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Fig. 1 MACRA timeline Source: Centers for Medicare & Medicare Services.

AAOS Now

Published 3/1/2016
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Craig R. Mahoney, MD; Stephen W. Shick, MD; Alexandra E. Page, MD

Understanding APMs and MIPS

The Medicare Access and Chip Reauthorization Act of 2015 (MACRA) not only replaced the flawed Sustainable Growth Rate model, but also offered a high-level description of a number of new initiatives to decrease cost and improve quality of care for Medicare beneficiaries. Almost a year after the passage of MACRA, implementation of the law continues to evolve with release of regulatory specifics from the Centers for Medicare & Medicaid Services (CMS).

MACRA defined two distinct payment pathways: Alternative Payment Models (APMs) and Merit-based Incentive Payment Systems (MIPS). MACRA also identified (but did not define) a third model, Physician-Focused Payment Models (PFPMs). PFPMs should be considered an adjunct to the APMs rather than a distinct pathway. Fig. 1 shows the current proposed timeline for MACRA implementation.

APM overview
APMs are proposed as value-based payment models that compensate providers based on care quality, outcomes, and cost. By changing the current fee-for-service structure to one in which reimbursement is tied to a quality- and/or value-based metric, the incentive to perform quality care will theoretically increase. The Department of Health and Human Services anointed the APM as the preferred reimbursement model even before MACRA legislation was passed. In January 2015, CMS established a goal for 30 percent of payments through one of the APMs by the end of 2016, and 50 percent by the end of 2018.

MACRA establishes reimbursement for APMs to encourage this pathway, with qualifying practices eligible to receive bonuses. From 2019 through 2024, practices participating in APMs would have the opportunity to receive a lump sum bonus equaling 5 percent of their covered Medicare professional service revenue. This 5 percent bonus would be in addition to any regular payment update provided for all physician services and to savings already achieved through the APM itself, such as an Accountable Care Organization (ACO), or monthly per-patient payments in a patient-centered medical home.

Beyond ACOs and patient-centered medical homes, another example of an APM is bundled payments. For many orthopaedic providers and practices that receive referrals from a number of different sources, participation in an ACO is problematic. Bundled payments are the APM most aligned with the orthopaedic practice. However, outside of joint replacements, orthopaedic bundles are not yet widespread, which limits access for nonreconstruction orthopaedic surgeons. For orthopaedic surgeons who are compelled to participate in the Comprehensive Care for Joint Replacement (CJR) model, it has not yet even been established if CJR will qualify as an APM.

Challenges for orthopaedic surgeons
Despite the obvious benefits, orthopaedic surgeons will likely face significant challenges with the APM pathway. A high participation threshold has been set. Minimum participation will be 25 percent of revenue or patients seen in the first year; this threshold will grow to a maximum 75 percent by the year 2023. In addition, practices or practitioners participating in an APM must also use a certified electronic health record. Participants must follow quality metrics and also must bear risk within the APM.

To meet quality thresholds, risk adjustment will need to be highly accurate and reliable. Readmission rates, complication rates (eg, infections, thromboembolic events, medical complications rates) have been correlated to preoperative medical status. Accurately documenting and coding comorbidities will not only be necessary to represent the patient population being treated, but also to know which patients carry an acceptable risk. Concern also exists that higher risk patients could become marginalized within APMs as they have the potential to negatively affect statistical success.

ACOs and health systems participating in the CJR initiative are currently predominantly hospital-based programs. Some APMs do not allow satisfactory latitude for physicians to manage costs. There is also a risk that physicians participating in these initiatives may not receive appropriate representation or financial consideration. ACOs are primarily primary care-based organizations and specialists may be underrepresented in governance structure or financial remuneration, while the CJR program is specific to hospitals and physician participation is not a requirement of the CJR rule. Groups able to demonstrate success with an APM should anticipate financial gains, although reinvestment into the APM structure should be expected.

Another concern would involve the increased administrative burden associated with APM participation. Following patient-reported outcomes, monitoring infection rates or readmission rates, or creating tighter connections between care providers would require extra staff and money. This burden is likely to be shouldered by physicians within the APM.

APMs require enhanced communication between hospitals and physician groups. Although this can create an administrative burden, connecting two engaged parties toward a common goal of improving patient care and decreasing costs can certainly improve the overall value of the service provided. Standards will undoubtedly be set high based on the increased competition for financial reward. There is certain to be innovation in both communication and overall patient care.

Physicians historically have been drivers of quality initiatives, and in this changing landscape, physician leadership will be more important than ever. Working hand-in-hand with hospitals as well as other subspecialists and primary care physicians, orthopaedic surgeons stand to play a very large role in the success of APMs in the 21st century.

Fig. 1 MACRA timeline Source: Centers for Medicare & Medicare Services.
Fig. 2 MIPS adjustments Source: Centers for Medicare & Medicare Services.

MIPS overview
Although APMs are enticing, it is anticipated that more than 90 percent of physicians will be reimbursed through MIPS. MIPS was established by MACRA to combine the currently existing quality programs of Physician Quality Reporting System (PQRS), Meaningful Use (MU), and Value Base Modifier (VBM). The financial incentives and penalties of these programs will be combined into a single program. CMS' stated goal is to pay for "value and better care" in a streamlined way.

For providers not participating in APMs, the traditional fee-for-service Medicare fee schedule will be adjusted by MIPS. In 2016, still under the pre-MACRA reporting and penalty laws, PQRS, MU, and VBM begin to penalize physicians for noncompliance with the potential penalty growing to 7 percent of annual Medicare revenue. MIPS will combine these programs as well as their incentives and their penalties. Both in terms of timing and specifics, the January 2016 announcement by CMS that MU will be replaced by "something better" leaves the exact impact on the MU component of MIPS undefined as of press time. Regardless, MIPS will have a composite performance score based on the concepts of the current quality measures (PQRS, MU [or equivalent], and VBM) along with additional factors.

Providers are determined to be eligible for MIPS based on several factors. In 2017 and 2018, Eligible Professionals will include physicians, nurse practitioners, physician assistants, certified registered nurse anesthetists, and clinical nurse specialists. Starting in 2019, physical therapists, occupational therapists, speech pathologists, nurse midwives, clinical social workers, audiologists, clinical psychologists, and dietitians will also be eligible. Providers will be exempt from MIPS if 25 percent of their Medicare revenue comes from an APM, if it is the provider's first year of Medicare participation, or if the provider falls below the low-volume threshold.

MIPS scoring
Beginning in 2017, MIPS will measure physicians on four performance categories: quality, resource use, clinical practice-improvement activities, and MU (though the MU portion is pending change). The MIPS score will be on a 100-point scale with 30 points allocated to quality (PQRS/VBM), 30 points to resource use (VBM cost), 25 points to MU, and 15 points to clinical practice improvement. Each physician's composite score will be compared to a performance threshold (PT). The PT will be determined by CMS each year and is likely to be the mean or median of all eligible Medicare providers. For the first 2 years of the MIPS program, the PT will not be based on MIPS scores, but rather a combination of measures relating to PQRS, MU, VBM and other factors as determined by CMS. Fig. 2 summarizes the adjustments under MIPS. Starting in 2019, physicians participating in MIPS can receive a payment adjustment ranging from plus 4 percent to minus 4 percent. This adjustment will grow to 9 percent in 2022 and thereafter. In addition, in years 2019 through 2024, exceptional performers may be eligible for an additional positive payment adjustment of up to 10 percent.

For example, if the PT is 50 points, a physician earning a MIPS score of 50 would have a payment adjustment of 0 percent. A physician with a score of 51 and greater earns a positive incentive, while a physician with a score of 49 and less will receive a penalty. The program is set up to be budget neutral, so the penalties of those below the PT will pay for the positive incentives of those above the PT.

Clinical practice improvement is a new performance category that will include scoring for expanded practice access, population management, care coordination, beneficiary engagement, patient safety, and practice assessment. Quality measures will be updated by CMS each November for the following year. CMS will seek input through notice and comment rulemaking. The AAOS is working closely with CMS in the development of these measures.

Orthopaedic surgeons may be asking themselves, "What should I do now?" MIPS offers progressively stronger incentives and penalties to participate in quality performance measures. For some practices, the cost of participating may be greater than the penalties incurred. For those practices not yet participating in PQRS, MU, or VBM, it may be time to make the changes needed to avoid future penalties.

The political process will no doubt influence the rollout of MIPS. Having a voice in the process will be more important than ever. Participating in the political process through the American Association of Orthopaedic Surgeons (AAOS) Political Action Committee (Orthopaedic PAC) is an excellent opportunity for orthopaedic surgeons to help shape the future of health care in the United States.

In addition, although PFPMs remain poorly defined, orthopaedic surgeons should keep them on their radar as a potential alternative for specialists. MACRA requires that criteria for PFPMs, including models for specialists, must be established by Nov. 1, 2016.

Craig R. Mahoney, MD; Stephen W. Shick, MD; and Alexandra E. Page, MD, are members of the AAOS Health Care Systems Committee.

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