Your Guide to Medicare Value-Based Care
By Amy Lynn Sorrel Texas Medicine April 2015

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Cover Story — April 2015 

Tex Med. 2015;111(4):26-34.

By Amy Lynn Sorrel
Associate Editor

The alphabet soup of Medicare's quality reporting programs has not been easy for physicians to swallow, or follow. But for many, they are an entry point to a fast approaching value-based care system that seeks to break the cycle of high health care spending and reorganize and reward care delivery around better patient health. 

This guide breaks down the what, when, why, and how behind what has become a confusing web of requirements for physician practices at a critical juncture: In 2015, all three of Medicare's main physician quality reporting programs start penalizing practices for noncompliance, and penalties will grow into the future. 

Medicare's approach certainly has its flaws, and medicine continues to advocate for fixes that streamline the myriad administrative requirements and appropriately measure and value physician performance. At the same time, the programs were intended to give physicians clinical data to help them improve health outcomes, and Medicare finally released quality and cost reports that Texas Medical Association officials say physicians should use to gauge how these value-based programs likely will impact their practices.

"As with any government program, they made it harder than it should be. But they are in the right arena in terms of trying to drive toward quality," says TMA Council on Health Care Quality member Michael Ragain, MD. The family physician is chief medical officer at University Medical Center (UMC) Health System in Lubbock. 

Physicians will have to do their own math to determine the cost of the programs versus the penalty of foregoing participation, he says. "Many physicians may not have the option not to participate based on their patient population, now that so many patients are covered by Medicare. So they definitely should pay attention. It will hurt financially — and by reputation — if they get a bad mark from Medicare on a quality report. But it won't be that great doctors aren't doing a great job, just that they are not putting the systems in place to manage it."  

When it comes to quality improvement in general, physicians can't afford to give up on the process, adds Austin otolaryngologist Jeffrey B. Kahn, MD, a member of the Council on Health Care Quality. 

"As difficult as it is, when it comes to determining what quality is in health care, we need to be the ones defining it. We need to continually think about ways in which we can improve," he said. "But we should not pretend the process is easy, and we need to be aware that the complexity — especially when there are penalties involved or we have metrics thrust upon us — runs the risk of drawing our attention away from the most important thing: Ultimately this whole process should be about making patients healthier and providing the best possible care they can get."

Medicare's Jan. 26 announcement of specific goals and timelines for transitioning to a value-based payment system also should create a sense of urgency and opportunity for physicians, says Harold D. Miller, an expert on health care payment and delivery reform. The president and chief executive officer of the Center for Healthcare Quality and Payment Reform spoke at TMA's Winter Conference Jan. 30-31. 

"Under any system, you have to have physicians thinking about quality, as well as cost. And particularly, one of the challenges we have today is, if you try to convince an employer to contract with you, the question that gets asked is: 'Well, how do I know these are good doctors?'" he told Texas Medicine. Everybody knows there are savings to be had, and value-based care "is the direction [the system] is going. The question is, is it going to be a good version or a bad version? And physicians need to stand up and say: We recognize there's an issue with spending and there's an issue with quality, and we are going to address it. But here's what we need to be able to do that. Physicians can and should bring solutions to the table that will work, and patients will be a whole lot happier."

What is value-based care? 

Simply, value-based care means achieving the best outcomes at the lowest cost, says Ronald S. Walters, MD, a member of TMA's Council on Health Care Quality and associate vice president of medical operations and informatics at The University of Texas MD Anderson Cancer Center in Houston. 

"You want to provide the best quality product at the lowest price. Most people want affordable, high-quality health care. And just like other markets, the people who can do that will be the winners," he said. That's where analyzing processes, measuring outcomes, and changing practices come into play: "Most doctors think they already deliver high-quality, affordable care. But if you don't measure it, you don't know it."

Achieving value also requires restructuring how health care is paid for, Mr. Miller says. "It's redesigning the way care is delivered and having payment that supports that design. That's value-based care: when the care delivery and the payment go hand in hand."

Some large private practices and organizations are attempting to better link the two with models like accountable care organizations (ACOs) and bundled payments; Medicare is trying through several programs that encourage physicians to track their quality activities and adopt technology to promote improvements. Driven by the Affordable Care Act, most of these programs steer away from payments based purely on the number of patients physicians see or tests and procedures they perform, and they add incentives and penalties based on cost and quality factors, such as better outcomes and patient adherence to recommended care.

What are the different Medicare physician quality reporting programs?

There are three main programs physicians report their quality data to and a fourth under which Medicare uses that data to issue public "report cards" on physician quality. The programs are all interconnected, TMA Director of Clinical Advocacy Angelica Ybarra notes, and Medicare now docks physicians' pay for failing to participate. 

  1. Under the Physician Quality Reporting System (PQRS), physicians must document and report on the care they provide through a set of clinical quality measures. There are now hundreds of measures to choose from. Over time, practices also must report on patient experience and satisfaction using Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys.
  2. The meaningful use (MU) program requires physicians to demonstrate that they are using certified electronic health records (EHRs) to improve quality, safety, and efficiency in their practices. Compliance criteria increase over time over three stages that focus on data capture and sharing (Stage 1); advanced clinical processes (Stage 2); and improved outcomes (Stage 3). 
  3. In 2015, Medicare implemented the value-based payment modifier (VBM), which adjusts physician payments based on the quality data they report to PQRS and on Medicare cost data. Payments to large practices face adjustments this year based on 2013 quality and cost data, and 2015 reporting will determine payments for all physicians in 2017. 

Dr. Ragain also reminds physicians of the public element to quality reporting through Medicare's Physician Compare website

Meant to help inform patients looking for Medicare doctors, the website displays quality ratings derived from physicians' quality performance scores. In 2014, Medicare posted ratings for certain large group practices and ACOs. The government plans to phase in more measures and all Medicare physicians by the end of 2015. 

"Uninformed consumers are going to look at that, and it's going to be a very inaccurate but well-publicized proxy for your quality if you are not scoring well," Dr. Ragain said.

How are these programs tied to quality?

TMA leaders acknowledge that no quality reporting program is perfect. Dr. Kahn reminds physicians to decide for themselves the costs versus the potential benefits. "But any time a physician can meaningfully reflect upon his or her own practice, actively consider ways to improve it, and have control over that process, that can be very useful," Dr. Kahn said. His 12-physician practice participates in PQRS and MU and will come under the VBM next year. 

One advantage to Medicare's quality programs, over commercial programs, for example, is "at least with Medicare you get to choose, and you know ahead of time what those measures are," he adds. "The disadvantage is, there is some bureaucratic hassle, so it pays to plan ahead of time and understand exactly what the metric says."

Knowing that, Dr. Kahn can decide whether to collect data in real time or know what codes to look for later. For the most part, the metrics he chooses, he says, are "relatively straightforward and simple because the primary outcome we're looking for is something we are already doing," such as avoiding systemic antibiotics for patients who don't need them. "At this early stage, the PQRS program hasn't fundamentally changed the way I do things. But it has fundamentally changed the way in which I think about documenting so the care I provide can be demonstrated as being quality." 

Having the flexibility to pick measures also allows Dr. Ragain to develop a plan to boost disease screening and immunization rates. "In studies where you ask doctors if they believe in giving Pneumovax, 99 percent say yes, but only 20 percent or less are getting it. It's about systems, and like anything, if you set up a system to deliver that care, it works better than if you depend on individual memory. Now we'll drive those rates high, and that will change care."

Especially with the new quality and resource use reports (QRURs) Medicare released, "knowing how we fare compared to the average range and benchmark is a good thing. And it's really the first time we actually had that kind of clinical data feedback."  

The feedback reports provide information on physicians' cost and quality performance in 2013 and how they compare with their peers. Dr. Ragain says the analysis, though tricky to interpret, got his group thinking about how to coordinate specialty and primary care so patients who primarily visit the ophthalmology clinic, for example, don't miss their vaccinations. 

Because the QRURs also preview the performance scores Medicare uses to calculate the VBM, Dr. Ragain also could see his group face a potential penalty this year and make adjustments in time to avoid it. 

Why is 2015 so important? 

This year, Medicare did away with the financial incentives previously offered to get physicians to participate in its various quality reporting programs. Now it's purely a penalty-based system for those who do not comply. Also, with the VBM now in play, quality data reported in 2015 will affect Medicare payments for all physicians by 2017, and any penalties incurred are applied in addition to those for PQRS nonreporting and failing to meet EHR meaningful use criteria. Those penalties alone add up to as much as 9 percent of pay in 2017.

Earlier this year, the Department of Health and Human Services — for "the first time in the history of the Medicare program," according to a statement — also set a goal of having 85 percent of all traditional Medicare payments tied to quality by 2016, whether through the physician VBM, alternative models like ACOs, patient-centered medical homes, or bundled payments.

"They told us this was coming," Dr. Walters said. The move was already envisioned in the Deficit Reduction Act of 2005, "and if that was 2005, you can bet it was discussed in 2002 or 2003, if not before. It's the train that's hitting us now, but that train has been building up speed for some time, and the speed is going to rapidly increase."

How does the value-based payment modifier work? 

Created by ACA, the VBM determines payments by comparing a quality index value — based on selected PQRS measures — with a cost index value — based on total physician and hospital costs for that patient, explains Donna Kinney, director of research and data analysis in TMA's Division of Medical Economics. The modifier rewards or penalizes physicians whose scores are significantly different from average. The result is cuts to all Medicare fees for physicians whose patients incur higher-than-average Medicare costs if quality scores are low; payment increases to physicians when measured quality is high and Medicare cost is low; and no adjustments for physicians whose care falls within the average. 

What are the penalties? When do they take effect? 

The intersection of these federal quality reporting programs and their associated penalties could add up to a significant hit to physicians' Medicare income for those who have not successfully participated as far back as 2013. That's because the penalties for each program overlap, and Medicare policy generally back-dates the reporting requirements, meaning physicians face a penalty based on their performance in the two years prior. (See "Penalties Add Up.") 

PQRS penalties start at 1.5 percent in 2015, based on 2013 reporting, and remain a flat 2 percent starting in 2016; MU penalties increase over time. Payment reductions or incentives under the VBM depend on physicians' level of participation and performance in the various programs, and Medicare is phasing in the program starting with larger practices.  

  • In 2015, practices with 100 or more eligible professionals face possible penalties, or incentives, of 1 percent, based on 2013 cost and PQRS reports.
  • In 2016, practices with 10 or more are included, with possible penalties increased to 2 percent based on 2014 data.  
  • In 2017, all physicians face possible fee adjustments, based on 2015 PQRS and cost data, with the possible penalties increased to 4 percent.    

The tricky thing for physicians to remember, says Dr. Ragain, is those counts include the other professionals in the practice, such as nurse practitioners, physician assistants, social workers, therapists, and dietitians. "So you might think you only have eight doctors, but if you have four midlevels, you're at 12 and you're in."

Ms. Kinney also cautions that the VBM payment cuts are not limited to Medicare-participating physicians; they also affect the limiting charge for nonparticipating physicians. The VBM does not apply to physicians who formally opt out of Medicare.

Aren't these programs just a bureaucratic nightmare?

Physicians continue to sound the alarm on the administrative complexity of Medicare's value-based care programs and looming threats to practices' viability and ultimately Medicare participation. 

"No other segment of the health care industry faces penalties as steep as these, and no other segment faces such challenging implementation logistics. The tsunami of rules and policies surrounding the penalties are in a constant state of flux due to scheduled phase-ins and annual changes in regulatory requirements. In fact, the rules have become so complex that no one, often including the staff in charge of implementing them, can fully understand and interpret them," American Medical Association Executive Vice President and Chief Executive Officer James L. Madera, MD, wrote in an Oct. 21, 2014, letter to former Centers for Medicare & Medicaid Services (CMS) Administrator Marilyn Tavenner. "Ironically, the environment makes it difficult for physicians to invest in health information technology, as well as make desired payment and delivery reforms."

In his introduction to TMA's Healthy Vision 2020, Second Edition, TMA President Austin I. King, MD, puts it in simpler terms: "Our government must make it easier — not more difficult — for us to care for our patients."

The MU program and PQRS each have so many different sets of measures requirements, submission processes, and reporting periods that Dr. Ragain's file on the programs is nearly two inches thick. 

He describes the 300 PQRS metrics — which change year to year — as "mind-boggling." His group must choose nine measures to report, which have to fall within the National Quality Strategy's (NQS') six domains of quality measurement. "Then each measure has its own exclusion criteria, and it matters if you look at your patient population what choice you make, so you really have to dig in to find out what you want to do. It's a lot to take in fairly quickly. And of course there's an expense to all of this."

TMA's 2014 health information technology (HIT) survey shows that Texas physicians are doing their part with 69 percent now using an EHR. Nevertheless, CMS numbers suggest more than half of professionals eligible for the MU program will face penalties this year for not meeting program criteria. TMA also has received several calls from physicians who incorrectly believe that if they report the quality measures in the MU program, they have complied with PQRS.

After completing Stage 1, Dr. Khan's otolaryngology group is evaluating whether it's worth proceeding to Stage 2 because the one-size-fits-all scheme leaves little room for the practice to adapt as it sees fit to actually achieve the quality improvements Medicare wants. "Do I take a penalty, or fundamentally change how I practice in a way that's not good?" 

Physicians also worry about getting penalized for factors beyond their control. 

Ms. Kinney says Medicare's payment calculations under the VBM do not adjust for risks such as patient noncompliance, poverty, or other demographic factors shown to affect quality and costs. That puts physicians treating the sickest patients at a real disadvantage. In fact, according to AMA's letter, "a CMS contractor found that physician groups with the highest risk patients were three times more likely than average to have poor quality scores and four times more likely to have poor cost scores." 

Medicare's methodology also holds physicians responsible for care their patients receive elsewhere. For example, Medicare assigned the costs for 1,350 surgical visits to the surgeons in UMC Medical Center's multispecialty practice, even though half of those visits were handled by physicians or organizations outside the UMC group. A third of the specialty care visits and the associated costs assigned came from elsewhere, too.

"Medicare patients can choose to go wherever they want. And if I'm a primary care guy trying to manage costs, and patients are going to a cardiologist outside the system who may order all kinds of testing, I have very little control over that," Dr. Ragain said. "I'm happy to be responsible for the costs that are attributable to me. I'm not so happy to be accountable for the costs attributable to everybody else."

What is organized medicine doing to address these issues? Are Medicare and Congress listening? 

TMA and AMA continue to advocate to Medicare and Congress for needed changes to these programs, with some success so far. Meanwhile, TMA has developed a host of tools to help physicians cope and adapt to the fast-approaching world of value-based care. (See "Your Value-Based Care Toolbox.")

In section 6, "Use Health Information Technology Wisely," of Healthy Vision 2020, Second Edition, TMA leaders write: "HIT needs significant work to make it more efficient and effective for patient care. Many physicians find they are clicking more but achieving less. Currently, it's too expensive, too disruptive to patient care."

The document calls for fixes to MU, simplification of Medicare quality reporting systems, significant risk-adjustment of VBM scores, and support for physician-driven quality improvement initiatives. 

To address some of the imminent threats, AMA's letter proposes fixes that: 

  • Require physicians to meet only one set of quality reporting requirements for PQRS, MU, and VBM, and provide timely feedback on their reporting;
  • Create a more robust set of quality reporting options and a formal appeals process for PQRS;
  • Offer a more flexible approach for meeting MU requirements; and 
  • Repeal or at least tamp down the VBM penalty structure and allow for a longer, more flexible phase-in period. 

TMA Director of Health Information Technology Shannon Vogel says Medicare responded in part by allowing physicians to combine the clinical quality measures they must report under MU with PQRS reporting. She recommends physicians "check with their vendor to see which [measures] can be submitted to CMS electronically. Vendors typically do not certify for all clinical quality measures reporting." 

At medicine's urging, Medicare also for the first time made the QRURs available for all physicians last fall.

NQF also took up medicine's call for some form of socioeconomic risk adjustment in quality measurement after the board approved a trial to assess the impact of factors like income, education, race, and ethnicity on the process. Dr. Walters and Mr. Miller — members of an NQF advisory committee and its board, respectively — agree the development signals potential improvements to the current system, as CMS often takes its cues from NQF.

Also thanks to TMA's and AMA's advocacy efforts, the unprecedented progress Congress made last year drafting a bill to eliminate the flawed Medicare Sustainable Growth Rate (SGR) formula included a more streamlined quality reporting-based system. The proposed Merit-Based Incentive Payment System, or MIPS, would still link a portion of doctors' pay to their quality performance, but it consolidates PQRS, MU, and VBM. That change could help reduce physicians' compliance costs and offer fewer penalties and more flexibility. Penalties under the current programs would still exist, but eventually sunset in 2018 and be replaced by a new set of penalties and incentives, Ms. Kinney says. 

TMA is fighting to keep SGR repeal efforts alive, with help from key congressional members, including vice chair of the House Energy and Commerce Subcommittee on Health and bill sponsor Rep. Michael C. Burgess, MD (R-Lewisville), and House Ways and Means Health Subcommittee Chair Rep. Kevin Brady (R-The Woodlands). Should SGR repeal efforts stall yet again, TMA is working with these congressmen and other members of the Texas delegation to simplify the value-based care programs. 

Mr. Miller says thus far, Medicare has done little to truly reform care, but physicians can play a pivotal role. "If somehow we are going to be paying the exact same way for the exact same thing, and throw a few quality and efficiency measures on top, that's not what I call value-based care," he said. Congress has been looking at how to cut elsewhere to pay for SGR versus "how can we redesign the Medicare system. That's not been the conversation in Washington. Who can do that? Physicians can do that."

Amy Lynn Sorrel can be reached by phone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.


Alphabet Soup

PQRS — Physician Quality Reporting System
Medicare program requiring physicians to document and report on clinical quality measures. Scores feed into the VBM, value-based payment modifier (see below).

MU — Meaningful use
Medicare's electronic health records incentive program.

VBM — Value-based payment modifier
Medicare calculation to adjust physician fee-for-service payments either up or down based on how they perform on cost and quality factors.

CAHPS — Consumer Assessment of Healthcare Providers and Systems
Patient satisfaction and experience surveys.

QRUR — Quality and resource use report
Medicare feedback reports on physician quality and cost scores and how they compare to their peers.

SGR — Sustainable Growth Rate
Medicare formula to calculate physician fee-for-service payment rates.

MIPS — Merit-Based Incentive Payment System
Alternative value-based payment system proposed under draft SGR repeal legislation that combines these current programs: PQRS, MU, and VBM.


Your Value-Based Care Toolbox

The world of value-based care is at physicians' doorstep. Here are some tools and resources TMA recommends to help you step confidently out into this evolving arena. 

TMA Practice Help

TMA's Practice Help webpage has a host of practical and educational resources to get you started with Medicare's value-based care programs: 

  • The Quality Improvement Resource Center connects you with TMA-approved vendors to guide you through the Physician Quality Reporting System (PQRS) and provides clinical quality improvement tools to engage your patients.
  • The Technology Resource Center has everything you need to know about meaningful use reporting and electronic health record implementation. 

Medicare Quality and Resource Use Reports (QRURs)

TMA officials urge physicians to download and check these performance feedback reports to preview the quality and cost scores Medicare uses to calculate your payments under the new value-based payment modifier. The quality measures and scores come from data you report to PQRS; Medicare supplies data for the services and procedures contributing most to your patients' costs. 

TMF Health Quality Institute

For no-cost consulting on Medicare's quality reporting programs, turn to the TMF Quality Innovation Network Quality Improvement Organization, an offshoot of the TMF Health Quality Institute. Under contract with Medicare, TMF has created several educational networks you can join:  

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TMA PracticeEdge Provides Real Options to Design Your Own Future

In February, TMA announced the launch of TMA PracticeEdge, a new services company developed by TMA to bring physicians the technologies and expertise that are essential to providing — and proving — quality care, including accountable care services and practice transformation services. 

Interested in learning more about TMA PracticeEdge? Visit the website  or contact us by email or by phone at (888) 900-0334.

Watch for additional detailed coverage in the May issue of Texas Medicine

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Last Updated On

May 13, 2016

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