As with many things, there is a long story, and a short story. 2017 MACRA earnings have become public, and they are much lower than expected. Even providers earning a perfect 100 on their MIPS Composite Score are receiving around 2% positive fee adjustments compared to the potential of 14% (base of 4% plus bonus of 10%). The short story is that based on MACRA “actual” payment incentive percentages, we can infer two things about how providers performed under MACRA in 2017:

 

  1. Very few providers were penalized; and
  2. Very many providers received exceptional scores

Essentially, based on the low payout percentages (even for perfect scores) in 2017, we can infer that MIPS scores were clustered tightly toward the top end. The “so-what” from this story is important. In the future (2019 and later, and possibly even 2018), avoiding penalties will become very difficult, as will earning high rewards.

 

And now … the rest of the story.

 

As you know, MACRA “money” comes from two separate pools of funds. The first pool is the “revenue neutral” funds, and the second is for “exceptional performance”. Here is how they each work:

 

  • Revenue Neutral Pool – is funded by providers who earn penalties under MACRA. In the long run, penalized providers are those whose MIPS Composite score (MCS) is less than a national “median” threshold. The median threshold is to be constructed so that half of the providers in the country (below the median) pay penalties which create the Revenue Neutral Pool. The other half of the providers earn incentives, which are paid from this pool. This pool is the +/- 4% in 2017 (increasing annually to a maximum of +/- 9%). Let’s call this +/- 4% the “financial adjustment factor for revenue neutral funds”.

CMS must pay all “revenue neutral” incentives from this pool. There is a scaling factor that adjusts a provider’s earned percentage down (or, theoretically up) so that in aggregate, the pool is paid back to zero. In 2017, CMS set an artificially low threshold. Rather than using a median of all submitted scores, the threshold was set at an arbitrary 3 points MCS. Under this model, the only way to earn a penalty was to avoid submitting any MIPS content at all. The practical result of this action is that almost no one was penalized in 2017, and the “scaling factor” was set very low (probably something like .001). What this means is that even providers with a perfect MCS would have their “financial adjustment factor for revenue neutral funds” reduced to 0.0004%, rather than 4.00%.

 

  • Bonus Pool – is funded by a fixed annual dollar amount of $500,000,000. This pool is to be paid out to providers with exceptional MCS scores and is in addition to the Revenue Neutral funds. Nice, right? In the long run, the threshold for the Bonus Pool would be part way between the Base Threshold, and a perfect MCS of 100. CMS also set this threshold at an arbitrary value of 70 points MCS. The basic (arbitrary) formula says that a provider earning 70 MCS points would receive a “Bonus Financial adjustment” of 0.5%, and a provider earning a perfect 100 MCS would receive a bonus financial adjustment of 10.0%. Pretty nice … but this fund is also constrained by the fixed annual dollar amount of $500,000,000. CMS uses a scaling factor here as well to adjust the individual financial adjustment percentages so that they never pay out an aggregate of over $500,000,000.

Here as well, in 2017 a very large number of providers had very high scores. The result was that CMS applies a scaling factor, such that providers who may have otherwise earned an extra 10% were reduced to a fraction of what they would have normally earned. The actual scaling factors have not yet been published, but I believe the value for the Bonus Pool would have been around 2.0%. Therefore, providers who would have earned 10% with a perfect MCS, would be reduced to around 2% (raw score 10% * Scaling Factor .2).

 

Implication for 2019 and Later

In 2019 CMS is scheduled to initiate the legislated rules for MACRA scoring. These rules require that half of the providers in the country pay penalties, which are used to fund the other half. Similar to a “topped out” quality measure, MIPS scores clustered toward the top end will result in a very high median threshold and a correspondingly high threshold for exceptional performance. Taking an attitude that “our MIPS scores for 2017 and 2018 were pretty high, and we are ok” could actually put a provider in the penalty box for 2019.

 

2018 could be interesting as well. Transitional rules for 2017 were originally extended to 2018. These rules were intended to ease the provider community into a difficult new program. If 2017 scores show that the population at large performed very well, might CMS re-consider transitional rules for 2018, and move directly into the more strict legislated rules?

 

Bottom line: 2017 MACRA was easy. 2019 MACRA will have very high thresholds for penalty avoidance. And 2018 could be open for re-adjustment.

 

I know this is a complex topic, and possibly controversial as well. I would love to hear some of your thoughts!

 

Jay R. Fisher
Jay.Fisher@C3Partners.biz