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The Sustainable Growth Rate (SGR) formula was implemented to limit the growth in Medicare expenditures on physician services. Under the SGR, physician payments were determined through a formula that linked Medicare spending to economic growth. For the first few years the SGR formula did work as intended. The problem began more than a decade ago when health care costs began rising more than the growth of the economy thus triggering continual automatic cuts in the physician payment were Congress not to intervene. Congress acknowledged that the SGR formula was flawed and has acted to temporarily stop the automatic cuts every year since 2003, these temporary fixes only postponed the SGR cuts which were growing each year.

In this issue, we will discuss the legislation that replaced the SGR with a new physician payment methodology.


The Medicare Access and CHIP Reauthorization Act (MACRA), that was signed into law by President Obama on April 16, 2015 finally provides a permanent fix to the physician payment formula by doing away with the SGR formula and further shifting towards value-based payments.

The MACRA mandates that the base physician payment rate will be increased annually by 0.5% from 2015 through 2019. From 2020 through 2025 the base physician rate will be frozen, but eligible providers will have the opportunity to receive additional payment adjustments through the new Merit-Based Incentive Payment System (MIPS).

In an effort to incentivize physicians to participate in alternative payment models (APMs), MACRA requires the establishment of two separate conversion factors for each year beginning with 2026. In 2026, practices involved in a qualifying alternative payment model (APM) will receive a 0.75% conversion factor increase while those providers not involved in an APM will receive a 0.25% rate increase to the conversion factor.

Among other provisions, the MACRA also extends the Work Geographic Practice Cost Index (GPCI) floor of 1.0 until January 1, 2018. The extension of the Work GPCI floor prevents cuts of up to 3 percent in areas where the labor costs would be lower than the national average. This is particularly important to providers and beneficiaries in rural areas. 1

Budgetary Offsets 2

There are several provisions in the legislation that help to offset the budgetary costs of this legislation; Medigap policies sold to newly eligible Medicare beneficiaries on or after January 1, 2020 may not provide coverage of the Part B deductible, and beginning in 2018, Medicare premiums for Part B and Part D will increase for some higher-income beneficiaries.

In Figure 1, the Kaiser Family Foundation illustrates how the changes to Medicare's income related premiums for Medicare Part B and Part D would affect beneficiaries with incomes above $133,500 ($267,000 for married couples). There is no change to the premium payments for beneficiaries with incomes above $214,000, who are already required to pay 80 percent of Part B and Part D program costs. 2

These premium levels would remain constant in 2018 and 2019 and beginning in 2020, the premium levels would be updated annually based on inflation.

Figure 1 Medicare Part B and D Income-Related Premiums. Kaiser Family Foundation.


Beginning in 2019, eligible providers will have to choose between participation in the Merit-Based Incentive Payment System (MIPS) or in a qualified Alternative Payment Model (APM). Providers will be able to decide annually which program they will participate in.

MACRA establishes a new payment committee called the Physician-Focused Payment Models Technical Advisory Committee and requires that initial appointments to the committee be made by October 13, 2015. 3

As is often the case with Medicare legislation, MACRA leaves it up to CMS to determine much of the details of the APMs and MIPS. In the 2016 Medicare Physician Fee Schedule Proposed Rule CMS seeks comments on various issues related to APMs and MIPS including criteria by which to qualify an APM, physician participation in APMs and the development of the MIPS.

While many of the details of the MIPS and qualifying APMs are yet to be determined, the recent law provides information on the bonus payments for qualifying APM and MIPS participants and other key provisions of the programs. 4

Merit-Based Incentive Payment System 5,6

Beginning in 2019, the new legislation consolidates the existing three incentive programs into the new Merit-Based Incentive Payment System (MIPS) and sunsets the separate incentives and penalties for these programs:

  1. Physician Quality Reporting System (PQRS)
  2. Electronic Health Reporting (EHR) Meaningful Use
  3. Value-Based Modifier (VBM) program

Initially, the MIPS will apply to doctors of medicine or osteopathy, doctors of dental surgery or dental medicine, doctors of podiatric medicine, doctors of optometry, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists.

The MIPS will assess the performance of eligible providers (EPs) in four categories: quality, resource use, EHR meaningful use, and clinical practice improvement activities: 5

  1. Quality: Measures used for this performance category will be published annually in the final measures list. In addition to measures used in the existing quality performance programs (PQRS, VBM, EHR MU), the Secretary will solicit recommended measures and fund professional organizations and others to develop additional measures. Measures used by qualified clinical data registries may also be used to assess performance under this category. Whenever feasible quality measures would represent five domains:
    • Clinical care,
    • Safety,
    • Care coordination,
    • Patient and caregiver experience, and
    • Population health and prevention. 5

  2. Resource Use: The resource use category will include measures used in the existing VBM program. The methodology that CMS is currently developing to identify resources associated with specific care episodes would be enhanced through public input and an additional process that directly engages professionals. The additional process allows professionals to report their specific role in treating the beneficiary (e.g., primary care or specialist) and the type of treatment they deliver (e.g., chronic condition, acute episode). This additional process addresses concerns that algorithms and patient attribution formulas fail to accurately link the cost of services to a professional. 5

    Resource use measurement would also reflect additional research and recommendations on how to improve risk adjustment methodologies to ensure that professionals are not penalized for serving sicker or more costly patients. 5

  3. Meaningful Use: Current EHR Meaningful Use requirements, demonstrated by use of a certified system, will continue to apply in order to receive credit in this category. To prevent duplicative reporting, professionals who report quality measures through certified EHR systems for the MIPS quality category are deemed to meet the meaningful use clinical quality measure component. 5

  4. Clinical Practice Improvement Activities: Professionals will be assessed on their effort to engage in clinical practice improvement activities. Incorporation of this new component gives credit to professionals working to improve their practices and facilitates future participation in APMs. The set of recognized activities will be established in collaboration with professionals. Activities must be applicable to all specialties and attainable for small practices and professionals in rural and underserved areas. 5

Recognized activities, established in collaboration with individual specialties include:

    • Expanded practice access
    • Population management
    • Care coordination
    • Beneficiary engagement
    • Patient safety and practice assessment
    • Participation in an APM 6

Eligible professionals (EPs) will receive a composite score of 0-100 based on their performance in each of these four performance categories. The EP's score will be compared to a performance threshold (derived from the performance scores of all EPs) and those exceeding the threshold will be eligible for a payment increase while those whose score is below the threshold will receive a decrease in their payment. 5

The weights of the categories change in years 2019, 2020 and 2021. In particular, the weights of the resource use and quality categories increase in 2021 to 30% respectively as shown in Figure 2. 5

Both the penalties and positive adjustments will be awarded proportionally. In 2019, the payment penalty is capped at 4%, this rises to 5% in 2020, 7% in 2021 and 9% in 2022. EPs that exceed the performance threshold will see a payment increase using a sliding scale based on their performance score with the top incentive payment capped at 3 times the negative adjustment cap. Because the MIPS is a budget-neutral program the penalties assessed to poor performers will be used to fund the incentives paid to good performers. 5

EPs also have an opportunity to earn an additional incentive payment. An additional performance threshold for "exceptional performance" will be set at the 25th percentile of the range between the initial performance threshold and 100, or the 25th percentile of actual composite performance scores for MIPS EPs with composite scores at or above the initial performance threshold. 5

Aggregate additional incentive payments will be capped at $500 million per year for each of 2019 through 2024. These additional incentive payments will be allocated in relation to the EPs performance with better performers receiving larger incentive payments. The bonus payments will enable some EPs to receive incentive payments even if all professionals score above the initial threshold. 5

The performance period for the MIPS is a year, and payment adjustments will be made through the application of a MIPS adjustment factor that will adjust the Medicare payment for services paid under the Medicare Physician Fee Schedule (MPFS). 4

CMS will publish MIPS information on the Physician Compare website including information regarding the performance of MIPS eligible professionals under the MIPS, including the composite score for each MIPS EP as well as the performance of each MIPS EP with respect to each performance category. 5

Figure 2 Weighting of MIPS Categories in 2021.

*The HHS Secretary may reduce this percentage when 75% or more EPs are meaningful users.

Alternative Payment Models

Providers could choose to opt out of the MIPS by participating in an Alternative Payment Model (APM) such as an Accountable Care Organization (ACO), or Patient-Centered Medical Home (PCMH). MACRA defines APMs to include models being tested by the Center for Medicare and Medicaid Innovation (CMMI) (other than health care innovation awards), accountable care organizations (ACOs) participating in the Medicare Shared Savings Program, models tested under the Health Care Quality Demonstration Program, and other demonstrations required by federal law.

For years 2019 through 2023, qualifying APM participants could earn a 5 percent lump sum bonus (payable on an annual basis) in addition to their regular Medicare payments. In 2019 and 2020, physicians would be eligible for this bonus if at least 25 percent of their Medicare payments during the most recent period for which data are available were attributable to services provided to beneficiaries through an eligible APM. As illustrated in Figure 3, in subsequent years the threshold increases and includes payments from either Medicare only or Medicare and all payers combined. 4

It appears that Medicare's new Oncology Care Model (OCM), an episode-based payment model that was developed by the CMMI would qualify as an APM. If this is the case, oncologists participating under the OCM could opt out of the MIPS when the program is up and running.

Figure 3 Qualifying Thresholds for APM Bonus

The MACRA seeks to alleviate some of the burden of transitioning to APMs or participating in the MIPS for small practices by allocating $100 million for HHS to provide technical assistance to those practices with 15 or fewer eligible professionals. Preference will be given to those small practices located in rural areas, health professional shortage areas, medically underserved areas, and those with low MIPS composite scores. 1

The bill also provides some medical liability protection through the provision which states, "Development, recognition, or implementation of any guideline or other standard under any Federal health care provision shall not be construed to establish the standard of care or duty of care owed by a health care provider to a patient in any medical malpractice or medical product liability action or claim." This statement is followed by the caveat that it does not preempt any State or common law governing medical professional or medical product liability actions or claims. 3

Although the MIPS does not begin until 2019, you can begin preparing for the new program now by working towards continual improvements in your performance, measurement and administrative processes in the three existing quality programs (MU, PQRS, and VBM) which will be consolidated in the MIPS. Successful performance and reporting in these programs now will help to smooth your transition to the MIPS and increases the likelihood of success in this new program.

More information on the MACRA will be published by CMS as more details of the framework and implementation of the law are established by the Secretary of Health and Human Services.


The Centers for Medicare & Medicaid Services (CMS) has released their proposed rules for 2016.

The 2016 Medicare Physician Fee Schedule proposed rule, "Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2016" was released July 8 and was published in the Federal Register on July 15, 2015.

According to CMS estimates, the hematology/oncology specialty will see a zero percent impact as a result of the proposed regulations.

Comments to the 2016 proposed physician rule were accepted until 5pm E.T. September 8, 2015. You can read the proposed rule and comments at the link below. https://www.federalregister.gov/articles/2015/07/15/2015-16875/medicare-program-revisions-to-payment-policies-under-the-physician-fee-schedule-and-other-revisions.

Below are a few of the most pertinent highlights from the Proposed Physician Rule:

Conversion Factor

CMS estimates the 2016 Conversion Factor at $36.1096 this reflects the 0.5% increase mandated by the Protecting Access to Medicare Act of 2014 (PAMA).

Modifications to the Physician Quality Reporting System

CMS did not propose any changes to the criteria for satisfactory reporting in the PQRS or participation in a qualified clinical data registry (QCDR). CMS states that they are proposing to use the same criteria that were established for the 2017 PQRS payment adjustment, which is generally to require the reporting of nine measures covering three National Quality Strategy domains.

If an individual EP or group practice does not satisfactorily report or satisfactorily participate while submitting data on PQRS quality measures, a 2% negative payment adjustment would apply in 2018.

CMS proposes to add measures where gaps exist, as well as to eliminate measures that are topped out, duplicative, or are being replaced with a more robust measure. CMS also proposes to add a reporting option that will allow group practices to report quality measures data using a QCDR.

CMS reminds providers that the 2018 PQRS payment adjustment is the last adjustment that will be issued under the PQRS as future adjustments to payment for quality reporting and other factors will be made under MIPS, as required by MACRA.

Physician Compare

CMS proposes the following new policies for the Physician Compare website:

  • An indicator on profile pages for individual EPs who satisfactorily report the new PQRS Cardiovascular Prevention measures group in support of Million Hearts and group practices and individual EPs who receive an upward adjustment for the Value Modifier;
  • To make individual-level QCDR measures available for public reporting, and, to publicly report group-level QCDR measures;
  • To publicly report an item (or measure)-level benchmark derived using the Achievable Benchmark of Care (ABC™) methodology. The benchmark would be displayed as a five star rating.
  • To include in the downloadable database the Value Modifier tiers for cost and quality, noting if the group practice or EP is high, low, or neutral on cost and quality; a notation of the payment adjustment received based on the cost and quality tiers; and an indication if the individual EP or group practice was eligible to but did not report quality measures to CMS; and
  • To publicly report in the downloadable database utilization data for individual EPs. For individual and group-level measures, CMS will publicly report all measures submitted, reviewed, and deemed valid and reliable in the Physician Compare downloadable file. However, not all measures will be included on the Physician Compare profile pages.

The Medicare EHR Incentive Program

CMS proposes to revise the definition of certified EHR technology to require certification of EHR technology in accordance with criterion proposed by the Office of the National Coordinator (ONC) for Health Information Technology in relation to CMS's form and manner requirements for electronic submission of CQMs certified electronic health record technology.

Advance Care Planning

CMS is proposing to establish separate payment and a payment rate for two advance care planning services provided to Medicare beneficiaries. CMS notes that while the Medicare statute currently provides coverage for advance care planning under the "Welcome to Medicare" visit patients may not need these services when they first enroll. Therefore, establishing separate payment for advance care planning codes provides greater opportunity and flexibility to utilize these planning sessions at the most appropriate time for patients and their families.

For Medicare beneficiaries who choose to pursue it, advance care planning is a service that includes early conversations between patients and their practitioners, both before an illness progresses and during the course of treatment, to decide on the type of care that is right for them.

CMS is accepting public comments on this proposal including whether Medicare should pay separately for these services and if so the appropriate payment to begin January 1, 2016.

Part B Drugs/Payment for Biosimilar Biological Products

CMS is proposing to update the regulations to clarify that the payment amount for a billing code that describes a biosimilar biological drug product is based on the average sales price (ASP) of all biosimilar biological products that reference a common biological product's license application.

"Incident to" Policy for Calendar Year 2016

In the calendar year 2014 PFS final rule, CMS required that, as a condition for Medicare Part B payment, all "incident to" services and supplies must be furnished in accordance with applicable state law. The definition of auxiliary personnel was also clarified to require that the individual furnishing "incident to" services must meet any applicable requirements to provide such services, including licensure, imposed by the state in which the services are furnished.

For 2016, CMS is proposing to clarify that the billing physician or practitioner for "incident to" services must also be the supervising physician or practitioner. Additionally, CMS is proposing to require that auxiliary personnel providing "incident to" services and supplies cannot have been excluded from Medicare, Medicaid, or other Federal health care programs by the Office of Inspector General, or have had their enrollment revoked for any reason at the time that they provide such services or supplies.

The Office of Inspector General (OIG) maintains a searchable exclusions database on their website at http://exclusions.oig.hhs.gov/Default.aspx.

Physician Value-Based Payment Modifier

The Value-Based Payment Modifier (Value Modifier) provides for differential payments under the PFS to physicians, groups of physicians, and other eligible professionals (EPs) based on the quality and cost of care they furnish to beneficiaries enrolled in the traditional Medicare Fee-for-Service (FFS) program.

Under the Value Modifier Program, performance on quality and cost measures can translate into payment incentives for EPs who provide high quality, efficient care, while EPs who underperform may be subject to a downward adjustment. This program is set to expire in CY 2018, as the Merit-Based Incentive Program (MIPS) begins in CY 2019.

CMS proposes the following key provisions:

  • To use CY 2016 as the performance period for the CY 2018 Value Modifier;
  • To continue to apply the CY 2018 Value Modifier based on participation in the PQRS by groups and solo practitioners;
  • To apply the quality-tiering methodology to all groups and solo practitioners that satisfactorily report PQRS. Groups and solo practitioners would be subject to upward, neutral, or downward adjustments under the quality-tiering methodology, with the exception finalized in the CY 2015 PFS final rule that groups consisting only of non-physician EPs and solo practitioners who are non-physician EPs will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018;
  • To waive application of the Value Modifier for groups and solo practitioners, as identified by Tax Identification Number (TIN), if at least one EP who billed for PFS items and services under the TIN during the applicable performance period for the Value Modifier participated in the Pioneer ACO Model, CPCI, or other similar Innovation Center model during the performance period, beginning with the CY 2017 payment adjustment period;
  • To continue to set the maximum upward adjustment under the CY 2018 Value Modifier at: +4.0 times an adjustment factor (to be determined after the conclusion of the performance period), for groups with ten or more EPs; +2.0 times an adjustment factor, for groups with between two to nine EPs and physician solo practitioners; and +2.0 times an adjustment factor for groups and solo practitioners that consist only of non-physician EPs; and
  • To set the amount of payment at risk under the CY 2018 VM to -4.0 percent for groups with ten or more EPs, -2.0 percent for groups with between two to nine EPs and physician solo practitioners, and -2.0 percent for groups and solo practitioners that consist only of non-physician EPs who are PAs, NPs, CNSs, and CRNAs.


The American Medical Association (AMA) and CMS have announced changes to ease the transition to ICD-10. In particular, the AMA Wire lists the following changes:

  • Claim denials. For the first year ICD-10 is in place, Medicare claims will not be denied solely based on the specificity of the diagnosis codes as long as they are from the appropriate family of ICD-10 codes. This means that Medicare will not deny payment for these unintentional errors as practices become accustomed to ICD-10 coding. Note, the exception to this is when an LCD or NCD requires a more specific diagnosis code. In addition, Medicare claims will not be audited based on the specificity of the diagnosis codes as long as they are from the appropriate family of codes. This transition period will give physicians and their practice teams time to get up to speed on the more complicated code set. Both Medicare Administrative Contractors and Recovery Audit Contractors will be required to follow this policy.
  • Quality-reporting penalties. Similar to claim denials, CMS will not subject physicians to penalties for the Physician Quality Reporting System, the value-based payment modifier or meaningful use based on the specificity of diagnosis codes as long as they use a code from the correct ICD-10 family of codes. In addition, penalties will not be applied if CMS experiences difficulties calculating quality scores for these programs as a result of ICD-10 implementation.
  • Payment disruptions. If Medicare contractors are unable to process claims as a result of problems with ICD-10, CMS will authorize advance payments to physicians.
  • Navigating transition problems. CMS has said it will establish a communication center to monitor issues and resolve them as quickly as possible. This will include an "ICD-10 ombudsman" devoted to triaging physician issues.


1 Congress.gov. H.R.2 - Medicare Access and CHIP Reauthorization Act of 2015. https://www.congress.gov/bill/114th-congress/house-bill/2/text. Accessed August 3, 2015.

2 Juliette Cubanski and Tricia Neuman. Medicare's Income Related Premiums: A Data Note. http://kff.org/medicare/issue-brief/medicares-income-related-premiums-a-data-note/. Accessed August 3, 2015.

3 Congress.Gov. H.R.2 - Medicare Access and CHIP Reauthorization Act of 2015. https://www.congress.gov/bill/114th-congress/house-bill/2/text. Accessed August 3, 2015.

4 Centers for Medicare and Medicaid Services. Proposed policy, payment, and quality provisions changes to the Medicare Physician Fee Schedule for Calendar Year 2016. CMS.gov. http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-08.html. Accessed August 3, 2015.

5 Ways and Means. SGR Repeal and Medicare Provider Payment Modernization Act. Waysandmeans.house.gov. http://waysandmeans.house.gov/UploadedFiles/HR_1470_Section_by_Section.pdf. Accessed August 3, 2015.

6 Centers for Medicare & Medicaid Services. MLN Connects® National Provider Call. CMS Quality Reporting Programs under the 2016 Medicare Physician Fee Schedule Proposed Rule. CMS.Gov. https://www.cms.gov/Outreach-and-Education/Outreach/NPC/Downloads/2015-07-16-PQRS-Presentation.pdf. Accessed August 3, 2015.

7 American Medical Association. CMS to make ICD-10 transition less disruptive for physicians. AMA Wire. http://www.ama-assn.org/ama/ama-wire/post/cms-icd-10-transition-less-disruptive-physicians. Accessed August 3, 2015.

Published by Rise Marie Cleland. Sponsored by Lilly Oncology

Risë Marie Cleland Rise@Oplinc.com

Oplinc, Inc.
1325 Officers Row
Suite A
Vancouver, WA 98661
360.695.1608 office

Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com

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Risë Marie Cleland is the Founder and CEO of Oplinc, Inc., a national organization of oncology professionals. Through Oplinc, Inc., Ms. Cleland publishes the weekly Oplinc Fast Facts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.

Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.gov.

CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2015 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

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