Medicare Physician Compensation Supply of Medical Services

Will MACRA kill small physician practices?

Depending on the source, 34% to 59% percent of physicians are employed in practices of less than 10 physicians.  On the other hand, 39% of physicians are employed by hospitals.  How will these proportions change over time?

An interesting paper by Casalino (2017) examines the impact of the  Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) on the likely composition of physicians in the future.  MACRA provides incentives for physicians to join Advanced Alternative Payment Model (AAPM) programs which include:

  • Accountable Care Organizations (e.g., Next Generation ACOs)
  • Comprehensive End-Stage Renal Disease Care Organizations
  • Oncology Care Model
  • Comprehensive Primary Care Plus (CPC+) medical home program

AAPMs require physicians to accept both upside and downside financial risk.  Those participating in an AAPM receive a 5% payment bonus between 2019-2024 and have a 0.75% payment increase compared to only a 0.25% payment increase for physicians participating in Merit-Based Incentive Payment System (MIPS).

CMS is investing $20 million annually for the next 5 years to provide technical assistance to physician practices of 15 or fewer patients.  Additionally, physicians in CPC+ programs only need to take on nominal risk.  Additionally, physicians with fewer than 100 patients or with less than $30,000 of billings are also exempt from both quality measure reporting as well as positive and negative payment adjustments.

Are these incentives sufficient to keep small practices alive in the U.S?  Casalino thinks not.

Nevertheless, I believe it likely that MACRA will accelerate the movement of physicians into corporate employment. Participating in the CPC+ program or creating an Oncology Care Model practice requires the investment of capital and of substantial physician and staff time, both of which are scarce in small practices, and it involves taking some financial risk for the cost of care.

More importantly, the complexity of MACRA will, I believe, be too daunting for many physicians. The material presented in this article may seem somewhat complex, but it is a very simplified version of the 823-page MACRA final rule.


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