Thursday, March 30, 2017 | Larry Sobal
I hear all the time, especially from hospital executives, that “MACRA is a physician practice thing.” That’s certainly true in principle, but often hospitals have far greater connection with this legislation and its impact than they realize. Hospitals should take an acute interest in MACRA for one obvious reason: they are tied to the fate of their physicians, whether they like it or not. There are many more aspects that should cause hospital leaders to consider MACRA very much a hospital initiative.
Besides repealing the Sustainable Growth Rate (SGR), the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) laid out two paths for adjusting physician’s Medicare fee-for-service payments: the Merit-Based Incentive Payment System (MIPS) and alternative payment models (APMs). This past October, CMS released its final rule outlining how it planned to implement the clinician payment changes to the Quality Payment Program (QPP) mandated under the Medicare Access and CHIP Reauthorization Act of 2015. This is a complex 900+ page piece of legislation with major implications for clinician payment across the next decade. And as much of the focus is on how it will create winners and losers among physicians, conversations often overlook is the fact that hospitals and health systems have a vested interest in helping their physicians succeed under MACRA, whether through MIPS or an advanced APM.
In fact, many hospitals are already directly on the hook when it comes to MACRA. This is because according to the annual survey conducted by the American Hospital Association, hospitals in the United States employ over 250,000 physicians. When you add close to 300,000 physicians who had individual or group contractual arrangements with hospitals, that represents a large percentage of the 712,000 clinicians CMS estimates will be affected by MACRA.
As MACRA unfolds, it’s not unreasonable to think that independent physicians will seek assistance to help them address MACRA while maintaining their independence. They will be looking to align themselves with organizations that will provide needed guidance regarding the challenges and opportunities that MACRA presents.
Therefore, hospitals that employ or contract for the service of physicians (and other clinicians covered under MIPS) will carry the expense of implementation of compliance with MACRA and will be impacted by any physician reimbursement changes that result from MACRA performance. More challenging is that physicians will be looking to hospitals to help them sort out the complicated pieces of MACRA, and to either take ownership or provide guidance on MACRA compliance. As people are learning, it’s no easy task (it can actually be painful) to distill MACRA implementation and reporting down to the essential steps.
In addition, it’s no secret that CMS intends to use MACRA as a vehicle to drive physicians out MIPS and into one of the various APMs. As that occurs, hospitals will be required to take part in APMs to ensure that the physicians with whom they partner can be eligible for bonus payments and exemption from the MIPS reporting requirements that are connected with the APM track.
That all seems clear enough, but there are other less obvious MACRA impacts to hospitals.
For example, expected physician reimbursement changes as a result of MACRA could impact fair market value of physician practices in the future. If physician practices do not reach MIPS composite score targets, they will suffer reimbursement penalties, which will negatively impact practice and physician compensation values as well as the employing hospital. On the other hand, good performers will be positively impacted by earning MIPS bonuses for exceeding the performance threshold. In contrast to MIPS penalties, these MIPS bonuses will result in increased revenue, which could drive up the overall bottom line for practices and hospitals and will likewise need to be considered in fair market valuations.
Here’s something that hospitals may not know about MACRA. With MIPS, CMS can conduct an onsite audit at any time — and have total access to your electronic health record and patients’ protected health information (PHI). Many physicians, whether they are employed or not, are utilizing an EHR provided by the hospital. Having CMS show up and start digging into your EHR data will make a surprise Joint Commission visit seem like a walk in the park.
MACRA may also impact your hospital volumes. First, according to a study in Health Affairs, physicians and staff spend an average of 15.1 hours per week per physician tracking and reporting quality measures to Medicare, Medicaid and private payers. This time away from treating patients translates into less patients seen and less hospital activity, such as diagnostic testing. As hospitals/health systems increasingly assume greater risk for managing the health of their populations, executives need to ensure that physician compliance with MIPS or APM reporting requirements does not result in meaningless engagement, wasted resources or otherwise negatively interfere with patient access to care.
Executives need to ensure that physician compliance with MIPS or APM reporting requirements does not result in meaningless engagement, wasted resources or otherwise negatively interfere with patient access to care.
A second volume impact may come from MACRA changing physician utilization and treatment patterns. As more physicians learn to meet the reporting requirements of MIPS, which by 2021 will focus 60% of the scoring on Quality (30%) and Cost (30%), or move into APMs and assume financial risk, it’s reasonable to assume that unnecessary variation in care will decline, likely resulting in some volume reductions.
So as not to position MACRA as all doom and gloom, let’s not forget that MIPS offers high-performing physicians some attractive MACRA bonus opportunities to increase their reimbursement. Additionally, advanced APMs can qualify them for the 5 percent annual bonus payment for APM participation. And in contrast to MIPS, bonuses in the advanced APM program, as well as contractually specified bonuses or penalties, have no requirement to be budget neutral, so APMs will have less of a “winners and losers” aspect to them.
Another area where MACRA can impact hospitals is that physician compensation and service agreements will need to evolve. Moving forward under MIPS or APMs, hospitals will need to assess their existing financial relationships with physicians, whether they are employed or operating through professional services agreements. Hospitals will need to determine to what extent physicians or the health system will bear the risks and reap the rewards associated with MIPS or APM models. In addition, when contracting with physicians, hospitals must ensure that any incentives are tied to performance in delivering high value and low cost care, if they aren’t already. The implementation of MACRA should support such efforts. While some past CMS initiatives (including PQRS) have historically focused on simply reporting certain data, quality evaluation under MIPS will examine physician performance versus benchmarks on outcome and process measures.
Furthermore, effective implementation of a value-based care strategy will require engaging physicians in a new way – and creating an incentive program that reinforces their participation. Hospitals will need to make investments in their ability to understand cost structures, establish evidence-based care paths and manage variation in cost and quality – not only internally, but across the care continuum.
It’s my hope that hospitals and health systems will look at MACRA as creating an opportunity rather than a burden. Reaching a shared vision and strategy for a transition to value-based care is essential for both physicians and hospitals. This means in the coming years the fates of hospitals and physicians will be tied even more closely together. This creates opportunities for organizations to support physicians with their MIPS performance in the short run, while making the transition to value-based care and planning to be in an advanced APM down the road.
In summary, there are some critical reasons why MACRA should be viewed as hospital and physician legislation:
Still feeling unsure, unprepared or confused? Learn everything you need to know to optimize MACRA opportunities at our MACRA pre-conference session during CV Transforum Spring’17, April 18th, on Amelia Island, FL.
Illustration: Lee Sauer
Larry Sobal is Executive Vice President and a Senior Consultant at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and health insurance. Larry consults, writes and presents on topics relevant to transforming physician practices and health systems. His weekly blog post comes out on Thursdays and can be accessed at www.medaxiom.com.
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Larry Sobal, MBA, MHA, is CEO of a yet-to-be-named cardiology practice which is transitioning from employment to an independent physician group effective January 1, 2019. He has a 37-year background as a senior executive in physician practices, consulting, medical group leadership, hospital leadership and health insurance.
To contact, email: [email protected]
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