Skip to main content

Medicare Payment Reform Becomes Law: An Overview of the Medicare Access and CHIP Reauthorization Act of 2015

Innovations in Oncology Management, Vol. 2 No. 3

Editor’s Note

Welcome to the most recent issue of Innovations in Oncology Management™, a newsletter series that provides up-to-date information on current issues that are directly affecting the business of oncology care. Developed for oncology practice administrators, administrative staff, advanced practice clinicians, and oncology pharmacists, this third newsletter in the second series focuses on the recent Medicare payment reform with the passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and its implications for oncology practices.

The elimination of the sustainable growth rate formula with the passage of MACRA has direct impact on the reimbursement of physicians who manage Medicare beneficiaries. The new legislation introduces new Medicare payment options that will be implemented over several years, as outlined in this newsletter. Those who receive Medicare reimbursement will have to select their preferred option in the next several years.

The information presented in this newsletter outlines the key changes introduced by MACRA and the dates directly relevant to oncology practices. We hope you find this newsletter to be a valuable resource for your practice. Previous newsletters have explored a variety of topics related to oncology practice administrations that can be found at

The recent passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was most notable for repealing the sustainable growth rate (SGR) formula, a provision that was intended to contain reimbursement increases for physicians serving Medicare patients. In addition to eliminating the SGR, MACRA includes other policy changes that will affect the oncology community. In particular, the law makes significant changes to the way that Medicare will pay physicians, accelerating Medicare’s shift toward value-based payments.

In the future, higher-income Medicare beneficiaries will be expected to contribute more to the cost of their healthcare. Of particular relevance to pediatric patients with cancer, Congress included a 2-year extension of the Children’s Health Insurance Program (CHIP) as part of the legislation. Additional funding has been provided for the development of quality measures, and funding for technical assistance support will assist smaller practices, particularly those in underserved areas.1

History of the Sustainable Growth Rate Formula

The SGR formula, first implemented as part of the Balanced Budget Act of 1997, was designed to control the costs of Medicare reimbursements for physicians by tying annual increases to the growth in the national economy.2 Specifically, the SGR was intended to ensure that the annual increase in the expense for a Medicare beneficiary would not exceed the growth of the gross domestic product (GDP).3

In the first few years after the Balanced Budget Act of 1997 was enacted, the SGR provision worked as intended. During that period of economic growth, medical cost increases were relatively modest, and the SGR allowed for annual increases in physician payments. In 2001, however, the combination of a recession and increasing medical costs led to a mandatory reduction of 4.8% in physician payment in 2002. In subsequent years, Medicare costs continued to outstrip GDP growth, and the difference between physician payments and target expenditures kept growing, cumulatively leading to a gap of 21.2% by March 2015.2,3

To delay catastrophic cuts to professional reimbursement, Congress provided multiple short-term fixes known as “SGR patches” over the years.3 In an effort to limit the divergence between the actual level of physician-related Medicare spending and the target in the SGR formula, the SGR patches controlled Medicare spending to some degree, but also limited physician payment increases below the inflation rate between 2002 and 2015.3,4 It was clear for years that the SGR and the physician payment system urgently needed attention, and in 2014, several congressional committees agreed on a plan to reform the flawed SGR payment methodology.2

Landmark Medicare Reform Legislation Is Signed into Law

MACRA was signed into law on April 16, 2015, with resounding bipartisan support.4,5 The legislation repealed the SGR formula for Medicare physician payment, and eliminated the possibility of large, sudden physician fee cuts that would have been mandated by the SGR formula.3

The repeal of the SGR means the temporary “patches” implemented to override the annual growth rate formula will no longer be necessary. MACRA provides physicians and other healthcare professionals the following stable fee update for several years3,6:

  • July 2015 through December 2019—Medicare physician payments increase 0.5% annually
  • 2020 through 2025—Medicare physician fee-for-service payments remain at 2019 levels.

Physician Payment Models

MACRA replaced the SGR formula with 2 possible payment tracks for physicians that will begin to offer bonuses in 2019. One track adjusts physician fees according to a single quality or value score derived from the Merit-Based Incentive Payment System (MIPS), and the other enables physicians to be paid according to alternative payment models (Figure). Physicians who receive Medicare reimbursement will be required to choose 1 of these 2 paths beginning in 2019.4,6


Alternative Payment Model

Physicians choosing to participate in an alternative payment model can receive a 5% annual bonus on their Medicare fee-for-service payments for years 2019 to 2024.1 To be eligible, physicians must prove that they receive substantial revenue through an alternative payment model. Substantial revenue can be defined in 2 ways.

In the first option, 25% of Medicare payments must be attributable to the alternative payment model by 2020, increasing to 50% in 2021. Starting in 2026, physicians participating in an alternative payment model qualify for a 0.75% annual update.1 The bill defines alternative payment model to mean any of the following definitions:

  • Patient-centered medical home (PCMH), assuming that the PCMH is shown to improve quality without lowering costs, or it lowers costs without harming care quality4,6
  • A Medicare shared-savings program in an accountable care organization6
  • Any model under the Center for Medicare and Medicaid Innovation (other than a healthcare innovation award)6
  • Selected Medicare demonstrations, or other demonstration required by federal law.6

Merit-Based Incentive Payment System

The MIPS is more closely aligned to the traditional fee-for-service Medicare payment structure with which many physicians and oncology practices are familiar. However, under this program, fee-for-service payments will be adjusted, with bonuses or penalties, depending on a physician’s score in a new reporting program that includes an array of performance measures.4,6 If physicians do not meet preset performance thresholds, they will be subject to a decrease in reimbursements.7 However, they will also have the opportunity to qualify for substantial bonus payments.6

In the MIPS model, physicians will be rated by their ability to effectively manage services and healthcare utilization across a number of metrics from year to year. Physicians will be benchmarked either to their peers in the same specialty or against themselves.7

The MIPS consolidates several existing programs, including Medicare and Medicaid electronic health record (EHR) incentive programs (known as “meaningful use”), the Physician Quality Reporting System, and the Physician Value-Based Payment Modifier into a unified program.4,6

The MIPS program will assess physician performance under 4 performance categories to determine whether an individual qualifies for an incentive payment, including4,6:

  • Quality of care, such as measures of processes of care, patient outcomes, patient safety, and care coordination
  • Resource use per episode of care or other average measures of utilization
  • Clinical practice improvement activities, such as after-hours access and telehealth services
  • Meaningful use of certified EHR technology.

Physicians will receive a score between 0 and 100 based on their performance in these 4 areas and may be eligible for bonuses or subject to penalties, depending on their scores.8

The MIPS program represents a bona fide opportunity for high-performing physicians to earn substantial bonuses, and for all physicians to avoid penalties if they meet prospectively established quality thresholds.6 Physicians can receive maximum positive payment adjustments of 4% in 2019, 5% in 2020, 7% in 2021, and 9% in 2022, with extra “exceptional performance” bonuses if they meet all MIPS quality standards. Underperforming physicians will be subject to negative payment adjustments of 4% in 2019, 5% in 2020, 7% in 2021, and 9% in 2022.4,9

Starting in 2026, physicians participating in the MIPS will be eligible for a 0.25% annual update in their payments.1 Adjustments will be calculated based on the physician’s composite performance score that will be compared with the mean and median of the previous year’s composite score for all clinicians.4

Some details of the legislation are yet to be determined, and the Centers for Medicare & Medicaid Services (CMS) is expected to request input to clarify the implementation of several MACRA provisions that may affect physician payment, including the selection of low-volume threshold, the definition of clinical practice improvement activities, and how to define a physician-focused payment model.10

Other MACRA Provisions

Although most of the attention has been given to the MACRA provisions that focus specifically on physician payment reform, several other aspects of the legislation are worthy of attention.

Technical Assistance for Smaller Practices

Between 2016 and 2020, MACRA calls for the allotment of $20 million annually in technical assistance to help practices with 15 or fewer professionals transition to alternative payment models or improve MIPS performance.11,12 Priority will be given to providers in underserved areas and in areas suffering from healthcare provider shortages.12 This MACRA provision may benefit certain community oncology practices and clinics.

Funding for Quality Measures

Funding is provided for quality measure development, at $15 million annually from 2015 to 2019, with any excess funding available through 2022. Physicians will continue to play a central role in developing quality standards.11

Children’s Health Insurance Program Extension

CHIP, a program funded jointly by states and the federal government, provides health coverage to eligible uninsured children up to age 19 years in families with incomes too high to qualify them for Medicaid.13 Before the passage of MACRA, CHIP was only funded through 2015. The new legislation extends funding through 2017. According to CMS, additional CHIP costs will be offset to some degree by reductions in Medicaid costs and by premium tax credits and cost-sharing subsidies.14

Higher Cost-Sharing by Higher-Income Medicare Beneficiaries

To help offset the cost of the new legislation, MACRA includes a provision to increase Medicare premiums for some higher-income beneficiaries. Specifically, Medicare beneficiaries with annual incomes from $133,500 to $160,000 ($267,000-$320,000 for married couples) will contribute 65% of their Part B and Part D program costs, starting in 2018, which is increased from the 50% share before 2018.

Beneficiaries with incomes from $160,000 to $214,000 ($320,000-$428,000 for married couples) will be required to pay 80% of Part B and Part D program costs, compared with the current rate of 65%. MACRA does not change premium payments for beneficiaries with annual incomes higher than $214,000, who are already required to pay 80% of Part B and Part D program costs.15

Legal Protection

MACRA includes language that protects physicians in certain medical liability cases. Under the law, medical liability cases cannot use Medicare quality program standards and measures as a standard or duty of care.1

Next Steps

Several details regarding future Medicare payments remain to be determined. On July 8, 2015, CMS released the calendar year 2016 Physician Fee Schedule (PFS) proposed rule, which finalizes changes to several of the quality reporting initiatives that are associated with performance-based payments, including the Physician Quality Reporting System, the Physician Value-Based Payment Modifier, and the meaningful use incentive program. The PFS pays for services furnished by physicians and other practitioners, and applies to office visits, diagnostic tests, surgical procedures, therapy services, and other professional services delivered in all sites of care.10

In the PFS proposed rule, CMS is also calling for the calculation of net reductions in a number of codes that were deemed to be “misvalued.” Currently, CMS has identified changes that achieve 0.25% in net reductions because of misvalued codes; the code changes in the final rule could move closer to the statutory goal of 1% reductions, based on public comment and new recommendations. As part of this provision, CMS identified several codes for radiation therapy as potentially misvalued, and seeks to change the utilization rate assumption for capital equipment related to the provision of radiation therapy. It is estimated that the changes could result in payment reductions of 3% for radiation oncologists and up to 9% for freestanding radiation therapy centers.10,16

The proposed PFS rule also seeks public comment on a proposal to establish separate payment for 2 advance care planning services offered to Medicare beneficiaries by their healthcare providers. According to CMS, establishing separate payment for advance care planning codes gives beneficiaries and providers greater opportunity and flexibility to utilize these planning sessions at the most appropriate time for patients and their families. New Current Procedural Terminology (CPT) codes and associated payment amounts for advance care planning services are slated to take effect beginning January 1, 2016.10

Other provisions included in the proposed PFS rule are public reporting requirements associated with the Physician Compare program, clarifying payment amounts for billing codes that describe biosimilar biologic drugs, and clarifying regulations regarding the physician self-referral law.

Finally, the proposed rule seeks public comment on language pertaining to appropriate use criteria for clinical decision support related to advanced diagnostic imaging services.10

CMS accepted public comments on the PFS proposed rule until September 8, 2015. The proposed rule was scheduled to be published in the Federal Register on July 15, 2015. CMS will issue the final rule by November 1, 2015.10

1. Medicare Access and CHIP Reauthorization Act of 2015. April 16, 2015. Pub L No. 114-10, 87 Stat 129.
2. Fontenot K, Brandt C, McClellan MB. A primer on Medicare physician payment reform and the SGR. Health360. Accessed August 25, 2015.
3. Manchikanti L, Staats PS, Boswell MV, Hirsch JA. Analysis of the carrot and stick policy of repeal of the sustainable growth rate formula: the good, the bad, and the ugly. Pain Physician. 2015;18:E273-E292.
4. McClellan MB, Thoumi AI. Physician payment reform in Medicare: a landmark achievement, and a long way to go. ASCO Daily News. May 30, 2015. https://am.asco.
org/physician-payment-reform-medicare-landmark-achievement-and-long-way-go. Accessed August 22, 2015.
5. Thompson G. SGR repealed, but the work is just beginning. Oncol Pract Manage. 2015;5:1-8, vi.
6. American Academy of Family Physicians. Frequently asked questions on the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Updated May 7, 2015. Accessed August 22, 2015.
7. McKnight W. In post-SGR world, physicians face two payment options. May 1, 2015. Updated May 7, 2015.
options/c83d961813b6c3c8a9e47fd2f97a8a99.html. Accessed August 22, 2015.
8. Hertz BT. After SGR: physician pay facing a value-driven future: while many details remain to be finalized, here’s what physicians need to know about the future of Medicare reimbursement. Med Econ. 2015;92:49-53.
9. American Medical Association. H.R. 2—Medicare Access and CHIP Reauthorization Act of 2015. Comparison chart. 2015. Accessed August 25, 2015.
10. Centers for Medicare & Medicaid Services. Proposed policy, payment, and quality provisions changes to the Medicare Physician Fee Schedule for Calendar Year 2016. July 8, 2015. Accessed August 21, 2015.
11. American Medical Association. Medicare Access and CHIP Reauthorization Act of 2015—H.R. 2: frequently asked questions about H.R. 2. Accessed August 25, 2015.
12. American Congress of Obstetricians and Gynecologists Government Affairs. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA): summary of SGR repeal and replacement provisions. May 2015. Accessed August 26, 2015.
13. Eligibility. Accessed August 26, 2015.
14. Spitalnic P; for the Centers for Medicare & Medicaid Services. Estimated financial effects of the Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2). April 9, 2015.
downloads/2015hr2a.pdf. Accessed August 26, 2015.
15. Cubanski J, Neuman T; for the Kaiser Family Foundation. Medicare’s income-related premiums: a data note. June 3, 2015. Accessed August 26, 2015.
16. Reinitz K. Radiation oncology: proposed 2016 MPFS released. July 20, 2015. Accessed August 26, 2015.

Stakeholder Perspective

Preparing for MACRA

An interview with Denise Pierce, President, DK Pierce and Associates.

Earlier this year, we saw substantive Medicare reform with the passage of the Medicare Access and CHIP Reauthorization Act (MACRA). Similar to the Affordable Care Act, MACRA will be implemented over a period of several years. To discuss the implementation of MACRA, Innovations in Oncology Management recently spoke with Denise Pierce, who has more than 30 years of experience in policy management, reimbursement planning, and medical economics. She possesses extensive knowledge of hospital inpatient and outpatient and physician office reimbursement systems. Ms Pierce is also a well-known speaker and author on health policy and patient access issues.

Q: In your experience, what is the current awareness level of the MACRA legislation among oncologists and oncology practice administrators?
Denise Pierce:
Practices have limited awareness about many provisions of the legislation at this time. Oncology practices are dealing with a variety of priorities right now, including the implementation of the International Classification of Diseases, Tenth Revision, Clinical Modification; the Centers for Medicare & Medicaid Services (CMS) Oncology Care Model (OCM); and transition to new electronic medical record (EMR) systems. We recently fielded a survey of 36 oncology practices regarding their interest, their knowledge, and what actions they were taking to prepare for MACRA. We found that when asked about the MACRA legislation, approximately half were unsure about what it meant. The other half were rather neutral on how it might impact their future.

Q: Which aspects of MACRA are poorly understood?
Ms Pierce:
Practices have paid attention to the sustainable growth rate repeal and the new reimbursement methodology for Medicare patients, because it affects them right now. They know that there will be 0.5% annual increases for their fee-for-service Medicare beneficiaries in the next few years, but in my experience, there is limited understanding of the wide-ranging impact that MACRA will have on the medical community as a whole, and on oncology in particular.

In our survey, we found that practices participating in the OCM are not necessarily more knowledgeable about MACRA than nonparticipating practices. There is a consideration that the OCM will literally become the alternative payment model (APM) option, which would make the transition to MACRA-specific requirements easier. However, there has not been a specific CMS guidance on that.

Q: Which key points of the legislation remain to be clarified or determined by CMS?
Ms Pierce:
There will be 2 payment tracks, the Merit-Based Incentive Payment System (MIPS) and the APMs, and practices must ultimately choose between one track or the other. However, they may start on one track and then switch to the other, but clarification is needed about whether there is a penalty if they were to do that, and how they would approach it.

As outlined above, there is also the perception that oncology practices participating in newer care delivery and payment models will automatically be compliant with the APM track requirements under the MACRA legislation. Although this may be intuitive, CMS has not provided specific guidance about how OCM practices will roll into the APM payment track under MACRA.

Q: Why would an oncology practice choose one payment track over the other?
Ms Pierce:
To some degree, decisions may be guided by their current infrastructure. For example, practices that are participating in the OCM are well-suited to choose the APM track. Of course, many practices participating in the OCM are larger groups with multiple locations, but we are also seeing participation from smaller practices in more rural settings. Practices that do not intend to develop the infrastructure required to participate in the OCM or in other value-based programs in the next few years may be better suited to consider the MIPS payment track.

The development of internal pathways is another characteristic that may help determine the track chosen by practices. Many practices are developing their internal pathways capabilities now, and those that are ready will be better prepared to go down the APM track. The EMR capability will also be an important determinant. We are seeing that many practices are instituting different systems to allow them to better capture the information required to document that they are providing good quality care in accordance with the “meaningful use” criteria and with other reporting requirements.

In addition to upgrading their EMR systems, oncology practices will need adequate staffing to track, document, and report on quality metrics. For example, they will be required to capture time to fill information for patients who are receiving oral cancer drugs, which will necessitate unique staffing and/or training within the practice.

Q: Given today’s quality-driven payment system environment, do you think that the MIPS option may be transitional, and that providers’ practices will be required to adopt the APM track anyway?
Ms Pierce: That is probably the intent. The tone of the legislation seems to favor the creation of a methodology that would accommodate the different types of practices and where they stand regarding value-based and quality incentives at this time. However, the ultimate goal is the broad adoption of value-based, performance-driven care delivery and payment structures.

Q: What resources are available to help oncology practices prepare for MACRA?
Ms Pierce:
Some organizations, such as the Association of Community Cancer Centers and the American Medical Association, have provided useful summaries highlighting the key points of the MACRA legislation. Thus far, most of the resources I have seen are informational in nature.
However, I have not seen any turnkey educational resources that can help practices make their own decisions. There will be ongoing rulemaking from CMS to provide detailed clarification around the development of MIPS and APMs tracks, which will then lead to specific resources to help oncology providers make an educated decision.

Q: When should practices begin to actively prepare for the MIPS or APM payment track decisions?
Ms Pierce:
Practices will not be required to start assessing decisions on their payment track until late 2018, which allows the integration of CMS guidance and rulemaking around the legislation. Then practices can decide if they are ready for a value-based, evidence-based payment methodology. Cutting-edge practices will have made their decisions in 2016. The other practices will have to decide by early 2017, because by 2018, to participate in APMs, they must ensure that (starting in 2019) at least 25% of their total Medicare revenue is attributable to an APM within their system. If practices have not made their decision by early 2018, they will not have adequate time to prepare.