1. MACRA—The Medicare Access & CHIP Reauthorization Act: A Catalyst for Moving Physicians to Value
Kaufman, Hall & Associates, LLC
June 30, 2016

2. Introduction Introduction
Passed with the broad bipartisan support of Congress in 2015, the Medicare Access & CHIP Reauthorization Act (MACRA) will make sweeping changes to how Medicare pays for physician services, pushing physicians toward risk-bearing value arrangements.
Physician participation is mandatory. We expect MACRA to dramatically alter the way physicians practice, whether independently or as employees of hospitals and health systems. For the financial viability of their practices, physicians will need to partner with larger organizations that have risk contracts for managing population health. MACRA can be expected to accelerate the shift of physicians into large practices and employment by hospitals.
This publication presents details on how MACRA is to be implemented, the implications and tactical challenges for hospitals and health systems, and questions healthcare leaders should be asking about their organizations’ preparedness for MACRA.
CONTENTS
Introduction 2
MACRA in Brief 3
Implications 6
Tactical Challenges 7
Questions Leaders Should Be Asking 8
For More Information 9

3. MACRA in Brief Alternative Payment Models (APMs)
Two-Track Framework
Alternative Payment Models (APMs)
Advanced APMs bear “more than a nominal amount of risk for monetary losses”—in other words, significant downside risk
Defined as either an accredited Patient Centered Medical Home (PCMH), or model with performance-tied payment of 25% or higher of a physician’s or group’s Medicare revenue, or 20% of patients served by the physician/group in 2019
Include six proposed models: Medicare Shared Savings Program (MSSP) ACOs Track 2 and 3, Next Generation ACOs, Comprehensive Primary Care Plus (approved PCMHs), most ESRD care organizations, and Oncology Care Model Track 2
Require use of certified EHR technology
Offer a 5% incentive payment
Merit-based Incentive Payment System (MIPS)
Physicians who do not participate in advanced APMs will be default participants in MIPS
Based on the fee-for-service model with a direct tie to quality performance
Includes allied clinicians
MACRA eliminates the sustainable growth rate formula and creates a two- track framework to reward physicians for providing value- based care

4. MIPS Program Component (% of score) Value-based Payment Modifier
MACRA in Brief
MIPS Performance Management Structure
Pre-MACRA Program
MIPS Program Component (% of score)
Measures
PQRS
Quality (50%)
Clinicians select six measures to report (one outcome or high-value measure; one cross-cutting measure)
Value-based Payment Modifier
Resource Use (10%)
CMS will calculate these measures based on claims; no reporting required
Meaningful Use
Advancing Care Information (25%)
Clinicians report measures of patient engagement and information exchange
None
Clinical Practice Improvement (15%)
Physicians choose from more than 90 activities. Medical homes earn full credit; APMs earn half credit
MIPS payment adjustments of up to ± 9% will be based on physician performance in four categories
Source: Adapted from CAPG: “MACRA: A Deep Dive on the Proposed Rule.” Webinar, June 7, 2016.

5. MACRA in Brief Timeline
Physicians must move quickly toward one of the two tracks. Performance Year 1 starts January 1, for FY 2019 payment
MACRA in Brief Timeline
2015 and earlier
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026 and later
.5% 0%
±4%
±5%
±7%
0.75%
APMs
FEE
Fee Schedule Updates
0.25%
MIPS
Quality
Resource Use
MIPS
Clinical Practice Improvement Activities
± 9%
Meaningful Use of Certified EHR Technology
PQRS, Value Modifier, EHR Incentives
MIPS Maximum Bonus or Penalty (+/-)
Certain
APMs
Qualifying APM Participant
Medicare Payment Threshold
Excluded from MIPS
5% Incentive Payment
Excluded from MIPS
Source: Centers for Medicare & Medicaid Services :
MIPS and APMS begin operating

6. Implications
It will be difficult for solo and small practices to make the investments needed for MIPS compliance or advanced APM qualification without alignment with an entity that has scale and contracting capabilities
Hospitals will need a pluralistic approach to helping and integrating physicians
Offer an advanced APM
Provide support for MIPS compliance
Expect to invest (further) in physician practices and sustain at least initial operating losses
Hospitals that employ physicians may bear the cost of the implementation of—and ongoing compliance with— the MIPS reporting requirements, and be at-risk for any payment adjustments1
It is unclear whether Medicare Advantage plans—which now cover one in five Medicare beneficiaries—will be deemed an advanced APM
The Act is expected to survive whomever wins the November election
If your hospital doesn’t help physicians, some other entity will
1American Hospital Association: “Physician Payment Reform—What Is the MACRA?” Issue Brief, Apr. 19, 2016.

7. Tactical Challenges
Develop and implement a plan for your independent medical staff
Sort out which physicians you’re willing/not willing to employ
Put in place an effective clinical integration network
Access risk contracts with managed lives and a provider network
Understand that downside risk is a must; upside-only contracts don’t count
Implement specific performance requirements for all clinicians participating in your network
Develop the ability to measure and grade clinician performance
Be willing to exclude/remove clinicians who do not meet your performance requirements
Build or purchase the capabilities and infrastructure required to manage risk
Although a limited number of health systems have made the pivot to value, most health systems will need to address four tactical challenges

8. Questions Leaders Should Be Asking
How do you envision helping your independent physicians prepare for MACRA?
What steps are you taking toward offering physicians an advanced APM?
What alignment strategies are you pursuing with affiliated physicians?
What investments will be needed to fund MACRA- readiness and alignment strategies?
Do you have the necessary financial resources to compete for physicians? If not, what partnerships and/or relationships might be necessary?
MACRA is revenue-neutral. There will be winners and losers

9. For More Information
Please contact James J. Pizzo Managing Director and National Physician/ Value Leader or
Robert W. York Senior Vice President and leader of the Population Health Management division at