CMS recently released results of Medicare’s value-based payment modifier for 2015.[1]  This is the first year in which physicians are subject to adjustments under the payment system and, in this first phase of implementation, only affects practices with 100 or more eligible professionals. 

The value-based modifier provides for differential payment to a physician or group of physicians under the Medicare Physician Fee Schedule based upon care quality and cost during a prior performance period. 2015 payment adjustments, for example, are based on data from 2013. 

1,010 affected groups fell into one of two categories designated by CMS. Category 1 includes groups of physicians that self-nominated for the Physician Quality Reporting System (PQRS) and either reported at least one measure or elected the PQRS Administrative Claims reporting option. Category 2 includes groups that did not self-nominate for PQRS. 

Groups in Category 2 (319) automatically receive a -1.0% adjustment for the year. For the 691 groups in Category 1, quality-tiering was optional. Groups could alternatively elect to have a neutral value modifier, which means there will be no adjustment of their 2015 payments.  While 127 groups elected quality-tiering, CMS had sufficient cost and quality data for only 106 of them. Of these 106 groups, 14 will receive an upward adjustment of +1.0x, 11 will receive a downward adjustment of -.05 or -1.0%, and 81 are in tiers resulting in a neutral modifier. No group qualified for the +2x adjustment awarded for high quality and low cost or for the additional +1x available for treating high-risk beneficiaries. 

As the law requires that the value modifier be budget neutral—that the increased payments to high performing groups equal the reduced payments to other groups—the upward payment adjustment factor (“x”) is based on the aggregate amount of downward payment adjustments. For 2015, the adjustment factor is 4.89%, representing a projected redistribution of $11,377,858. 

The reach of Medicare’s value-based modifier only extends from this point, and it does so rapidly. Physicians in group practices of 10 or more eligible professionals will be subject to the system in 2016, and it becomes the norm for all physicians participating in Fee-For-Service Medicare in 2017. While quality-tiering is mandatory for Category 1 groups in 2016, those with between 10 and 99 eligible professionals will be held harmless from any downward adjustments. Moreover, groups in which one or more physicians participate in the Medicare Shared Savings Program, the Pioneer ACO Model or the Comprehensive Primary Care Initiative in 2014, the relevant performance period for 2016 adjustments, are exempt. 

For physicians who will be subject to adjustments in 2016 but who did not register to participate in the PQRS Group Practice Reporting Option in 2014, there is another way to avoid next year’s automatic downward modifier of -2.0%. At least 50% of the eligible professionals in the group must participate as individuals and meet related requirements. Individual eligible professionals have until March 31 to participate in the 2014 PQRS through the qualified registry or qualified clinical data registry options.[2]