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October 17, 2016


With the release of final regulations on how it updates Medicare payment rates for physicians, the Centers for Medicare & Medicaid Services has ushered in a new era of pay-for-performance in physician reimbursement.


The final regulations replace the old Sustainable Growth Rate (SGR) formula which Congress discontinued under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).  In its place is the new system, called the Quality Payment Program, that bases payment updates on the value and quality of care physicians provide.


Under the new system, payment updates and adjustments have several basic elements:


  1. All physicians will receive a minimal annual update in base payments.
  2. All physicians must then choose one of two new payment tracks which provides additional annual payment incentives for improving quality and cost:

a.      Merit-Based Incentive Payment System (MIPS):  Payment adjustments are based on how well physicians perform in four areas: quality, cost, clinical practice improvement, and use of electronic health records.  Payments can be adjusted +/- 4% in 2019, rising to +/- 9% in 2022 and beyond.

b.      Advanced Alternative Payment Models (AAPM):  Payment adjustments are based on whether physicians participate sufficiently in Advanced Alternative Payment Models (coordinated care models) in which they share financial risk for possible losses.  Payments are adjusted +5% annually from 2019 – 2024.


The program begins implementation in 2017, which CMS is calling a transition year, with the first payment adjustments beginning in 2019.


CMS briefing materials


Philips comments on MACRA

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