MACRA Proposed Rule: What You Need to Know June 1, 2016 1

Why Does This Matter? Physicians: Impact on payment, performance measurement requirements Hospitals: May bear cost of implementation and compliance with new payment and performance measurement system by employed physicians Continued shift in hospital-physician relationships Incentives to participate in alternative payment arrangements increasing interest in risk-bearing arrangements We expect the new physician payment system will have a number of important impacts on hospitals in the coming years, and look forward to hearing your thoughts on these implications during the discussion. A few potential impacts have emerged from our early discussions with members. The most directly impacted hospitals will be those that employ their physicians. Those hospitals will need to absorb the costs of compliance But we also expect this new payment system will impact the continued shift in hospital-physician relationships. For example, some physicians may find the stability of hospital employment more appealing. And given the significant incentives to participate in APMs, there may be more pressure from physicians for hospitals to participate in risk bearing relationships

MACRA Proposed Rule Released on Apr. 27 Proposes policies implementing new Physician Quality Payment Program mandated by MACRA Affects payment in CY 2019 Performance period of CY 2017 Comments due June 27

Physician Quality Payment Program PQRS VM MU Starting in 2019…. Just as a quick reminder, the MACRA passed last year. In addition to eliminating the deeply flawed SGR formula for physician payments, it established a new, two track physician quality payment program in 2019. That program does two things: Consolidates three previously separate programs into one (the Merit-Based Incentive Program, or MIPS) and; Provides incentives for participation in APMs. Taken together, these programs are an aggressive step in moving the field from volume to value. MIPS APM

Payment Under MACRA 0.0% annual update 2021 2022 2024 2025 2023 2019 APM: Bonus of 5% of PFS payments annually APM 0.75% annually; no bonus payments 0.0% annual update MIPS OR APM 2021 2022 2024 2025 2023 2019 2020 2026 MIPS 0.25% annually, PLUS penalties/bonus up to ± 9% This slide illustrates the payment impact under MACRA over the next several years. The middle line is the base annual payment update. As you can see, from 2020 through 2025, it is zero percent, and a physician’s payment updates depend on their MIPS and APM performance. The amount at risk for MIPS goes up until it reaches 9 percent in 2022 and beyond. APM bonuses available through 2024, then go away. In 2026, higher base payment updates for APM participants, but no bonus. ±4% ±5% ±7% ±9% ±9%

Merit-based Incentive Payment System MIPS = Default Payment System Category CY 2019 CY 2020 CY 2021 and beyond Quality 50% 45 % 30% Resource Use 10% 15 % Clinical Practice Improvement Activities Advancing Care Information (i.e., Meaningful Use) 25 % Each of the four categories comprising the MIPS Composite score will receive a weight, as outlined in the slide. The MACRA requires a heavier emphasis on quality and resource use measures than on the other two performance categories. In general, those two categories must make up 60 percent of the score. However, CMS has some discretion to vary percentages on a number of factors. For example, CMS could choose to reduce the weight of the Meaningful Use category if there is insufficient adoption of EHRs. Similarly, it could reduce the weight of the clinical practice improvement activities if there are not enough activities in which professionals can participate. Lastly, CMS will assign professionals that fail to meet a reporting requirement the lowest possible score for that category. So for example, if a professional does not submit quality data, they would receive the lowest score in the quality category Proposed weights reflect MACRA requirements Scores of “zero” for measures/categories where data not reported

MIPS: Eligibility Applicable to physicians, PAs, NPs, CNSs and CRNAs beginning in 2019 Others can be added in 2021 Can participate as individual clinicians or groups Exemptions for: Certain participants in alternative payment models Physicians in first year of Medicare Clinicians below CMS-defined low volume threshold Proposed as Medicare charges under $10K AND fewer than 100 Medicare patients during performance period The MIPS will be the default payment system for physicians, physician assistants, nurse practitioners, certified nurse specialists, and certified registered nurse anesthetists beginning in 2019. CMS may choose to expand the payment system to other professionals paid under the fee schedule (such as physical, occupational, speech therapists) beginning in 2021. Certain professionals will be exempted form the MIPS and its associated reporting requirements. Those include: Qualified APM participants, which will be physicians who receive a certain percentage of payments through “Partial” APM participants, who receive some payments through an APM but not enough to qualify as APM participants, and who do not report measure data under the MIPS. CMS will need to provide more definition on who fits in to this category. Professionals who do not meet a low-volume threshold that will be determined by CMS

MIPS: Applicability to Rural Providers Critical Access Hospitals (CAHs) MIPS would apply to CAHs billing under Method II whose clinicians have reassigned their billing rights to the CAH Payment adjustment apply to professional services Federally Qualified Health Centers / Rural Health Clinics MIPS does not apply to FQHC/RHCs, or to clinicians billing under the payment systems for FQHCs / RHCs However, MIPS would apply to clinicians that bill services under the fee schedule (even if they practice in an RHC/FQHC) (e.g., moonlighting, private practice)

MIPS: Non-Patient Facing Clinicians MACRA allows CMS to modify MIPS requirements to reflect practice of non-patient facing clinicians CMS proposes to define non-patient facing clinicians as those billing 25 or fewer patient-facing encounters during billing period CMS would define encounters using codes Code list TBD

MIPS: Data Reporting Mechanisms Must select one mechanism per category For CY 2019, report CY 2017 data Data generally due to CMS by Mar. 31, 2018 Data completeness thresholds

MIPS: Quality Measure Requirements For most reporting mechanisms, clinicians and groups would report at least 6 measures. Of the 6: Must report 1 cross-cutting measure 1 outcome measure (or another high priority measure if outcome is unavailable) Can choose any 6 from list of available measures Specialty measure sets also available For groups of 10 or more clinicians, CMS also would calculate claims-based “population measures” Reflect avoidable admissions and readmissions

MIPS – Resource Use Measures CMS would continue using 2 all-condition resource use measures used in value-modifier program Total costs per capita Medicare spending per beneficiary for physicians CMS also proposes to use clinical condition and procedure episode cost measures from a list of 40+ measures Cost score = average score of all the measures that can be attributed to clinician / group Various attribution methodologies

MIPS – Clinical Practice Improvement Activities (CPIAs) Category intended to recognize physicians for participation in care coordination, patient safety and patient engagement activities CMS proposes a list of over 90 CPIAs from which clinicians can choose Each CPIA assigned a weight towards score Participation in certified PCMH receives highest score, participation in MIPS APM receives half the highest score To receive full credit, generally need to participate in more than one CPIA

MIPS Scoring Approach Quality Resource Use Category How Scored Receive 0-10 points for each measure based on decile of performance Measures are averaged to calculate overall category score E.g., if reporting 9 measures, CMS would determine points on each measure and divide by 90 possible points Receive 0 points for any measure on which data are not submitted when applicable data are available Two kinds of “bonus points” available: “High-priority measure” bonus points for reporting additional outcome or high priority measures “EHR Reporting Bonus” of one point for clinicians/groups reporting measures using Certified EHRs Resource Use Measures are averaged to calculate overall score Let’s dive a little deeper into how physicians and other professionals will be scored and receive payment adjustments under the MIPS Each physician or group will receive a “MIPS Composite Score” of 0 to 100 points, with 100 points being best. That score will reflect their performance in four categories: Quality measures (using measures in current law programs or new measures) Resource use measures (again, using current law or other measures) Clinical Practice Improvement activities. CMS will need to provide more specific definition in regulation, but the MACRA suggests these activities would include patient safety assessments, population management, care coordination and so forth) Meaningful Use of EHRs, using existing law requirements Each year, CMS will need to establish scoring thresholds for upward or downward payment adjustments. We’ll talk about that in a couple of slides And after the first year of the program, CMS must recognize professionals for improved performance. The details of how they do this will need to be addressed in regulation, but one could envision approaches similar to hospital value-based purchasing.

MIPS Scoring Approach Category How Scored CPIA Receive score out of a possible 60 possible points Receive points on each CPIA “Medium” value activity worth 10 points “High” value activity worth 20 points Participation in APM: Receive half the highest score (30 points) Participation in certified PCMH: Receive maximum score (60 points) Advancing Care Information Earn up to 100 points “Base Score” of 50 points “Performance score” of up to 80 more points Let’s dive a little deeper into how physicians and other professionals will be scored and receive payment adjustments under the MIPS Each physician or group will receive a “MIPS Composite Score” of 0 to 100 points, with 100 points being best. That score will reflect their performance in four categories: Quality measures (using measures in current law programs or new measures) Resource use measures (again, using current law or other measures) Clinical Practice Improvement activities. CMS will need to provide more specific definition in regulation, but the MACRA suggests these activities would include patient safety assessments, population management, care coordination and so forth) Meaningful Use of EHRs, using existing law requirements Each year, CMS will need to establish scoring thresholds for upward or downward payment adjustments. We’ll talk about that in a couple of slides And after the first year of the program, CMS must recognize professionals for improved performance. The details of how they do this will need to be addressed in regulation, but one could envision approaches similar to hospital value-based purchasing.

MIPS Alternative Payment Models CMS proposes to adopt alternative scoring approach for participants in “MIPS APMs” Defined as APM with: Participation agreement with CMS One or more MIPS-eligible clinicians Payment incentives based on quality and cost Criteria mutually exclusive with those for Advanced APM Track MIPS Category Weight for MSSP and Next Gen ACO Weight for other MIPS APMs Quality 50% 0% Resource Use CPIA 20% 25% ACI 30% 75%

Translating the MIPS Composite into Incentives and Penalties Exceptional performance bonus (up to 1 percent) 100 Exceptional performance threshold (2019 – 2024 only) Positive adjustment on sliding scale MIPS Composite Score Performance Threshold (Determined annually) Negative adjustment on sliding scale *******This slide contains animation******* Once CMS has determined a composite score, it must then use that score to determine upward, neutral or downward adjustments. FIRST CLICK: CMS will first determine a “performance threshold” for each year of the program based on the performance of all providers in the MIPS. Professionals with MIPS Composite scores above the threshold receive positive payment adjustments on a sliding scale. Professionals with scores below the threshold receive negative payment adjustments on a sliding scale SECOND CLICK CMS then will then determine what MIPS Score is 25 percent of the performance threshold score. Any professionals scoring below that threshold will receive the maximum possible negative payment adjustment. That starts at 4 percent in CY 2019, and goes all the way up to 9 percent in 2022 and beyond. FINAL CLICK As noted earlier, the MIPS is a budget neutral program. CMS can pay no more out in incentives than it collects in incentives. However, for CYs 2019 through 2024, the MACRA authorizes an “exceptional performance bonus” for the top performers in the MIPS. This is funded separately from the other MIPS adjustments. Each year, CMS will need to determine a threshold score above which the bonus would apply. 25 percent of performance threshold Maximum Negative Adjustment

ACI Performance Category MIPS proposes four performance categories: Quality Resource Use Clinical Practice Improvement Activities Advancing Care Information The percentage of the Advancing Care Information Category may be reweighted as more clinicians become meaningful users Some complexity for Source: CMS overview on MIPS and APMs 1

ACI Performance Category Base Score: a score for participation and reporting Performance Score: a score for performance at varying levels above the base Maximum of 50 points toward the total composite score with two proposals Primary Proposal: based on 6 objectives and 11 of 15 measures derived from Stage 3 Alternate Proposal: based on 8 measures and 16 of 20 measures Modified Primary and Alternate Proposal: based on 10 objectives and 16 measures derived from Modified Stage 2 Maximum of 80 points toward the total composite score based upon three objectives and 8 measures Patient Electronic Access Coordination of Care Through Patient Engagement Health Information Exchange Performance category: each measure is assigned up to 10 points. 95% performance rate equals 9.5 points One bonus point is CMS proposes to define a meaningful EHR user under MIPS as a MIPS eligible clinician who possesses certified EHR technology, uses the functionality of certified EHR technology, and reports on applicable objectives and measures specified for the advancing care information performance category for a performance period as specified by CMS. CMS is proposing to adopt a definition of certified EHR technology for MIPS eligible clinicians that is based on the definition that applies in the EHR Incentive Programs under 42 CFR 495.4. For 2017, MIPS eligible clinicians would be able to use EHR technology certified to either the 2014 or 2015 Edition certification criteria. Those who only have 2015 Edition CEHRT can choose to report for ACI: (1) on the objectives and measures specified that correlate to Stage 3 requirements or (2) on the alternate objectives and measures that correlate to Modified Stage 2. Those providers with a combination of 2015 Edition and 2014 Edition may choose to report for ACI: (1) on the objectives and measures which correlate to Stage 3; or (2) on the alternate objectives and measures which correlate to modified Stage 2, if they have the appropriate mix of technologies to support each measure selected. Those who only have technology certified to the 2014 Edition would not be able to report on any of the measures specified for the ACI performance category that correlate to Stage 3 measures. 2

ACI: Base Score Primary Proposal using 2015 Edition Certified EHR Source: Table 6, MIPS and APMs Proposed Rule, 81 Fed. Reg. 28222, May 9, 2016 3

ACI: Base Score Alternate Proposal using 2015 Edition Certified EHR Concerns: Coordination of Care Through Patient Engagement: Objective: use certified HER to engage with patients (or authorized representative ) about patient’s care. VDT: at least 1 unique patient actively engages as measured by VDT or access the health information through the use of an API that can be used by applications of the patient’s choice and configured to the API in the MIPS eligible clinician’s certified EHR or a combination of 1 and 2. The numerator appears to require one of each type of patient. The proposed rule states that the numerator is the number of unique patients (or their authorized representatives) in the denominator who have viewed online, downloaded, or transmitted to a third party the patient’s health information during the performance period and the number of unique patients (or their authorized representatives) in the denominator who have accessed their health information through the use of an API during the performance period. Source: Table 7, MIPS and APMs Proposed Rule, 81 Fed. Reg. 28223, May 9, 2016 4 © 2016 American Hospital Association

ACI: Base Score Primary and Alternate Proposal using Modified Stage 2 and 2014 Edition Certified EHR For 2017: In an effort to not unduly burden eligible clinicians who are still using 2014 Edition certified EHR in 2017. CMS states that the variation is in the measures associated with the Coordination of Cre through Patient Engagement and the Health Information Exchange objectives. However, the Public Health Objective eliminates the option to report one measure and actually would require reporting on three measures Source: Table 8, MIPS and APMs Proposed Rule, 81 Fed. Reg. 28224, May 9, 2016 5 © 2016 American Hospital Association

ACI: Performance Score Concern: Even those eligible clinicians who Source: Table 9, MIPS and APMs Proposed Rule, 81 Fed.Reg. 28225, May 9, 2016 6 © 2016 American Hospital Association

MACRA Three attestations proposed for hospitals, CAHs and eligible clinicians concerning information blocking: Hospitals, CAHs and physicians did not “knowingly and willfully take action to limit or restrict the compatibility or interoperability” of their certified EHR.” The technology is implemented to conform with standards, allow patient access and support secure and trusted bi-directional exchange of structured health information with other health care providers, including unaffiliated providers, and with disparate certified EHR technology and vendors. Hospitals, CAHs or physicians responded in good faith and in a timely manner to requests to retrieve or exchange electronic health information, including from patients, health care providers, and other persons, regardless of the requestor’s affiliation or technology vendor. 7 © 2016 American Hospital Association

Alternative Payment Model Incentives MACRA provides incentives for physicians who meet designated thresholds of APM participation Lump-sum bonus payment of 5% of Part B payments for professional services Exemption from MIPS reporting requirements and payment adjustments Higher base rates beginning in 2026 Incentives in 2019 based on 2017 APM participation Only Medicare APMs count in 2017-2018; all-payer option begins in 2019 As a reminder, the MACRA provides incentives for physicians who demonstrate significant participation in alternative payment models by meeting thresholds (either based on payments or patient counts) set in statute. Those incentives include (read from slide) CMS has proposed to use a base performance year of 2017, which means that it will assess APM participation in 2017 for incentives in 2019 CMS will consider only participation Medicare payment models in 2017-2018; beginning in 2019, if a physician does not qualify for incentives based on Medicare APM participation, CMS will consider participation in payment models across all payers. This includes Medicare Advantage, Medicaid and private payers. NOTE – if you are asked…MA does not count in the first two years because the law specifically limits incentives to participation in models for Medicare Part B payments in the first two years.

Qualified Professional Determination Qualified professional = meets the criteria to qualify for APM incentives based on participation in advanced APMs CMS proposes following general process: Determine whether the APM meets the advanced APM criteria Identify the APM entity Determine whether eligible clinicians in APM entity collectively meet threshold for APM participation

Qualified Professional Determination Qualified professional = meets the criteria to qualify for APM incentives based on participation in advanced APMs CMS proposes following general process: Determine whether the APM meets the advanced APM criteria Identify the APM entity Determine whether eligible clinicians in APM entity collectively meet threshold for APM participation

Medicare APMs Medicare APMs are defined as: A model tested by the CMMI, other than a health care innovation award An ACO under the Medicare Shared Savings Program Certain other demonstrations under federal law For Medicare, the statute specifies the models listed on the slide as APMs. NOTE, just for background – Though the statute specifies MSSP ACOs as eligible APMs, it also requires that an APM bear more than nominal financial risk. This could mean that the 99 percent of MSSP ACOs that are currently enrolled in the downside risk-only track would not qualify as an APM.

Criteria for Advanced APMs MACRA requires advanced APM to meet certain criteria: Require use of certified EHR technology Condition some amount of payment on quality measures comparable to those in the MIPS quality category Participating entities must bear risk for monetary losses of more than a nominal amount, OR be a medical home in a model expanded by CMMI Only certain alternative payment models will “count” for purposes of the incentive – CMS is calling those advanced APMs. The law sets certain criteria that advanced APMs must meet. Those include (read from slide). NOTE – Beyond the scope of this presentation, but the ACA set certain criteria for a model to be expanded by the CMMI. No medical home models have been expanded by CMMI using this authority CMS has proposed requirements under each of these three criteria. Our overall take is noted beside each. The definitions of certified EHR technology and the quality measurement requirement are fairly flexible and take into account the different needs of different models We are very concerned with CMS’s definition of the financial risk criteria

APM Financial Risk Standard Generally applicable standard = downside risk (APM entity owes CMS if spending > projections) Relaxed standard for medical homes = no downside risk required; would not apply if organization that “owns” medical home has > 50 physicians CMS proposes two standards for financial risk: One standard would apply to most entities that participate in alternative payment models. This standard requires the entity participating in the APM to accept financial risk if actual spending under the model exceeds projected spending (measured by a benchmark or target price) – also known as downside risk. This could be through repayment to CMS or reduced payments. CMS has also set fairly high parameters for how much risk is enough. {NOTE – a little technical, but if asked, here are the standards (all three must be met): minimum loss ratio of at least 4 percent (this is the amount of excess spending over the projected spending that may be incurred before the provider has to start repaying CMS – so if the benchark is $100, the provider’s expenditures can be $104 before it has to start repaying CMS); marginal risk of at least 30% (this is the amount of loss a provider must share with CMS – so if there are $100 in losses, the provider must absorb at least $30 of that); and total potential loss has to be at least 4% of the benchmark or target (so if there is a stop loss provision and the benchmark is $100, the provider must owe at least $4). The standard other is a more relaxed standard that would apply to medical homes. This standard does not require downside risk, as long as the medical home is at financial risk for performance on quality metrics - for example, the medical home would own money to CMS if it doesn’t hit its performance targets. However, after the first year, the looser standard would not apply to medical homes where the organization that owns and operates the medical home has more than 50 clinicians. This would likely disqualify most hospital-based medical homes from qualifying – meaning hospital medical homes would have to incur downside risk in order for participating physicians to qualify. This is a fairly unusual requirement for medical homes.

How Much Risk is Enough? Standard for “nominal risk”: Minimum loss ratio ≥ 4% Potential marginal losses (e.g. shared losses) ≥ 30% Potential loss ≥ 4% A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

Limited Medicare Models Available MSSP Track 1 MSSP Track 2 MSSP Track 3 Next Generation ACO Comprehensive ESRD Care Oncology Care Model (two-sided track)* Bundled Payments for Care Initiative Comprehensive Care for Joint Replacement Comprehensive Primary Care Plus (as medical home)* Applying CMS’s proposed criteria to existing models, you will see that a very limited number of models that would qualify as advanced APMs. The most common disqualifier is the financial risk standard. [NOTE – if asked, BPCI would not qualify because it doesn’t tie payment to quality measures, and CJR does not include an EHR requirement. The others are disqualified because of the financial risk standard.] In particular, there are very few options for hospital-driven models to qualify. For example, though hospital-led ACOs make up about 50% of the MSSP, most participants are in Track 1. Similarly, a number of hospitals participate in BPCI – and some hospitals were mandated to take financial risk through the CJR. And as we discussed on the last slide, most hospital-driven medical homes that participate in the CPC+ program will not qualify. We are disappointed that those efforts will not be recognized. Overall, CMS has projected that only between 30,000 – 90,000 clinicians (out of around 800,000 projected to be impacted by the MACRA changes) will qualify for the APM incentives in year 1. * Not yet implemented

Qualified Professional Determination Qualified professional = meets the criteria to qualify for APM incentives based on participation in advanced APMs CMS proposes following general process: Determine whether the APM meets the advanced APM criteria Identify the APM entity Determine whether eligible clinicians in APM entity collectively meet threshold for APM participation

APM Entity APM entity = entity that participates in an APM through a direct agreement with CMS or a non-Medicare payer Primarily responsible for cost and quality of care APM entity group = the group of clinicians participating in an APM entity CMS to identify through combination of APM identifier, APM entity identifier, TIN and NPA A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

Qualified Professional Determination Qualified professional = meets the criteria to qualify for APM incentives based on participation in advanced APMs CMS proposes following general process: Determine whether the APM meets the advanced APM criteria Identify the APM entity Determine whether eligible clinicians in APM entity collectively meet threshold for APM participation

Calculation of Advanced APM Participation CMS would consider payment amounts and patient counts when calculating advanced APM participation, use most advantageous Determinations would be made at group level by aggregating payments/patients Beginning in 2019 (for 2021PY), CMS would calculate Medicare advanced APM participation first; if QP status not reached, would consider all payer APMs A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

APM Participation Thresholds QP Payment Amount Thresholds   2019-2020 2021-2022 2023 and beyond Medicare Option QP 25% 50% 75% Partial QP 20% 40% All-payer Option N/A Medicare Total QP Patient Count Thresholds   2019-2020 2021-2022 2023 and beyond Medicare Option QP 20% 35% 50% Partial QP 10% 25% All-payer Option N/A Medicare Total A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

Other Payer APMs Other payer APMs = Medicare Advantage, Medicaid, private payer arrangements Advanced APM criteria parallel to those for Medicare advanced APMs Fully capitated arrangements qualify CMS would require clinicians to submit information to verify eligibility of arrangements A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

APM Incentive Payment Lump-sum payment = 5% of Part B professional service payments across all TINs Based on calendar year prior to payment year Would exclude adjustments for MIPS, VM, MU and PQRS, plus financial risk payments Payment would be made to APM entity TIN A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

Implications for Hospitals and Health Systems Physicians will not receive credit for participation in most hospital-driven APMs Interested physicians will seek two-sided risk models Potential erosion of the glide path that allows providers to experiment before moving into risk bearing arrangements MACRA creates a process for recommendation and approval of physician-focused payment models A few of the potential implications of the advanced APM criteria for hospitals and health systems: Physicians will not receive credit for participation in most hospital-driven APMs Physicians who are interested in moving into APMS will likely seek risk-bearing arrangements Currently, non-risk based tracks – such as shared savings-only programs – allow providers to experiment with financial and performance accountability before moving on to two-sided risk . We are concerned that CMS’s definition of financial risk will erode this “glide path” to risk-based arrangements and thus chill experimentation with new models. In addition, the MACRA creates a technical advisory group to review and recommend to CMS approval of physician-focused payment models. CMS proposes to define physician focused payment models as models that include physician group practices or individual physicians as APM entities and that target the quality and costs of physician services. We are hearing that a number of the physician specialty societies plan to urge approval of models – in particular, episodic payments – that benefit their particular constituency. We have some concerns that this will lead to fragmentation of the payment and delivery systems. We plan to urge CMS to give priority to models that encourage collaboration across providers and settings of care.

Initial Impressions Right Direction Work in Progress Concerned Fewer required MIPS measures Steps to align public/private measures Moving away from all-or-none scoring in Advancing Care Information Generally flexible approach to CPIAs No MIPS hospital measure reporting option yet (but CMS considering it) Need more alignment and focus of measures across continuum Is Advancing Care Information category flexible enough? Narrow definition of financial risk for APMs Misalignment of Hospital Meaningful Use with Advancing Care Information No socioeconomic adjustment

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