No longer is the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) something we talk about in the future tense. The final rule was released on October 14, 2016, and it confirmed that the start date of the first implementation period will be January 1, 2017 – just a few months away at this point. This is not a “simple” replacement to the sustainable growth rate, but a game-changing development that will likely dramatically alter the delivery and financing of care. It is designed to accelerate adoption of value-based care practices far beyond Medicare and will impact all sectors of the industry – from providers and health plans to medical technology and pharmaceutical manufacturers.
It was with this lens that Deloitte recently held a “boot camp” to bring together key leaders from our industry practices to focus on the transformational shift to value-based care. We were there to dig into this issue that’s positioned to reshape health care from all angles and learn from what’s happening in the trenches of our health care system. I went into the boot camp having spent a lot of time with our leaders from across the health care industry discussing how MACRA and previous value-based care initiatives will impact medical technology (medtech) companies. The shift from volume- to value-based care has accelerated over the past two years, with the US Centers for Medicare and Medicaid Services (CMS) expanding new payment models beyond the Medicare Shared Savings Program or Next Generation Accountable Care Organizations to include more bundled payment programs for procedures involving medtech, such as orthopedics and cardiovascular care.
This new value-based care reality is highly disruptive to the medtech industry. Successful medtech innovators should consider looking beyond unmet clinical needs to also address quality improvement and cost reduction in the holistic delivery of care – or risk being commoditized. Many are developing services or solutions “beyond the product” to drive better outcomes for patients, while improving the efficiency of care delivery for providers.
All are rethinking how to address increasing demands for credible evidence to support the value of their offerings. New contracting models are being tested that link technology pricing to clinical or economic outcomes. And commercial organizations have been busy adapting to customers changing how they make purchasing decisions.
Going into the boot camp, I expected to hear how critical these new strategies are as MACRA intensifies the emphasis on value-based care. Some implications of MACRA seem clear. For example, the consolidation that we’ve seen in recent years among medtech customers (hospitals, medical groups, and health systems) seems set to continue. In a recent online pulse survey by the Deloitte Center for Health Solutions, many of the US health care executives surveyed who lead value-based care efforts predict MACRA will drive further consolidation among physicians. Many feel that it is due to physicians needing access to greater resources to bear increased financial risk, comply with reporting requirements, and invest in needed capabilities.
Although MACRA has a timeline for implementation stretching over the next several years, clinicians will start reporting their performance in January 2017, and applications to participate in qualifying advanced Alternative Payment Models (APMs) are due April 2017. This means that many health systems and physician groups are already developing strategies to comply with the law, improve performance, and sort through competing demands for investments and resources. Medtech’s c-suite customers are being challenged to execute quickly on major strategic and operational changes without compromising performance, and their teams have no time to spare. Access to providers to discuss new value propositions and partnering models may be a big challenge for medtech.
What really struck me was our discussion of alternative ways physicians will be paid. CMS has projected that the majority of clinicians will begin in the Merit-Based Incentive Payment System (MIPS) rather than the APM track. The big “ah ha” moment for me was resource use in clinicians’ composite performance score under MIPS. While resource use is weighted at zero for “transition year” of 2017, CMS will review claims in 2017 and intends to calculate this measure and provide feedback to clinicians. And, it quickly grows to 30 percent of the MIPS composite score by the 2019 performance year.
Critically, this may be where many providers seek to differentiate their MIPS composite score – and receive payment increases – since other score components may result in limited differentiation across clinicians. Put simply, utilization of health care services, particularly those that are higher cost, will become increasingly important for all industry stakeholders under MACRA.
The medtech implications are significant: Besides intense scrutiny on medical technologies, clinician referral patterns and choices of sites of care are likely to be disrupted. Successful medtech companies will have to navigate local markets evolving at various speeds with payers and providers making different choices on risk models, network choices, and strength of supporting capabilities. As a result, medtech companies should articulate – and present credible evidence on – how their offerings impact delivery of care in terms of quality and cost.
As we think about the future of health care in the post-MACRA world, choices on utilization embedded in clinical pathways will be critical. Medtech companies can bring critical insights to therapeutic areas and patient journeys within and across specific sub-populations to help define care choices.
However, many believe we first need to build more trust among the health care sectors. As MACRA influences a new period of change, medtech leaders should credibly position themselves as partners at the table, to improve the lives of patients and achieve the goals of value-based reform.
For more on how MACRA is disrupting the health care system at every level and the latest on Deloitte’s insights around the law, please visit our MACRA website.