Payment Evolution

July 5, 2022

How the Expiration of MACRA's aAPM Bonus Will Impact ACO Decision Making

Editor’s Note: Jenna Stern, Vizient, AVP, Regulatory Affairs & Public Policy, also contributed to this post.

In the absence of congressional intervention, a significant financial incentive for physicians to participate in value-based payment models will disappear at the end of 2022.

To provide greater stability to providers reimbursed by Medicare, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) rescinded the flawed sustainable growth rate (SGR) methodology enacted by the 1997 Balanced Budget Act and aims to reward clinicians for value rather than volume. MACRA’s Quality Payment Program (QPP) went live in performance year 2017 and consists of two physician payment tracks: Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (aAPMs), which are models with downside financial risk that surpasses a minimum risk threshold.

MIPS applies positive or negative annual rate increases based on physicians’ relative performance in a wide range of metrics; since the launch of the program, the value of rate increases for strong performance have been negligible.

However, providers with enough volume in two-sided risk models have been able to participate in the aAPM track of the QPP as a qualifying APM participant (QP). QPs have been able to earn a lump-sum bonus in the amount of 5% of their aggregate, annual Part B professional service revenue—a meaningful financial reward often used to reinvest in resources necessary for ongoing performance improvements. This bonus, per MACRA, is in place during the 2017–2022 performance years and has been a key consideration for providers weighing participation in accountable care organization (ACO) models. Thus, ACO participation in certain models, such as the Medicare Shared Savings Program (MSSP), Primary Care First (PCF), and the Next Generation ACO successor model Global and Professional Direct Contracting (which will transition to the ACO Realizing Equity, Access, and Community Health [REACH] model in 2023) is influenced by the aAPM bonus being in place. In addition, QPs in these models receive an exemption from the MIPS reporting requirements and payment adjustment.

Since 2022 is the last performance year for providers to earn this bonus, which will be paid out in 2024, QPs are questioning future participation in aAPMs. Without congressional intervention, providers in the aAPM track in the 2023 performance year will not earn a bonus and will also face downside risk in their respective APMs. As a result, MIPS likely will be the more favorable track for most physicians next year.

Beginning in performance year 2024, which corresponds with payment year 2026, providers in aAPMs will receive a 0.75% annual rate increase while still facing downside risk in a two-sided model. Meanwhile, providers in MIPS will receive a 0.25% rate increase, along with an additional rate adjustment for relative performance on MIPS measures and no further downside risk exposure. The lack of more favorable financial opportunities in the aAPM track creates an incentive to remain in fee-for-service (FFS) reimbursement and not advance as quickly to downside risk models, which counters CMS’s goal of shifting toward value-based care.

In late 2021, the CMS Innovation Center issued a strategy refresh that outlines their goal of having 100% of Medicare FFS beneficiaries and a “vast majority” of Medicaid beneficiaries in an accountable care relationship by 2030. Given that providers still heavily rely on the 5% incentive in their decision to participate in an aAPM, we anticipate the agency’s goal will be more challenging to achieve.

Further, providers could anticipate unprecedented financial pressure come 2023, as several policies Congress provided in late 2021 to financially support providers recently expired or are set to expire December 31, 2022. For example, the 2% Medicare sequester cuts were reimposed on July 1, 2022. In addition, the Medicare physician fee schedule (PFS) conversion factor would have decreased by 3.75%, but Congress provided a one-year 3% increase, so rates instead decreased by 0.75% from 2021. While the PFS proposed rule has yet to be released, the conversion factor is expected to continue to decline. Also, the 4% Pay-As-You-Go cuts that Congress averted for 2022 are slated to begin early 2023. Although there has been a bill introduced that would extend the aAPM bonus, among other changes, and Congress is being called on to provide financial relief, similar to efforts from 2021, the path forward remains unclear. Providers will need to carefully weigh their options.

What should providers be thinking about amid financial uncertainty?

Should legislation to extend the 5% bonus or other financial relief policies be passed, it is not likely to occur before participation decisions need to be made. In other words, providers will need to decide about their 2023 APM participation by considering a range of scenarios. MSSP ACOs, for example, that are currently in BASIC Tracks A, B or C may be considering jumping risk tracks in 2023, a scenario that may be particularly appealing if the aAPM bonus is extended. However, final 2023 risk track selection for MSSP must occur in early September, and without congressional intervention to extend the aAPM bonus, organizations may opt to remain in their lower risk glidepath. ACOs in BASIC E or ENHANCED or REACH may be considering terminating participation altogether if they do not have the opportunity to earn the aAPM bonus. ACOs should consider the following questions when thinking through their future participation decision:

  • How will your participation decision impact your patients? Participation in an aAPM can provide opportunities to better manage your patient population through program features such as waivers to fraud and abuse laws and prospective payments; terminating and/or switching participation could be disruptive to patient care. However, without support from the 5% bonus, aAPM participation—and the associated downside risk exposure—may not be financially viable, and the net administrative and financial burden could negatively impact patient care.
  • What are your capabilities to successfully report under MIPS? Non QPs will default to MIPS participation and must successfully meet quality reporting requirements to avoid downside rate adjustments. Since performance period 2019, providers have had the option to apply for exceptions to MIPS program requirements due the COVID-19 public health emergency (PHE), however the future of this flexibility is unclear. Providers that are terminating APM participation must assess new reporting requirements under MIPS and prepare for the unpredictability of MIPS rate adjustments given its budget neutral, retrospective forced-rank scoring system.
  • What opportunities do you have to align value-based care (VBC) incentives across other payers? Regardless of whether Congress acts, your organization will forfeit its return-on-investment if financial incentives for VBC adoption are not aligned across payers. A successful, sustainable VBC strategy requires integrated transformation of your care delivery model, operating model and financial model, including a coordinated financial structure for risk arrangements. Should Congress provide additional financial relief of any kind, including extending the Medicare aAPM bonus, it will not be permanent, so it is critical to design your VBC portfolio holistically to ensure future success and without reliance on the aAPM bonus.

The most recent Medicare trustees' report underscores the dire need to transition away from FFS reimbursement. The Hospital Insurance Trust Fund is now projected to be insolvent by 2028—two years later than had been projected in last year’s report—due in part to the post-pandemic Medicare population being lower cost. The updated timeline is both a somber reflection of the impact of the COVID-19 pandemic that disproportionately took the lives of people with comorbidities and a reminder that dramatic changes in how health care is paid for will be required to impact that trajectory of the trust fund’s path to insolvency. When making near-term decisions, providers must consider their long-term strategy for success in a post-FFS payment landscape.

No matter where your organization stands today on its journey to value-based care, our alternative payment model experts use extensive research to advise you on the right programs to participate in, and then help facilitate successful implementation of these programs. Please reach out to us for more information or to speak with an Sg2 value-based care expert.

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Senior Principal
Drawing upon 20 years of experience in health care management and strategy, Tawnya collaborates with health systems and payers to develop innovative and detailed plans for future growth. Tawnya’s areas of focus and expertise include health care reform, market forces and strategic analysis, specifically around hospital-physician alignment, emerging reimbursement and incentive models, performance optimization, payer strategy, and the intersection of health policy with delivery system transformation.