$100M allocated to help small practices use the Quality Payment Program

Congress, through the bipartisan Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10), has recognized the importance of small and rural medical practices and provided funding for their assistance in navigating the new Medicare Quality Payment Program (QPP). To this end, CMS has announced the award of approximately $20 million to 11 organizations for the first year of a five-year program to provide on-the-ground training and education about the QPP. The program is for individual clinicians or small group practices of 15 or fewer clinicians. CMS also intends to invest up to an additional $80 million over the remaining four years of the program.

The Quality Payment Program

MACRA ended the sustainable growth rate formula, which threatened clinicians participating in Medicare with potential payment cliffs for 13 years. The QPP improves Medicare by helping practices focus on care quality. The QPP has two tracks to choose from: (1) the Advanced Alternative Payment Models (APMs); or (2) the Merit-based Incentive Payment System (MIPS). If a practice decides to participate in an Advanced APM, through Medicare Part B, it may earn an incentive payment for participating in an innovative payment model. If it decides to participate in MIPS, it will earn a performance-based payment adjustment.

A practice is part of the QPP in 2017 if it is in an Advanced APM or if it bills Medicare more than $30,000 a year and provides care for more than 100 Medicare patients a year. If a practice is below either threshold, it is not in the program. For MIPS, the practice must also be a physician, physician assistant, nurse practitioner, clinical nurse specialist, or a certified registered nurse anesthetist.

Training and education effort

The training and education contracts have been awarded to the following organizations: Altarum; Georgia Medical Care Foundation (GMCF); HealthCentric; Health Services Advisory Group (HSAG); IPRO; Network for Regional Healthcare Improvement (NRHI); Qsource; Qualis; Quality Insights (West Virginia Medical Institute); Telligen; and TMF Health Quality Institute.

These 11 organizations will provide hands-on training to help thousands of small practices, especially those that practice in historically under-resourced areas including rural areas, health professional shortage areas, and medically underserved areas. The training and education resources will be available immediately, nationwide, and will be provided at no cost to eligible clinicians and practices. The organizations will provide customized technical assistance to clinicians and practices. For example, clinicians will receive help choosing and reporting on quality measures, as well as guidance with all aspects of the QPP, including supporting change management and strategic planning and assessing and optimizing health information technology.

Other free training and education

CMS reports that thousands have received free training and education through webinars and in-person training from CMS staff since the QPP Final Rule was released last October (see MACRA final regulations reflect input from ‘months-long listening tour’, October 14, 2016).

In addition, every clinician in the QPP can receive in-person training through the established Quality Innovation Networks, the Transforming Clinical Practice Initiatives, and the Alternative Payment Model Learning Systems.

Structure call coverage arrangements to avoid Stark & AKS issues

When compensating physicians for the time they spend on-call, hospitals should draft call coverage agreements with care to avoid potential problems implicating federal laws prohibiting physician self-referral (Stark Law) and kickbacks (Anti-Kickback Statute (AKS)). In a webinar presented by the Health Care Compliance Association (HCCA), Robert G. Homchick, partner at Davis Wright Tremaine LLP, and Scott M. Safriet and Adam S. Polsky, partners at HealthCare Appraisers, Inc., discussed changes to the call coverage risk analysis based on court opinions and changes in government implementation of rules.

As with most physician compensation arrangements, the Stark Law (42 U.S.C. §1395nn) is the threshold issue when analyzing call coverage agreements; additionally, if the agreement passes muster under Stark, the AKS (42 U.S.C. §1320a-7b) risks should be relatively modest. Both analyses contain some of the same considerations, such as fair market value (FMV) and commercial reasonableness.

Homchick, Safriet, and Polsky noted the following concerns for call coverage:

  • on-call coverage is becoming more expensive, but hospitals are facing decreased reimbursement; and
  • because traditional methods of securing call coverage no longer apply to all situations, hospitals are becoming more creative to obtain coverage.

To effectively secure coverage, hospitals should consider many options, and determine which is best applied in their situation. Potential coverage options include concurrent coverage, telemedicine, bundling on-call coverage with services beyond the emergency room, on-call coverage payment for employed physicians, and use of the “activation fee” concept.

However, the webinar cautioned that not all arrangements are the same, and in situations where it is truly difficult to secure coverage, a different approach may be necessary. Additionally, hospitals should look into the underlying reasons of why securing that coverage has been difficult—for example, are there shortened response times, a physician shortage in the marketplace, or is coverage restricted or quasi-restricted.

KFF offers facts about Medicare spending

As the new Administration and Congress consider changes to federal health care programs, including Medicare, a Kaiser Family Foundation (KFF) issue brief offers spending facts about the program, which currently accounts for roughly $1 of every $7 in federal spending. The brief indicated that repealing the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would increase spending and worsen the program’s long-term financial outlook, but noted that Medicare faces challenges apart from ACA repeal, including higher health costs and an aging population.

Although the program faces financial challenges, KFF noted that Medicare “isn’t going broke.” The Hospital Insurance Trust Fund, which pays for Part A benefits, primarily through payroll taxes, is expected to pay for full insurance benefits until 2028, at which point it will be able to pay for 87 percent of hospital benefits. Part B physician services and Part D drug benefits, however, are paid for through a combination of general revenues and beneficiary premiums and are set only a year in advance. As a result, they are not subject to a funding shortfall, but higher projected spending would increase the amount of general revenue funding and beneficiary premiums required to cover costs. Spending on Part benefits is expected to rise faster than spending on benefits paid for under Parts A and B, with per-capita spending expected to rise 5.8 percent for Part D between 2015 and 2025, compared to 3.2 percent for Part A and 4.6 percent for Part B.

The aging U.S. population is resulting in higher Medicare spending. For example, the number of people over age 65 is expected to double from 2010 to 2050 from 40 million to 84 million, while the number of people over 80—who account for a disproportionate share of Medicare spending—is expected to nearly triple, from 11 million to 31 million. Medicare spending accounted for 15 percent of the federal budget in 2016, and is expected to increase to 18 percent of the federal budget, accounting for $1 in every $6 spent, by 2027. Average annual growth in spending is expected to increase more quickly between 2015 and 2025—at a rate of 7.1 percent—than it did immediately after the ACA was enacted between 2010 and 2015, when it increased at a rate of only 4.4 percent.

ACA provisions reducing payments to providers and Medicare Advantage (Part C) plans reduced overall spending growth from 9 percent between 2000 and 2010 to 4.4 percent between 2010 and 2015. KFF cited a Congressional Budget Office (CBO) report and stated that ACA repeal would add $802 billion to Medicare spending through 2025; KFF opined that repeal would lead to higher deductibles, premiums, and cost sharing for beneficiaries and would hasten the insolvency of the Hospital Insurance Trust Fund (see Repealing the Affordable Care Act—an unaffordable idea?, Health Law Daily, June 24, 2015). With the ACA in place, KFF reports that net Medicare spending is projected to grow from 3.2 percent of the gross domestic product (GDP) in 2016 to 5.7 percent of the GDP in 2046; prior to the ACA, net Medicare spending was projected to account for 8.5 percent of the GDP in 2046.

Hospital-owned physician practices continue to grow, but integration has issues

“The Affordable Care Act and changing economic conditions have encouraged an increase in the integration of physicians with hospitals,” according to a study conducted Marah Short, M.A., Vivian Ho, Ph.D., and Ayse McCracken, MBA, CPA for the James A. Baker III Institute for Public Health at Rice University. The Rice University study found that hospitals with physicians on salary rose from 44 to 55 percent between 2008 and 2013 and noted that a growing number of hospitals are employing primary and specialty care physicians, as well as hospitalists. The authors  concluded that the data showed an overall trend of increasing integration, but stated that many hospitals are transitioning to lower levels of physician-hospital integration. The study examined the trends in hospital integration over time designating four forms of integration based on the type of contractual relationship a hospital has with physicians.

Number and impact of hospital-employed physicians

The number of physician practices owned by hospitals/health systems rose 86 percent between 2012-15, with the percentage of physicians employed by hospitals or health systems increasing in every region of the country, according to a study prepared by Avalere Health and released September 7, 2016, by Physicians Advocacy Institute (PAI). This study also found that by mid-2015, one in four medical practices were hospital owned and 38 percent of U.S. physicians were employed by hospitals and health systems. In 2015, hospitals employed more than 140,000 physicians. In addition, from 2012 to 2015, hospitals acquired 31,000 physician practices. PAI noted that the acquisitions typically involve the acquisition of the services of multiple physicians through employment contracts, as well as the practice’s physical building and equipment.

Kelly Kennedy, PAI executive vice president, stated that “The shift toward more physicians employed by hospitals could mean higher costs for the entire health system. For patients, it impacts both where they receive and how much they pay for care.” Robert Seligson, PAI president and chief executive officer of North Carolina Medical Society, added that “Payment policies from governmental agencies and health insurance companies heavily favor large health systems and [that] makes it challenging for independent physician practices, especially smaller practices to survive.”

Accountable care organizations and payment innovations

“Through integration, hospitals could better control physician practices to increase efficiency and decrease costs,” by reducing duplication of services, providing clinical benefits, and improving communication and coordination of care between hospitals and physicians, the Rice University study explained. The authors further noted that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) encouraged the integration of physicians with hospitals when it established accountable care organizations with the goal of reducing health care costs while encouraging  doctors, hospitals, and other health care providers to come together voluntarily to give coordinated high quality care to their Medicare patients. ACOs and medical homes will continue to spur integration in coming years, the study predicted.

Regulations mandated by the ACA have offered various payment innovations and opportunities for physicians and hospitals to participate in value-based contracting. These options provide better solutions with less operating and financial risks for hospitals and physicians, the study noted, perhaps allowing hospitals and hospitals to forgo integrating. Hospitals can form a successful ACO, while physicians can maintain their private practice and both benefit from the shared savings. However, hospitals seeking to participate as a Medicare ACO must build relationships with primary care physicians (PCPs) and will have better control of hospital referrals for inpatient and outpatient care if the PCPs are hospital employees, according to the Rice University study.

Conflicting interests in integration

Conflicting interests played a role in the choice to integrate or de-integrate, the study explained. Hospital employment of physicians is influenced by a variety of factors, including preparation for value-based contracting and the attraction of certain specialists that generated a significant patient volume. Hospitals studied were uncertain whether to employ highly compensated specialists or primary care physicians. Specialists considered the risk of declining incomes and sought partnerships with hospitals because reimbursement for ancillary services are paid at a higher rate when billed as the service of a hospital provider organization than when provided in private practice.

Other issues facing the integration of a hospital and an independent physician practice include payer contracting for Part B services; billing, coding, and collections process; staffing costs, policies, and procedures; and supply chain management. The differences in operation between the two may result in increased clinic operation costs along with pressures on physicians to contain costs. The differences in operation between the two may result in increased clinic operation costs along with pressures on physicians to contain costs.  The study recommends that hospitals create a governance structure with strong physician leadership and experienced practice administrators to address  and assimilate the practices into the hospital’s infrastructure.

The study noted that “a successful partnership requires physicians and hospitals to have aligned goals and strategies consistent across the organization.” When determining whether to integrate, the study recommended that hospitals and physicians consider whether there is both a cultural and financial fit and expectations of the physician and the hospital need to be clearly defined and aligned. While physician practices operate as small businesses, hospitals function as more sophisticated business entities, the study explained.While physicians may expect few changes in the way they do business, hospitals likely will expect physicians to operate their clinics in alignment with hospital systems, processes, and policies, and align referrals with its medical staff and outpatient services. .