MACRA, ACA, SGR, GDP, ACOs, and Other Alphabet Soup

Pharmacy TimesAugust 2016 Pain Awareness
Volume 82
Issue 8

For more than 3 decades now, pharmacy has been talking the talk but has struggled to walk the walk.

What Do These Acronyms Have to Do with the Changing Pharmacy Practice Models?

For more than 3 decades now, pharmacy has been talking the talk but has struggled to walk the walk. Helpler and Strand introduced us to Pharmaceutical Care in 1990. Schools of Pharmacy migrated to the doctor of pharmacy degree throughout the remainder of that decade, and not long after the turn of the century, medication therapy management came along and was bolstered by the Medicare Modernization Act of 2003, mandating that Part D plans administer care delivery programs for payment beyond the dispending fee. Numerous other valiant efforts, such as the Asheville Project, have been put forth to unchain pharmacy, at least partially, from its retailing bonds. However, our ambulatory existence still remains dominated by reimbursement over acquisition cost, even in health systems where clinical pharmacy models have grown and evolved but are now increasingly subsidized by outpatient pharmacy “savings” and profits.

I had the privilege of speaking at a conference recently about new pharmacy practice models and population management strategies that will be essential to sustainability and success in the post—health reform era. I asked the room of more than 100 pharmacist-attendees to raise their hands if they had heard of MACRA. And after a substantial pause, nobody’s hand had gone up. As a health economist, I was startled and taken aback. The largest payer in the history of humankind just ramped up payment model changes that were set in motion by early-phase implementations of the Affordable Care Act (aka “Obamacare”), with the most widespread and comprehensive provider payment changes in the history of the program, and not one pharmacist in the room knew about it.

For nearly 2 decades, physician fee schedule updates for Medicare patients have been tied to the sustainable growth rate (SGR), which has been subsequently tied to the gross domestic product (GDP) through the Balanced Budget Amendment of 1997. Philosophically, this was an attempt to keep health care expenditures at or below the growth of the economy, at large, per Medicare recipient. Yet, over time, it proved troublesome as the cost of providing and delivering care grew at a faster rate than the GDP. Thus, the “doc fix” was, with regularity, required to be passed by congress to avoid the political (and potentially economic) pain of insufficient physician fee schedules resulting from implementing the SGR.

This attempt to rein in unsustainable expenditures in the Medicare program was challenged in its outyears because its primary lever to reduce costs was by pricing alone, not by incentivizing downward pressure on utilization and by aligning physician and provider payment with clinical and economic performance. Tied to the notion of the Triple Aim—a term coined by former CMS director, Don Berwick—meant to imply that better care results in better health, which results in lower costs; MACRA built upon the pilots and demonstrations emanating from ACA related to shared savings and a number of preexisting quality-improvement bonus programs to create a single, unified approach to realizing the triple aim as a way of expressing value in the health care system.

“In 2011, Medicare made almost no payments to providers through alternative payment models, but today, such payments represent approximately 20% of Medicare payments … HHS has set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements, by the end of 2016, and tying 50% of payments to these models by the end of 2018. HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016 and 90% by 2018 through programs such as the Hospital Value-Based Purchasing and the Hospital Readmissions Reduction Programs. This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”

—CMS Report from Proceedings1

Why does any of this matter to pharmacy?

Many of the drivers of success in these new payment models for physicians and hospitals are tied directly or indirectly to optimizing medication use for patients. These new Part A and Part B payment models are socialized among policy wonks as being “pay for value” or “fee for value.” Nearly all of the current ACO measures are directly or indirectly tied to medication use, and a number of the incentives in the developing alternative payment models are likely to have the same. Additionally, many of the ongoing efforts in existing programs, such as 30-Day Re-Admission Penalties, Bundled Payments, and Chronic Care Management programs, have medication optimization activities quite necessarily tied to them to increase the likelihood of maximum value for payment.

What is the risk/opportunity for pharmacy practice?

Unfortunately, the larger pharmacist community seems to remain largely unaware of, or unwilling to strategically align itself with, alternative payment models that require medication optimization activities to be successful. For a number of decades now, we have wanted to provide care beyond the pill bottle, but demand from payers and providers alike has been tepid, so efforts have lacked alignment, scale, and sustainability. Now that that the inevitable march away from fee-for-service, as we know it, has begun, pharmacy needs to step in and fill the void; if we do not, somebody else will.

Troy Trygstad, PharmD, PhD, MBA, is vice president of Pharmacy Programs for Community Care of North Carolina (CCNC), which works collaboratively with more than 1800 medical practices to serve more than 1.6 million Medicaid, Medicare, commercially insured, and uninsured patients. He received his PharmD and MBA degrees from Drake University, and a PhD in pharmaceutical outcomes and policy from the University of North Carolina. He also serves on the board of directors for the American Pharmacists Association Foundation.


  • Better, smarter, healthier: in historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value [news release]. website. Published January 26, 2015. Accessed July 18, 2016.

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