3. MACRA spells the end of the standalone primary care provider and health tech looks to fill the void
In late 2016, CMS overrode the way Medicare physicians received payment with the passage of MACRA (Medicare Access and CHIP Reauthorization Act). The legacy approach to physician payment, known as the Sustainable Growth Rate (or “doc fix”), was based on a fee for service backbone. MACRA details how physician payment and its adjustment over time will occur after 2018. These payment adjustments will be based on two value-based criteria: involvement in Alternative Payment Models (APM – such as ACOs and CMMI demonstration projects) and a Merit-based Incentive Payment System (MIPS). With MACRA reporting to begin in 2018, I predict that 2017 will see increased market adoption of health tech solutions to manage and automate primary care operations.
Prognosticators familiar with nominated HHS Secretary Dr. Tom Price’s preferences predict that MACRA will remain unchanged in the new administration given its broad bipartisan support. What may change though, is shifting of mandatory APM rollouts such as the CJR (Complete Joint Replacement) demonstration project and cardiovascular bundles to optional/voluntary participation. This switch to voluntary participation is possible because the APM component of MACRA is a bonus payment until 2026, when it then becomes a requirement and a lion’s share of the payment adjustment schedule. The below chart shows the dollar flows in typical APM structure for the average PCP.
For the next 10 years, MIPS (Merit Based Incentive Payment System) will become the required, default system of clinician payment adjustment. The MIPS adjustments start at a (+/-) adjustment of 4 percent of Medicare revenue, but ultimately grow to (+/-) 9 percent by 2022. Said another way, a clinician can stand to gain a bonus or a dock in pay equal to the adjustment figure in a given year. The MIPS system is based on four components of reporting of care of varying significance: quality, value-based payment practices, meaningful EHR use, and clinician improvement activities.
Compliance with MIPS reporting and achieving success in target measures creates a significant burden requiring dedicated infrastructure. Independent primary care groups will understandably struggle to comply and succeed in a post-MACRA world. Even large integrated practices will require new workflows given the potential 10-plus percent swings in Medicare revenue. Given the need for new infrastructure, I predict we will see the continued trend of consolidation of independent practices and entry by health tech/service start-ups offering MACRA compliance and optimization services.
The last five years have seen emergence of a spectrum of primary care practice management/value based care enablement offerings in the market. Three well-funded leaders in this space are Aledade (Venrock, GV, Biomatics), Village MD (Oak HC/FT), and Lightbeam Health (Hearst, 7 Wire). Y Combinator alum Able Health and Greenville based Chartspan (Iron Yard), represent new entrant, pure play MACRA enablement solutions. There are a host of start-ups who have pioneered Chronic Care Management (CCM) reimbursement code submission that are also well positioned to power MACRA compliance. Two notable players in this space are CareSync (Greycroft, Harbert, Merck GHI) and MD Revolution (Jump). I predict that this is just the tip of the iceberg, and venture investors will see a flood of new entrants combining aspects of the above business models to serve the growing need of primary care practices in a post-MACRA world.