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Understanding MACRA, MIPS and APMs

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This blog was originally published in June 2017, and was updated in May 2023.

MACRA, MIPS, and APMs are three important terms related to the Medicare payment system that are essential for healthcare providers to understand. 

The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 introduced new payment models for healthcare providers that focus on quality and value-based care, instead of fee-for-service models. The Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) are two tracks under MACRA that healthcare providers can choose to participate in, in order to receive incentive payments or avoid penalties. 

Understanding MACRA, MIPS, and APMs is essential for healthcare providers to navigate the changing healthcare payment landscape.

What is MACRA?

The Affordable Care Act (ACA) had a positive impact on healthcare in the United States. Congress passed MACRA in 2015, hoping to build on this success by increasing funding to physicians participating in and meeting benchmarks set by the Merit-Based Incentive Payment System (MIPS). MACRA also established Advanced Alternative Payment Methods (APM), a program that rewards physicians who explore innovative payment methods that benefit patients.

Service providers who met program goals would move from a fee-for-service payment structure to a pay-for-performance structure. In other words, physicians who did their jobs well would receive more money than those who emphasized patient numbers of care outcomes.

When these programs were signed into law, their designers knew they needed a reliable way to measure success. As a result, they developed the Quality Payment Program.

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What is the Quality payment program?

The CMS Quality Payment Program, enacted by MACRA, enables independent providers to focus more on providing high-quality care for their patients. The program offers two tracks for independent practices to choose from:

  • Advanced Alternative Payment Models (APMs)

  • The Merit-based Incentive Payment System (MIPS)

Both of these options require adopting electronic health records (EHR) software to make it possible for supervisors to evaluate outcomes. 

Incentive programs — including Value-Based Modifier (VBM), Medicare EHR Incentive Program, and the Physician Quality Reporting System (PQRS) — already existed. The Quality Payment Program would replace them, making service providers even more responsible for the levels of service they offer. Those that excelled via APM or MIPS could receive higher pay for treating Medicare and Medicaid patients.

Related Content: Get expert tips for finding an EHR solution that supports MACRA

What is MIPS?

The Merit-based Incentive Payment System (MIPS) is a payment model under MACRA. It’s designed to incentivize healthcare providers to improve the quality, cost, and efficiency of care they provide to patients. Eligible healthcare providers are required to report data on four performance categories: Quality, Cost, Improvement Activities, and Promoting Interoperability. 

The scores from each category are combined to determine the provider's MIPS score, which is used to determine their payment adjustment. The goal of MIPS is to promote high-quality, value-based care and improve healthcare outcomes for patients.

Determining the MIPS score

As mentioned before, your MIPS score is calculated based on four categories. Providers receive a score between 0 and 100 for each category, and the scores are combined to produce the final MIPS score. The higher the score, the better the provider's performance, which may lead to incentive payments.

Quality of care

Quality of care is measured by evaluating how well healthcare providers perform on specific measures that assess healthcare quality and patient outcomes, such as patient satisfaction, clinical outcomes, and care coordination. Providers must select and report on a set of measures that are relevant to their patients. The higher the provider's score on these measures, the better the quality of care they have provided.

Clinical practice improvement activities

This category is measured by assessing healthcare providers' participation in activities that improve clinical practice, such as care coordination, patient engagement, and population health management. Providers choose relevant activities and document their participation by implementing new processes or technologies, conducting staff training, or improving patient communication.

Cost of resources

The is measured by evaluating the total cost of care for a specific episode of care or a patient's overall cost of care. This includes costs related to hospitalization, post-acute care, and any other services related to the episode or patient. 

Providers are not required to report any data for cost measures, as CMS calculates these measures using administrative claims data. The cost performance category makes up 20% of a provider's MIPS final score, with higher scores indicating lower costs of care.

Promoting interoperability

This category requires healthcare providers to use certified electronic health record (EHR) technology and EMR software to improve patient care and interoperability, promote patient engagement, and provide patients with electronic access to their health information. 

How do MACRA, MIPS, and APMs affect independent practices?

MACRA, MIPS, and APMs affect independent practices by changing how they get paid for Medicare services. Under MACRA, providers who participate in Medicare are required to choose between MIPS or an APM. Independent practices must ensure they meet reporting requirements to avoid payment penalties and take advantage of potential payment incentives.

Participating in MACRA

How can independent practices participate in MACRA in 2023? The good news is that the government wants more independent practitioners to get involved so they can see improved health outcomes that lower the overall cost of healthcare and prevent long-term illnesses. 

The following are options for those wishing to participate in MACRA.

  • You can participate for a reduced number of days instead of the whole year. By taking this approach, you could qualify for a small payment if you submit data on how your practice is using technology and what you are doing to improve your quality of care. As a Clinical EHR participant, you can demonstrate that you are taking steps to improve your patient care while streamlining and optimizing your clinical workflow.

  • You can participate for the full calendar year. To take advantage of this option, you would have been ready to fully participate in the Quality Payment Program for a full calendar year.

  • You can participate in an Advanced Alternative Payment Model. If possible, provide information from 2017 to 2022. You will receive a 5% APM Incentive Payment. If that isn't an option for you, submit information for 2023 to receive a 3.5% APM Incentive Payment.

See How You Can Ensure MACRA and MIPS Compliance

We want to help ensure that you are MACRA compliant. Download our free E-Book, “Mastering MACRA” to see how you can ensure MACRA compliance, and contact us to learn more about your options!


What is the MACRA rule?

The MACRA rule is a federal regulation that establishes a new payment framework for healthcare providers who participate in Medicare. The rule seeks to replace the Sustainable Growth Rate (SGR) formula that was used to calculate Medicare payment rates for healthcare providers. 

How does MIPS relate to MACRA?

MIPS (Merit-based Incentive Payment System) is a payment track under the MACRA (Medicare Access and CHIP Reauthorization Act) rule. MIPS is a key component of this payment framework and incentivizes providers to deliver high-quality care.

Where do I find my MIPS score?

You can find your MACRA MIPS score by visiting the Quality Payment Program website and entering your 10-digit NPI number. 

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