CMS moves forward with implementation of MACRA, other policy changes in Physician Fee Schedule Update

The Centers for Medicare and Medicaid Services (CMS) on Thursday, November 2, 2017, released final rules on Medicare reimbursement for 2018 that will have significant implications for providers’ margins and drive many provider and payer organizations to revisit their strategic objectives. The final rules for the 2018 performance period under the Quality Payment Program (QPP) of the Medicare Access and CHIP Reauthorization Act (MACRA) and the 2018 Part B Physician Fee Schedule Update include critical details that will have implications for providers related to value-based care, coding compliance, health information technology investments and telehealth services, among other issues.

The final rule for the MACRA QPP 2018 performance period is scheduled for publication in the Federal Register on November 16, 2017, and the final rule on the Part B PFS update is scheduled for publication in the Federal Register on November 15, 2017. Provisions of both rules will take effect January 1, 2018.

The final rule for the 2018 performance period under MACRA is notable in that it marks the Administration’s commitment to implementing MACRA and providing incentives for clinicians to move away from the fee-for-service reimbursement model toward risk-bearing, coordinated care models that strive to improve both patient outcomes and the efficiency of care. In addition, although CMS has continued to provide greater flexibility to clinicians as they transition into the new payment tracks under MACRA, such regulatory flexibility generally is not available to CMS in future years due to the underlying statutory requirements. CMS states that this second year of implementation in 2018 builds upon the foundation that has been established to provide a trajectory for clinicians to value-based care and to prepare for full implementation in 2019.

Highlights of key provisions of the two rules are provided below.


MACRA, which was enacted in April 2015, repealed the Sustainable Growth Rate (SGR) formula for updates to the Medicare Part B PFS and set payment updates for all years in the future. At the same time, MACRA created two new Part B payment tracks for clinicians to establish the QPP:

  • The Merit-based Incentive Payment System (MIPS), which will provide positive or negative payment adjustments for clinicians whose practices are more closely tied to fee-for-service reimbursement; and
  • Advanced alternative payment model (AAPM) Qualifying Participants (QPs), for clinicians who have significant percentages of their practices in risk-bearing, coordinated care models in exchange for temporary financial bonuses and higher payment updates long-term.

Performance year 2018 under the QPP will dictate MIPS payment adjustments and eligibility for AAPM bonuses for 2020.

Merit-based Incentive Payment System (MIPS)

Under the final rule for the 2018 performance period, CMS increased the threshold for participation in MIPS by raising the low-volume threshold. Under the policy, clinicians who have less than $90,000 in Part B charges annually or do not see more than 200 Medicare Part B beneficiaries will be excluded from MIPS for 2018. For 2017, clinicians are excluded from MIPS if they have less than $30,000 in Part B charges for the year or do not see more than 100 Part B beneficiaries.

For clinicians who are participating in MIPS, the performance threshold for 2018 will be set at 15 points, up from 3 points for the 2017 performance year. The performance threshold is the point that will distinguish whether clinicians will receive positive or negative payment adjustments based on their performance in the four MIPS categories: Quality, Cost, Advancing Care Information (ACI) and Improvement Activities (IA). The payment adjustments for 2020 year will range from -5% to +5% and to achieve budget neutrality as required by law.

For 2018, Quality will account for 50% of the MIPS composite score. CMS finalized that clinicians would need to submit Quality data for a full year for the 2018 performance period, rather than the 90-day period required for 2017.

Perhaps most notably in the final rule with regard to MIPS, CMS finalized that performance in the Cost category would account for 10% of the MIPS composite score for 2018, up from 0% in 2017. In the proposed rule, CMS called for keeping the Cost weight at 0% for 2018, but many stakeholders expressed concern about challenges clinicians would face if the weight of the Cost performance category jumped from 0% for 2018 to 30% for 2019 as required by the statute.

Performance in the Cost category will be based on claims and will not require additional reporting by clinicians. For 2018, Cost performance will be based on the Medicare Spending per Beneficiary and total per capita cost measures that were used in the value-based modifier program. CMS is working to develop episode-based measures and plans to release them in future rulemaking before they are included in MIPS; field testing on eight episode-based cost measures will run through November 15, 2017.

ACI generally will continue to count for 25% of the MIPS composite score in 2018. CMS finalized that clinicians could use either 2014 or 2015 Edition Certified Electronic Health Record Technology (CEHRT) for 2018, although clinicians who use only the 2015 edition CEHRT will receive a bonus.

IA will count for 15% of the MIPS composite score for 2018. Clinicians do not need to report more than four activities – four medium or two high-weighted activities – to receive full credit for IA for the 2018 performance period. This is the same standard as is being used for the 2017 performance period.

To address concerns of clinicians that they may be at a disadvantage in MIPS based on the complexity of their patient mix, CMS has finalized a policy that will provide up to 5 bonus points to clinicians for the treatment of complex patients. The bonus points will be awarded based on a combination of the Hierarchical Condition Categories (HCCs) and the number of patients treated who are dually eligible for Medicare and Medicaid (“dual eligibles”).

Advanced Alternative Payment Model (AAPM) Qualifying Participants (QPs)

In the final rule for 2018, CMS finalized that the performance period to determine QP status in AAPMs would be January 1, 2018, through August 31, 2018. For AAPM entities that start or end during the performance period, CMS will assess QP status based on the time the entity was able to participate in the AAPM, so long as the AAPM entity participated for at least 60 days. The policy is intended to make it easier for clinicians to achieve QP status if they join AAPM entities that form after the performance period begins.

In previous rulemaking, CMS provided for two distinct generally applicable nominal risk standards. To be considered an AAPM, AAPM entities must bear financial risk of at least 3% of the expected expenditures that an AAPM entity is responsible for under the AAPM for all performance years. Alternatively under the revenue standard, APM entities must bear financial risk equal to at least 8% of the estimated Parts A and B revenue of the participating AAPM entity for the 2017 and 2018 performance year periods. In the final rule for 2018, CMS extended the availability of the revenue standard through performance year 2020.

The final rule for the 2018 performance period also includes critically important detail for the All-Payer Combination Option, through which clinicians can receive credit toward AAPM QP status based on their participation in Medicare Advantage (MA), Medicaid managed care, and other commercial contracts that meet AAPM criteria beginning in performance year 2019. An important provision for states and health plans is that CMS provides for a voluntary “payer-initiated process” running from January to April 2018 for states to submit payment arrangements for Medicaid contracts to be certified as other-payer AAPMs and a similar process for Medicare Advantage organizations (MAOs) that will run from April to June 2018. Organizations participating in CMS-sponsored multi-payer initiatives will be able to seek Other Payer AAPM certification through a process running from January to June 2018.

CMS intends to provide a payer-initiated process for the remaining Other Payer AAPMs in future years. In the meantime, clinicians participating in contracts they believe meet the criteria for Other Payer AAPMs will have to submit information on the payment arrangements to CMS themselves beginning in August 2019.

In the final rule, CMS adopted January 1 through August 31 as the performance period for Other Payer AAPMs, and finalized a policy that allows clinicians to be assessed for QP status based on participation in Other Payer AAPMs at either an individual or AAPM entity level. The final rule also provides for two financial risk standards for Other Payer APMs, consistent with the revenue standard for Medicare APMs: at least 3% of the expected expenditures for which an AAPM entity is responsible, and at least 8% of estimated revenue of the participating AAPM entity where the risk is expressly defined in terms of revenue.

Part B PFS update

This separate final rule addresses changes to the Medicare physician fee schedule and other Medicare Part B payment policies such as changes to the Medicare Shared Savings Program, to ensure that payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes required under MACRA.

Payment update

Most notably, the overall update to the Part B PFS for 2018 will be +0.41%, reflecting the 0.5% update set by MACRA and a reduction of 0.09% as a result of the misvalued code target recapture amount set by a 2014 law.

Non-excepted off-campus provider-based hospital departments paid under PFS

The Part B PFS update finalizes a 20% reduction to current PFS payment rates for items and services furnished by certain off-campus hospital outpatient provider-based departments (HOPDs). Specifically, the change in policy will result in PFS payment rates, referred to as the “PFS Relativity Adjuster,” being reduced from 50% of Outpatient Prospective Payment System (OPPS) rates to 40% of OPPS rates. This adjustment reflects further analysis of claims data since the CY 2017 update was released.

This change in policy come on top of an earlier change in policy that bars certain off-campus HOPDs from being reimbursed under the OPPS and instead requires them to be reimbursed under the PFS, as part of the implementation of Section 603 of the Bipartisan Budget Act of 2015.

Telehealth services

CMS finalized the addition of seven codes to the list of telehealth services for calendar year 2018 and eliminated the reporting requirement for the telehealth modifier GT used to identify when a telehealth service was provided via an interactive audio and video telecommunications system. The additional codes focus primarily on care management and risk assessment-related procedures.

Care management services

The PFS payment update finalizes proposals to adopt CPT codes for calendar year 2018 for reporting certain care management services currently reported using Medicare G-codes.

Part B drugs

Consistent with other efforts by the Administration to address prescription drug costs, the Part B PFS update finalizes a policy that will no longer group newly approved biosimilars and biologics in the same billing code.

In addition, the final rule implements a Part B drug payment policy enacted as part of the 21st Century Cures Act that transitioned payment for Part B infusion drugs or biologics furnished through covered durable medical equipment (DME) from a pricing methodology based on average wholesale price (AWP) to one based on average sales price (ASP).

Patient relationship codes

MACRA requires CMS to develop new patient relationship categories and codes in an effort to more accurately assess clinicians’ performance under the MIPS Cost category. CMS proposed the patient relationship categories in April 2017, and the PFS update finalizes certain Level II Healthcare Common Procedure Coding System (HCPCS) codes that will be required to be included on claims beginning January 1, 2018. CMS plans to work with clinicians to ensure proper use of the new codes.

Medicare shared savings program (MSSP)

Among other policy changes intended to ease regulatory burden for MSSP accountable care organizations (ACOs), the final rule adds three new chronic care management and four behavioral health integration (BHI) codes to the definition of primary care services used to assign Medicare beneficiaries to an ACO. Patient attribution to Federally Qualified Health Centers and Rural Health Clinics is also streamlined under this rule, as well as permitting these entities to submit data as group practices, rather than individual practitioners.


Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see to learn more about our global network of member firms.

Copyright © 2017 Deloitte Development LLC. All rights reserved.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s