Weighing the Financial Impact of MIPS vs. APM

As CMS moves toward its goal of shifting 80% of its spend to value-based care, doctors will soon face a choice between two alternative payment models. Here's a primer on the financial stakes.

The year 2019 seems a long way off, but the reality is it will be upon us faster than we realize. And with it comes a decision physicians will be required to make that will likely have a significant impact on their practice’s financial bottom line.

That’s because US Centers for Medicare and Medicaid Services (CMS) has a clearly stated goal: move 80% of Medicare spend to alternative payment models by the year 2020. Alternative payment models can be defined as a choice between the Merit-Based Incentive Payment System (MIPS), or an alternative payment model (APM).

“Providers do have options about which one of these models they can choose to be in,” says Andrei Gonzales, MD, director of value-based reimbursement initiatives for McKesson Health Solutions. “But to me, it really seems like they’re favoring participation in the alternative payment models.”

And there might be solid financial reasons why.

Weighing Pros and Cons

CMS has specified milestones for achieving its overall goal. That includes achieving 30% of Medicare spend being covered under alternative payment models in 2016, and up to 50% by 2018. But as providers have a choice, Gonzales believes there may be greater financial rewards by choosing an APM.

“If you look at the MIPS model, the potential for payment increases is pretty small really, and it’s very competitive,” Gonzales says. “MIPS also has a potential downside.”

The potential downside, Gonzales says, is that with MIPS physician Medicare fee schedule payments will be adjusted up or down based on performance in four weighted categories: quality, resource use, meaningful use of electronic health records, and clinical improvement. Medical practices will receive a score from 1 to 100 based on how well they perform.

If medical practices perform at the mean, which is 50, Gonzales believes that could be financially problematic.

“In that scenario, there will be frozen payment rates for baseline Medicare,” he says. “So, if you perform as a mean for essentially a six-year period starting in 2020, there will be a 1.5% annual update going up to 2019. But, from 2020 to 2025, payment rates are going to be frozen for fee-for-service. And if you scored the mean, then you’re not going to get any adjustment.”

Gonzales acknowledges that there will be providers who score above 50 and will therefore be eligible for bonus. The bonuses will go from essentially zero percent up to perhaps 6% or a maximum of 12%. However, he says it will be a competitive process where there will clearly be winners and losers.

“You can see that with the combination of frozen payment rates and a competitive process, and the way that they’re expecting that curve to be distributed, if you’re in the MIPS program, you’re not going to experience much of a payment increase for that period of time.”

Time to Focus

Gonzales further explains that each of the four MIPS performance categories is weighted to help determine physician performance. For example, quality is at 30%; meaningful use is 25%; and resource use is 30%. The fourth category, clinical improvements—which doesn’t currently exist—will make up the remaining 15%. Those four components, Gonzales says, are what physicians should be presently considering.

“That’s what physicians really need to be focusing on right now, is how well they perform and how well they’re able to report in each category,” Gonzales explains. “Because there are a lot of reporting capabilities that a practice needs to put in place to succeed in these programs and make sure that they’re performing well.”

Medical practices also need to look inward and do a self-analysis. For example, how much Medicare business does the practice engage in? How much will the practice be impacted if reimbursement rates are frozen for a specified period of time? How much will compliance cost both from a total dollars spent and opportunity perspective? And also, how much are you doing, or not doing, to improve your ability to report and perform well in these different categories?

A lot of practices, Gonzales adds, have a somewhat limited Medicare exposure, especially depending regionally on how well Medicare is compensated or reimbursed in a particular region.

“If you’re confident in your practice’s ability to excel in these measures and stay there, there could be a big upside,” Gonzales says. “But it’s on a curve. And you’re competing against the entire country. So, that’s your potential risk.”