What will MACRA/MIPS really mean for hospitalists?


Everyone in healthcare management is finally coming to terms with the fact that SGR is gone for good and MARCA (Medicare Access & CHIP Reauthorization Act) is here to stay from 2015 to 2025 and beyond irrespective of who takes the office in November. Medicare has clearly indicated to us that they have no more money left to pay the doctors based on the volume of services provided and will be moving towards an entirely new and uncharted territory of paying doctors based on merits. It is quite possible that commercial payors will follow the Medicare lead in a short while. Let’s take a moment and look at what these incentives and penalties will really mean in terms of dollars for 2016 and forward.  


MACRA is an umbrella term that is comprised of two main pathways. The first one is called MIPS and basically represents an attempt to simplify and combine some of the existing incentive and penalty programs (PQRS, VM, MU). The second big one is APM that stands for Alternative Payment Models.  ACOs are the examples of APM. We will focus here only on the first quality payment program MIPS (Merit based Incentive Payment System). As an individual hospital that or a private hospitalist group that is not a part of ACO you will be automatically enrolled into MIPS with all resulting financial implications. There is a ton of MACRA/MIPS related information online starting from a 95 page CMS final rule as well as webinars and even online videos put out by various consulting companies. One big problem with all of them is they don’t give you the scope of actual impact. If you do not fully understand the financial risk and rewards you are not able to make an educated decision today regarding your investment in compliance programs.


Lets first briefly review the structure and the timeline of MACRA/MIPS. CMS has informed us that it will continue to increase the rates by 0.05 annually till 2019. After this the rates will remain flat till at least 2025. On top of that medicare will provide incentive or penalty that will increase from 4% in 2019 (based on 2017 reporting year) all the way to 9% in 2022 where it will stay remain for some time.


To better illustrate the actual  financial impact of the program let’s model two different scenario. A hospitalist in a community hospital typically generates about 4200 RVUs per year. Let us assume that roughly half of the RVUs are coming from Medicare (please apply your own data here to estimate the impact at your institution). The hospital typically collects about $50 per RVU on the back end, so the total amount of Medicare dollars at stake in 2016 are $105.000. This amount will increase by 0.5% each year and peak at $107,115 in the year 2019 and will remain flat till 2025.

Under our best case scenario the hospital A invests heavily into compliance and reporting and it is able to achieve a stellar 100% incentive with none of the penalties. Under the second scenario the hospital B decides to slack off and gets hit with all possible penalties under the sun through the MIPS program. After all said and done the first hospital will be better off compared to the second one by approximately $19,280 per year by the year 2025 (for each hospitalist FTE). This results in a cumulative gain of approximately $111,400 in 10 years or about $63,000 per hospitalist if represented in 2016 dollars. In other words a hospitalist program that consists of 10 physicians is standing to lose over $500.000 in 2016 dollars if it ignores MIPS completely.

Besides the pure financial implications the MIPS data will be publically posted on a Physician Compare portal. Needles to say, the time to get ready is now since 2017 will be the first years of data collection for MIPS.