October 20, 2016

QUESTION:        Does the recently released final rule for MACRA (or the law itself) require hospitals and other entities to revise contracts they have with physicians?

ANSWER:           MACRA does not require hospitals and other entities to revise contracts they have with physicians.  However, we recommend conducting a MACRA audit of the physician contracts in your organization to determine if revision is necessary and permitted and, if so, how to go about working with physicians to restructure their contracts so that they are aligned with the focus of MACRA.

MACRA repealed the Medicare Sustainable Growth Rate methodology for updates to the Physician Fee Schedule and replaced it with an approach to physician payment which is heavily dependent on rewarding the delivery of high-quality patient care through two methods:  Advanced Alternative Payment Models and the Merit-based Incentive System.  Both of these models incorporate various quality, cost, and use of certified Electronic Health Record criteria into determining the amount of reimbursement.  These reimbursement models may conflict with the compensation plan used for your current physician contracts.

A MACRA audit seeks to address any such conflicts by reviewing physician contracts to answer the following questions: (1) Will MACRA affect the agreement? (2) If so, how? (3) Where MACRA will affect the agreement, what can the entity do to revise its agreements to be more consistent with MACRA?

With respect to this last question, it is important to remember that physician contracts are legal documents and the terms of those contracts are binding on the contracting entity and the physician.  Any revisions have to be consistent with those terms.  Often, contracts will have provisions on amendments, which specify how and for what reasons the contract can be revised.  An amendment provision may allow the contract to be revised for legal or regulatory changes affecting reimbursement.  Under such circumstances, an amendment may be permitted due to MACRA.  Some contracts only permit amendments by consent of the parties to the agreement.  Regardless of the content of the amendment provisions in your physician contracts, engaging physicians in any amendment process is vital to ensure buy-in and transparency.