A proposed rule implementing the 2015 Medicare Access and CHIP Reauthorization Act (MACRA) outlines changes to the Medicare program to migrate from payment for volume to arrangements linked to quality and value. This webinar will review key provisions of the proposed rule and their impact on existing and future payment structures, including key issues, opportunities, and potential areas for comment and modification before the rule is finalized. On our agenda: -MACRA background and policy objectives expressed in proposed rule -Changes to existing Medicare reimbursement programs -Merit-Based Payment Incentive System (MIPS) program proposals -Alternative Payment Models (AMP) proposals -Implications, opportunities, and issues under the proposed rule

1. MACRA Proposed Rule: Issues &
Opportunities
June 1, 2016
Polsinelli
Reimbursement Institute
Sidney Welch
swelch@polsinelli.com
Bruce A. Johnson
brucejohnson@polsinelli.com
Cybil G. Roehrenbeck
croehrenbeck@polsinelli.com

2. Agenda
 MACRA background and policy objectives
 Proposed Merit-Based Incentive Payment
System (MIPS)
 Proposed Alternative Payment Model (APM)
proposals
 Implications, issues, concerns and
opportunities
 Q&A
2

3. Physician Payment
3
 Based on a complicated formula:
– Facility or Non-Facility Pricing Amount =
[(Work RVU * Work GPCI) +
(Transitioned Facility or Non-Facility PE RVU * PE GPCI) +
(MP RVU * MP GPCI)] * Conversion Factor (CF)
 Initial conversion factor was created in 1992 and
adjusted annually based on three factors:
– The Medicare Economic Index (MEI)
– RVU budget neutrality
– Medicare expenditures for physician services as
compared to a sustainable growth rate

4. Sustainable Growth Rate
4
 For the first few years of SGR, Medicare
expenditures did not exceed targets and
doctors received modest pay increases
 In 2002, doctors faced a 4.8% pay cut
 Every year since 2002, Congress has
passed legislation to temporarily
defer these physician pay cuts

5. Too many payment patches
5
Law Cut Year Score (bil.)
PL 108-7 2003 $54.0
PL 108-173 2004, 2005 $0.2
PL 109-171 2006 -$0.4
PL 109-432 2007 $3.1
PL 110-173 2008 (6 mos) $6.4
PL 110-276 2008 (6 mos),
2009
$9.4
PL 111-118 2010 (2 mos) $2.0
PL 111-144 2010 (1 mo) $1.0
PL 111-157 2010 (2 mos) $2.0
Law Cut Year Score (bil.)
PL 111-192 2010 (6 mos) $6.0
PL 111-286 2010 (1 mo) $1.0
PL 111-309 2011 $14.9
PL 112-78 2012 (2 mos) $3.6
PL 112-96 2012 (10 mos) $18.0
PL 112-240 2013 $25.2
PL 113-67 Jan-Mar 2014 $7.3
P.L. 113-93 Apr 2014-Mar
2015
$15.8
Total Cost $169.5
Source: Congressional Budget Office 2015

6. Pre MACRA Goals
6Source: Centers for Medicare & Medicaid Services (CMS)

7. CMS View of the Future
CMS Payment Model Framework
Category 1
Fee for Service
–
No Link to
Quality
• 100%
volume
Category 2
Fee for Service
Link to Quality
• Linkage to
quality
and/or
efficiency
Category 3
Alternative
Payment
Models using
FFS
Architecture
• Track 1 MSSP
ACO
Category 4
Population-
based Payment
• At risk
Pioneer
ACOs and
others
7CMS’ Better Care, Smarter Spending Healthier People (Jan. 2015)

8. MACRA
8
On April 14, 2015, the
U.S. Senate passed the
Medicare Access and
CHIP Reauthorization
Act of 2015 (“MACRA”),
and on April 16, 2015,
the bill became law.

9. Proposed Rule Under MACRA
 Notice of Proposed Rule Making
(NPRM) published in the Federal
Register on May 9, 2016 (pre-
publication version posted on April 27,
2016).
 Comments on the NPRM are due June
27, 2016.
9

10. MACRA’s Major Changes
10
 Repealed the SGR and annual scheduled cuts
 Established a path for physician participation
in alternative payment models (“APMs”)
 Consolidated penalty programs (MU, PQRS,
VBM)

11. MACRA, MIPS, APMs – Oh My!
 Medicare Access & CHIP
Reauthorization Act of 2015 (MACRA)
 Ends SGR
 Facilitates MIPS & APMs
 Merit-Based Incentive Program
Systems (MIPS)
 PQRS
 VBPM
 EHR Incentive Program
 Alternative Payment Models (APMs)
 Accountable Care Organizations
 Patient Centered Medical Homes
 Bundled Payments
 Medicare Shared Savings Program
11

12. MACRA Options
12
 Participate in FFS via the Merit-based Incentive Program (MIPs)
– Subject to reductions or increases in Medicare reimbursement
based on quality performance scores
– Reduced penalty risk
– Statutory updates
– Consolidated reporting
 Participate in Advanced Alternative Payment Models (APMs)
– Potential to earn five percent annual bonus
– Subject to financial risk
– Higher updates
– Exempt from MIPs
– Preferred treatment for medical homes
– Specialty models encouraged

13. How will MACRA affect me?
13Source: Centers for Medicare & Medicaid Services

14. New MACRA Goals
14Source: Centers for Medicare & Medicaid Services

15. 2019 2020 2021 2022 +
beyond
Merit-
Based
Incentive
Payment
System
(MIPS)
Adjusts Medicare FFS
reimbursement based on
performance score linked to:
• Quality
• Resource use
• Clinical practice improvement
• Advancing Clinical
Improvement (formerly EHR
meaningful use)
+-4%* +-5%* +-7%* +-9%*
* Possible 3x
upward
adjustment BUT
unlikely
Alternative
Payment
Models
(APM)
New payment approaches that
incentivize quality and value, such
as:
• CMMI Innovation models
• MSSP ACOs
• Demonstration programs
Most advanced AMPs (those that
bear risk):
• Not subject to MIPS
• 5% lump sum bonus payments
(2019-2024)
• Higher fee schedule update 2026
and beyond
Basic MACRA Framework
Source: Medicare Access and CHIP Reauthorization Act of 2015, Path to Value (CMS) 15

16. Merit-Based Incentive Payment
System (MIPS)
16
1

17. MIPS Generally
17
 The Merit-Based Incentive Payment System (MIPS) streamlines several
existing Medicare penalty programs, creating a single system with
consolidated reporting and timelines.
 MIPS eligible clinicians are:
 Physicians, Physician Assistants, Nurse Practitioners, Clinical Nurse
Specialists, Certified Registered Nurse Anesthetists, and groups that
include such professionals
 After MIPS’ third year, the Secretary has discretion to add more
providers to the list (e.g. physical or occupational therapists, clinical
social workers, etc.)

18. MIPS Excluded Providers
18
 Some providers are excluded from MIPS:
 Qualifying APM participants
 Partial qualifying APM participants who report data under MIPS
 Low-volume threshold clinicians (billing ≥ $10,000 & for ≥ 100
beneficiaries)
 Newly-enrolled Medicare participants (report following 1st year
enrolled)
 Excluded clinicians may “voluntarily report” to gain experience with MIPS
(like eligible clinicians who are new to Medicare program, for example).
 CMS defines “non-patient-facing MIPS eligible clinicians” as an individual or
group that bills 25 or fewer patient-facing encounters during a
performance period.

19. MIPS Timeline
19
Fall 2016
MIPS final
regulations
published
Jan. 1 2017
Beginning of
Year 1
performance
period
July 1 2017
Feedback
report
Dec. 31 2017
End of Year 1
performance
period
Jan. 1 2018
Beginning of
Year 2
performance
period
July 1
2018
Feedback
report
Dec. 31 2018
End of Year 2
performance
period
Jan. 1 2019
Year 1
payment
adjustment

20. MIPS Methodology
20
 CMS will assign a composite performance score (CPS)
based on performance over a year in:
– Quality (replaces PQRS and some parts of VM)
– Resource Use (replaces cost portion of VM)
– Clinical Practice Improvement Activities (new!)
– Advancing Care Information (formerly EHR
meaningful use)
 CMS will also apply an “adjustment factor” to MIPS-
eligible clinicians scores to determine total
performance

21. MIPS Performance Category Weights
Quality
50%ACI
25%
CPIA
15%
Resource
Use
10%
PY2017
Quality
45%
ACI
25%
CPIA
15%
Resource
Use
15%
PY2018
Quality
30%
ACI
25%CPIA
15%
Resource
Use
30%
PY2019
21

22. MIPS Payment Adjustments
CY Max % Gain Max % Loss
2017 - -
2018 - -
2019 +4% -4%
2020 +5% -5%
2021 +7% -7%
2022 & beyond +9% -9%
22

23. MIPS Data Submission
Mechanisms
23

24. Quality Performance Category
 Improvements to existing quality programs:
– Key change from 9 measures to 6; allows partial credit for
measures.
– CMS tried to address concerns about wading through too
many measures in the PQRS program to find applicable
measures by developing measure sets by specialty.
– MIPS-eligible clinicians will be required to report on one cross-
cutting measure and one outcome measure, but if not
available, another “high priority” measure.
– Acknowledges issues for sub-specialties.
– Provides bonuses for reporting through QCDRs.
24

25. MIPS Quality Performance
Category
25

26. MIPS Resource Use Performance
Category
 CMS proposes to use episode-based measures in this category, many of
which are specialty specific, building off of CMS’ sQRUR reports.
26

27. MIPS Clinical Practice Improvement
Activities (CPIA)
 MACRA specified that the CPIA performance category must include the
following activities:
 Expanded practice access
 Population management
 Care coordination
 Beneficiary engagement
 Patient safety and practice assessment
 By statute, CMS must give at least a 50% score to APM participants and
100% score for patient-centered medical home participants.
 CPIA measured on a “60 point” scale – different CPIAs have different
weights (e.g. “high-level” or “medium-level” activities) that contribute to
an overall score.
 Clinicians must perform CPIAs for at least 90 days of the reporting period.
27

28. CPIAs in the Proposed Rule
 CMS proposed more than 90 CPIAs, such as:
28

29. Advancing Care Information (ACI) fka
Meaningful Use
 ACI replaces EHR Meaningful Use for Medicare
physicians only
 Goals:
– Simplify requirements (from 18 measures to 11)
– Increase flexibility (i.e., not “all or nothing”)
– Ease burden
– Facilitate exchange of information, emphasizing
interoperabilitiy
29

30.  Extends application to PAs, NPs, CNSs, CRNAs
 CMS may reweight ACI portion of MIPS to 0% for
some EPs
– Some hospital-based EPs
– EPs facing significant hardship: (1) Insufficient
internet access; (2) Extreme and uncontrollable
circumstances; (3) Lack of control over availability of
CEHRT; (4) Lack of face-to-face patient interaction
– NPs, PAs, CRNAs, CNSs who submit no data
ACI Application
30

31.  Use CEHRT
 Report according to objectives and
measures
 Support information exchange and
prevention of health information
blocking, and cooperate with
authorized surveillance of CEHRT
ACI Requirements
31Source: Proposed Sec. 414.1375(b)

32.  In 2017 reporting year, flexibility to use 2014 or
2015 edition CEHRT
– EPs using only 2015 CEHRT, or a combination of 2014 and
2015 CEHRT can choose between objectives/measures
corresponding to Meaningful Use Stage 3 OR those
corresponding to Meaningful Use Modified Stage 2
– EPs using only 2014 CEHRT should comply with
objectives/measures corresponding to Meaningful Use
Modified Stage 2
 Starting in 2018 reporting year, all must use
2015 edition CEHRT, Stage 3
objectives/measures
ACI Reporting
32

33.  One-year reporting period
– Different than Meaningful Use 90-day reporting
period for all participants in 2015 and new
participants in 2015 and 2016
– MIPS EPs can submit data even if they do not
have a full year’s data
 Group reporting now available
– Not batch reporting with individual assessment,
but assessment as a group
ACI Changes
33

34. ACI Scoring
34

35. Alternative Payment Models (APMs)
35
2

36. Advanced Payment Model
Alternative to MIPS
 Eligible Clinicians who participate in certain Alternative
Payment Models are exempt from MIPS
Medicare (only)
Option
(2019 and beyond)
Other Payer
Combination Option
(2021 and beyond)
APMs FFS Reimbursement Implications
(2019-2024)
• Not subject to MIPS
• +5% Lump Sum Incentive
Payment for Part B Prof. Svs.
during Base Period
(2026 and beyond)
• Not subject to MIPS
• Higher Medicare Fee
Schedule updates
 Participation in Advanced APM entity sufficient (regardless of
whether APM achieves performance goals)

37. Incentive Payments for
Participation in Advanced APMs
 Entities that participate in Alternative Payment
Models (APMs) are eligible to qualify as an
“Advanced APM” where, during the applicable
Performance Period, the entity:
1. Require uses Certified EHR technology
2. Provides for payment for covered professional
services based on quality measures comparable to
measures under the MIPS performance category
3. Bears financial risk under the APM that is in excess
of a nominal amount, or involves a medical home
model
37

38. Eligible APM Entities
 Many existing entities participating in CMS
initiatives may qualify as an Advanced APM based
on proposed financial risk criterion including:
– MSSP ACOs in Tracks 2 & 3 (track 1 ACOs would not because
track 1 does not entail any financial risk)
– NextGen ACOs
– Comprehensive Primary Care Plus Program
– Other programs sponsored by CMMI
– Full capitation arrangements
– Not Medicare Advantage organizations (except under Other
Payer Combination Option
38

39. Financial and Nominal Risk
Standards
Financial Risk Requirements Nominal Risk Requirements
Total Risk (total
potential liability)
Marginal Risk
(maximum % in
excess of
expenditure
target)
Minimum Loss
Rate (maximum
loss rate without
triggering
repayment)
General
Standard
AMP payer (e.g., CMS) must
be able to:
• Withhold payment to
AMP Entity or ECs
• Reduce payments to AMP
entity or ECs
• Require AMP Entity to
repay
• 4% or more of
Expected
Expenditures
• Must be at
least 30% of
Expected
Expenditures
• No more
than 4% of
Expected
Expenditures
Medical Home
Model (less
than 50 ECs
assigned to
TIN or
subsidiaries)
All above plus:
• Cause APM Entity to lose
right to all or part of
guaranteed payments
• 2017, 2.5% of APM Entity Medicare Part A & B Revenue
• 2018, 3%
• 2019, 4%
• 2010 and later, 5%

40. Advance APM Illustration
APM Requirements
– Total Risk must exceed 4% (15% in MSSP Track 3)
– Marginal Risk per APM must be 30% (40% minimum in MSSP Track 3)
– Minimum Loss Rate must be no more than 4% (maximum 3.9% in
MSSP Track 3)
MSSP Track 3
Symmetrical Saving/Loss Options
Minimum Savings Rate 0% 0.5% 1.0% 1.5% 2.0% Symmetrical linked to
# of Attributed
BeneficiariesMinimum Loss Rate 0% -0.5% -1.0% -1.5% -2.0%
Shared Savings Maximum 75% of Shared Savings
Loss Rate Minimum and Maximum -40% to -75% of Shared Losses
Maximum Savings (% of Expenditure Benchmark) +20%
Loss Recoupment Limit (Stop loss) (% of Expenditure Benchmark) -15%

41. Becoming a QP or Partial QP
 Percentage of Eligible Clinician patients and/or payments through an APM
Entity
 Example (patient count method):
– # of APM Entity attributed beneficiaries receiving Part B professional services
during QP Performance Period/ Attribution-eligible beneficiaries receiving Part
B professional services during QP Performance Period
10,000 Attributed Beneficiaries (under applicable attribution rules) = 25.64%
39,000 Attribution-Eligible Beneficiaries (receive 1 E&M Service)
Medicare
Only Option
Threshold 2019-2020 2021-2022 2023 & Later
QP Payment 25% 50% 75%
Patient 20% 35% 50%
Partial QP Payment 20% 40% 50%
Patient 10% 25% 35%

42. Other Payer Advanced APMs
All-Payer
Combination
Option
Threshold 2021-
2022
2023 &
Later
Additional Medicare Option
Requirements
QP Payment 50% 75% Plus 25% payment threshold
Patient 35% 50% Plus 20% payment threshold
Partial QP Payment 40% 50% Plus 20% patient count threshold
Patient 25% 35% Plus 10% patient count threshold
Medicare Only Option counted first. If met, then no consideration of other payers
and All-Payer Combination Option

43. Timeline for APMs & Qualified Participants
2017 2018 2019 2021 2026
Performance
Period
-- Whether
Advanced APM and
QP
Performance
Period for
2019
Performance
Period for
2020
Performance
period for
2021 etc.
Other Payer
Combination
Option
available to
qualify as
APM and QP
QPs eligible
for higher
fee-
schedule
updates
Base Period
-- Determines
incentive payment
amount through EP
TINs
None Base Period
for 2019
incentive
payments
Base Period
for 2021 5%
Part B
incentive
payments
etc.

44. Implications – The Good, Bad and
Ugly
 APM strategic choices
– Select model from available options
 Complexity
– MIPS replaces existing programs with new
– APMs build on other program infrastructure (e.g.,
MSSP, NextGen, CPC+)
 Still fee for service
– Financial incentives with potential to increase spending
 “All in” considerations
– Group reporting and evaluation requirements

45. Implications – The Good, Bad and
Ugly
 Choices
– Private (physician-owned) practices
• APM participation strategies
• Model selection – single or multispecialty (e.g., physician
focused payment model possibilities)
– Hospital-affiliated practices
• Timing of Advanced AMP engagement
• Model selection (primary care vs. multispecialty models)
– Other (e.g., investor-owned) practices
• Concurrent attention to FFS and risk

46. Implications – The Good, Bad and
Ugly
 Challenges
– Migrating from shared savings to at risk
– Risk thresholds
• Expenditure benchmarks
• Medical Homes -- Part A and B revenues
– Risk funding mechanisms
• Withholds
• Repayment arrangements
• APM entities or Eligible Clinicians
– Defining what parties bear risk, relative amount and mechanics
– Operational details of APM and downstream relationships
– APM-specific requirements and other programs (e.g., MSSP
single-purpose entity requirements)

47. Alignment of Strategy and Money
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Medicare
Physician Fee
Schedule
Updates
0.5% 0.5% 0.5% 0.5% 0% 0% 0% 0% 0% 0% 0./75%
or
0.25%
Merit-Based
Incentive Payment
System (MIPS)
• Quality
• Resource use
• Clinical practice
improvement
• EHR meaningful
use
+-4% +-5% +-7% +-9% +-9% +-9% +-9% +-9%
Alternative
Payment Models
(APMs)
Excluded from MIPS
Source: Medicare Access and CHIP Reauthorization Act of 2015, Path to Value (CMS)
47
5% Incentive Payment
FFS UD

48. Implications: For Physicians
 For many physicians, some of whom have been waiting for the ACA to
be repealed, MACRA and its proposed rule herald a significant change
conceptually – volume to value – which will require a significant change
in behavior and operations
 Disconnect or transitional assistance that payment model is still fee for
service in MIPS?
 Death knell” for solo or small providers? 70% of the penalties will be
assessed to provider groups of less than 10.
 Will we see increase in acquisitions/collaborations?
 Comments/changes to lessen this financial impact?
 Start running the numbers now. Don’t wait for the Feedback Report.
Remember data gets reported to Compare and need to know accuracy
and impact.
48

49. Implications: MIPS
 If specialty physician doesn’t have outcome or high
priority measure, they will be disadvantaged in MIPS
 MIPS Quality measures propose administrative claims
based on population health measures part of VBM,
but they are hospital-focused, not physician focused
 MIPS resources measures are based on VBM cost, so
not translated to physicians
 MIPS Advancing Care changes scoring but not
measures
 What happens to physicians who do not qualify as
MIPS eligible clinicians? Impact of fact that APM
bonus is based on Part B billings?
49

50. Implications: APMs
 Physician participation in more than one APM
 Track 1 ACOs withdrawal from program; migration to risk
 “Other Entities” in ACOs do not count for attribution, so
will impact ability to use APM
 For ACOs, physicians will receive the APM incentive
payment, not the ACO
 Does the MIPS “exceptional performance” exceed the
APM bonus?
 Won’t know if APM qualifies as an Advanced APM until
after MIPS reporting is due
 “Nominal risk” to be defined “over time” with associated
operational issues
 Physician ability to control risk in APMs
50

51. Implications: TBD
 Revisions to payor contracts
 Could the changes in models result in revisions in
malpractice policies, premium shifts?
 Need to customize HIT to fit needs under new
models, let alone interoperability
 Alignment of hospitals meaningful use to physicians’
 MD compensation under employment and
professional services agreement will require revision
 How to address resource utilization in hospital-
owned physician practices
51

52. Questions?
Sidney Welch
Shareholder | Polsinelli PC
Atlanta, GA
404.253.6047
swelch@polsinelli.com
Bruce A. Johnson
Shareholder | Polsinelli PC
Denver, CO
303.583.8203
brucejohnson@polsinelli.com
Cybil G. Roehrenbeck
Counsel | Polsinelli PC
Washington, DC
202.777.8931
croehrenbeck@polsinelli.com
Reimbursement Institute | http://www.polsinelliri.com
52