Yet Steinbauer believes the Quality Payment Program, or QPP, will bring positive change. “It is absolutely the right thing to do because it looks at the value we are adding to the patient’s care.”

Supporting Articles

Established by the Medicare Access & CHIP Reauthorization Act, or MACRA, QPP ties physician payment to performance. It is a key part of CMS’ plans to link 90 percent of Medicare reimbursement to value by 2018, while deliberately moving providers toward alternative payment models — APMs — including bundled payment and shared savings.

“Starting Jan. 1, this will be the new order for physician payment,” says Melissa Myers, senior associate director of policy, American Hospital Association. “We expect this to accelerate the shift we’ve been seeing in hospital-physician relationships.”

QPP has two primary tracks: Most eligible clinicians will be in the Merit-based Incentive Payment System, or MIPS, and receive bonuses or penalties based on their performance in four categories: quality, cost, improvement activities and advancing care information. The second elite track requires being in a recognized Advanced Alternative Payment Model, which involves taking on significant financial risk in exchange for 5 percent incentive payments and a pass on MIPS reporting.

Framing the Issue

  • MACRA begins Jan. 1: Many physicians, as well as nurse practitioners and a handful of other clinicians, need to report performance data to CMS in 2017 to avoid Medicare payment penalties or to receive a bonus in 2019.
  • Besides impacting Part B reimbursements, MACRA promises to accelerate physician-hospital integration, value-based population health and risk-based alternative payment arrangements.
  • Hospitals and physicians need to begin preparing for 2017 reporting as soon as possible, while identifying their long-term strategy for succeeding under alternative payment models.

Hospitals and physicians need to take immediate steps to prepare for the QPP’s 2017 launch to ensure the best possible payment scenario. But it’s also important to understand the big-picture impact. Health care leaders and experts with years of experience in value-based care point to three long-term strategic implications.

1) Changing the Care Delivery Model

Both QPP tracks incentivize physicians to pay more attention to costs (both Part A and B Medicare spending), in addition to quality, which likely will lead to fewer admissions, says Austin Weaver, senior director of consulting at the Advisory Board. “Physicians are going to be thinking about how they can be more judicious with the cross-continuum spend of their patients.” 

As a result, more care will shift to lower-cost settings, including ambulatory, says Donald Fischer, president and CEO of the American Medical Group Association. “There’s going to be much more focus on keeping patients vertical and out of the hospital. If you can avoid those admissions, those readmissions, those emergency room visits, you’re going to do well.”  


Hospital leaders need to think about how this will affect revenues. “I would look at my potentially preventable admissions,” says Joe Damore, vice president of population health management at Premier Inc. To get started, he recommends reviewing the Agency for Healthcare Research and Quality’s list of ambulatory care-sensitive conditions, or medical problems (e.g., dehydration) that physicians often can prevent or manage effectively on an outpatient basis.

“I would calculate what percentage of my admissions are probably going to decline in the next five years, Damore says. “Then I would be looking for new sources of revenue to replace those potentially preventable admissions.”

At the same time, hospitals also will be given incentives to reduce acute care costs, since hospital spending will be included in the MIPS cost score once that is counted in 2018. “As physicians look to get a better score, they're going to be thinking about their hospital partnerships,” Weaver says. “If hospitals want to compete, it will be predominantly in that cost-management space because that’s where the most variation is.”

QPP will also boost transparency, making it easier for consumers and purchasers to learn about a physician’s performance, says Weaver. MIPS reporting will lead to an increase in the amount of information posted on Medicare’s Physician Compare website, although CMS is still determining how performance results will be organized and displayed. Currently, a limited number of quality metrics are posted on Physician Compare, and most focus on care processes (e.g., screening for depression). MIPS requires reporting on at least one outcome measure, such as depression remission at 12 months.

This focus on results promises to be more meaningful to patients and physicians alike. “The move toward measuring outcomes is one that many physicians will really welcome,” said Judith Melin, M.D., chief medical services officer, Lahey Clinic, during an AHA video series available, along with a full range of related MACRA tools and resources, at

2) Accelerating Physician Alignment

The Baylor St. Luke’s Health Network is about 2 ½ years and 2,500 physicians in toward building a clinically integrated network, which brings hospitals and physicians together to improve patient care and secure contracts with insurers. The Houston-based network has a distance to go to reach its goal: 10,000 physicians and 1 million lives under value-based payment arrangements.


But Steinbauer believes the QPP will encourage more independent clinicians to join forces with hospitals, groups or networks, given the infrastructure and resources required to report and improve performance under MIPS. “In the long run, it’s going to be easier to do well if we are aligned as groups,” he says. “Depending on which group you join, you can still have an independent-type practice where it’s your building and your charts and your employees, but your data will be aggregated and reported in a fashion that you don't have to worry about it as much.”

Inherent to its structure as a Medicare ACO, the Baylor St. Luke’s network participates in the Medicare Shared Savings Program Track 1, which is considered an upside-only, or one-sided, risk model. The network gets a portion of any savings it achieves by taking care of its Medicare population efficiently. But if spending exceeds target, the network does not have to cover any of the excess costs.

MSSP Track 1 ACOs are not considered Advanced APMs, but CMS has created a special MIPS category for them, called MIPS APM. Because the Baylor St. Luke’s network reports on its performance via MSSP, it will be exempt from a lot of MIPS reporting. They do not have to submit data separately for the MIPS and will be scored using a MIPS APM scoring standard.

Jennifer Vermeer, president and CEO of University of Iowa Health Alliance, agrees that the intention of QPP is to reward physician-hospital alignment. But she warns that some CMS requirements may cause disincentives for some organizations that are looking to integrate with physicians, depending on their specific circumstances.

The University of Iowa Health Alliance, which is also in MSSP Track 1, handles value-based contracting for four independent Iowa health systems, including University of Iowa Health Care. While most of the physicians in UIHA are employed by the health systems, a few independent physician groups joined forces with the alliance to participate as an ACO in MSSP Track 1.

However, these physician groups recently decided to leave the MSSP ACO because CMS requires all providers in MSSP ACOs to report performance as a single entity. “These independent groups were averse to being averaged with others,” Vermeer says.

This group reporting requirement is only for MSSP, which illustrates how CMS requirements will affect organizations in different ways. In the regular MIPS track, providers can decide to report as individuals or as a group.

3) Building Population Management and Risk Capabilities  

“Accepting risk is risky,” says Baystate Health’s Evan Benjamin, M.D., senior vice president for quality and population health and chief quality officer. He should know. Baystate’s physician-hospital organization participates in Medicare’s Next-Generation ACO Model, which is considered an Advanced APM with sizable two-sided risk.

Next-Gen ACOs reap most of the savings achieved by efficiently managing a Medicare population. As advanced APMs, they also will receive an incentive of 5 percent of Medicare Part B professional services revenue in 2019. But the downside risk is significant: If Medicare spending exceeds target, the ACO is responsible for covering a significant amount of the extra costs.

Despite that financial risk, Benjamin believes QPP will entice more physicians and hospitals to seek the advanced APM track. “There’s an incentive to get away from MIPS, which most docs see as very cumbersome and risky, and move toward a more streamlined approach of taking on risk,” he says. “For us, this has added fuel to the fire that we already started. We’re looking at [QPP] as a way to engage our physicians in recognizing that this is not a fad, that the future involves thinking in terms of global budget.”

Hospital and physician leaders need to carefully consider how rapidly they want to move toward two-sided, risk-payment arrangements, says Weaver. “This decision involves many factors beyond MACRA,” he says. “Every organization will have its own pace, given its market, given the financial state of the organization.”

For instance, Advocate Physician Partners seems a logical candidate for the advanced APM track. The physician-hospital organization is a joint venture between the 12 hospitals in Illinois-based Advocate Health Care and approximately 5,000 employed and independent physicians. The organization has more than a decade of experience in managing patient populations, with more than 50 percent of revenue tied to risk-based contracts, says Pankaj Patel, M.D., chief clinical integration and quality officer.

Advocate also has invested heavily in the infrastructure required to improve quality and costs across care sites, including health IT, medical homes, care management and clinical pathways. To engage physicians, Advocate requires PHO members to abide by membership criteria designed to help the network meet performance targets, such as sharing claims information and meeting patient access standards. Physician members also need to meet minimum performance standards to receive incentive payments under Advocate’s internal pay-for-performance fund, which pulls in about $100 million a year from various performance-based payment arrangements.

Despite being at the forefront of value-based care, Advocate has decided not to seek the Advanced APM track. For the near future, the organization plans to be in MIPS. Because Advocate is an MSSP Track 1 ACO, it will be in the special MIPS APM category.


For now, the downside risk involved in being an Advanced APM outweighs the potential financial benefits, says Patel. One major challenge is the difficulty of managing out-of-network costs for Medicare fee-for-service populations, particularly since beneficiaries are not given significant incentive to stay in network. “We find when patients have no reason not to go anywhere they want, they go anywhere they want,” he says.

To help coordinate care and keep Medicare patients in-network, Advocate is encouraging network specialists to join its MSSP ACO, which until recently was mostly primary care physicians. Around 600 specialty practices have joined the ACO in the last few months.

Patel believes the coming QPP requirements will help Advocate further drive performance improvement. “Now physicians have a CMS-directed incentive for value so it creates, I think, a better synergy.”

Executive Corner: Advice for key stakeholders as they prepare for Medicare’s Quality Payment Program:


Board members need to recognize that the hospital business is changing dramatically, driven in part by the shift from fee-for-service to value-based payment. “I view this like moving from the railroad business into the transportation business,” says Joe Damore, vice president of population health management, Premier Inc. “You're not just a hospital anymore. You’re really a health delivery and financing system. You’re really moving into managing populations. If you decide that you just want to be a hospital, "then you’re going to wind up being a subcontractor to population health organizations.” Specific to the QPP, trustees and hospital executives will need to weigh the financial risks and benefits of participating in MIPS vs. an advanced APM. 

Hospital executives

“You must support your physicians so that they can do well,” says Pankaj Patel, M.D., chief clinical integration and quality officer, Advocate Physician Partners. “You must build the infrastructure or you will lose — and not just in terms of a negative payment adjustment. You’ll lose the doctors.” During an AHA video series, which can be viewed at, Adam Myers, M.D., chief medical officer, Texas Health Physicians Group, recommended going to physicians with questions. “I would encourage hospitals and health systems to ask, ‘How can we help you meet these new standards? Do you have a care coordinator? Do you have the data you need? Do you have the analytics you need? Do you have adequate access to pharmacists … to work with your patients on medication optimization and reconciliation? Can you do telemedicine?' All those are going to be key components in the new way of doing things.”


“Physicians have a host of choices to make throughout the strategy and implementation of this program … we have the opportunity to select among a host of quality measures, for example," said Judith Melin, M.D., chief medical services officer, Lahey Clinic, during the AHA video series. “One of the useful things to recognize is that a physician can really tailor this to his or her practice in many instances.” Just as important, physicians need to think about how their processes and practices need to change so they can do well under QPP.

MACRA Resources

The American Hospital Association's MACRA Resource Page

This page offers a number of resources, including the latest information and updates about MACRA.

Quality Payment Program

CMS aims to provide easy-to-understand information on how to comply with QPP, along with lists of the specific metrics and improvement activities that can be reported. You’ll also find the QPP final rule, an executive summary of the rule, and links to CMS webinars.

American Medical Association

Physicians will find a tool to help them evaluate how QPP will impact their practices, and more.

American Medical Group Association

More educational resources and assessment tools can be found on this site.

Yet Steinbauer believes the Quality Payment Program, or QPP, will bring positive change. “It is absolutely the right thing to do because it looks at the value we are adding to the patient’s care.”