For clinicians who participate in Medicare, it's time to get moving. On Friday, October 14, the Centers for Medicare & Medicaid Services (CMS) released a final rule to implement the Quality Payment Program (QPP), the latest step in CMS's recent drive to transform the Medicare program from fee-for-service to payment systems tied to high-quality and cost-efficient care.1 The Final Rule keeps the basic proposed structure of the QPP in place – requiring clinicians to choose between payment adjustments based on quality and cost of care or participation in an alternative payment model – while slowing down the timeline for implementation to allow clinicians to opt for less risk and less potential reward in the early years of the program.


The QPP is only part of a larger movement by both private and public payers to shift from paying providers based on the volume of services to paying based on quality and cost-efficiency. In the Medicare program, this effort has accelerated with the implementation of the Affordable Care Act, including payment reforms for hospitals, skilled nursing facilities, and dialysis providers that incentivize providers to deliver higher-quality care at a lower cost.

The QPP establishes similar goals for payment to physicians and other clinicians under Medicare Part B, based on the most significant legislative change to physician payment in many years. Last year, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which replaced the Medicare sustainable growth rate formula with a 0.5% annual payment increase for doctors over the next five years and set in motion a transition of physician payment to a new system focused on quality, value, and accountability. MACRA requires physicians to choose one of two quality-based payment systems to avoid a financial hit: (1) the Merit-Based Incentive Payment System (MIPS), under which physicians get a percentage adjustment to Medicare payment based on a four-part score designed to measure quality, cost, and value of care; or (2) an Advanced Alternative Payment Model (APM), under which physicians who successfully participate in one of these models are exempt from MIPS and receive a payment bonus. These two systems together make up the QPP.

CMS published a proposed rule to implement the MACRA requirements on May 9, 2016, and received more than 4,000 comments in response.

Essentials of the Final Rule


  • The Final Rule is effective January 1, 2017, but the requirements of the QPP will be phased in over the next few years.
  • There is a two-year lag between each eligible clinician's performance and the payment consequences. So, for example, a clinician's performance in Calendar Year (CY) 2017 on the specified measures of quality and efficiency of care will not affect that clinician’s Medicare payments, if at all, until CY 2019. (There is a similar two-year lag under existing quality-based payment programs, so Medicare payments in CY 2017 and CY 2018 will be adjusted based on clinicians' performance in CY 2015 and CY 2016 under those programs.)The Final Rule makes CY 2017 a "transition year" – in this year, clinicians will have to meet certain minimum performance reporting requirements, but the system will be structured to encourage widespread participation and allow clinicians time to learn about and adjust to the new program. CMS expects CY 2018 to be a transition year as well and will propose specific policies for CY 2018 next year.
  • Instead of all clinicians being subject to payment bonuses or reductions of up to 4% based on a full year's worth of performance next year, the Final Rule allows clinicians to "pick their pace" for the first year, as previously announced in a CMS blog post. This means that clinicians will be able to choose from the following four options:
    • Report under MIPS for the full year in CY 2017 – clinicians who choose this option will be eligible for the maximum 4% bonus or reduction in payment, as well as a potential exceptional performer bonus, in 2019.
    • Report under MIPS for less than the full year but at least a 90-day period in CY 2017, and report more than one quality measure, more than one improvement activity, or more than the required advancing care information measures – clinicians who choose this option will avoid a reduction in payment and may be eligible for a small bonus in 2019.
    • Report under MIPS, but only one quality measure, one improvement activity, or the required advancing care information measures – clinicians who choose this option will avoid a payment reduction but also are not eligible for a bonus in 2019.
    • Successfully participate in an Advanced APM – clinicians who choose this option will earn a 5% bonus incentive in 2019 and be exempt from MIPS payment adjustments.
  • Clinicians who do not choose any of these options (that is, who fail to report even the bare minimum) will receive the full 4% payment reduction in 2019.
  • The intent of the "pick your pace" rule is to require most clinicians to participate in the QPP, but with a lower threshold for performance to allow clinicians with limited experience or resources to adjust to the new program.
  • The legacy quality reporting systems, including the Medicare Electronic Health Records (EHR) incentive, the Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier (VBPM), will sunset after CY 2016 (with resulting payment adjustments ceasing after CY 2018), as originally proposed by CMS.

Who is subject to MIPS?

  • CMS finalizes the essential definition of an "eligible clinician" subject to MIPS – any physician or other specified health care professional who is not specifically excluded from the program because the clinician:
    • Only recently enrolled in Medicare,
    • Successfully participates in an APM, or
    • Does not meet the volume threshold for treating Medicare patients or receiving Medicare payments.
  • Although the rules apply almost as broadly as in the original proposal, the Final Rule allows all eligible clinicians subject to the rule to "pick their pace" in the first year, as described above.
  • In addition, the Final Rule raises the volume threshold slightly so that more small practices may be excluded completely from MIPS. Under the Final Rule, clinicians could avoid being subject to the rule if they have less than US$30,000 in Medicare Part B allowed charges and see fewer than 100 Medicare Part B beneficiaries each year. (The Proposed Rule had the first threshold at US$10,000 in Medicare allowed charges each year.)
  • The Final Rule also changes the rules for "non-patient-facing" clinicians, who are subject to less stringent requirements. The Proposed Rule defined a non-patient-facing clinician as one who has fewer than 25 patient-facing encounters, as defined by a list of billing codes. The Final Rule increases this threshold to 100 patient-facing encounters, which likely will increase the number of clinicians who are subject to the less stringent rules.

Calculating the MIPS adjustment

  • The basics of the MIPS adjustment remain the same under the Final Rule – for every eligible clinician who chooses the MIPS track (that is, every eligible clinician who does not successfully participate in an Advanced APM), CMS will calculate a composite score based on four weighted categories: (1) quality, (2) cost, (3) clinical practice improvement activities, and (4) advancing care information. This composite score will be compared to a benchmark based on all other clinicians' scores to arrive at a final adjustment to the clinician's Medicare payments.
  • Zero weight for cost in transition year – In the first performance reporting year (CY 2017), the cost score will receive zero weight in the composite. The Proposed Rule would have made the cost score 10% of the composite score, but CMS finalized a zero weight for the first year to give clinicians more time to adjust. For the first year, the quality score will be weighted 60%, clinical practice improvement 15%, and advancing care information 25%. In the second performance reporting year (CY 2018), the cost score will begin to count toward the composite, with a weight of 10%.
  • 4% of payments at risk – In the first year, CMS finalizes that eligible clinicians who choose to fully participate in MIPS may receive a bonus or reduction in Medicare payments of up to 4%. Clinicians who choose a slower pace are shielded from any negative adjustment if they perform poorly, but also are eligible only for a small bonus – or none at all – if they perform well. Clinicians who fail to report anything under MIPS will receive the full 4% reduction in payments. The maximum amount at risk will grow in future years, up to 9% beginning in CY 2022.
  • Payment consequences two years after performance – CMS finalizes that payment adjustments in a given year are based on performance two years earlier, so a clinician's performance in CY 2017 will result in adjustments to Medicare payment in CY 2019. (Payment adjustments in CY 2017 and CY 2018 are based on performance under the legacy systems like PQRS and VBPM.)
  • In the CY 2017 transition year, for "full participation" in MIPS (and to be eligible for the full payment bonus or reduction), eligible clinicians will be required to meet the following requirements. These are minimum requirements, and reporting more than the minimum may improve the clinician's score.
    • Quality – Report six measures, or one specialty or subspecialty measure set
    • Clinical practice improvement – Participate in four activities (instead of the six originally proposed)
    • Advancing care information – Report on five required measures
  • In CY 2017, clinicians will be eligible to avoid a payment reduction (with no possibility of a bonus) simply by doing any one of the following:
  • Quality – Report one measure
  • Clinical practice improvement – Participate in one activity
  • Advancing care information – Report the five required measures

The other path – Advanced Alternative Payment Models

  • Under the Final Rule, eligible clinicians can avoid any MIPS adjustment – and earn a 5% payment bonus – by successfully participating in a qualifying Advanced APM.
  • The requirement is twofold: the APM must meet CMS's standards and the individual clinician must receive a minimum amount of payments or treat a minimum number of Medicare patients through the APM to qualify as a participant. (Beginning with performance in CY 2019, there will also be an option to qualify as an Advanced APM participant through an all-payer APM.)
  • The Final Rule retains the basic criteria to qualify as an Advanced APM, as well as the criteria for an individual clinician to qualify as a participant in an Advanced APM, despite criticism that the CMS proposals made it too difficult for APMs to qualify, including CMS-approved models like the Track 1 Shared Savings Program Accountable Care Organizations (ACOs).
  • Advanced APM requirements – To qualify as an Advanced APM, an APM must:
    • Require its participants to use certified EHR (at least 50% of eligible clinicians in the first year, 75% of participants thereafter);
    • Pay its participants based in part on quality measures similar to the MIPS quality measures; and
    • Be a CMS-approved "medical home" or require its participants to bear more than a nominal risk of losses, as defined in the rule. The requirement of "more than a nominal risk" eliminated models like the Track 1 ACOs, which do not require participants to bear any risk of losses.

CMS will publish a final list of Advanced APMs by January 1, 2017, subject to future updates. As of the release of the Final Rule, CMS has identified the following models as Advanced APMs:

  • Comprehensive ESRD Care (CEC) - Two-Sided Risk;
  • Comprehensive Primary Care Plus (CPC+);
  • Next Generation ACO Model;
  • Shared Savings Program - Track 2; and
  • Shared Savings Program - Track 3.

It is unclear at this point whether other high-profile APMs will qualify as Advanced APMs, particularly where those APMs do not require participants to take on the risk of losses. For example, the Oncology Care Model one-sided risk arrangement appears likely to be excluded as an advanced APM based on the CMS criteria.

  • Requirements to be a successful APM participant – To qualify as an Advanced APM participant, an eligible clinician must either:
    • Receive at least 25% of the clinician's payments for Medicare covered professional services through an Advanced APM or
    • See at least 20% of the clinician's Medicare patients through an Advanced APM.


  • The Final Rule is open for comments, which must be submitted no more than 60 days after the Final Rule is displayed in the Federal Register.