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MACRA's Mixed Bag of Gifts

A version of this article was published by The Daily Record on June 8, 2016.

On April 16, 2015, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

MACRA repeals the statutory Sustainable Growth Rate (SGR) methodology that was supposed to limit Medicare reimbursement to physicians, creates a stable rate increase schedule for Medicare physician payments, and introduces a merit-based incentive payment system (MIPS) for Medicare physician payments.

Additionally, MACRA opens the door to paying physicians to choose less expensive treatment modalities covered by Medicare (commonly known as "gainsharing") as long as the inducements do not limit or reduce "medically necessary" services.

A. Repeal of the SGR Formula

The statutory SGR formula was intended to maintain equilibrium between Medicare physician expenditures and, among other factors, growth in the per capita amount of the gross domestic product. In short, if the economy slows, Medicare payments to physicians were also to slow. However, since 2002, expenditures have exceeded SGR targets, thus triggering automatic reductions in rates under the Medicare physician fee schedule, which reductions Congress has repeatedly blocked.

MACRA was ushered in just in time to avoid an SGR generated 21 percent cut in Medicare physician payments in 2015. MACRA replaces the SGR formula with stable Medicare physician fee schedule updates, and beginning in 2019, payment adjustments through the new MIPS program, and eventually, payment increases based on participation in alternative payment models.

B. Stable Fee Schedule Updates

The updates to the Medicare physician fee schedule as of July 1, 2015, are as follows:

  • Update to the single conversion factor for July 1, 2015 through December 31, 2015
    - 0.5%
  • Update to the single conversion factor for 2016 and each subsequent year through 2019 - 0.5%
  • Update to the single conversion factor for 2020 and each subsequent year through 2025 - 0.0%
  • Update to the conversion factor for physicians participating in qualifying alternative payment models (APMs), such as accountable care organizations, for
  • 2026 and each subsequent year onwards - 0.75%
  • Update to the conversion factor for physicians not participating in APMs for 2026 and each subsequent year onwards - 0.25%


Current Medicare physician incentive programs, including the Electronic Health Record Meaningful Use Incentive Program, the Physician Quality Reporting System, and the Value-Based Modifier, will sunset at the end of 2018, in favor of the new MIPS program. The MIPS will judge performance based on quality, resource use, clinical practice improvement activities and meaningful use of certified EHR technology.

An eligible professional will receive a score based on his or her performance in these categories which will, in turn, be compared to a performance threshold. The performance threshold is simply an average of composite performance scores for all MIPS eligible professionals from the preceding year. Alternatively, eligible professionals may be able to form virtual groups based on geographic areas, specialties, and so forth, such that personal performance is compared to the virtual group instead.

As a result, the MIPS eligible professionalÕs payment adjustment determination is based on his or her composite performance score as compared to either the across the board average from the preceding year or the more narrow virtual group. A composite performance score equal to the threshold results in a zero payment adjustment, a composite performance score above the threshold results in a positive payment adjustment and a composite performance score below the threshold will result in a negative payment adjustment.

The payment adjustments have been capped as follows: +/- 4 percent in 2019, +/- 5 percent in 2020, +/- 7 percent in 2021 and +/- 9 percent in 2022 and onwards.

In addition, beginning in 2019, eligible professionals can receive further incentive payments when alternative payment models, such as accountable care organizations, produce at least 25 percent of their Medicare revenue.

D. Gainsharing

The Civil Monetary Penalties Act (CMP) makes it illegal to pay a physician not to provide services to a Medicare beneficiary.

However, the Office of the Inspector General of the Department of Health and Human Services (the OIG) has used Advisory Opinions to approve particular gainsharing arrangements in certain situations. The OIG believes that gainsharing, in specific arrangements, is beneficial, particularly when the limitation or reduction in services is tied to services that are not medically necessary.

MACRA inserts the words "medically necessary" into the CMP. Thus, inducements (meaning paying doctors or sharing cost savings with doctors) for limitations and reductions of services provided to Medicare beneficiaries are now outside the bounds of the CMP, and are, therefore, permitted, when they are tied to services that are not medically necessary and thus promote efficiency.


December 20, 2015




Rosen, Barry F.


Health Care