CMS takes next steps in implementation of new Medicare payment law: critical new details emerging for health care professionals, hospitals and health plans

CMS takes next steps in implementation of new Medicare payment law
Posted by Anne Phelps, on October 21, 2015.

The Centers for Medicare and Medicaid Services (CMS) is beginning the process of seeking comment and developing regulatory guidance on the recently passed Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA fundamentally changes how Medicare provider payments will be set in the future. It is critically important for health systems and health plans that employ physicians to begin to assess now how the law might affect their revenue and strategic priorities. Health systems and health plans may want to revisit their strategic relationship with health care providers in light of the law’s financial incentives for health care professionals to participate in risk-bearing coordinated care models.

Stakeholders should keep abreast of the critical regulations that the Administration is releasing over the next six to 12 months in order to be prepared to adapt to new requirements and processes that will start to be rolled out as soon as July 2016.

Overview of MACRA

MACRA repeals the Sustainable Growth Rate (SGR) formula and establishes a path toward a new payment system that will more closely align reimbursement with quality and outcomes measures while steering health care providers to participate in risk-bearing coordinated care models and away from the fee-for-service reimbursement system.

President Obama signed MACRA into law on April 16, 2015. The law specified payment updates under the Medicare physician fee schedule for all years in the future:

• 2016-2018: + 0.5%
• 2019-2025: 0% (no increase)
• 2026 and all subsequent years: Rates for providers who participate in alternative payment models (APMs) will increase by 0.75% annually, while rates for all other providers will increase by 0.25% annually

In addition to setting future payment updates under the Medicare physician fee schedule, MACRA also creates two financial incentive programs for providers who participate in APMs at some level. Providers who receive a substantial percentage of revenue from APMs will be eligible for bonus payments of 5% of estimated Medicare charges each year from 2019 through 2024. Under the Merit-based Incentive Payment System (MIPS), high-performing providers can qualify to share up to $500 million in additional MIPS payment adjustments each year from 2019 through 2024. (For additional details on the MIPS program, see the 10/1 RegPulse blog.)

New request for comments on care episode groups

On October 15, 2015, CMS released a Request for Comment on how to define “care episode groups” under the new law. The care episode groups were included in the law as part of an effort to help CMS measure resource use more effectively; the care episode groups will play a significant role in determining Medicare payments to health care professionals under the Physician Fee Schedule in the future.

The posting of the care episode groups highlights the Administration’s need for input from the health care community about issues such as:

• What specific clinical criteria and patient characteristics should be used to classify patients into care episode groups and patient condition groups?
• How should CMS approach development of patient condition groups for patients with multiple chronic conditions?
• How can care coordination be addressed in measuring resource use?

Beginning on January 1, 2018, Medicare claims will be required to include new codes corresponding with the care episode and patient condition groups, as well as new codes intended to capture a health care professional’s relationship to a patient. CMS will use the care episode codes and the patient condition codes reported on claims to compare similar patients, care episodes, and patient condition groups for specific periods of time.

MACRA required CMS to develop the care episode groups to account for a target of at least 50% of expenditures under Medicare Parts A and B, with the target increasing over time as appropriate. Together with new categories and codes intended to capture a health care professional’s relationship to a patient, the new care episode groups will be a significant factor in determining Medicare payment adjustments under MIPS, as well as APMs.

Previous request for comment on definition of MIPS and APMs – Period Extended

The posting of the episode groups follows a CMS request for information on implementation of MACRA that was published in the October 1, 2015, Federal Register. The RFI focused on some of the operational requirements and key definitions for the MIPS and APM incentive programs.

The RFI initially was subject to a 30-day comment period, but CMS on October 15 announced that it was extending the comment period by 15 days. Comments are now due by November 17, 2015.

Next steps

The Administration is moving into a period of increased regulatory activity related to MACRA. CMS will accept comments on the draft care episode groups through February 15, 2016, and post a draft list of codes corresponding to the care episodes by November 9, 2016. Another comment period will be provided before CMS is required to finalize the codes no later than December 14, 2017, just weeks ahead of the January 1, 2018, compliance deadline.

The Administration plans to release a Notice of Proposed Rulemaking on MIPS in 2016.

In addition, MACRA requires the HHS Secretary to establish metrics to gauge the interoperability of electronic health records by July 1, 2016.

US National Health Care Regulatory Team

Anne Phelps
Deloitte Advisory Principal
US Health Care Regulatory Leader
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Daniel Esquibel
Deloitte Advisory Senior Manager
Deloitte & Touche LLP

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Ryan Haggerty
Deloitte Advisory Senior Manger
Deloitte & Touche LLP