MACRA, MIPS & APMs: Fun With Numbers

Hello March! The first full week of March can only mean one thing—selection Sunday for the greatest sporting event of the season is less than one week away! The men’s college basketball field is wide open this season and it’s going to take some serious number crunching to fill out those NCAA brackets. Speaking of numbers, much has been written about the implementation of MACRA since the law’s passage last spring. Quite a bit of this is speculative as the proposed rule related to implementation has not been published. However, it does appear that numbers will be involved to determine who is eligible for the alternative payment model (APM) track, and who will be required to participate in the merit-based incentive payment system (MIPS). Let’s crunch a few numbers of our own and try to shed some light on the subject.

The APM path

When you peel back the layers of what we know today, it appears clear that CMS has created financial carrots which make it more favorable to take the APM path and avoid MIPS when possible. Perhaps the most telling “carrot” is the 5% bump in the Medicare physician fee schedule (PFS) that APM participants will enjoy during the upcoming fee schedule freeze, slated to take place 2019 to 2024. There is also a very minor PFS differential between APM and MIPS docs in the later years (a 0.75% vs. 0.25% bump respectively). Based on what we see in the legislation, organizations such as the Advisory Board believe that one becomes an “APM doc” in the early years of the program if 25% of your Medicare revenue moves through an alternative payment model. The APM that appears most attractive to a nephrologist is the ESCO. What follows is a thought experiment, complete with a boat load of assumptions, designed to see where one might land after crunching the numbers.

Assumptions

Yours truly purchased a copy of the 2013 RPA benchmarking survey and have abstracted several “averages” from that survey. As a brief aside, this survey is a remarkably valuable tool and if you have not seen it I would suggest you get your hands on the latest copy, which will include more up-to-date data than what I am sharing below.

To begin our analysis, let’s assume the average nephrologist sits exactly within the mean of the RPA benchmark survey results. We can start with the average “net charges” figure from the survey. In 2013 this was roughly $580k per FTE nephrologist. Of interest, 61% of net revenue was paid by Medicare. Using handy, back-of-the-envelope calculations, this puts our APM target at around $88k. Stated another way, in order for 25% of Medicare receipts to move through an APM, this average nephrologist would need to recognize $88k from services rendered to patients attributed to the ESCO ($580k x 0.61 x 0.25 = $88k).

Crossing the finish line

So what does it take to make this happen? Although $88k sounds like a big number, it is well within the scope of the typical ESCO participant. From the RPA survey, our average nephrologist cared for 68 ESRD patients in 2013. Although it varies, in our experience 50-60% of the patients in an ESCO facility are attributed by CMS to the ESCO. Let’s assume that figure is 50% and that our average nephrologist is the sole provider in our hypothetical 68-patient dialysis facility. While we are at it, let’s assume the payor mix within that facility is such that our average nephrologist collects what amounts to 100% of the prevailing Medicare PFS for his or her MCP payments across this population of patients. (I know we are taking liberties with assumptions, let’s chalk that up to an early case of March Madness.) Our RPA survey tells us the average nephrologist collected $180k in MCP revenue in 2013. Based on the above assumptions, $90k of this was paid by Medicare.

What does it all mean?

At the end of the day, everyone will do the math. Both payor mix and individual patient assignments will vary within each practice. But in this back-of-the-envelope thought experiment, your average ESCO participant should easily cross the APM threshold in the early years and thereby avoid the MIPS track. Note I did not include the inpatient charges our average nephrologist collects for services rendered to hospitalized attributed ESCO beneficiaries. Using the same assumptions above, and conservatively estimating that 1/3 of our average nephrologist’s inpatient revenue accrues from care provided to dialysis patients, one might bump the $90k figure up to $110-120k.

As the rules of engagement for MIPS and APMs become clearer later this year, nephrologists around the country will be crunching numbers like these. The good news for the nephrology community is that CMS appears to be committed to broadly expanding APM opportunities. As this picture unfolds, the Acumen blog will continue to sift through the details. In the meantime, settle in and enjoy some madness of your own—the madness that is March!

Terry Ketchersid, MD, MBA, practiced nephrology for 15 years before spending the past seven years at Acumen focused on the Health IT needs of nephrologists. He currently holds the position of Chief Medical Officer for the Integrated Care Group at Fresenius Medical Care North America where he leverages his passion for Health IT to problem solve the coordination of care for the complex patient population served by the enterprise.