Bonuses Shift to Penalties in Medicare Quality Initiatives

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Quality Feature – May 2013

Tex Med. 2013;109(5):35-39.

 By Amy Lynn Sorrel 
Associate Editor

Putting off Medicare's quality reporting initiatives could take a financial toll on physicians as many of the current incentives shift to penalties over the next couple of years.

Those programs include the Physician Quality Reporting System (PQRS), e-prescribing, meaningful use of electronic health records (EHRs), and, eventually, a value-based modifier that will automatically adjust physicians' Medicare payments based in part on PQRS performance.

Come 2015, the intersection of these federal programs and their associated penalties could add up to a 5- to 6-percent hit to physicians' Medicare income for those who have not successfully participated in the multiple programs beginning in 2013. That's because Centers for Medicare & Medicaid Services (CMS) policy generally back-dates the reporting requirements, meaning that physicians face a penalty based on their performance in the year or two prior.

Physicians will have to do their own math to determine the cost of participating or foregoing participation in the various initiatives, says Austin internist Ghassan F. Salman, MD, a member of TMA's Council on Health Care Quality. Nevertheless, those choosing not to report risk leaving a significant amount of money on the table.

Particularly with the shift to value-based payments on the horizon, "from a financial standpoint it behooves physicians to start reporting in PQRS," Dr. Salman said, adding that there is some time left to qualify for bonus payments.

But money isn't the only reason to get on board.

"These programs will help our physicians provide better quality of care and more coordinated care. The problem is not the physicians. It's the [health care] system, and the system is putting patients at risk. That's what this [shift towards value-based care] all boils down to. And it can be done," said Dr. Salman, chief executive officer (CEO) of the Austin Diagnostic Clinic (ADC).

The multispecialty group has participated in PQRS and the other initiatives since their inception. But even when the incentive payments go away, the quality improvements reaped will remain, Dr. Salman says. "Money alone is not going to improve quality."

Nor is the trend likely to disappear, with commercial carriers on Medicare's heels, says Gregory S. Sheff, MD, medical director of care management and clinical integration for Austin Regional Clinic (ARC).

The group participates in a Blue Cross and Blue Shield of Texas primary care medical home model with similar structures, among other commercial quality programs. ARC, in affiliation with Seton Healthcare Family, is also part of a pioneer Medicare accountable care organization (ACO) that uses a risk-based payment structure and PQRS-like measures.

"Medicare is determined to drive the system toward value-based payment on some level, and the way payers see it, it's a better way to practice medicine," Dr. Sheff said.

But Dr. Sheff says physicians are in a position to take charge and undo mistakes of the past. An example is private insurers' tendency to rely solely on claims data to rate and reward quality. "This is about putting the clinical and claims information together to give the whole picture. And if we [physicians] don't step up and do that, which we can through PQRS, someone else will do it for us."

Penalties Add Up

Medicare introduced PQRS in 2007 as a voluntary mechanism to encourage physicians to begin reporting their quality measure scores. Those who successfully reported are eligible for bonus payments. For 2013 and 2014, doctors can earn an additional 0.5 percent on their Medicare payments.

In 2015, however, penalties will replace the incentive payments. Physicians who do not participate in or meet the criteria for PQRS in 2013 will see their 2015 Medicare payments cut by 1.5 percent and payments cut by 2 percent in 2016 and beyond.

Physicians who do not comply with PQRS also could face a double whammy in 2015 and 2017, when CMS implements a value-based modifier to automatically adjust Medicare payments based on quality performance. Under the change, mandated by the Patient Protection and Affordable Care Act, CMS will base those adjustments in part on PQRS data.

The possibility remains CMS could delay implementation of the program. But as it stands, physician groups of 100 or more will be subject to the value-based modifier in 2015 based on their 2013 PQRS performance and could see a 1-percent payment reduction, on top of the 1.5-percent PQRS nonreporting penalty. The value-based modifier will impact all physicians participating in fee-for-service Medicare in 2017. So far, Medicare ACOs are exempt. 

Although the program's details are still being developed, CMS says it anticipates proposing to increase the penalty amounts under the value modifier as it gains additional experience with the cost and quality methodologies.

Physicians who do not e-prescribe also lose the opportunity for bonus payments in 2014 and face a 2-percent penalty. Until then, CMS uses a combination of incentives and penalties to encourage the activity. And physicians who fail to demonstrate meaningful use of EHRs will be subject to payment reductions of 1 percent in 2015, 2 percent in 2016, and 3 percent in 2017.

To put those numbers in perspective, penalties ranging from 1.5 to 2 percent could cost the average multispecialty practice $2,544 to $3,392 per physician, respectively, based on TMA and Medical Group Management Association data for average annual income for a multispecialty practice with 19-percent Medicare volume. A 0.5-percent bonus would mean an extra $848.

A recent study by the American College of Radiology's Harvey L. Neiman Health Policy Institute fired a warning shot when it predicted roughly 80 percent of physicians today would face PQRS penalties by 2016 and lose more than $1 billion a year in Medicare payments. Researchers based those projections on radiologists' PQRS participation from 2007 to 2010.

CMS recognizes that current participation in PQRS is low nationally, but says those numbers grow each year.

According to TMA's 2012 Physician Survey, 37 percent of physicians currently report quality data for Medicare's PQRS program, and another 15 percent plan to participate. Half of physicians implemented Medicare's e-prescribing incentive program, and 6 percent plan to do so. Forty-four percent of physicians applied for the EHR incentive payments, and 14 percent said they plan to apply.

CMS and others bet those numbers will improve. The agency already succeeded on the hospital side.

Medicare started hospitals off with voluntary reporting on about five measures in 2004, and only a small percentage participated, Dr. Salman says. Once bonuses kicked in, participation jumped, and only when CMS put the penalty in, did 100 percent start reporting.

To encourage physicians to begin PQRS reporting, CMS established minimal requirements for 2013 to avoid the 2015 penalty, such as reporting on at least one valid measure or measures group via claims, registry, or a qualified EHR.  

Getting Ready

Since CMS started the program in 2007, however, doctors have had a lot of time to prepare. Despite some difficulties along the way, "this has been a very long ramp," said Norman H. Chenven, MD, ARC's founder and CEO.

PQRS has nearly 200 measures, "making it possible for anybody and everybody to find something to report on," he said. "Medicare set this up so there's no excuse not to participate."

Primary care specialties, in particular, have a broad palate of measures to work with. Dr. Chenven recommends picking a handful of relevant measures to get started, then expanding as practices develop expertise. Most specialty societies have resources to help advise physicians on the available measures.

Dr. Chenven added that EHRs are better equipped than they were even a few years ago to capture and submit the quality information needed for reporting on PQRS and e-prescribing, which means less work for physicians.

Paper-based reporting remains an option, but is more labor-intensive and time-consuming.

Practices will have to bear some expense in creating the infrastructure to comply with quality reporting initiatives, and documentation can be cumbersome, Dr. Chenven acknowledged.

"But it's not that what we are being asked to do is unreasonable," he said, adding that EHRs and quality measurement are becoming fixtures in medical practice and payment mechanisms.

Dr. Salman says the various initiatives eventually will complement one another. Lack of coordination in early stages was due in part to the fact that the various initiatives were passed under different laws.

He agreed that EHRs are progressing to encompass everything required, from e-prescribing to quality improvement, and are likely here to stay.

Reporting mechanisms also have improved, Dr. Salman added. When PQRS began, for example, physicians had to input codes and report on a daily basis. Now doctors can report months of data retrospectively on most measures.

CMS acknowledges some barriers and early problems with the programs, but says the agency has consistently expanded the PQRS and e-prescribing programs and reporting options.

Keller family physician Gregory M. Fuller, MD, says that kind of streamlining is critical, especially for smaller practices like his.

As a certified medical home, North Hills Family Medicine already achieved meaningful use and participates in Medicare e-prescribing and PQRS. Even with just 4 percent of patients in Medicare, the three-physician group does not want to leave any dollars on the table.

"Most physicians are going to strive to meet these criteria, and we need to make sure the process is simpler and cleaner so they can achieve that," said Dr. Fuller, also a member of TMA's Council on Health Care Quality. "Physicians with a large Medicare population stand to lose a lot of dollars. For others, the question is whether that penalty is going to be egregious enough for them to consider dropping Medicare."   

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


 Incentives Become Penalties

 Come 2015, many of the incentive payments for Medicare's quality reporting initiatives will shift to penalties based on physician performance in 2013. Also in 2015, a new value-based payment system under development will kick in to adjust overall Medicare payments based on 2013 Physician Quality Reporting System (PQRS) scores.

Here is a look at how these negative adjustments could add up for physicians who do not participate in or fail to meet the criteria for the programs. Dollar amounts are per physician based on TMA and Medical Group Management Association data for average annual income for a multispecialty practice with 19-percent Medicare volume, and will vary by specialty.

 Program                                              Penalty  (Amount)  

Physician Quality Reporting System       1.5 percent  ($2,544)
E-prescribing                                        2.0 percent  ($3,392)
Meaningful use of EHRs                        1.0 percent  ($1,696)
Value-based modifier*                          1.0 percent  ($1,696)
Total                                                    5.5 percent  ($9,328)

 *For physician groups of 100 or more. Smaller practices will be impacted by the modifier beginning in 2017.

 For more information about Medicare's quality reporting initiatives, visit the TMA website.


 PQRS Tool Helps Reporting

 TMA's PQRIwizard is a simple and cost-effective online tool that eligible physicians can use to collect and report quality measure data under the Physician Quality Reporting System (PQRS) and qualify for available incentive payments.

PQRIwizard guides you through four easy steps:  

  1. Select your measures,
  2. Register,
  3. Enter chart data from 30 Medicare Part B patients, and
  4. Review and submit.

You will answer a series of questions for each patient. The wizard lets you know when your report is complete and ready to submit to the Centers for Medicare & Medicaid Services. The tool also provides feedback on patients, alerts you when you meet submission criteria, and offers a printable report of measure results in real time.

PQRIwizard, available for a fee, allows practices to participate in the PQRS program without modifying their billing processes.

Find more information and download the PQRIwizard on the TMA website or contact the TMA Knowledge Center at (800) 880-7955 or by email

May 2013 Texas Medicine Contents
Texas Medicine Main Page


Last Updated On

April 19, 2018

Originally Published On

April 17, 2013

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