Health Care Current | October 18, 2016

Going to school on MACRA: Building a foundation for success

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

Going to school on MACRA: Building a foundation for success

By Anne Phelps, principal, US Health Care Regulatory leader, Deloitte & Touche LLP

This past Friday, the US Centers for Medicare and Medicaid Services (CMS) released its eagerly anticipated final rule outlining the new payment programs under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). At nearly 2,400 pages, even for the most “schooled” in the health policy world, who are used to reading lots of health care regulations, this is a big one.

As our US Health Care Regulatory Leader at Deloitte, the first questions I received on Friday were: “So, Anne, what is your initial reaction to such a monster regulation?” and “What do you think of the changes and transition time given?”

My response is quite simple: A rule of this size and the focus of the first performance year as one of transition is entirely appropriate. The enormity of the new rules reflect the transformative intent of the law. The transition time given is an acknowledgement that the industry shift from volume to value will not happen overnight.

As we’ve said many times, MACRA is disruptive by design. Congress intended the law to put the industry on a path toward delivering much more cost-effective and outcomes-based health care. Congress and the Administration have made it clear that it will be an evolutionary process and will take place over many years. But, do not mistake this transition year as similar to past laws or policy changes that have been more about delays and “kicking the can” down the road. The MACRA journey is underway; we are full speed ahead.

MACRA is not designed to be merely a compliance law. It requires strategic choices by health care leaders, clinical and financial transformation within organizations, and critical investments to be planned for and made. In speaking with hundreds of hospital system executives and clinicians over the past few months, many are beginning to understand the transformative and organizational changes needed. But, for a CEO to transition his or her organization to new risk-bearing models or a CFO to change a revenue mix from volume to value, it may take strategic planning across the enterprise, data, technology, infrastructure, and more. Moreover, for a clinician to understand – let alone change – new care models, it may require a shift in focus to outcomes over processes, engagement with physician leadership to motivate change, and new performance management programs.

MACRA is a transformative law poised to drive payment and delivery reforms for clinicians and health systems across Medicare, other government programs, and commercial payers. In addition to significant new performance measures, reporting requirements, and compliance exercises, MACRA will necessitate major strategic decisions for physicians and other clinicians in how they organize themselves and how quickly they move into coordinated care arrangements. Similar decisions await health systems and health plans that employ those health care professionals or rely on them for patient referrals and to build their networks. And, while the law directly impacts Medicare payments through the Physician Fee Schedule, it also lays the groundwork and provides strong incentives for other payers to move in the same direction, thus potentially disrupting the health care system at all levels.

Even though transition time is given and clinicians can “pick their path” to ease in (see highlights in the October 17, 2016 Reg Pulse Blog), there are several critical issues to consider: 

  • The start date remains: The final rule retains January 1, 2017 as the start date of the first performance period. Organizations have little time to prepare to begin collecting data on clinicians’ performance if they plan to fully participate in the Merit-Based Incentive Payment System (MIPS) and hope to maximize their positive payment adjustments. 
  • Sitting out may not be wise: Clinicians considering sitting the first year out might be wise to reconsider. Clinicians who do not report in 2017 will receive the maximum negative payment adjustment of 4 percent in 2019. 
  • Cost performance will still be important: While many were relieved to see one of the most difficult MIPS performance categories – “resource use” or cost – is now weighted at zero for 2017, the focus on decreasing cost and utilization remains the end goal. The measure of costs will not be taken into account for the first year of MIPS and will not affect payment adjustments for 2019. However, CMS is still going to review claims in 2017 and intends to calculate cost measures and provide feedback to clinicians. Additionally, as required by the statute, the weight of the resource use performance category in calculating performance under MIPS will still increase to 30 percent by performance year 2019, which is significant.

Perhaps it is best to think about MACRA as similar to earning a degree. As any physician or clinician can tell you, it takes years to become an expert in the medical field. But, each year is important on the journey to your degree. If you skate by in your first year of classes, then year two becomes that much harder because you have not adequately prepared in your foundational courses. Each year builds upon the last. For the first year of MACRA, the good news is that the teacher has said that while you must participate in class, you can build a foundation at your pace and even receive some extra credit along the way.

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Implementation & Adoption

CMS locks in January 1, 2017 start date in final rule on new Medicare payment tracks under MACRA

On Friday, October 14, 2016, CMS issued the widely anticipated final rule on MIPS and the Alternative Payment Model (APM) Incentive under MACRA. Together, CMS is referring to the new payment tracks through MIPS and Advanced APMs as the Quality Payment Program (QPP). The first performance period under MACRA will begin on January 1, 2017, and the first payment adjustments under the law will take effect for 2019.

Notably, CMS issued the final rule with a comment period as part of an effort to take a staged approach to implementation of the QPP. The agency will accept public comments for 60 days once the final rule is posted for Public Inspection on the Federal Register. The final rule provides important details for the flexibility to MIPS participation that CMS outlined last month (see the September 13, 2016 Health Care Current) and makes some changes intended to help smaller practices participate. Clinicians who do not report will receive the maximum negative payment adjustment of 4 percent for 2019.

Notably, the final rule weights resource use at 0 percent for the 2017 performance period. This measure of costs will not be taken into account for the first year of MIPS and will not affect payment adjustments for 2019. As a result, quality will account for 60 percent of the composite performance score for 2019, clinical practice improvement activities will account for 15 percent, and advancing care information will account for 25 percent.

CMS also finalized the key components of the Advanced APM Incentive track without changes from what was put forward in the proposed rule. For example, the final rule retains the 4 percent total risk threshold for Advanced APMs, as well as the patient count thresholds included in the proposed rule. Although CMS has provided a list of APMs it anticipates will be Advanced APMs for 2017, it will provide a final list of Advanced APMs by January 1, 2017. The agency has raised the possibility of changes to the Medicare Shared Savings Program (MSSP) Track 1 that would permit participants to begin sharing limited downside risk and potentially qualify as an Advanced APM beginning in 2018. This option – called Medicare Track 1+ – may be attractive to organizations currently participating in MSSP Track 1 or entering MSSP for the first time. CMS will provide greater detail in future rulemaking.

CMS estimates that approximately 70,000 to 120,000 clinicians will become qualifying participants (QPs) based on their participation in Advanced APMs in 2017. CMS expects approximately 125,000 to 250,000 clinicians to be QPs in the 2018 performance year. CMS estimates that APM Incentive Payments in calendar year 2019 will total between $333 million and $571 million.

Background: MACRA repealed the sustainable growth rate (SGR) formula for updates to the Medicare Physician Fee Schedule and set payment updates for all years in the future. Through the QPP, the law is intended to link Medicare payment updates to quality and performance and drive the health care payment system across all payers away from fee-for-service reimbursement models. See more in the October 17, 2016 Reg Pulse Blog.

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Increased Medicare hospice spending due to higher number of patients

Medicare spending on hospice care increased from $10.4 billion in 2007 to $15.8 billion in 2015, mainly due to an increase in Medicare beneficiaries electing to receive hospice care. This is according to a recent study published in Health Affairs. The number of Medicare beneficiaries using hospice services increased 38 percent from 2007 to 2015, growing from 1 million to 1.4 million.

Hospice care is becoming increasingly popular in Medicare. Under this benefit, Medicare covers palliative care for beneficiaries who are terminally ill and have an estimated life expectancy of six months or less. More than twice as many Medicare decedents in 2014 used hospice than in 2000.

Researchers found that average spending per patient varies significantly by state and diagnosis. For example, average per-patient spending in 2015 ranged from $4,683 in Minot, North Dakota, to $18,106 in San Mateo County, California. On average, patients with cancer spend fewer days in hospice care than patients with dementia. Regions with higher hospice spending generally had more patients with dementia. Regions with lower hospice spending generally had more patients with cancer than regions with higher spending. In 2015, dementia accounted for 25 percent of the total hospice spending – roughly $4 billion.

(Source: John Hargraves & Niall Brennan, “Medicare Hospice Spending Hit $15.8 Billion In 2015, Varied By Locale, Diagnosis,” Health Affairs, October 2016)

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Physician-led ACO group outlines five areas for success under MSSP

Farzad Mostashari, MD and Travis Broome, leaders at Aledade, found that independent physician-led accountable care organizations (ACOs) can improve access, quality, and appropriate utilization of health care. Aledade is an organization that helps small physician groups form ACOs. The authors’ examination of strategies associated with success in MSSP was published in the American Journal of Managed Care.

The article provided results from two Aledade-initiated MSSP ACOs. The first, the Aledade Primary Care ACO, scored in the 98th percentile for quality measures compared with all MSSP ACOs and neither saved nor spent more than its benchmark. The second, the Delaware ACO, was in the 88th percentile for quality and spent 2.5 percent more than its benchmark. Both of the physician-led ACOs increased use of primary care services and revenue and decreased lab and imaging costs, emergency department visits, and hospital admissions.

The authors outlined five main focus areas for physician-led ACOs to improve operations and performance:

(Source: Farzad Mostashari and Travis Broome, American Journal of Managed Care, “The Opportunities and Challenges of the MSSP ACO Program,” September 20, 2016)

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Most MA enrollees are in plans with four or more stars

Last week, CMS released the 2017 Star Ratings for Medicare Advantage (MA) and Medicare Prescription Drug (MA-PDs) health plans. Nearly half (49 percent) of MA-PDs earned four or more stars for the 2017 plan year.

Approximately 68 percent of MA-PD beneficiaries will be in plans that earned four or more stars in 2017. This is an increase from 2014 when 52 percent of MA-PD beneficiaries were in four- or five-star plans, but a decrease from 71 percent in 2016. The data shows the availability of highly-rated MA-PDs has increased since 2014.

Background: CMS calculates star ratings based on MA and MA-PD health plans’ quality and performance. The ratings determine MA Quality Bonus Payments and help beneficiaries and caregivers select their plans. CMS calculates star ratings based on a set of measures that fall into five categories: 

  • Outcomes
  • Intermediate outcomes
  • Patient experience
  • Access
  • Process

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Medicaid expansion states seeing lower percentages of uninsured patient visits to physicians and emergency rooms

Hospitals and physicians are seeing lower shares of uninsured patients visiting ambulatory physicians and emergency rooms in states that expanded their Medicaid programs. Researchers from the Agency for Healthcare Research and Quality (AHRQ) compared the share in 2014 to prior years. Meanwhile, adults with public coverage (i.e., Medicaid, Medicare) are making up a larger share of these types of visits. In states that did not expand their Medicaid programs, researchers found no significant change in uninsured patients’ share of physician and emergency room visits.

While changes in coverage likely influenced these trends, other contributing factors could include the health risks of those who self-selected into coverage, their health care seeking behavior, and availability of primary care providers.

The increased shares of Medicaid and exchange plan payments reflect a decrease in the overall uninsured rate. The 2015 American Community Survey found that the uninsured rate decreased 1.3 percentage points between 2014 and 2015. In 2015, the percentage of people without health insurance coverage was 9.1 percent, compared with 10.4 percent in 2014.

(Source: Selden et al. “Insurance Coverage of Ambulatory Care Visits in the Last Six Months of 2011-13 and 2014, by Medicaid Expansion Status,” AHRQ, October 2016)

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On the Hill & In the Courts

MedPAC proposes options to lower Part B costs

The Medicare Payment Advisory Commission (MedPAC) recently discussed possible options to address rising prescription drug costs in Medicare Part B. In 2014, spending for these drugs reached $22 billion – $4 billion of which was beneficiary cost sharing. In the last five years, drug spending has grown 8 percent annually.

The Commission highlighted six possible policy options designed to lower costs. Three would aim to increase competition to reduce price increases, and three would aim to improve the accuracy of the payment formula and data CMS uses to make payments:

Analysis: In discussing these options, the Commissioners broadly supported modifying ASP and WAC reporting and pricing. Much of the discussion focused on possibilities for restructuring the CAP and for consolidating biosimilars under single billing codes with their reference products. The Commission said that lack of participation was the major challenge of the first version of the CAP, so will continue to discuss the possible structure of the new CAP and strategies to increase provider participation.

Commission members agreed that grouping biosimilars into the same billing code with their reference product would be consistent with the Commission’s stance that Medicare should pay similar rates for similar care. However, some questioned if the biosimilar market is mature enough for this. This policy might unintentionally create disincentives for biosimilar innovation. Also, while generic drugs are identical to their brand products and approved for all the same indications, biosimilars can be approved for fewer indications than their reference product. MedPAC is accepting comments on these options online and through the mail and will address them at the November 3, 2016 public meeting.

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HHS publishes Open Government Plan 4.0 for greater transparency, collaboration, and participation across agencies

The US Department of Health and Human Services (HHS) recently published the fourth iteration of the Open Government plan. The plan sets financial reporting, open sourced coding as a vehicle for technology adoption, and digital strategies as priorities for the new financial year. It also calls for government transparency and interagency collaboration on these priorities. The plan was developed collaboratively by the HHS Innovation Council, the New Media Council, and the Freedom of Information Act (FOIA) Council and includes input from private industry stakeholders.

Open Government Plan 4.0 has stronger emphasis on transparency and data sharing. According to HHS, the agency has published nearly 3,000 datasets to drive public and private innovation in technology development and adoption. The fourth iteration of the plan includes whistleblower protections, strategies to disseminate open source software, and procedures to better engage patients and industry stakeholders.

The plan also identifies seven “flagship” high-priority initiatives: 

  • National Institutes of Health Precision Medicine Initiative Cohort Program 
  • The CMS Open Payments Program
  • The CMS Blue Button
  • Health Resources and Services Administration Title V Maternal and Child Health Block Grant Program Transformation
  • Patient-Focused Drug Development
  • The CMS Quality Rating System
  • Innovative and Active – A Public Comment Database Plays Role in the Physical Activity Guidelines Development Process

HHS chose these initiatives because they represent cross-agency collaboration that uses innovative technology and processes to improve outcomes. HHS is seeking public comments on the current version of the plan on its website.

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Around the Country

Expanded Oregon Medicaid waiver proposal would address social determinants of care

Oregon has proposed to expand its Medicaid reform program to support partnerships between health and social service providers and invest in systems that help providers share data and communicate about their patients. It is proposing to expand the scope of the Oregon Health Plan, its 1115 demonstration program, from 2017 through 2022. In 2012, the state established coordinated care organizations (CCOs) through an 1115 demonstration waiver with CMS. Under the waiver, the 16 CCOs receive capitated payments to go toward governing and administering care for Medicaid beneficiaries.

The new waiver would create Coordinated Health Partnerships (CHPs) to coordinate services that address social determinants of health between CCOs, hospitals, community-based organizations, and more. CHPs would provide services to address aspects of housing and better care coordination: 

  • Homelessness prevention and transitions of care: Support seamless care transitions by ensuring that enrollees get all medical needs assessed on an ongoing basis and funding services that help individuals move from institutional settings (e.g., jails, prisons) into the community. 
  • Housing transition services: Help with finding housing, obtaining environmental modifications to homes, care coordination, and more. 
  • Tenancy sustaining services: Investing in services to help people stay in their homes long term, including eviction prevention and utilities management.

CHPs would make these services available to the highest-need individuals in the state, including people with repeated avoidable visits to the ER, with mental health or substance abuse disorders, and/or who are homeless or at risk of becoming homeless.

Oregon’s CCOs have reduced avoidable emergency room use by 50 percent since 2011 and have increased enrollment in patient-centered primary care homes. Today’s waiver is projected to save the federal government $1.4 billion by 2017, and Oregon projects that the renewed waiver could increase that to $6.5 billion through 2022.

Analysis: States can apply for CMS demonstration waivers to pursue alternative and innovative strategies to provide residents with access to high-quality, affordable health insurance as long as they meet certain requirements. Oregon is one of many states looking to capitalize on these flexibilities to both save costs and experiment with new ways of providing coverage. As health care stakeholders increasingly understand how social determinants of health influence patient outcomes, we will likely see additional programs addressing social needs.

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CMS and Washington agree on Medicaid reform waiver

CMS and Washington agreed on a new five-year 1115 demonstration waiver to reform care provided through the state’s Medicaid program. The waiver is part of the state’s efforts to focus on prevention and care management for people with chronic conditions like diabetes and behavioral health conditions.

The waiver is designed to foster community health care collaboration, expand long-term services and supports for individuals with disabilities and older adults, and address housing and employment needs for vulnerable populations.

The state hopes this waiver will:

  • Reduce avoidable use of ERs, psychiatric hospitals, and nursing home facilities
  • Improve prevention and care management 
  • Accelerate Medicaid payment reform
  • Decrease Medicaid cost growth below the national trend

The waiver includes up to $1.125 billion in federal funding to support a Delivery System Reform Incentive Payment (DSRIP) program. CMS approved the agreement in a letter but said that details are still being finalized.

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Breaking Boundaries

Health system testing out IoT technology to make patient stays more comfortable

Thomas Jefferson University Hospital in Philadelphia is testing Watson, IBM's artificial intelligence computer system, to help patients feel more comfortable during their stay by automating some basic tasks so that physicians and nurses can focus on caregiving. Watson’s Internet of Things (IoT) platform can connect to devices and analyze data. It can turn a traditional hospital room into a “smart room” that can respond to common requests and needs, with the ultimate goal of improving staff efficiency and helping the patient have a better overall experience.

If a patient has a routine question or request, such as when lunch is being served or needing to change their room temperature, they can speak to Watson instead of buzzing and waiting for a nurse. Watson’s smart speakers and IoT platform can handle the request. Patients can also request soothing music, find out information about their physician, or ask about logistics, such as visiting hours.

Improving patient experience is a goal of many health systems, driven by the need to stay competitive, concern over nontraditional entrants into health care (such as retail clinics and telehealth companies), payment models that provide incentives for hospitals to improve patient experience, and the increasing influence of social media.

In a recent Deloitte report, “The value of patient experience,” Deloitte researchers found a strong correlation between higher patient experience ratings and improved profitability. For example, between 2008 and 2014, hospitals with “excellent” overall patient experience ratings had a net margin of 4.7 percent, on average, compared with 1.8 percent for hospitals with “low” ratings. These findings also held true when the team ran a regression analysis to control for other factors that might contribute to hospitals’ profitability.

Analysis: While many technologies are creating opportunities across the health care industry, IoT technology is especially exciting. IoT technology makes objects “smart” via embedded sensors and links them through wired and wireless networks, generating large amounts of data and allowing remote monitoring and self-regulating medication. Analysts project the global IoT-based health care market will grow by 38 percent from 2015 to 2020.

Technologies based on IoT applications will likely begin to transform how health care is delivered and alter hospital, health system, nursing home, and medical device company operating models. Deloitte’s 2016 Survey of US Health Care Consumers found that consumers of all demographics are open to technology-aided care. But, providers will likely need to earn their trust on both quality of care and protection of patient information. To win customer buy-in, the user experience—for caregivers, patients, insurers, and everyone else—will likely need to be as seamless as possible.

(Sources: IBM, Watson Internet of Things, 2016; Research and Markets, “Global Internet of Things (IoT) healthcare market to grow 37.6% by 2020—increasing support from government organizations,” BusinessWire, June 7, 2016)

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