiatives focused on the Medicare-Medicaid enrollees; initiatives to accelerate the development and testing of new payment and service delivery models; initiatives to speed the adoption of best practices.
In January 2015, HHS took a major step – months before MACRA became law - and announced goals to tie 50 percent of Medicare payments to quality or value through alternative payment models by the end of 2018, and tie 90 percent of Medicare fee-for-service payments by the end of 2018. To achieve these goals, HHS launched the Health Care Payment and Learning Action Network (HCPLAN). Participants include providers, payers, employers, patients, consumer groups, health experts, and state and federal government agencies. The broad stakeholders represent a wide variety of interests, including publicly traded companies, not-for-profit organizations, urban facilities, rural providers, small practices, large systems and national associations. Further, the Comprehensive Primary Care Plus model, which requires commercial payers to partner with CMS and Medicaid agencies, indicates more collaboration between private payers and CMS is on the horizon.
The private market has also stepped up. The Health Care Transformation Task Force is made up of providers, insurers and employers that have committed to shift 75 percent of its members’ business into contracts with incentives for health outcomes, quality and cost management by January 2020.
So What About MACRA
In the simplest of terms, MACRA repealed the Sustainable Growth Rate (SGR) Formula that determined Medicare Part B reimbursement rates for physicians and replaced it with new ways of paying for care. At the time of its passage, MACRA was primarily known for repealing the SGR provisions that would have significantly cut physician payments based on the 1997 Balanced Budget Act intended to curb Medicare spending on physician services. Prior to MACRA, the SGR was temporarily “fixed” as part of a 17-year annual Congressional ritual that angered physicians and frustrated policymakers. As it turns out, MACRA’s “Permanent Doc Fix” introduced a payment system poised like no other to drive health care delivery and payment reform across physicians, health systems, and government and commercial payers.
And yet, the devil is in the details. CMS must implement MACRA by redefining the basis of physician payment that supports better care for patients and lowers spending for payers without putting physician practices and hospitals out of business or exposing them to inappropriate financial risk. Easy, right?
Slogans are not solutions. Under MACRA, participating providers will be paid based on the quality and effectiveness of the care they provide. A growing percentage of physician payment will be based on value, not volume. High-value care will be defined by measures of quality and efficiency, and providers will earn more or less depending on their performance against those measures. MACRA’s value-based payment programs will be based on two new reimbursement structures: the Merit based Incentive Payment System (MIPS) and Alternative Payment Models (APMs).
CMS released proposed regulations to implement MACRA last April - a slim 962 pages – to an anxious industry. Many of the most influential voices in health care policymaking – all supporters of the MACRA law - have outlined concerns with the proposed regulations. The American Medical Association’s 70-page letter states that “certain provisions require considerable modifications,” and the American Association of Family Physicians’ 107-page letter urges CMS to “step back and reconsider the approach.”
First of all, there’s the timing. The final rule is expected in November, leaving only a few months before the proposed first performance reporting period begins Jan. 1, 2017. A recent Deloitte survey found that half of physicians surveyed had not heard of MACRA, so clearly there is an intensive education campaign needed. Concerns are also being raised that smaller providers may face more difficulty complying with MACRA metrics, in particular the electronic health record and technology-based requirements, or that some of the qualifying APMs require greater capital or a larger patient population. As such, many industry experts have predicted an increase in provider affiliations, mergers and transitions to hospital-based employment. And it’s unknown how the proposed rule will impact rural and small providers, particularly the low-volume threshold that would exempt small practices from certain reporting requirements.
To what extent CMS will change MACRA rules to accommodate these concerns remains to be seen. Leveraging all available options, industry stakeholders are placing pressure on Congress, which is in turn placing pressure on CMS to make significant changes to MACRA in its final rule. According to Politico, 77 organizations reported lobbying on MACRA in the second quarter of 2016, which was more than double the 38 that cited the law in the first quarter.
If CMS does not address critical stakeholder issues in its final rule this fall, some hope that Congress would take action to intervene by the end of the year. CMS will publish the rule at a time when Congress will not be taking on any new business, however - Congress is in session just five weeks until the November elections, then four more weeks until its target adjournment in mid-December. Not many pieces of legislation are expected to move during this time, but it is feasible the appropriations process could be targeted.
The 2017 fiscal year begins Oct. 1, so Congress will need to pass at least one continuing resolution to keep the government funded in absence of new spending authority. And of course, there will be changes after the new year in agency leadership with the new administration, some turnover in Congressional seats and perhaps a Senate majority shift. It is unlikely, but not out of the realm of possibility, that unresolved MACRA issues could be prioritized for Congressional action in the first half of the year.
To that end, we have seen indications CMS will make significant changes to the final rule. The Senate Finance Committee held a hearing on MACRA on July 13, during which CMS Acting Administrator Andy Slavitt indicated CMS is considering alternate start dates, shorter reporting periods and finding other ways for physicians to get experience with the program before it hits. Mr. Slavitt stated that they are “open to multiple approaches” in regard to MACRA, especially after sorting through more than 3,900 public comments submitted through formal comment.
Also at the hearing, Chairman Hatch suggested that CMS could publish an interim rule, rather than a final rule. In layman’s terms, this move by CMS would allow them to further refine the rule, or implement only portions of it, while others are still under development.
John Travis, Cerner Vice President of Regulatory and Compliance Strategy, recently published a blog that reminded us that much of MACRA is a familiar point of departure, and much can be leveraged by those already actively using electronic health records and who have participated in prior CMS value-based programs. Many providers can look within to identify good starting points for MACRA-specific regulations, including existing APM participation, practice activities that align to CPIA and so on. While we do not yet know the next steps of CMS and Congress, eligible clinicians who have a good track record of participation in the value-based programs that preceded MACRA under the Physician Fee Schedule should enjoy some degree of assurance they are already positioned for success.
“If I have seen further it is by standing on the shoulders of giants.” — Isaac Newton
This summer, I celebrated my 21st anniversary at Cerner. I first heard our founder, CEO and chariman, Neal Patterson, demand the overhaul of paying for health care more than a decade ago. I’m thrilled to work with so many smart and talented people who are focused on helping our clients meet these new demands, and to personally work with policymakers and others across the industry to ensure MACRA is implemented in its best form. Watching history is not the same as helping make it.
Future generations of health care stakeholders will look back with the same wonder and pity we have when we think of life before antibiotics, antiseptics and anesthesia. MACRA is what can make value-based care real. This is exciting, but it won’t be easy. Make no mistake – we are experiencing a turn of events that will change forever health care in the United States.
1President Obama honors an obscure Washington tradition of using multiple pens to sign important legislation, which can then be given as keepsakes. For reference, the President signed the Affordable Care Act in 2010—his signature legislation—with 22 pens.