MACRA primer for ob/gyns

June 9, 2016

Even if you see few Medicare patients, start preparing for value-focused payment.



Dr Lockwood, editor in chief, is Senior Vice President, USF Health, and Dean, Morsani College of Medicine, University of South Florida, Tampa. He can be reached at


Back in 1997, when healthcare consumed 13.2% of the GDP, there were dire warnings about the unsustainable costs of Medicare. In response, Congress enacted the Balanced Budget Act, which contained a provision termed the Sustainable Growth Rate (SGR). The SGR formula was designed as a politically risk-free mechanism for legislators to limit Medicare spending. The idea was that if physician costs exceeded targets, an across-the-board reduction in Medicare payments to physicians would be automatically triggered unless actively overruled by Congress.

Thus began an annual kabuki dance in which physicians were threatened with outlandish cumulative cuts in their Medicare payments-often over 20%, due to out-of-control costs. However, magically at the 11th hour, we were habitually “saved” and grateful to receive some de minumus increase. Worse, this exercise in futility did nothing to restrain healthcare costs. In 2014, US healthcare spending grew at 5.3%, totaling more than $3 trillion or $9523 per person and accounting for 17.5% of GDP.1 Well, the good news is that in April 2015, Congress repealed the SGR. The bad news is that it was replaced by a potentially more onerous and very complex piece of legislation: the Medicare Access and CHIP Reauthorization Act, or MACRA for short.



What is MACRA?

While MACRA ends the hated SGR formula, its leitmotif is the generation of accelerating financial pressure and administrative burdens designed to drive physicians from their comfort zone of traditional fee-for-service payments to either partially at-risk value-based payments (VBPs) or more fully at-risk (ie, capitated) advanced alternative payment models.

Fundamentally, MACRA is designed to slow annual Medicare spending increases, which currently run at a 5.5% compound annual growth rate and account for 20% of total national health expenditures.1 It also is designed to unify the current patchwork of Medicare physician VBP programs including the Physician Quality Reporting System (PQRS), the Value-based Payment Modifier and, perhaps most hated, the Electronic Health Record Meaningful Use Incentive Program.

Finally, it should be noted that the enabling legislation passed overwhelmingly with strong bipartisan support, so it is unlikely to go away regardless of which party wins our increasingly bizarre presidential “reality show” contest or whether the Accountable Care Act endures beyond January 2017. So I would advise you to read on.

How will MACRA work?

While its final rules may change, at its core, MACRA streamlines current VBP programs into 2 distinct pathways: 1. the Merit-Based Incentive Payment System (MIPS), an incremental strategy linking physician reimbursement to both increases in the quality (ie, patient safety and outcomes) and reductions in cost of care, but retains a fee-for-service payment structure; and 2. the Advanced Alternative Payment Model (APM), which builds on current accountable care organizations, bundled payments, and patient-centered medical homes to encourage partial or fully capitated care administered through large, clinically integrated provider networks. All physicians caring for Medicare patients will have to choose one of these 2 paths well before 2019.

Merit-Based Incentive Payment System (MIPS)

I believe that the majority of physicians are likely to initially choose the MIPS path as it is essentially an aggregation of 3 different programs about which many physicians have some knowledge and/or already participate.

On an annual basis, physicians will submit process and outcome measures, proof of quality assurance efforts and electronic health record (EHR) adoption data to the Centers for Medicare and Medicaid Services (CMS) which will, in turn, assess all related Medicare claims to determine the total costs of a physician’s care. CMS will use a weighted composite score to compare all physicians, which will determine whether a bonus or penalty is due (Table).




The mean composite score for all MIPS-eligible physicians will be calculated for the prior performance period. Payment adjustments will be based on a sliding-scale bell-shaped curve such that physicians who score at the threshold will receive no payment adjustment, those above the mean will receive a positive adjustment on each Medicare Part B claim for the following year, and those below the mean will receive a negative adjustment the following year.3 The delta in payments will increase from ±4% in 2019 to ±9% in 2022. However, the expectation is that so many participants will be penalized or not receive bonuses that, in order to remain revenue neutral, higher bonuses can be provided to exceptionally high-quality providers-up to 27% by 2025. Finally, it is expected that the weighting of measures will change over time and that the composite mean will also frequently change based on continuous improvements by all participants.

The baseline MIPS physician fee schedule will increase annually by 0.5% from 2015 through 2019 with no increases from 2020 through 2025 and a minimal 0.25% annual increase at and after 2026. But don’t despair, there are likely to be physician exemptions from MIPS, including those in their first year of practice, those working in rural or Federally Qualified Health Clinics and, obviously, those participating in advanced APMs.3 In addition, physicians with very low Medicare volumes may also be exempted, an exception that may be particularly relevant to ob/gyns.

Advanced Alternative Payment Model (APM)

Given the relatively flat and at-risk fee schedules inherent in MIPS, you may be interested in how the alternative pathway works. The advanced APM path is designed for physician groups that are already accepting some form of risk in their payments (eg, Accountable Care Organizations [ACOs] or bundled payments). While only about 30% of Medicare payments are currently funneled through advanced APMs,4 CMS has clearly indicated its intent is to move more and more physicians in this direction.

Providers opting to pursue the advanced APM path will be excluded from MIPS adjustments. Instead, they will receive an annual incentive bonus consisting of 5% of their previous year’s total aggregate Medicare expenditures.



To qualify for these enhanced payments, your APM must use similar quality measures employed by MIPS, employ an EHR, incur more than a “nominal financial risk” or already constitute a patient-centered medical home.3 Once physicians reach a threshold percentage of their Medicare payments through an approved advanced APM (25% in 2019 and 75% in 2023), they will be considered “qualifying participants.”4 Importantly, starting in 2026, the annual fee schedule growth rate will be substantially higher for qualifying advanced APM participants than for MIPS providers (0.75% vs 0.25%). However, there is always a potential to lose money by taking risk and then not providing the requisite value (ie, having low quality and/or high cost).

Yet to be determined is how CMS will manage “collisions” of alternative payment models.4 For example, groups of primary care physicians participating in a low-cost ACO may be concerned that referring their patients to specialist physicians participating in a fixed-cost bundled payment program will reduce their ability to “gain-share” through cost reductions. Such potential conflicts will need to be resolved by CMS prior to full implementation.

Take-home message

Most US physicians taking care of Medicare patients will soon need to choose between MIPS and advanced APM pathways. In addition, even if you are an ob/gyn who cares for few Medicare patients, many commercial plans are likely to adopt a similar payment strategy. Importantly, you really need to at least tentatively choose between pathways by 2017 because data upon which CMS will calculate composite value scores will start to be collected then.

In other words, physicians must begin the race toward value immediately. So if you haven’t reported data on quality measures through PQRS or as part of EHR meaningful use, do so ASAP. Finally, many of your patients, when confronted by the choice between high-deductible, high co-pay, and high-premium plans versus lower-cost, capitated “HMO-like” plans, managed by clinically integrated networks of providers, will likely choose the latter. Thus, if you are not part of such a network, you may find yourself with a lot fewer patients in 2019.


1. Centers for Medicare & Medicaid Services. National Health Expenditure Data. Accessed June 1, 2016.

2. US Department of Health & Human Services. Administration takes first step to implement legislation modernizing how Medicare pays physicians for quality. Accessed June 1, 2016.

3. MACRA Ready: Frequently Asked Questions: Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Accessed June 1, 2016.

4. Mechanic RE. When new Medicare payment systems collide. N Engl J Med. 2016;374(18):1706–1709.