MACRA Final Rule: CMS Strikes A Balance; Will Docs Hang On?

On Friday, the Centers for Medicare and Medicaid Services (CMS) released the Final Rule implementing the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)—aka the “SGR” repeal bill, aka Medicare physician payment 3.0. The central theme of the MACRA Final Rule is its softening of key program parameters in an effort to allay provider concerns, rally participation, and avoid adverse consequences out of the gate. While the rule concludes—for now—the crescendo that started with passage of MACRA in 2015 and gained steam with the Proposed Rule CMS issued in April, the song is far from over. What seems clear is that CMS has called the tune for the first few years of the program; what’s less clear is whether physicians and related providers will play along.


The rule finalizes parameters of the Merit-Based Incentive Payment System (MIPS) and the Advanced Alternative Payment Models (APMs), collectively referred to as the Quality Payment Program (QPP). (You can’t break this stuff down without a healthy dose of alphabet soup). The rule softens several parameters of the MACRA regime, changes that have been hinted at, for example, during Acting Administrator Andy Slavitt’s appearance before the Senate Finance Committee on July 13 and the Agency’s September 8 announcement that physicians would be able to “pick their pace” for satisfying MIPS criteria in 2017. More on that in a bit. Highlights of the rule include, first, formalization of the “transition year” during calendar year (CY) 2017 that significantly modifies the reporting requirements of the QPP for that year. Second, CMS took steps to weaken the thresholds by which providers may participate. Third, CMS reduced the amount of measures required for reporting under the Advancing Care Information and other MIPS categories. Finally, the Agency softened the degree of risk providers must accept in Advanced APMs, though it preserved the requirement that such entities face downside risk (i.e., the possibility of losing money due to poor performance). We’ll catch a few additional changes along the way. As part of the fanfare accompanying this sweeping regulation, demonstrating their optimism for (or faith in) the MACRA regime, CMS and White House officials held a press conference in the morning and Acting Administrator Slavitt posted an open letter to physicians on the CMS Blog. For additional background, please refer to my recent Health Affairs blog posts on MACRAMIPS, and APMs, as well as the comprehensive Health Affairs Health Policy Brief on MACRA. CMS provides its own summary of the rule in a handy executive summary here. The policies begin taking effect in CY 2017. Provider performance during that year will yield payment consequences to them in CY 2019. Despite being final for 2017, the Rule has a sixty day comment period.


Think of MIPS as the “base” program for MACRA—if providers don’t participate in it or gain an exemption from it, they receive a payment cut (even in the first year). The Final Rule establishes the manner in which eligible clinicians and groups will participate in MIPS, which consolidates components of three existing programs: the Physician Quality Reporting System (PQRS), the Value-based Payment Modifier, and the Electronic Health Record (EHR) Incentive Program. It also adds a fourth performance measurement component, clinical practice improvement activities. Eligible clinicians may see positive, neutral, or negative adjustments of up to four percent to payments in 2019 based on their 2017 performance, with an additional $500 million allotted annually between 2019 and 2024 for “exceptional” performance. The final rule simplifies CMS’ proposals in several of the statutorily specified quality domains. Domain scoring weights for CY 2017 are noted parenthetically:

  • Quality Activities (60 percent)In the final rule, CMS established that for full performance, clinicians will report on six quality measures, or one specialty-specific or subspecialty-specific measure set. A lower threshold of one measure out of six applies for CY 2017. 
  • Clinical Improvement Activities (15 percent)CMS finalized that eligible clinicians may attest to having completed up to four medium-weighted or two high-weighted clinical practice improvement activities, a reduction from the initially proposed six. For the 2017 transition year, reporting of certain activities via EHRs under the Advancing Care Information Performance category will help providers meet the requirements of this, new category.
  • Advancing Care Information Performance Category (25 percent)Eligible clinicians are required to report on five EHR use-related measures, a reduction from 11 measures in the proposed rule. CMS notes that “based on significant feedback, this area is simplified into supporting the exchange of patient information and how technology specifically supports the quality goals selected by the practice.”
  • Cost/Resource Use (Zero percent)CMS simplified the cost performance category and eliminated it from the calculation of providers’ overall performance score for CY 17. CMS added that, as performance feedback becomes available from claim analysis, the cost category’s contribution to the overall performance score will increase to the statutory 30 percent level by 2021.

CMS finalized the proposal that MIPS-eligible clinicians have the flexibility to submit information individually or via a group. Registry-based reporting is also permitted. For the transitional year 2017, CMS established four paths providers may follow, each with the minimum performance threshold to avoid a payment penalty reduced. The four paths are:

  1. report under MIPS for 90 days;
  2. report under MIPS for less than a year but more than 90 days and report more than one quality measure, more than one improvement activity, or more than the required measures in the advancing care information performance category;
  3. report one measure in each MIPS category (besides resource use which is automatically reported) for the entire year; or
  4. participate in an Advanced APM.

If providers fail to report one measure or activity, they will receive the full negative 4 percent adjustment. While that ostensibly harsh penalty is maintained, this is a far cry from the initially proposed standard that providers must report on at least six quality measures to satisfy that component of MIPS in 2017. As referenced above, CMS also took several steps to address concerns regarding the ability of small or rural practices to participate. Physicians and related professionals who accrue “less than or equal to $30,000 in Medicare Part B allowed charges or [see] less than or equal to 100 Medicare patients” are exempt from MIPS requirements. CMS says this represents 32.5 percent of Medicare clinicians but only five percent Medicare Part B spending. Further accommodating smaller practices, CMS allowed for “virtual groups,” a MIPS reporting option where up to ten clinicians combine reporting as one group. The Agency will not implement virtual groups in the 2017 transition year, however, presumably because it needs more time to execute the systems changes necessary to do so. CMS estimate that between approximately 592,000 and 642,000 eligible clinicians will be required to participate in MIPS in 2017. By 2019, 90 percent of eligible clinicians will participate and MIPS-related adjustments that year will be evenly balanced between cuts totaling approximately $199 million and bonuses of about the same amount. Additionally, though, CMS will distribute the MACRA-allocated $500 million in additional incentive payments to high performing providers.


Providers who receive a substantial portion of their reimbursement from Advanced APMs are exempt from MIPS. They are eligible for five percent bonus payments in 2019 and, later, an accruing reimbursement differential from their non-Advanced APM colleagues. One of the key criteria by which an APM is determined to be “Advanced” is that the participating provider must bear more than nominal risk under the reimbursement model. In the Final Rule, CMS sets this standard for 2017 and 2018 as a potential downside of eight percent of all Medicare reimbursements or three percent (down from four in the Proposed Rule) of the expected expenditures for which the provider is responsible under the APM itself. In determining the required risk amount, CMS retracted proposals relating to marginal risk and minimum loss ratio (MLR) due to their complexity, though these elements will apply to “Other Payer” Advanced APMs starting in 2019. Unique standards are established for medical home models. With regard to which models qualify as an Advanced APM, CMS is exploring an enhanced ACO Track 1+ model for 2018 and intends to revisit the Comprehensive Care for Joint Replacement (CCJR) model and others, with reopened application periods, to expand the options providers have. CMS will complete its initial set of Advanced APM determinations no later than January 1 of next year. Advanced APMs are really the ballgame here, folks. Beginning in 2017, some existing APMs will not meet statutory requirements to be categorized as Advanced APMs. CMS will now characterize these programs as “MIPS APMs,” subjecting providers in them to reporting requirements and payment adjustment under the MIPS track. (MIPS requirements will also apply to any eligible clinicians in Advanced APMs who do not meet participation thresholds.) However, in response to comments and in an effort to recognize these clinicians’ participation in delivery reform, CMS finalized a proposal that MIPS-eligible clinicians who participate in MIPS APMs will be scored using the APM scoring standard instead of the one generally applicable to MIPS. Ease threshold, add complexity, and stir. CMS estimates that approximately 70,000 to 120,000 will participate in Advanced APMs in 2017 and up to 250,000 will do so the following year. In CY 2019, these ambitious providers will received between $333 and $571 million in APM Incentive Payments.


If you have ever wondered whether regulating is a careful balance between implementing your best policy while avoiding political backlash, look no further than this Final Rule. The Agency has done a pretty artful job here of keeping the MACRA train moving while making it as feasible as possible for providers to participate successfully, without altogether abandoning the letter and spirit of MACRA. As an initial sign they hit the target, key Members of Congress have already weighed in applauding the Rule. Here’s a tip: when Members applaud a regulation like this so quickly, two things are going on: 1) they are taking a solid helping of credit for changes the agency has made; and 2) they are putting affected stakeholders on notice that they have an uphill battle in securing new changes soon. Read: this is as good as it’s going to get. In my Viewpoint piece in the September issue of Health Affairs, I wrote that Congress (and provider lobbies) have a golden opportunity to tweak MACRA next year, when several expiring Medicare-related provisions must be addressed. But now, while still possible, this seems much less likely. The complexity and Icarian vision of MACRA abides, but CMS has opened the door as wide open as possible and is all but ushering docs in with their bare hands. So the ball is squarely in the court of physicians and related providers. My tip: get on board now. The train has left the station.

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