EP Perspectives

Understanding MACRA: The Future of Physician Compensation

Krishan K. Kataria, MD1 and Abraham G. Kocheril, MD, FACC, FACP, FHRS2

1Carle Illinois College of Medicine, Champaign-Urbana, Urbana, Illinois; 2OSF Cardiovascular Institute and the University of Illinois at Urbana-Champaign, Urbana, Illinois


Krishan K. Kataria, MD1 and Abraham G. Kocheril, MD, FACC, FACP, FHRS2

1Carle Illinois College of Medicine, Champaign-Urbana, Urbana, Illinois; 2OSF Cardiovascular Institute and the University of Illinois at Urbana-Champaign, Urbana, Illinois



The cost of U.S. health care has been a significant issue for many years. In 1988, a team of Harvard researchers developed a formula to set the fee schedule for physicians. This formula was based on relative value of physician work, a geographic modifier, and a monetary conversion factor that translated the formula into dollars. In 1997, the Sustainable Growth Rate (SGR) algorithm was used to calculate the monetary conversion factor, predicting the annual spending targets based on Medicare-compensated physicians. As a result, there were many years of threatened payment reductions. The Medicare Access and Children’s Health Insurance Program (CHIP) Reauthorization Act of 2015 (MACRA) repealed the Medicare SGR methodology for updates to the physician fee schedule and replaced it with a Quality Payment Program (QPP).

The intent of MACRA is to improve the economics and quality of care delivered to patients. It aims to achieve a patient-centered health care system that delivers better care as well as promotes smarter spending and healthier communities. The goal of MACRA is to transition from fee-for-service payments to payments for quality and value. 

In this article, we present a brief primer on important upcoming changes.


In the ongoing transition from paying for volume to value, the QPP changes the way Medicare incorporates quality measurements into payments and develops new policies to address and incentivize participation in alternative payment models. 

QPP implements the provisions of MACRA through two avenues: Merit-based Incentive Payment System (MIPS) and Alternate Payment Models (APMs). 


The majority of practicing clinicians will be participating in MIPS. Payments to clinicians under MIPS will be based on performance categories such as quality, cost, and meaningful use of electronic medical records (EMR). MIPS will consolidate three existing programs: the Physician Quality Reporting System (PQRS), Value-Based Payment Modifier (VBM), and Medicare Electronic Health Record incentive program for eligible professionals. MIPS will focus on quality (evidence-based specialty specific standards as well as practice-based improvement activities), cost, and use of Certified Electronic Health Record Technology (CEHRT) to support interoperability and avoid redundancies. 

Specifically, the MIPS score is calculated based on reporting in the four pillars of MIPS: quality, Promoting Interoperability (PI), cost, and improvement activities. These measures are outlined in significant detail on the Centers for Medicare & Medicaid Services (CMS) website, and the details of those measures are beyond the scope of this article. For transition year 2017, cost has been given a category weight of 0%, but by year 2021, this is expected to increase to 30%. Based on MIPS scoring, payment adjustments will be made to reflect efforts on value-based care. The options in 2017 ranged from negative 4% payment adjustments to clinicians or groups of clinicians who did not participate, to positive payment adjustments for clinicians who submitted a full year of data.

Participants in the MIPS track include qualified physicians or groups of qualified clinicians who bill Medicare Part B for more than $90,000 and provide care for more than 200 Medicare part B patients. Clinicians who do not meet these criteria may opt out of QPP. Qualified clinicians in MIPS include: physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists. 

The MIPS year begins on January 1st and ends on December 31st. This program started in January 2017, which was a transition year, and submissions for that year were to be submitted by March 2018. Payment adjustments based on performance in 2017 go into effect on January 1st, 2019.


APMs aim to move the health care system from volume-based care to value-based care. APMs can apply to a specific clinical condition, a care episode, or a population. Examples of APM models include: bundled payments for care improvement advanced model (BPCI Advanced), next generation ACO model, oncology care model (OCM), comprehensive ESRD care, shared savings program track 2 and 3, and Medicare accountable care organization (ACO) track 1+ model. 

The following three criteria must be met to be considered an advanced APM: 1) The APM must require participants to use CHERT; 2) Payment for covered professional services is based on quality measures comparable to those in the quality performance category under MIPS; and 3) The APM must either require that participating APM entities bear risk for monetary losses of a more than nominal amount under the APM, or be a Medical Home Model. 

For participants in Advanced APMs, a 5% incentive will be given for the designated performance year. In general, this is preferable to participation in MIPS.

Comprehensive Primary Care Plus (CPC+)

CPC+ represents Medicare’s efforts to strengthen the primary care delivery in the U.S. to promote population health and reduce overall costs. CPC+ is both a payment and care delivery model. It aims to incorporate five comprehensive primary care functions: 1) access and continuity; 2) risk-stratified care management; 3) data-driven population health management; 4) patient and caregiver engagement, and 5) comprehensive and coordinated care. Organizations participating in CPC+ will have the option to choose from two tracks (track 1 and track 2). The practices enrolled in CPC+ will receive prospective non-visit-based care management fees per attributed Medicare beneficiary from CMS. CPC+ track 1 will be 100% fee-for-service (FFS), whereas CPC+ track 2 will employ a hybrid model that blends FFS and global payment for evaluation and management services based on per attributable Medicare beneficiary. The eventual goal of the hybrid payment model is to make practices ‘incentive neutral’ and allow them to deliver care in both office-based settings and non face-to-face visits. Both of these tracks have the potential to receive incentive payment based on the quality and utilization metrics.

Accountable Care Organization (ACO)

ACOs are groups of doctors, hospitals, and other health care providers who voluntarily join together to provide high-quality care to their Medicare patients. ACOs aim to deliver the right care for patients at the right time in order to avoid unnecessary duplication of services and prevent medical errors. ACOs contribute to expand the CMS mission of providing high-value care by participating in one of the three tracks under the Medicare Shared Savings Program.

The Shared Savings Program is an alternative payment system that promotes accountability and motivates ACOs to invest in high-quality and efficient services. The number of ACOs participating in the shared savings program has grown from 220 in 2012 to 561 in 2018, covering 10.5 million assigned beneficiaries. 

The overarching goal for the Shared Savings Program is to lower the growth of expenditure on health care delivery for the population of Medicare patients. By promoting coordinated health care delivery, ACOs can choose to participate in the monetary savings that can be achieved by application of this model. Depending on the track that an organization chooses, they also assume the downside risk if the targets for lowering medical spending are not met. 


MACRA represents the government’s efforts to rein in the costs of health care, moving from the current volume-based payment system to a value-based payment system. Health care systems have invested heavily in electronic health records as well as in the staff needed to implement the required EMR data submissions and participate in QPP. These efforts are still in their infancy, and their complete impact on patient care and physician compensation is yet to be seen.

Disclosures: The authors have no conflicts of interest to report regarding the content herein.   

Recommended Reading

  1. Quality Payment Program. CMS. Available at https://qpp.cms.gov/. Accessed August 10, 2018.
  2. Comprehensive Primary Care Plus. CMS. Published August 10, 2018. Available at https://bit.ly/1UZdgmL. Accessed August 10, 2018.
  3. Shared Savings Program. CMS. Available at https://go.cms.gov/2KJzupP. Accessed August 10, 2018.
  4. 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. Federal Register. Published November 4, 2016. Available at https://bit.ly/2lrUZ2e. Accessed August 10, 2018.
  5. Estimated Sustainable Growth Rate and Conversion Factor, for Medicare Payments to Physicians in 2015. CMS. Available at https://go.cms.gov/1yTBo0v. Accessed August 10, 2018.