On April 16, 2015, the Medicare Access and CHIP Reauthorization Act of 2015 was signed into law, ending 18 years of last-minute “fixes” to the deeply flawed sustainable growth rate formula for Medicare Physician Fee Schedule payments. In addition to staving off a 21 percent payment cut, the MACRA provides predictable annual payment updates for physicians and other professionals paid under the PFS. Even more significantly, the MACRA creates a new physician payment and performance measurement system that, beginning in 2019, will tie an increasing percentage of payment to value, and incentivizes physician participation in alternative payment models (APMs). This new payment and quality reporting system signals significant changes to the way physicians and hospitals will need to work together to provide care to their communities. 

In brief, the law provides two “tracks” — the Merit-based Incentive Program (MIPS), which will be the default payment system, and payments to professionals who demonstrate significant participation in APMs. Starting in 2019, the MIPS will replace three current pay-for-performance programs. Physicians will be measured on their performance related to quality, resource use, clinical practice improvement activities and meaningful use of electronic health record technology. They will earn rewards or penalties, based on performance, of up to ±4 percent of their PFS payments in 2019, rising to ±9 percent by 2022. In contrast, the APM track allows physicians who receive a significant portion of their payments through eligible APMs to be exempt from most MIPS quality reporting provisions, and through 2024, to receive a 5 percent bonus payment. Eligible APMs must meet a number of criteria, including quality measurement, use of certified EHR technology, and responsibility for more than a nominal amount of financial loss. Eligible APMs will be defined in regulation by CMS, but potential Medicare APMs include Shared Savings Program accountable care organizations and some models being tested by the Centers for Medicare and Medicaid Innovation.

The field is moving toward many of the mechanisms encompassed in MACRA as the nature of physician-hospital relationships shifts to more formal structures that can accept clinical and financial risk. These changes now have a key inflection point in 2019.

In a 2014 AHA survey looking at the types of relationships developing between hospitals and physicians, results indicate relatively low levels of integration and organization. Responding hospitals reported a broad array of physician arrangements, with nearly half employing physicians and significant ownership of physician practices. However, the majority of hospital-owned practices had fewer than 25 physicians, presenting an opportunity to consolidate practices to take advantage of quality improvements, standardized processes and the ability to accept risk.

Among respondents, only 13 percent indicated they were participating in bundled payment arrangements with physicians in 2013, and 16 percent were participating in a shared savings arrangement. So, while payment is moving to these types of alternative models, only a modest number have developed the clinical quality measures, information technology infrastructure and cultural connections needed to support these care delivery models.

As hospitals work more closely with physicians, they will need tools and resources to strengthen patient outcomes, ensure financial stability and be successful as part of a truly continuous system. These more integrated arrangements allow for joint establishment of clinical protocols, financial mechanisms that align incentives, tracking of performance across the care continuum and integration of information systems, all of which optimize the potential for achieving the Triple Aim of better health, better health care and lower costs. In addition, to support the needs of clinical integration to improve quality, patient safety and streamline care delivery, arrangements between and among physicians and hospitals need to promote mutual accountability and joint leadership to bring health care delivery to the next level.

To help address these needs, the AHA is partnering with the American Medical Group Association to develop a national-level learning fellowship to assist hospitals and their medical groups in improving their chances of success in the new payment environment. Look for more information about the fellowship this spring. 

John R. Combes, M.D., is chief medical officer and senior vice president of the American Hospital Association and president of the Center for Healthcare Governance, an AHA affiliate. He is also a member of Speakers Express.