The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established a new framework for Medicare physician payment. Under the law, beginning in 2019, health care professionals participating in the program will come to a crossroads on their path to reimbursement.

In one direction—the default direction—they will be subject to the Merit-Based Incentive Payment System (MIPS), a revamp of Medicare’s fee-for-service (FFS) payment system that consolidates existing quality programs into a unified reimbursement component. The MIPS is examined in considerable detail in another Health Affairs Blog post.

Medicare professionals, however, do not have to get swept up in the MIPS stream. Those who receive a certain share of their revenue through alternative payment models (APMs) are exempt from MIPS requirements. The law further encourages participation in APMs by providing incentive payments during the first few years of implementation and steeper increases to their base reimbursement rate later on. This post will attempt to hone in on what an APM under MACRA really is, discuss the provider incentives under this path, and clarify what we know so far about efforts underway to create and implement them.

What Is An APM?

Under Medicare’s traditional fee-for-service reimbursement approach, providers are paid based on the volume of services delivered. By now we all seem to understand that rendering more care is not the same as rendering high-quality care, and the policy conversation has increasingly focused on tying payment to the value of the services rendered.

Familiar examples of existing alternate payment structures in this vein include accountable care organizations (ACOs), episode-based payments, and patient-centered medical homes (PCMHs). Notably, some of these models use fee-for-service payment structures but are nevertheless broadly considered APMs because a component of payment is tied to value in some way.

In addition to some of these existing programs, additional APMs will be developed and introduced by a Physician-Focused Payment Models Technical Advisory Committee, chartered by MACRA. This Committee is expected to release a proposal this spring to further define these new models, with finalization of the concepts due later in the year.

MACRA gives us some broad parameters for what an eligible APM needs to have. For example, the law states that “the alternative payment entity” must use a certified electronic health record (EHR), have quality measures in place, and bear “more than nominal risk” (with some exceptions). For this last requirement, there is already some debate about the meaning of the phrase “more than nominal risk.” Some stakeholders assert that models without any downside risk at all should qualify. They point out that the start-up, infrastructure, and maintenance costs associated with these programs represent far more than nominal risk.

For their own part, CMS leaders penned this post on Health Affairs Blog last fall. This is clearly a priority for the Administration. It’s also consistent with a path they began to march down prior to MACRA’s passage, as this helpful CMS slide presentation makes clear.

Provider Incentives For APM Participation

Among MACRA’s sweeping payment reform provisions are several short- and long-term steps to encourage providers to participate in APMs. For example, those participating in APMs are eligible for initial bonus payments, exempt from MIPS requirements, and are generally not expected to meet EHR Meaningful Use (MU) requirements. MACRA refers to the intrepid travelers along the APM path as “qualifying participants.” These classifications are important in Medicare-ville.

During the first five years of implementation (2019-2024), qualifying participants are encouraged to participate in APMs through a 5 percent annual “bonus” if they receive a “significant share” of revenue through eligible APMs. The 5 percent bonus is computed as a lump-sum based on the aggregate amount of Medicare-covered services for that professional for the preceding year. Notably, the Medicare Payment and Advisory Commission (MedPAC) observed that, although there is a requirement for quality measurement, there is no statutory requirement that APMs actually perform well on quality or reduce costs for clinicians to receive the bonus payment.

Caregivers participating in APMs also receive higher annual payment updates for their lingering fee-for-service revenue stream beginning in 2026. Anticipating broader APM participation as a result, CMS’ independent Office of the Actuary acknowledged the “favorable incentives” for providers to adopt APMs and projected a 60 percent share of Medicare physician spending in “ACOs and other qualifying payment models” in 2019, reaching 100 percent by 2038.

Further clouding the reimbursement landscape, MACRA establishes a two-track system for designating qualifying participants as actually qualifying: 1) beginning in 2019, if they receive a significant share of APM revenue in Medicare alone; or 2) beginning in 2021, if they receive a significant share of APM revenue through Medicare or a combination of Medicare and other payers. The statute also envisions “partial qualifying participants” who only fractionally satisfy these thresholds. These providers are not required to participate in MIPS, but are also not eligible for APM incentives. Advanced payment purgatory, if you will. Best of luck to CMS in drawing these lines.

MACRA also provides exceptions and alternatives for providers who are unable to participate in an APM because there is no qualifying program in their area. CMS is also required to test APMs relevant to specialty professionals, professionals in small practices, and those that align with private and state-based payment initiatives.

Implementation So Far

On September 28, 2015, CMS issued a Request for Information (RFI) on MACRA implementation. While the RFI was mostly focused on the MIPS program, it also broached issues relating to the definition and structuring of APMs. Specifically, the RFI sought input on: how to determine whether providers qualify for the APM payment incentive; using patient counts instead of percentages of payments to determine whether providers have enough volume at risk to be eligible; how to define a “more-than-nominal” degree of financial risk required; how “use” of certified EHRs should be defined, among other topics.

The Department of Health and Human Services (HHS) recently convened the first meeting of the Technical Advisory Committee noted above in anticipation of a November 1, 2016, statutory deadline for rulemaking on defining physician-centric APMs. During the meeting, CMS officials discussed the process for stakeholder submission of ideas and how the agency would approach their consideration of them. One CMS official tipped the agency’s hand a bit by suggesting only some APMs will qualify as “eligible APMs” under MACRA by being the “most advanced” APMs.

While the physician community is indisputably interested in (and participating in) APMs, understandable concerns remain as many questions have yet to be answered. Practitioners have noted the potential for MACRA APMs to hold them accountable for costs outside of their control, for example.

Finding a balance between bona fide innovation in cost control and quality improvement, while creating space for provider participation and success, is the essence of the task before CMS and all stakeholders involved. As existing and future approaches continue to be refined, we can expect the growth curve of provider participation to trend upward.

Huxley would be proud.