The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 makes sweeping changes to how Medicare will pay for physician services. The legislation repeals the flawed Medicare physician sustainable growth rate (SGR) formula and, instead, provides predictable payment increases. The law also calls for the Centers for Medicare & Medicaid Services (CMS) to implement a new two-track payment system for physicians and other eligible professionals. The intent of the two tracks is to tie an increased percentage of physician payments to outcomes through the Merit-based Incentive Payment System and to encourage the adoption of “alternative payment models” (APMs). APMs move payment away from fee-for-service reimbursement, and instead pay providers based on the quality and cost of care for particular episodes (e.g., bundled payment), or defined patient populations (e.g., accountable care organizations).

Implications for Hospitals and Health Systems. How CMS implements the changes contained MACRA will have a significant impact, not only on physicians, but also on the hospitals and health systems with whom they partner. Hospitals that employ physicians directly will help defray the cost from implementation of and ongoing compliance with the new physician performance reporting requirements, as well as be at risk for any payment adjustments. Moreover, hospitals may be called upon to participate in APMs so that the physicians with whom they partner can qualify for the APM track.

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