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MACRA & QualOptima – Impacts of Federal Legislation After ACA

There has been extraordinarily sparse attention to what is indisputably positive impacts on health care in America from the Affordable Care Act (ACA).  It was notable, for example, that during the repeal and replace actions in Congress that Republicans intended to keep the value-driven payment provisions in place.  There are fiscally conservative reasons not to repeal the ACA in its entirety.  After passage of the ACA, there has been other federal legislation that advanced some of the concepts intended to improve the quality of health care while reducing the costs of care.

In our preceding Note introducing QualOptima for Enterprise Value Management (EVM), we commented on both the uncertainty yet striking certainty in health and health care. We considered how EVM empowers healthcare providers, their patients and payers to achieve optimal outcomes and valuable personalized care safely. The certainty is that America is and must change how healthcare providers are paid.  This radical change in paying for health care is what has become certain in a survive, thrive or perish free enterprise system.

In the certainty of what will be the new payment system, value-driven payment must be the urgent priority and strategy.  This is the business case for Quture introducing EVM implemented with the QualOptima Health Informatics Platform (PaaS), using Health Data Science by Value Data Centers.  Quture transforms an output- volume-based enterprise into an impact and outcome-driven enterprise.

Unfortunately, consistent with bureaucracy, the speed of change and the compromise of regulatory requirements is unsatisfactory.  But the framework for change is clear, as must be the resolve of those demanding better care for the astronomical fees being paid.  As the metrics for measuring quality in the value equation with cost become more scientifically proven and precise, the reporting, transparency and payment regulations must be understood to embrace the need for EVM and the QualOptima Health Informatics Platform.

Hospital payments for value-driven incentives are primarily required by the Affordable Care Act (ACA) and its Inpatient Prospective Payment System (IPPS).  Equally significant, federal legislation known as MACRA (Medicare Access and CHIP Reauthorization Act of 2015) creates a new framework for rewarding physicians for providing higher quality care.  MACRA is also significant to hospitals, especially those that have invested heavily in purchasing physician practices.

MACRA is extraordinarily complex legislation.  Some of its provisions, which are considered here, are favorable to EVM and QualOptima.  Others, which will be discussed below, detract from Quture’s strategies over the years. But in an effort the summarize MACRA requirements, here goes.

4 Elements of the MACRA Payment Formula

4 Elements of the MACRA Payment Formula

MACRA establishes two (2) tracks for payment, called the Quality Payment Program (QPP) as the umbrella term for these two tracks:

  • Merit-based Incentive Payment System (MIPS); and
  • Advanced Alternative Payment Models (AAPMs).

MACRA also adds a new performance category, called Improvement Activities (IA), to the MIPS framework. At the same time, MIPS consolidates three (3) existing quality reporting programs that existed prior to MACRA:

  • Physician Quality Reporting System (PQRS);
  • Value-based Payment Modifier (VBPM); and
  • Meaningful Use (MU).

As outlined above, the Merit-based Incentive Payment System (MIPS) consolidates three (3) existing quality reporting programs: the Physician Quality Reporting System (PQRS), the Value-based Payment Modifier (VBPM), and meaningful use (MU). The system also adds a new performance category, called Improvement Activities (IA). Scores from the four (4) categories are combined to establish a final score (0-100) that will be compared against a threshold. The final score is then used to determine physician payment adjustments. The categories that make up the MIPS final score are:

  • Quality—based on PQRS;
  • Resource use—based on VBPM;
  • Advancing Care Information (ACI)—based on MU; and
  • Clinical practice improvement activities—new IA performance category.

Scoring for each category will change over three (3) years, with the relationships of quality to cost adjustments:  quality declines from 60% t0 30% while cost increases from 0% to 30%. Scores will be weighted and rolled up into the MIPS final score.


*If the Secretary of the U.S. Department of Health and Human Services (HHS) determines the proportion of eligible clinicians who are “meaningful users of electronic health records (EHRs)” is estimated at 75% or greater, the weight of the ACI category may be reduced. The remaining performance categories will be increased by the corresponding number of percentage points. The lowest weight the ACI category can carry is 15%.

This summary illustrates how complex such detailed legislation and regulations are both for public and provider understanding.  But the significance to Quture and our development of the QualOptima Health Informatics Platform should be clear.  For example, MIPS requires physicians and physician groups who want to benefit from the financial incentives require reporting specific metrics.  Physicians and groups must report at least six (6) measures, including one outcome measure.  In addition to the six (6) reported measures, CMS will calculate the all-cause hospital readmissions measures for groups of 16 or more.  These measures are available from CMS as the “2016 Physician Quality Reporting System (PQRS) Measure Specification and Measure Flow Guide for Claims and Registry Reporting of Individual Measures.”

Compliance with new, comprehensive quality initiatives of the federal government will result in more transparency, such as Hospital Compare and Physician Compare. At the same time, these initiatives will exponentially increase liability exposure for risk management.  The emerging alphabet soup of quality reporting makes this urgent need for Quture’s EVM manifestly clear, far beyond MACRA and the acronym included in its title, CHIP, such as QPP, MIPS, PQRS, VBPM, MU, IA, AAPMS, QCDR, CAHPS, etc., not to mention population health, precision health, comparative effectiveness and patient reported outcomes.  The Final Rule for MACRA legislation should make this urgent need for Enterprise Value Management abundantly clear!

For those who have followed the business strategies of Quture these past several years, you will remember the extensive efforts and resources we committed to a project in Connecticut for radiologists to report PQRS measures.  The project was particularly promising because radiology had successfully lobbied CMS to allow additional quality measures beyond those allowed for payment incentives.  Our first hurdle, which is now very widely understood, was that the hospital, who contracted with the radiology group directly, would not allow these physicians to have access to the data they entered for their patients.

But the ultimate reality hit when we discovered that CMS still favors data which can be easily collected using billing codes.  Software based on billing codes quickly entered the PQRS market, which temporarily discouraged Quture’s continuing in this market.

Even cost analysis in the MACRA regulations remains based on billing codes.  There is no reporting requirement for eligible clinicians under the cost category. CMS will calculate the clinician’s performance using claims data. During the transition year (2017), the cost performance category has been reweighted to 0%. Beginning with performance year 2018 (for payment year 2020), clinicians will be assessed on their performance of total per capita costs and Medicare spending per beneficiary (MSPB). Clinicians will also be assessed on applicable episode-based measures. To help clinicians become familiar with cost measures, CMS will provide feedback on these measures during the transition year.

Remember Quture’s frequent discussions about cost analysis in health care.  This is perhaps the only major industry in America that does not know every detail of what it costs to deliver its product.  Under MACRA, “cost” is what the government pays for care, not what it costs the provider to deliver that care.  So billing codes will still be used to calculate the cost portion of the MIPS final score.

As the technologies and analytics of our competitors become dinosaurs, along with their reliance on fee-for-service payment, Quture will be unique in the healthcare data analytics market with the introduction of EVM.  Quture’s expertise and experience for over 40 years has been to empower healthcare decision-makers with the data and analysis to implement their strategies.  Boards of trustees, executive C-suite management, and medical staffs need insight from information to not only devise their strategies, with high-price advisors, but to monitor and implement processes that deliver profitably on those strategies.

Hospital Value-Based Payments Under IPPS:

The Inpatient Prospective Payment System (IPPS) primarily regulates payments to hospitals for value-driven incentives as required by the Affordable Care Act (ACA). The value-based incentive program places at stake 1% of hospitals’ Medicare inpatient prospective payment system payments, gradually increased from 2013 to 2% in 2017.

One in every five (5) Medicare beneficiaries is hospitalized one or more times each year.  There are almost 5,000 inpatient acute-care hospitals nationwide that treat these beneficiaries.  Of the approximately $300 billion dollars spent on the Medicare program each year, almost $100 billion is spent on inpatient services.

Over three-quarters of these hospitals are paid under IPPS, while nearly one quarter are paid based on costs and are called Critical Access Hospitals.  The IPPS pays a flat rate based on the average charges across all hospitals for a specific diagnosis regardless of whether that particular patient costs more or less. Everything from an aspirin to an artificial hip is included in the package price to the hospital.

Under the IPPS, each case is categorized into a diagnosis-related group (DRG) to determine the base rate.  Payment is also adjusted for differences in area wage costs — and depending on the hospital and case — teaching status, high percentage of low-income patients, the use of new technology and extremely costly cases.

CMS added the following quality domains and weights for FY 2017 for Clinical Care:

  • Outcomes (25%)
  • Process (5%)
  • Patient and Caregiver Centered Experience of Care/Care Coordination (25%)
  • Safety (2%)
  • Efficiency and Cost Reduction (25%)

Negative MACRA Impacts on Quture:

As summarized above, Meaningful Use (MU) under the HITECH Act portion of the ACA is consolidated by MIPS as one of the three (3) existing quality reporting programs that existed prior to MACRA.  In 2009 as part of the Health Information Technology for Economic and Clinical Health (HITECH) Act, the federal government set aside $27 billion for an incentive program that encourages hospitals and providers to adopt electronic health records systems (EHR). Billions more were allocated to help train health information technology (HIT) workers and assist hospitals and providers in setting up EHRs that would enable the health data historically sequestered in paper files to be shared among providers and used to improve health care quality.

In return for this bonanza of funding intended to improve care and outcomes while reducing costs, EHR vendors were required to meet specific technical specifications over three (3) stages.  While Stage I requirements have been enforced, Stages II & III were eliminated when consolidated into MIPS under MACRA.

While it is difficult to understand why Congress gave into multiple lobbies to eliminate these MU requirements, Quture is left to change our strategies since 2009 that are now impacted.  There are multiple impacts, but the primary strategic change results from eliminating the Blue Button requirement.  Blue Button required EHR vendors to provide patients with the ability to electronically transfer their own data from that EHR to their selected electronic record, such as an “individual-controlled” personal health record (PHR).  This would have allowed patients to aggregate all their own medical information from multiple physicians and hospitals into a single electronic record.

A series of publications advocate individual-controlled records, some discussed in previous Notes.  This impact is primarily on the strategic plan and patent application anticipated for Quture Health.  The other immediate impacts of MACRA are positive for QualOptima for EVM to empower healthcare providers, their patients and payers to achieve optimal outcomes and valuable personalized care safely at reduced cost.