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Through a variety of initiatives and programs that change how heath care is delivered and physicians are paid, CMS is driving health care toward the goals of improving quality and reducing costs.

MACRA ties all Medicare Part B provider payments to quality and encourages physicians to pursue alternative payment models (APMs). MACRA’s favorable focus on APMs supports continued increase and diversity of these innovation models. MACRA has the potential to transform the health care payment landscape beyond Medicare. To mitigate risk under APMs, strategic partnerships with PAC providers will be key.


MACRA is bipartisan legislation enacted in 2015 overhauling the way Medicare pays clinicians under the Part B Physician Fee Schedule. MACRA established the Quality Payment Program (QPP), which provides financial incentives for Medicare Part B providers to participate in risk-bearing APM arrangements for the quality of care they provide to Medicare patients, instead of the quantity of care.

The Quality Payment Program rewards value and outcomes in one of two ways: Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs).

Merit-based Incentive Payment (MIPS)

Under MIPS, eligible clinicians are included that meet the low volume threshold based on allowed charges for covered professional services under the Medicare Physician Fee Schedule (PFS) and the number of Medicare Part B patients who are furnished covered professional services under the Medicare Physician Fee Schedule.

Performance is measured through the data clinicians report in four areas - Quality, Improvement Activities, Promoting Interoperability (formerly Advancing Care Information), and Cost. The four performance categories make up clinicians’ final score.

MIPS was designed to tie payments to quality and cost efficient care, drive improvement in care processes and health outcomes, increase the use of healthcare information, and reduce the cost of care.

Alternative Payment Model (APMs)

An Alternative Payment Model (APM) is a payment approach that gives added incentive payments to provide high-quality and cost-efficient care. APMs can apply to a specific clinical condition, a care episode, or a population.

Under MACRA, qualifying APM participants (QPs) who earn a minimum percentage of their payments through advanced alternative payment models or see a minimum percentage of patients through advanced APMs are exempted from merit-based incentive payment system (MIPS) reporting requirements and can earn a five percent Medicare payment bonus from 2019-2024.

Advanced Alternative Payment Model

Advanced APMs are a subset of APMs that let practices earn more rewards in exchange for taking on risk related to patient outcomes. Under the QPP, clinicians sufficiently participating  in Advanced APMs qualify for an annual 5% Medicare Part B incentive (paid 2019 - 2024), and an exemption from MIPS. Advanced APMs must fulfill these additional requirements:

  • Participants must use certified EHR technology.
  • Payment is based on quality measures comparable to those in the MIPS Quality performance category.
  • APM entities must bear more than a “nominal amount of risk” for payment or other monetary losses, or the APM is a Medical Home Model expanded by the CMS Innovation Center.

What Models are Advanced APMs in 2018?

In Performance Year 2018, the following models are Advanced APMs:

2019: Six Medicaid Advanced APMs

Six Medicaid payment arrangements will qualify as an Advanced Alternative Payment model under QPP’s all-payer option. CMS plans to update the list and release similar lists for Medicare Advantage and other plans later this year.

Below are the six Medicaid payment arrangements named as advanced APMs for 2019: 

1. Massachusetts' accountable care partnership plan, managed care.

2. Ohio's episode-based payments model, fee-for-service and managed care.

3. Tennessee's retrospective episodes of care model, managed care

4. Washington's Community Health Plan of Washington, managed care (Population-based payment model, adult/blind or disabled, option B: Individual community health center risk)

5. Washington's Community Health Plan of Washington, managed care (Population-based payment model, family/SCHIP, stop‐loss option B).

6. Washington's Community Health Plan of Washington, managed care (Population-based payment model, family/SCHIP, stop‐loss option C).

PAC Providers: Strategic Partners to Mitigate Risk Under APMs

APMs can be one-sided (including upside financial risk only) or two-sided (including both upside and downside financial risk). Upside risk models allow providers to share in healthcare savings if their services make care delivery more efficient. Under downside risk models, providers must refund a payer if the actual care costs exceed financial benchmarks. Strategizing partnerships and initiatives with high-performing post-acute care providers can help to mitigate risk. Key areas include: Quality, Improvement Activities, Promoting Interoperability (formerly Advancing Care Information), and Cost.

Synergistic goals between physicians and PAC providers can:

  1. Reduce variations in care.
  1. Reduce the total cost of care.
  1. Integrate clinical delivery models to better manage patient care and care transitions beyond an acute stay.
  1. Manage high-risk patient populations to reduce readmissions and ED visits.
  1. Align quality and financial measures.
  1. Expand chronic care management beyond physician offices.

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