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Improve Quality, Control Spending, Maintain Access — Can the Merit-Based Incentive Payment System Deliver?

Article · February 13, 2017

Medicare is poised to overhaul the way it pays for ambulatory care services. The Centers for Medicare and Medicaid Services (CMS) has published a final rule codifying the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA),1 which directed CMS to gradually replace fee-for-service reimbursement with value-based payment approaches. MACRA’s bipartisan passage may position it to play an outsized role in federal efforts to improve health care quality, rein in service volume, and control spending growth while not jeopardizing access to care. Can it deliver on these goals?

MACRA’s influence on Medicare spending may be substantial. Medicare Part B paid $70 billion for physician services in 2015,2 but the referrals, orders, and prescriptions of ambulatory care physicians drive much of Part A spending (which totaled $279 billion in 2015). CMS faced several challenges in redesigning Part B payment. Part B pays diverse specialists and practices that vary in size, affiliation with hospitals and larger medical groups, and participation in new payment models. CMS administrative systems, geared toward fee-for-service payment, are difficult to overhaul. And payment changes that pressure practices to close or consolidate could disrupt access.

MACRA’s Quality Payment Program, which launched on January 1, 2017, creates two parallel payment pathways: alternative payment models (APMs) and the Merit-Based Incentive Payment System (MIPS). The APM path relies on new types of organizations and contract incentives, such as accountable care organizations, that meet CMS-defined criteria for achieving quality improvement and assuming financial risk. The MIPS is rooted in the fee-for-service system, adjusting payments according to a score described below. CMS estimates that the number of MIPS-participating clinicians could initially outnumber those qualifying for APMs by seven to one.

To ease the transition, CMS built the MIPS on three existing programs: the Physician Quality Reporting System (PQRS), the Value-Based Payment Modifier, and the Meaningful Use program for health information technology (IT). CMS introduced a pick-your-pace rollout3 and exempted low-Medicare-volume practices (approximately 32% of Medicare Part B–billing clinicians accounting for 5% of spending) during 2017. But by allowing clinicians to customize their compliance, CMS may be inviting unforeseen effects, especially since clinicians’ operational decisions will affect the policy’s outcomes (see flow chart).

How the MIPS and Other Drivers Can Influence Practice Decisions, Key Practice Outcomes, and Medicare Population Outcomes

How the MIPS and Other Drivers Can Influence Practice Decisions, Key Practice Outcomes, and Medicare Population Outcomes. Click To Enlarge.

The backbone of the MIPS is a payment adjustment derived from an eligible clinician’s Composite Performance Score, comprising subscores on quality measures, clinical practice improvement activities (CPIAs), resource use, and advancing care information (IT use). CMS will calculate the resource-use subscore on the basis of total (Parts A and B) per capita costs for more than 40 predefined clinical episodes for patients attributed to the clinician or group as compared with average Medicare spending on these episodes. Advancing-care-information scores will depend on attesting to prespecified activities and measures, with performance determined by factors such as the local availability of electronic registries and interoperability of electronic health records (EHRs).

Clinicians’ performance on quality and CPIA subscores will largely depend on their selection of quality measures, CPIAs, and reporting methods. CMS granted clinicians substantial latitude to choose quality measures. Through an annual CMS Call for Quality Measures, eligible professional organizations can suggest quality measures to the Department of Health and Human Services (HHS). After peer review, these may be added to specialty-specific measure sets, from which participants must select at least six measures, including at least one outcome measure (if available) for reporting in each performance period. Since participants will tend to select measures on which they expect to perform well, CMS may, beginning in year 2, adjust or remove topped-out measures.

The CPIA category also involves a “request for information” inviting suggestions for CPIAs and offering guiding criteria. Providers will select two to four CPIAs from an HHS-developed list and submit their relevant data. Some practices — such as certified patient-centered medical homes — will receive full CPIA credit on the basis of improvement activities required for certification; others — such as small and rural practices, non–patient-facing clinicians, and practices in professional shortage areas — may select only one to two CPIAs.

For quality measures and CPIAs, clinicians will submit their own data, either as individuals or as part of a group. They may report measures using either of two CMS-approved types of registries, EHRs, CMS Web interfaces, claims, or attestation to participation in a CPIA and may use different reporting methods for different categories. This flexibility allows providers already participating in programs such as the PQRS to continue submitting data through the same mechanism. For CMS, however, it adds administrative complexity and will make performance comparisons difficult because reporting of the same measure by different methods can produce different results and benchmarks may differ.

The history of incentive programs suggests that clinical performance changes slowly, but other aspects of care delivery can change quickly. Practices’ business models are attuned to a fee-for-service environment. The MIPS will shift their focus from generating services to generating payment adjustments. Many observers hope that clinicians will pursue quality and efficiency changes similar to those that hospitals pursued in response to the diagnosis-related-group payment system: standardizing clinical protocols and medical supply purchasing and using drugs, diagnostic tests, and imaging more judiciously. But clinicians will probably focus first on identifying the combination of measures and improvement activities that produce positive payment adjustments. Staffing patterns may change as office staff take on MIPS reporting, care management, and patient engagement.

The MIPS may also spur providers to revisit their IT capabilities. Most EHRs have separate clinical record and billing functions designed to document fee-for-service encounters. The MIPS ought to generate demand for IT systems that support performance measurement, population health management, and feedback on quality and costs, but its incentives for interoperability and clinical decision support may be weak. Sharing data among clinicians involved in a care episode will be difficult given interoperability limitations. Practices working with technology vendors that can quickly adjust their systems may have an advantage over those with less agile vendors.

Outfitting practices to participate in the MIPS could be costly. The market is already driving small practices to join larger groups for administrative support and economies of scale. MIPS participation thresholds could affect these decisions. For example, MACRA offers reporting adjustments and includes $100 million in technical assistance nationally over 5 years to small practices (those with 15 or fewer eligible clinicians) and those in rural or shortage areas.4 Clinicians with low Medicare volume will be exempted from the MIPS in 2017. Reporting adjustments are offered to non–patient-facing clinicians, defined as those billing 100 or fewer patient-facing encounters during a determination period. For practices near these thresholds, minor staffing or service changes could yield additional technical support and ease MIPS requirements.

The MIPS is a national program, but practices’ financial success is determined locally. Competition and the presence of dominant hospitals or insurers can influence a practice’s potential for positive payment adjustments. Moreover, the pace of practice consolidation varies by state.5 Other local factors, such as available workforce, local wages, and trends in utilization will affect both a practice’s decisions about how to participate and the performance level it can achieve.

Prior attempts to modify physician payment were plagued by inertia, increasing service volume, and spending growth. Will the MIPS change this dynamic? Combined with the diversity of practice features and local markets, the clinician discretion granted by the MIPS is a double-edged sword. Clinician responses may have limited impact on quality and spending, but MIPS may nevertheless spark unintended practice responses. Evaluating the MIPS on the basis of measured quality, payment adjustments, and financial effects alone may be insufficient, especially in the short term. CMS should monitor for other signs of disruption and progress — effects on access to care, clinician morale, patient experience, practice consolidation, migration to APMs, and progress toward innovative care models and team-based care — and be prepared to make adjustments that improve quality, affordability, and access while minimizing unwelcome side effects.


From the Commonwealth Fund, New York (E.C.S.); and the Kennedy School of Government, Harvard University, Cambridge, MA (C.J.H.).

1. Centers for Medicare & Medicaid Services (CMS), HHS. Medicare program: Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) incentive under the physician fee schedule, and criteria for physician-focused payment models: final rule with comment period. Fed Regist 2016;81:77008-77831. Medline
2. 2016 Annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. June 2016 (
3. Slavitt A. Plans for the quality payment program in 2017: pick your pace. Baltimore: CMS Blog, 2016 ( Quality payment program: Baltimore: CMS, 2017.
4. Support for small practices. Quality Payment Program fact sheet. Baltimore: Centers for Medicare and Medicaid Services, 2016 (
5. Muhlestein DB, Smith NJ. Physician consolidation: rapid movement from small to large group practices, 2013-15. Health Aff (Millwood) 2016;35:1638-1642. CrossRef | Web of Science | Medline

This Perspective article originally appeared in The New England Journal of Medicine.

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