Over the past few years Congress has created a number of programs that call for payment incentives and reductions (referred to as “adjustments” by the Centers for Medicare and Medicaid Services) that impact physicians and their practices. These programs include:

  • Sequestration
  • Electronic Prescribing (eRx)
  • Electronic Health Records (EHR) and Meaningful Use (MU)
  • Physician Quality Reporting System (PQRS)
  • Value Based Modifier (VBM)

At their inception, most of these programs offered an incentive to participate. However, most of the programs are entering their penalty phases, with complex and potentially conflicting requirements and implementation processes. Congress created these programs through several different pieces of legislation. To date, the Centers for Medicare and Medicaid Services (CMS) and Congressional policymakers have typically assessed the various value-based programs by focusing on each of the programs in isolation. As demonstrated in the chart below, this isolation creates the cumulative effect of a set of penalties that, when combined with a 2% payment sequester reduction, could potentially reduce reimbursement for Medicare services in total by 11% in 2017, growing to a 13% reduction or more by the end of the decade. SUMMARY OF THE MEDICARE PENALTY REDUCTION    


https://www.practicons.com/wp-content/uploads/2022/01/stareport.pdf The Budget Control Act of 2011 imposed caps on discretionary programs designed to reduce their funding by more than $1 trillion over the 10 years from 2012 through 2021, relative to the Congressional Budget Office baseline from 2010. It also established a Joint Select Committee on Deficit Reduction to propose legislation reducing deficits by another $1.2 trillion over that period, and established a backup “sequestration” procedure to increase the incentive if the Joint Committee to reach a compromise. Because the Joint Committee failed to achieve its goal, sequestration — a form of automatic cuts that apply largely across the board — began on April 1, 2013. The mandatory cuts in Medicare payments to physicians, providers and insurance plans are limited to 2% of such payments in any year. This means that Medicare physicians will continue to bill Medicare in the normal way but will be reimbursed at two percent less than the Medicare fee schedule.

Electronic Prescribing (eRx)

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ERxIncentiv Program start date: 2009 Medicare introduced an e-prescribing program in 2009 that encourages physicians to electronically transmit their prescrip- tions. The e-prescribing program provided incentive payments for physicians who e-prescribed and payment penalties for physicians who did not. Successful reporting in calendar year 2012 provided a 1% incentive. Successful reporting in calendar year 2013 provided a 0.5% incentive. Calendar year 2013 was the last year to earn an eRx incentive. Starting in 2012, Medicare began a 1% payment reduction penalty on all Medicare allowed charges for eligible professionals who did not electronically transmit their prescriptions. The penalty increased to 1.5% in 2013 and 2% in 2014. Although calendar year 2014 is the last year that payment reductions will be incurred for not electronically prescribing under the eRx program, physicians who did not successfully e-prescribe in 2012 and therefore were subject to the 2014 e-prescribing penalty may still face penalties under the electronic health records (EHR) program. Electronic prescribing via certified EHR technology is a requirement for eligible professionals in order to achieve meaningful use under the Medicare and Medicaid EHR incentive programs. Physicians who received e-prescribing penalties in 2014 and do not achieve meaningful use in 2014 face a 2% penalty in 2015 (1% for failure to e-prescribe and 1% for failing to achieve meaningful use).

Electronic Health Records (EHR) and Meaningful Use (MU)

http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Basics.html Program start date: 2011 The Medicare and Medicaid electronic health record (EHR) incentive programs provide incentive payments to eligible professionals, eligible hospitals and critical access hospitals as they adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology. In order to receive the CMS incentive payment for implementing EHRs, providers must begin implementation in 2014. Medicare and Medicaid EHR incentive payments are detailed at Medicare EHR Incentive Payment Schedule for Eligible Professionals. In the American Recovery and Reinvestment Act of 2009 (ARRA), Congress mandated that payment reductions should be applied to Medicare eligible professionals and eligible hospitals who are not meaningful users of certified EHR technology under the Medicare EHR Incentive Program. If a provider is eligible to participate in the Medicare EHR Incentive Program, they must demonstrate meaningful use in either the Medicare EHR Incentive Program or in the Medicaid EHR Incentive Program, to avoid a payment reduction. Medicaid providers who are only eligible to participate in the Medicaid EHR Incentive Program are not subject to these payment reductions. Payment reductions will be applied beginning on January 1, 2015, for Medicare eligible professionals. The payment reduction will be applied to the Medicare physician fee schedule (PFS) amount for covered professional services furnished by the eligible professional during the year.

Physician Quality Reporting System (PQRS)

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html Program start date: 2007 PQRS is a reporting program that uses a combination of incentive payments and payment reductions to promote reporting of quality information by eligible professionals (EPs). For more information on the PQRS quality measures, click here. The program provides an incentive payment to practices with EPs who satisfactorily report data on quality measures for covered Physician Fee Schedule (PFS) services furnished to Medicare Part B Fee-for-Service (FFS) beneficiaries (including Railroad Retirement Board and Medicare Secondary Payer). Payment incentives began in 2007 at 1.5%. They increased to 2% in 2009 and 2010. In 2011 they decreased to 1%, and further decreased to 0.5% in 2012 and 2013. The last year to receive an incentive payment was for reporting completed for calendar year 2013. The base incentive payment was 0.5%, but increased to a total of 1.5% if the physician participated in a Maintenance of Certification  Program and successfully completed a qualified Maintenance of Certification Program practice assessment. Eligible professionals who do not satisfactorily report data on quality measures for covered professional services will be subject to a 1.5% payment reduction under PQRS beginning in 2015 (based on reporting in 2013). The PQRS payment reduction applies to all of the eligible professional’s Part B covered professional services under the Medicare Physician Fee Schedule. For 2016 and subsequent years, the payment reduction is 2.0%.

Value Based Modifier (VBM)

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/index.html Program start date: 2011 The VBM program was enacted by Congress as part of the Affordable Care Act (ACA). Under the program, physicians will be paid at higher rates if they spend less than the national average per patient and successfully report on quality measures. Physicians will be paid less  if they spend more than the national average and do not report on quality measures. The ACA mandated that, by 2015, CMS begins applying a value  modifier under the Medicare Physician Fee Schedule. Both cost and quality data are included in calculating payments for physicians. The program applies as follows:

  • Physicians in group practices of 100 or more eligible professionals (EPs) who submit claims to Medicare under a single tax identification number (TIN) will be subject to the value modifier in 2015, based on their performance in calendar year 2013.
  • Physicians in group practices of 10 or more EPs who participateinFee-For Service Medicare under a single TIN will be subject to the value modifier in 2016, based on their performance in calendar year 2014.
    • For 2015 and 2016, the Value Modifier does not apply to groups of physicians in which any of the group practice’s physicians participate in the Medicare Shared Savings Program, Pioneer ACOs, or the Comprehensive Primary Care Initiative.
  • All physicians who participate in Fee-For-Service Medicare will be affected by the value modifier starting in 2017.

The methodology for determining per capita cost measures can be found on the CMS Value Based Modifier website under Educational Resources. VBM and PQRS are closely tied together. Successful reporting of PQRS will provide quality data for determining tiering calculations for VBM payment incentives or penalties. Those who do not report PQRS or are not successful reporters are subject to both the PQRS and VBM payment adjustments. Payment adjustment amounts are determined annually through Medicare Physician Fee Schedule Rules. Reference: 

  • Centers for Medicare and Medicaid Services
  • California Medical Association
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