On April 16, 2015, President Obama signed into law a permanent sustainable growth rate (“SGR”) fix.  The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) eliminates the Medicare SGR methodology, which has been used to determine annual updates to the Medicare Physician Fee Schedule (“MPFS”).

Background
Initially enacted as part of the Balanced Budget Act in 1997, the SGR was intended to limit Medicare spending on physician services.  However, the SGR methodology has called for negative updates annually since 2002, causing Congress to pass 17 short-term “doc fix” bills since 2003.  In April 2015, MACRA, a permanent fix, passed both chambers with bipartisan support despite the estimated $141 billion increase in federal budget deficit that will be attributed to it over the next 10 years.  This new model incorporates a move from fee-for-service to pay-for-performance for physician services.

MACRA Payments

MPFS Annual Update
MACRA freezes payment rates for physician services between January 1, 2015 and June 30, 2015.  The MPFS will receive a 0.5% update for the remainder of 2015 and 0.5% update annually thereafter until 2019.  From 2020 to 2025, there will be no update.

Alternative Payment Models
Starting in 2026, payments for services will be based on whether a provider is a qualifying alternative payment model (“APM”) participant.  An APM is an accountable care organization (“ACO”), a payment and service delivery program operated by the Center for Medicare and Medicaid Innovation, or a specified demonstration program.  APM participants will receive a positive update of 0.75%, while non-APM providers will only receive a 0.25% positive update.  From 2019 through 2024, qualified APM participants will receive a bonus of 5% of the estimated aggregate amounts paid for covered professional services rendered in the preceding year.

Incentive Payments
The Merit-Based Incentive Payment System (“MIPS”) is a new incentive payment program that combines the Value-Based Modifier (“VBM”), the EHR Meaningful Use Incentive Program (“MU”), and the Physician Quality Reporting System (“PQRS”).  These three programs will sunset at the end of 2018, and the MIPS incentive payments will begin in 2019.  The MIPS program will evaluate physicians based on four categories—quality; resource use; clinical practice improvement activities; and meaningful use of EHR—to arrive at a composite score.  The composite score dictates the adjustment factor—which can be positive or negative—that will apply to the professional’s payments for that year.