How SGR repeal will change quality reporting and payment models
In April 2015, after many years of efforts by physician advocacy groups, new legislation permanently replaced the Medicare sustainable growth rate (SGR) formula. No more stopgap legislative actions would be necessary to avoid drastic cuts in physician payments under Medicare. Instead, the Medicare Access and CHIP (Children's Health Insurance Program) Reauthorization Act (MACRA) set a much different path for the future.

MACRA contains numerous far-reaching reforms centering on how Medicare will issue and adjust payments to physicians. Specifically, MACRA will expand and accelerate the movement toward value-based payment reform, by overhauling current Medicare quality reporting efforts and expanding alternative payment models.

Under MACRA, Medicare payments to physicians are scheduled to increase 0.5 percent annually until 2019. Beginning in 2019, however, physicians will need to choose one of two payment adjustment pathways.

The MIPS path
The first pathway is the Merit-Based Incentive Payment System (MIPS), which consolidates the following current Medicare quality reporting programs into one:

• Physician Quality Reporting System (PQRS)
• Physician Value-Based Payment Modifier
• Electronic Health Record (EHR) Incentive Program

The composite MIPS score will consist of 4 parts: quality (50 percent in 2019, decreasing to 30 percent by 2021), resource use (10 percent in 2019, increasing to 30 percent by 2021), EHR usage (25 percent), and clinical improvement (15 percent).

Exactly how MIPS quality measurement will change from its current form as PQRS remains to be fully defined. Although PQRS-based payment adjustments will continue through 2018, this (2016) is actually the last year for reporting to PQRS. In 2017, CMS aims to have its new MIPS reporting system in place, collecting data to be used for the payment adjustments scheduled to start under the new program in 2019.

MACRA does emphasize that qualified clinical data registries (QCDRs) will continue to play a key role in reporting. MACRA also expands reporting under QCDRs. Although only individual providers can currently satisfy quality reporting requirements through QCDRs, MACRA extends this option to group practices as well.

EHR usage will be measured under meaningful use guidelines. Clinical improvement will incorporate several factors, including expanded practice access, care coordination, beneficiary engagement, and patient safety.

Each year, the Centers for Medicare & Medicaid Services (CMS) will set a median threshold, based on prior years' data. Providers will receive either a bonus or a penalty based on their cumulative score.

Maximum penalties will start at -4 percent of payments, increasing to -9 percent by 2022. Bonuses can be up to three times the maximum penalty: +12 percent in 2019 and up to +27 percent by 2022. However, the MIPS program is designed to be budget neutral, so bonuses and penalties must balance, in a manner similar to the current Physician Value-Based Payment Modifier.

In addition, an "exceptional performance" bonus pool of up to $500 million will be established. Providers who qualify can potentially receive up to an additional 10 percent bonus annually until 2024.

The APM route
Providers who derive a substantial percentage of their Medicare payments from alternative payment models (APMs) may be exempt from MIPS under the APM pathway. APMs that will be included in the program will require participating physicians to assume financial risk, to use an EHR, and to report quality metrics.

Qualifying APM programs include the following:

• Medicare accountable care organizations
• Bundled Payments for Care Improvement initiative
• Medicare Shared Savings Program
• Comprehensive Primary Care initiative

Providers selecting the APM track in 2019 must derive 25 percent of their Medicare reimbursements through APMs. This percentage increases to 50 percent by 2022 and to 75 percent in 2023 and thereafter.

Physicians in the APM track will receive a 5 percent bonus annually through 2024. Starting in 2026, physicians participating in APMs will have a larger fee schedule adjustment (0.75 percent increase annually) than those who do not participate (0.25 percent increase annually).

Linking to value
MACRA represents the most important health legislation since the Affordable Care Act (ACA) was passed in 2010. In addition to eliminating the uncertainty and budgetary frustrations associated with the SGR formula, MACRA further solidifies many of the experimental quality and payment initiatives pioneered as a result of the ACA. By consolidating numerous existing programs into two broad payment adjustment pathways, CMS strengthens its policy levers to link reimbursements to value.

David B. Bumpass, MD, and Julie Balch Samora, MD, PhD, MPH, are among the Washington Health Policy Fellows.