MACRA, Physicians, and “Big Med”

By: Rick Mayes, Ph.D.

Medicare Payment Policy Matters (a Lot)

MedicareMedicare is the most important player in the annual battles over who controls the manner in which medical care is paid for and how much it costs. As the single largest individual buyer of health care and the “first mover” in the annual payment game between those who provide care and those who pay for it, Medicare invariably drives – directly or indirectly – the behavior of medical providers and private payers. The program’s reimbursement rates for physicians are the only transparent ones; as such, they provide the benchmark for private payers in their negotiations with physicians. Granted, the details of payment reform are often mind-numbingly complex and arcane and the number of new acronyms can be soul-draining, but following major changes in Medicare payment policy is critically important for understanding who gets coverage for what and how most health care is financed, organized and delivered.

MACRA Basics and Physicians’ Options

In April 2015, in a very rare display of political bipartisanship, Congress voted overwhelmingly – 392 to 37 in the House and 92 to 8 in the Senate – to scrap Medicare’s system for reimbursing physicians that had existed since 1992 and to transition to a new physician payment system with the Medicare Access and CHIP Reauthorization Act (MACRA).[i] Frustration and disappointment with the previous system had reached a level among physicians and elected leaders of both parties that major change finally occurred after years of complaining. MACRA reflects the unavoidable reality that some models for paying physicians are better than others. “The three worst,” jokes James Robinson, “are fee-for-service, capitation, and salary. Fee-for-service rewards the provision of inappropriate services, the fraudulent upcoding of visits and procedures, and the churning of ‘ping-pong’ referrals among specialists. Capitation rewards the denial of appropriate services, the dumping of the chronically ill, and a narrow scope of practice that refers out every time-consuming patient. Salary undermines productivity, condones on-the-job leisure, and fosters a bureaucratic mentality in which every procedure is someone else’s problem.”[ii] MACRA is intended to encourage the development of models that blend the different payment approaches in order to mitigate the undesirable elements of pure fee-for-service, capitation, or salaried physician reimbursement.

Under MACRA, the majority of physicians will participate in one of two new Medicare payment models: a (1) Merit-based Incentive Payment System (MIPS) or an (2) advanced Alternative Payment Model (APM). MIPS retains the existing fee-for-service system but streamlines a number of current Medicare pay-for-performance metrics to calculate percentage bonuses or penalties, starting in 2019, for physicians based on their overall “quality” scores. The second option for physicians is to essentially join a large health care system that takes on some of the financial risk related to patient care in exchange for the possibility of earning bonus payments if higher quality care is provided at lower cost. Eligible advanced APMs could include: Medicare Shared Savings Programs, Next Generation ACO Models, Oncology Care Model Two-Sided Risk Arrangements, and Comprehensive End-Stage Renal Disease Care Models.[iii]

Concerns over MACRA’s Potential Acceleration of “Big Med”

A major concern related to MACRA is the potential harm that the Act could inflict upon smaller physician practices that will struggle to pay for the increased administrative costs associated with just participating in MIPS. Unless major changes are made this year to MACRA, many physicians will eventually be confronted with having to join a big, integrated health care system in the form of an APM. “Faced with MACRA’s complexity and the financial risk it introduces,” observes Larry Casalino, “many physicians are likely to throw up their hands, say ‘this is the last straw—I can’t take it anymore’.”[iv] Until recently, the majority of physicians chose to not even submit various quality data to Medicare and simply accept a 1.5% penalty in their reimbursement fees due to the expense and onerous work involved.[v] Physicians already report greater stress and frustration due to spending more time dealing with external quality measures.[vi] Their frustrations will only increase if MACRA accelerates the corporate transformation of American medicine, which it could likely to do.

In its current form, MACRA amounts to something of a gamble on the ability of big health care organizations to improve the quality of patient care and restrain cost growth. This gamble reflects a belief among many employers, elected officials, and members of the health policy community that pay-for-performance schemes for health professionals work and that Medicare must shift from a volume-to-value reimbursement model that moves away from fee-for-service payment. Yet the evidence for this belief is thin, mixed, and preliminary. Therefore, argues Robert Berenson, a major question is whether physician leaders will be able to actively guide the evolution of large APMs and other integrated health systems “to increase quality, reduce costs, and reaffirm a (perhaps updated) form of professionalism or, alternatively, passively accept a transformation in the body and soul of American medicine.”[vii]


[i]  G. Wilensky, “The ‘Doc Fix’ Is Over, but Unresolved Concerns Linger,” JAMA 313 (June 9, 2015):2211.

[ii]  J. Robinson, “Theory and Practice in the Design of Physician Payment Incentives,” 79 Milbank Quarterly (2001):149-77.

[iii]  See Centers for Medicare & Medicaid Services, Quality Payment Program Fact Sheet, (Washington D.C.: January 2017).

[iv]  L. Casalino, “The Medicare Access and CHIP Reauthorization Act and the Corporate Transformation of American Medicine,” Health Affairs 36 (May 2017):867.

[v]  See R. Berenson, D. Kaye, “Grading a Physician’s Value—The Misapplication of Performance Measurement,” New England Journal of Medicine 369 (2013):2079-81.

[vi]  See P. Miller, “The Medical Profession’s Future: A Struggle Between Caring for Patients and Bottom-Line Pressures,” Health Affairs 35 (March 2016):407-10.

[vii]  R. Berenson, “A Physician’s Perspective on Vertical Integration,” 36 Health Affairs (September 2017):1585-90.