On April 27, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would implement changes to reimbursement under the Medicare Physician Fee Schedule (PFS) as required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).  The proposed rule contains the following key elements: (i) a framework for the new Merit-based Incentive Payment System (MIPS), (ii) a methodology for making incentive payments for participation in alternative payment models (APMs), and (iii) proposed criteria for use by the Physician-Focused Payment Model Technical Advisory Committee (PTAC) in making recommendations on physician-focused payment models (PFPMs).

Merit-based Incentive Payment System

MACRA and the recent proposed rule each provide that physicians not participating in an alternative payment model (further described below) will be reimbursed under the Merit-Based Incentive Payment System (MIPS) starting in 2019. MIPS is intended to promote better care, healthier people, and smarter spending by evaluating eligible clinicians using a Composite Performance Score that will incorporate performance on quality, resource use, clinical practice improvement activities, and meaningful use of certified electronic health records.  Based on each eligible clinician’s (which includes physicians, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists) Composite Performance Score, he or she may receive an upward payment adjustment, a downward payment adjustment, or no payment adjustment.

MIPS is intended to consolidate elements of Medicare legacy reporting programs including the Physician Quality Reporting System (PQRS), Value-Based Payment Modifier (VM), and the Medicare Electronic Health Records (EHR) Incentive Program, (i.e., Meaningful Use program).  In their place, clinicians will be evaluated under four performance categories:

  • Clinical Quality. This criterion will represent 50% of the clinician’s Composite Performance Score. To encourage meaningful measurement, CMS has proposed to allow clinicians and groups the flexibility to determine the most meaningful measures and reporting mechanisms for their practice. Generally, MIPS eligible clinicians would report at least six measures from a selection published in the proposed rule, which would be required to include one cross-cutting measure (if patient-facing) and at least one outcome measure.
  • Advancing Care Information. This criterion will represent 25% of the clinician’s Composite Performance Score. The Advancing Care Information program would require that clinicians report on eleven base and specialty-specific quality measures, which is a reduction from the 18 measures reported under the Meaningful Use program.
  • Clinical Practice Improvement Activities. This criterion will represent 15% of the clinician’s Composite Performance Score. CMS notes that this category would “reward clinical practice improvements, such as activities focused on care coordination, beneficiary engagement, and patient safety. Clinicians may select activities that match their practices’ goals from a list of more than 90 options.”
  • Resource Utilization. This criterion will represent 10% of the clinician’s Composite Performance Score. For this category, the clinician’s score would be derived from Medicare claims submitted, and no additional reporting would be required. CMS notes that the category “would use 40 episode-specific measures to account for differences among specialties.”

The MIPS incentive payments are intended to reward those clinicians demonstrating cost savings and quality care as compared to their peers. Clinicians reimbursed under MIPS will potentially receive payment adjustments (upward or downward) of 4% in 2019, which increases to 9% in 2022. MIPS payments are intended to be a zero-sum program in that payment increases to clinicians scoring well under MIPS criteria will be met with corresponding decreases to clinicians with low Composite Performance Scores.  In conjunction with MIPS payment adjustments, PFS payment rates will be increased by 0.5% through 2019, by 0% between 2020 and 2023, with 0.25% payment updates resuming after 2023.

Clinicians may report MIPS criteria individually, as part of a group operating under the same tax identification number, or as part of a virtual group of 10 or fewer individual clinicians. MIPS information reported in 2017 will be used to make payment adjustments in 2019.

Advanced APM Framework

As an alternative to participation in the MIPS program, incentive payments be made to certain Qualifying APM Participants (QPs) for participation in eligible APMs referred to as “Advanced APMs.” Advanced APMs are APMs through which eligible clinicians have the opportunity to become QPs. Achieving QP status is significant because QPs are eligible for incentive payments beginning in 2019.

An APM must meet each of the following criteria to qualify as an Advanced APM:

  • Require participants to use certified electronic health record technology (CEHRT). CMS proposes to use the same definition of CEHRT for both MIPS and Advanced APMs to allow eligible clinicians to use their existing shared electronic health record (EHR) systems. CMS proposes to require that at least 50% of eligible clinicians who are enrolled in Medicare use the certified health information technology functions outlined in the proposed definition of CEHRT during the first QP Performance Period. CMS proposes to increase the required percentage to 75% beginning the second QP Performance Period. CMS proposes to define the QP Performance Period as the full calendar year that aligns with the MIPS performance period. For example, 2017 would be the QP Performance Period for the earliest 2019 payment year.
  • Provide for payment for covered professional services based on quality measures comparable to those in the quality performance category under MIPS. CMS proposes that payment be based on at least one evidence-based quality measure and one outcome measure. CMS clarifies that the Advanced APM must only consider the outcome measure if it is available on the annual list of MIPS quality measures for the specific QP Performance Period and is otherwise appropriate.
  • Require that the participating APM Entities bear the risk for monetary losses of more than a nominal amount.CMS proposes a general standard to be used for assessing the financial risk criterion. To satisfy the financial risk criterion, CMS proposes that the APM Entity include provisions in its Participation Agreement with CMS that would enable CMS to withhold payment, reduce payment rates, or require the APM Entity to make payment to CMS. CMS proposes a three-tiered risk-based approach for calculating whether an APM meets the nominal amount standard—i.e., marginal risk, minimal loss rate (MLR), and total potential risk. CMS also proposes more specific criteria for the Medical Home Model, another APM Entity form comprised largely of primary care or multispecialty practices. In particular, CMS proposes to apply the financial risk criterion only to those APM Entities within the Medical Home Model that are owned and operated by organizations with 50 or fewer eligible clinicians.

The QP Determination Process

CMS proposes to make QP determinations based on a collective evaluation of all eligible clinicians (including groups of such professionals) participating in an Advanced APM Entity during a specified QP Performance Period. Group QP determinations would apply to all of the individual eligible clinicians who are identified as part of the Advanced APM Entity. Notably, however, eligible clinicians who are QPs are excluded from MIPS.

CMS proposes that its collective evaluation process will involve calculating a threshold score for an Advanced APM Entity by analyzing either claims for Medicare Part B covered professional services (the payment method) or counting the number of Medicare beneficiaries for which the eligible clinician received payment for Part B covered professional services (the patient count method). For individual eligible clinicians participating in multiple Advanced APM Entities, the eligible clinician becomes a QP even if only one of those Advanced APM Entities meets the QP threshold.

Beginning with 2019 and 2020 payment years, CMS will make QP determinations based only on evaluating Medicare Part B payments or patient counts. The statutory QP threshold for an eligible clinician to qualify as a QP starts at 25% in 2019 and 2020, increases to 50% in 2021 and 2022, and increases again to 75% in 2023. Beginning in payment year 2021, however, CMS proposes to allow eligible clinicians with lower levels of participation in Advanced APMs to become QPs through sufficient involvement in Other Payer Advanced APMs (i.e., State Medicaid programs and commercial payers, including Medicare Advantage Plans). CMS will consider and evaluate payments and patients from all other payers, with certain limited exceptions, when making QP determinations, thus broadening the potential scope of participation in Advanced APMs.

CMS proposes to apply the QP status to an eligible clinician’s NPI across all of the TINs to which he or she has reassigned the right to receive Medicare payment, and not solely to the billing TIN affiliated with the Advanced APM Entity.

The Amount, Timing and Disbursement of APM Incentive Payments

CMS will make APM Incentive Payments to eligible clinicians who become QPs through participation in Advanced APMs. Beginning in 2019 through 2024, QPs will receive a lump sum incentive payment equal to 5% of their prior year’s payments for Medicare Part B covered professional services, and beginning in 2026, will receive a higher update under the Medicare PFS than non-QPs.

In determining the amount of the aggregate payment amount, CMS proposes to exclude the following: (1) the statutorily mandated adjustments required under the Medicare PFS (e.g., MIPS, Value-Based Payment Modifier (VM), Medicare EHR Incentive Program and Physician Quality Reporting System (PQRS) payment adjustments) and (2) financial risk payments such as shared savings payments or net reconciliation payments. CMS proposes, however, to include supplemental service payments (i.e., Medicare Part B payments often not reimbursable through the Medicare PFS for longitudinal management of a beneficiary’s health) so long as certain criteria are met.

CMS proposes to make the APM Incentive Payments based on data from the preceding calendar year (i.e., the incentive payment base period) and for a period of 3 months thereafter. For example, for the 2019 payment year, CMS would capture claims submitted with dates of service beginning January 1, 2018 through December 31, 2018 and processing dates of January 1, 2019 through March 31, 2019.

PFPM Criteria

Section 1868(c)(2)(A) of the Act requires that the Secretary establish criteria for PFPMs no later than November 1, 2016, which PFPM criteria may be used by PTAC in making comments and recommendations on PFPMs. CMS organizes its proposed criteria into three overarching categories:

  • Payment incentives for higher-value care. The PTAC must consider whether the PFPM (1) provides incentives to practitioners to deliver high-quality health care; (2) provides the needed flexibility to deliver high-quality care; (3) improves quality of care at no additional cost; (4) makes payment to APM Entities with payment methodologies designed to achieve the goals of the PFPM criteria; and (5) has evaluable goals for quality of care, cost and other PFPM goals.
  • Improvements in delivery of patient care. The PTAC must consider whether the PFPM encourages better care coordination among practitioners and across all care settings, improvement in patient safety standards, and greater attention to individual patient needs and population health needs.
  • Information enhancements through use of technology. The PTAC must consider whether the PFPM encourages the use of health information technology to inform patient care decisions.

The proposed rule is scheduled to publish in the Federal Register on May 9, 2016. Comments to provisions in the proposed rule must be received no later than 5 p.m. on June 27, 2016.


*Blake Walsh is admitted only in Tennessee. Her practice is supervised by members of the firm admitted in the District of Columbia.