How MACRA is hastening the demise of fee-for-service


Guest post by Jonathan H. Burroughs, president and CEO of The Burroughs Healthcare Consulting Network. He's also a certified physician executive and a fellow of the American College of Physician Executives and the American College of Healthcare Executives. 

In April, 2015, President Barack Obama signed into law the Medicare Access and CHIP Reauthorization Act (MACRA) to replace the deservedly maligned sustainable growth rate (SGR) physician Medicare reimbursement methodology. Over several decades, SGR had fallen more than 21 percent behind predicted healthcare costs, necessitating annual last-minute congressional renegotiations to prevent a significant drop in physician Medicare reimbursement, which would have had a profound impact on the access of Medicare beneficiaries to physician care.

Without much fanfare and with rare congressional bipartisanship support, MACRA became the law of the land and will quietly revolutionize how physicians are paid by Medicare over the next decade.

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What MACRA does is separate traditional fee-for-service (FFS) volume-based methodology from all of the other "pay for value" methodologies that include: bundled payments, shared savings, risk-based capitation models (PMPM) to name a few, which are all a part of the new Merit-Based Payment System (MIPS) or Alternative Payment Models (APMs).

Until 2019, there will be no significant difference between FFS and APM payments; however, beginning in 2019, FFS payments will be frozen through 2024, while APM payments will increase by 5 percent annually and those participating in MIPS will earn a 4 percent increase that will potentially increase to 9 percent by 2022 based upon a pay-for-value incentive methodology. Physicians who rate in the top decile will be eligible for additional "premium" payments and from 2024-2026. Those who participate in APM will receive additional 0.75 percent increases, whereas those who don't will receive increases of 0.25 percent. What this means is that the difference between Medicare reimbursement of the top performers within MIPS or APM and the lower performers within FFS will be at least 36 percent.

This is obviously a seismic shift in the healthcare industry and raises the following points:

  • We are moving into a business model that is a meritocracy, and not all healthcare organizations will survive
  • Lower performers will subsidize higher performers in a revenue-neutral way to payers
  • Higher performers will gain disproportionate market share on the backs of lower performers
  • Organizations that want to position themselves to receive optimal reimbursement by 2019 will need to prepare today by transforming both their care and business models

Read the full commentary at Hospital Impact

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