SGR Repeal: There’s a new Sheriff in Town

A couple of weeks ago, organized medicine along with most physicians in this country breathed a sigh of relief when the Senate followed the House and overwhelmingly voted to repeal the Sustainable Growth Rate (SGR). In place for almost two decades, the SGR began as a reasonable idea but quickly morphed into an annual nightmare for the nation’s physicians. With the President’s signature, the SGR now rests in peace and Congress will no longer be pressed into service at the 11^th hour to correct the mistake made by their predecessors. Some are happy with the resulting modest annual Medicare increase docs will see through 2019, others are not, but everyone I have spoken to is delighted the SGR is now in the history books.

The new Sheriff

However, today’s post is not about the short term 0.5% annual increase in the legislation. No, the permanent doc fix has something else in store for us. As recently mention in our blog, the SGR repeal will roll up the “CMS Triple Threat” into a single incentive program, which is set to take flight in 2019. In roughly 1,344 days, there will be a new Sheriff in town. The Merit-Based Incentive Payment System, thankfully abbreviated MIPS, is an ambitious construct, which if successful will accelerate the nation’s migration away from the current transactional, volume-dependent fee-for-service program to a value-based payment system.

The plan is to leverage the experience to date with PQRS, Meaningful Use, and the Physician Value Based Payment Modifier (VM); combine that experience with an as-yet-undefined measure of Clinical Practice Improvement Activities; and, voila, each of us will have a composite performance score between 0 and 100. How exactly the triple threat and the new metric for practice improvement will be measured, weighted, and combined to create a provider’s composite performance score is yet to be determined of course, but CMS has a couple of years to fill in the details. Implicit in this new world is the fact that 2018 will be the last year for the PQRS, Meaningful Use, and VM programs as we know them today.

MIPS

At a high level your MIPS composite performance score will be generated from four domains:

1. Quality. CMS intends to publish eligible quality measures on an annual basis. They will likely start with the measures that are part of PQRS, Meaningful Use, and the VM. Note: providers will be able to choose which measures to report from a master list of options.
2. Resource Use. CMS plans to leverage the techniques used within the VM framework to measure resource utilization by providers. Note: plans are underway to tweak the existing patient attribution process so that it more fairly assigns cost of care to the appropriate provider(s).
3. Meaningful Use. Little change beyond what we have recently seen is anticipated for the meaningful use component of MIPS. Although, as you will see below, there may be an opportunity to avoid this pesky member of the trifecta.
4. Clinical Practice Improvement Activities. The new kid on the block is perhaps best described by a direct quote from a summary prepared by the House Committee on Energy & Commerce and Ways & Means: “Professionals will be assessed on their effort to engage in clinical practice improvement activities. Incorporation of this new component gives credit to professionals working to improve their practices and facilitates future participation in APMs. The menu of recognized activities will be established in collaboration with professionals. Activities must be applicable to all specialties and attainable for small practices and professionals in rural and underserved areas.” APMs, by the way, are Alternate Payment Models…more on that later.

Zero-sum game

There are a few new dollars in this piece of legislation, but not many. In fact part of the appeal this bill had for lawmakers was that it carried that trendy phrase “budget neutral.” What this means for you is that starting in 2019, for every provider that wins the MIPS sweepstakes, there will also be a provider that loses. And, as we will see in a moment, we’re not talking small potatoes here.

Based on my read of what’s in the public domain, MIPS will work something like this: You will have the opportunity to be scored as an individual provider or as a group practice. The contestants in this contest include the usual suspects. Pertinent to the practice of nephrology, all docs, NPs, PAs, and clinical nurse specialists are in the game starting in 2019. At some point prior to 2019 (2017 would be my guess), CMS will determine every provider’s composite performance score, a figure between 0 and 100. Next they will select either the mean or the median from this national experience and that score will establish the 2019 performance threshold. The performance threshold is basically the tipping point for MIPS. Score above it and you collect a bonus; score below it and you pay a penalty. As with the VM, the dollars collected via the penalty will be used to pay those who perform well. Unlike the VM, however, this program uses a linear distribution to hand out rewards and penalties. What that means in English is almost everyone will be impacted by this program. As you may recall, early estimates for the VM suggest over 80% of physician practices would see no payment adjustment due to the VM. Not the case here.

Highs and lows

Taking a page from previous experience with incentive programs, we can infer that the magnitude of the MIPS payment adjustments will expand over time. And, just like today, the payment adjustments represent a percentage of the provider’s Medicare Part B book of business. The table below highlights the maximum upside and downside we will face in the years ahead.

Maximum MIPS Payment Adjustments

Year	2019	2020	2021	2022
Max Penalty	4%	5%	7%	9%
Max Bonus	12%	15%	21%	27%
Spread	16%	20%	28%	36%

 

Reportedly, those providers with a composite performance score between 0 and 25% of the performance threshold will face the maximum penalty. As scores rise above that 25% mark and get closer to the performance threshold, providers will face a proportionally smaller penalty (recall our new friend the linear distribution). Those whose score is equivalent to the performance threshold will see no impact upon their fee schedule. The money collected via penalty will be pooled and CMS will distribute it to providers whose performance score is north of the performance threshold, again in a linear fashion such that those with the highest scores will theoretically capture the maximum bonus. There are also some complex “kickers” for exceptional performance which will be funded by “new money” (capped at $500 million per year).

APMs: Avoiding Sheriff MIPS

Earlier I alluded to a potential path to avoid most of the MU framework. That path is part of CMS’ drive to encourage your participation in Alternative Payment Models (APMs). Frequent readers of this blog may recognize APMs as they were part of the plan Secretary Burwell laid out in a blog post of her own. Again, quoting from our friends at Energy & Commerce and Ways & Means: “Professionals who receive a significant share of their revenues through an APM(s) that involves risk of financial losses and a quality measurement component will receive a five percent bonus each year from 2019-2024. A patient-centered medical home APM will be exempted from the downside financial risk requirement if proven to work in the Medicare population. Two tracks will be available for professionals to qualify for the bonus. The first option will be based on receiving a significant percent of Medicare revenue through an APM; the second will be based on receiving a significant percent of APM revenue combined from Medicare and other payers. The second option makes it possible for professionals to qualify for the bonus even if Medicare APM options are unavailable in their area. If no Medicaid APM is available in a state, a professional’s Medicaid revenue will not be counted against the proportion of revenue in an APM. In states where Medicaid APMs are available, Medicaid medical homes will also be exempted from downside financial risk if they are proven to work in the Medicaid population. Professionals who meet these criteria will be excluded from the MIPS assessment and most EHR meaningful use requirements.”

Of course 2019 is a few years off, but one might imagine that APMs that involve risks of financial loss and quality measurement will include some of the programs we are familiar with today such as Pioneer ACOs, the Bundled Payments for Care Improvement (BPCI) Initiative, and, if they do in fact get off the ground this year, the ESCOs.

Sea change ahead

So what does it all mean? A wonderful question and one for which I do not have an answer, but a couple of thoughts come to mind. The SGR repeal establishes the MIPS framework and creates “steerage” towards APMs. There is a decent chance these two components of this legislation will ultimately make it one of the most important steps along the path to value-based purchasing. I think we can expect to see a couple of fundamental shifts among the practices that successfully meet these new challenges. First and foremost, “business as usual” will not succeed. Our practices, for example, have evolved within a transactional fee-for-service environment and they are staffed to succeed in that world. Those staffing models will likely change because within a value-based environment, what happens to the patient between office encounters and procedures becomes increasingly important. Second, this type of “sea change” will very likely lead to consolidation as small independent practices look for “strength in numbers.” It will be difficult for small practices to invest in the infrastructure necessary to succeed in the new world of value-based health care. Finally, in contrast to what we have experienced with recent incentive programs from CMS, MIPS comes with some serious chops. In just seven short years the reimbursement spread between the “best” and the “worst” among us will approach 40%. The proposed linear distribution of the payment adjustment within MIPS may create a “haves” and “have nots” scenario, the likes of which we have not previously seen.

I recently had the opportunity to join several colleagues and speak about value-based payment at one of our national meetings. During the Q&A session it was clear there are nephrologists among us who still do not believe our payment structure is changing. I think the remaining doubters may look back on 2015 as a turning point. Secretary Burwell hinted at what was coming in January, ESCOs will very likely get started in July, and the SGR repeal elected a new sheriff. Soon Sheriff MIPS will be patrolling our health care neighborhood. Many of the details remain a work in progress, but one thing is very clear, value-based health care is here to stay.

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.