The goal of the Quality Payment Program is to transition from fee-for-service to payments to physicians and hospitals for quality and value.
The goal of the Quality Payment Program is to transition from fee-for-service to payments to physicians and hospitals for quality and value.

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Payments to physicians and hospitals are becoming increasingly quality-based

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Government and private insurers are adopting payment plans based more on service quality and less on service quantity. At the end of 2016, the Centers for Medicare & Medicaid Services (CMS) issued regulations implementing the new Quality Payment Program, which will increase Medicare payments to physicians and hospitals if quality goals are met and reduce them if goals are not met.

Quality Payment Program eligibility requirements

The Quality Payment Program regulations apply to physicians who participate in the Medicare program, who bill Medicare for more than $30,000 per year and who provide care for more than 100 Medicare patients per year. Physicians who do not meet the eligibility requirements are not subject to the Quality Payment Program’s benefits or penalties.

The new regulations and the law that authorizes them add to the number of healthcare acronyms to keep track of. The law, which was passed by Congress in 2015, is the Medicare Access and CHIP Reauthorization Act (MACRA). The term “CHIP”—an acronym within an acronym—stands for the Children’s Health Insurance Program.

After the law passed, CMS began drafting the rules to implement the law. CMS received more than 4,000 comments from people and organizations including physicians and professional associations. CMS then issued final rules that required more than 800 pages, including commentary on the rules.

The goal of the program, according to the rule, is to support “transitioning from fee-for-service payments to payments for quality and value.” The program replaces the prior systems—the Physician Quality Reporting System (PQRS) and the Sustainable Growth Rate formula (SGR). 

The SGR formula was the statutory provision that Medicare payments to physicians would be sharply reduced each year unless Congress stepped in to stop the reduction—which Congress did, although sometimes after the rate cuts took effect for a few months.

Quality Payment Program participation tracks

The Quality Payment Program has two tracks that clinicians can choose from: Merit-based Incentive Payment Systems (MIPS) and Advanced Alternative Payment Models (APMs).

The MIPS apply not only to physicians but also to physician assistants, nurse practitioners, clinical nurse specialists and nurse anesthetists. Data collection and reporting are the foundations of the program. Clinicians report data in multiple categories:

  • Quality performance (e.g., documentation of current medications in the medical record, colorectal cancer screening)
  • Improvement activities (e.g., care transition documentation practices improvement, collection and use of experience and satisfaction data on access)
  • Advancing care information (e.g., e-prescribing, public health record reporting)

CMS says the program offers a “flexible, pick-your-own pace approach to the initial years of the program.” Under the regulations, clinicians reporting for 2017 can report varying numbers of quality measures for periods between 90 days and one year. Those who want to participate fully should generally report data in six categories. 

Groups should report data in 15 categories covering one year. Data must be reported by National Provider Identification numbers tied to a Tax Identification Number.

Adjustments to payments

Under MIPS, if an individual or group does not report any data for 2017, they will receive a 4 percent negative payment adjustment on Medicare reimbursements for the following year. If minimum data are submitted (for example, a physician submits one quality measure and one improvement activity for a 90-day period in 2017), a downward adjustment can be avoided. If a full report is made for the year, bonuses of up to 4 percent can be paid.

The penalty and bonus percentages increase in subsequent years—up to 9 percent in 2022.

The second track of the program, APMs, is designed for providers who are already part of an organization designed to save costs and promote quality, such as Accountable Care Organizations (ACOs) and Medicare Shared Savings Programs. 

Such organizations receive bundled payments for providing care for patients. For example, Medicare may pay a fixed sum for hip replacement or certain cardiac problems, covering the period of hospitalization and 90 days of follow-up care.

As with the MIPS, participants in APMs must submit quality data, which will determine whether payment rates will be raised or lowered.

More information on the Quality Payment Program, including specific measures for medical specialties, can be obtained from the CMS website.

Private sector initiatives

The private sector is also shifting to payments based on service quality rather than just quantity. UnitedHealthCare, Blue Cross and Aetna, for example, use a variety of initiatives to promote value-based care. 

These initiatives include ACOs, patient-centered medical homes, bundled payments and pay-for-performance, by which payments go up or down depending on quality measures.

A recent study reflects the cost savings that can come from the initiatives. The study, “Cost of Joint Replacement Using Bundled Payment Models” by Amol S. Navathe M.D., Ph.D., and others, appeared in the February 2017 issue of JAMA Internal Medicine. 

The researchers studied 3,942 patients who received joint replacement surgery and whose procedures Medicare paid for using bundled payments.

The average cost per procedure was reduced by 20.8 percent, from $26,785 to $21,208, when compared to traditional fee-for-service payments. The savings come primarily from reduced costs for implants, supplies and institutional care. The study said, “Patient illness severity remained stable.”

Jeff Atkinson teaches health care law at DePaul University College of Law in Chicago.


Jeff Atkinson

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