Medicare is slowly but steadily moving toward value-based methods of reimbursing physicians, hospitals, and other health care providers differentially based on quality and cost of care.  The evolving payment methods add performance or value-based modifiers to traditional Medicare fee-for-service reimbursement.  For physicians, new value-based payment modifiers will adjust each provider’s payment rates under the Medicare Part B fee schedule according to their performance compared to measures of quality and cost.  This is in contrast to traditional fee-for-service reimbursement where providers get paid the same regardless of their clinical or economic performance.

Earlier this year, physicians, health insurers, and health policy experts gathered to share their opinions about how the Centers for Medicare and Medicaid Services (CMS) should implement a new Medicare fee-for-service payment method for physicians. The Robert Wood Johnson Foundation (RWJF), which hosted the meeting, discusses those recommendations in a report, as CMS prepares to publish draft quality and cost measures next year.

The RWJF report is a good read for those interested in the subtleties and challenges CMS must grapple with to implement Medicare’s new value-based physician payment modifier, which is required under Section 3007 of the Affordable Care Act (ACA) health reform law and section 1848(p) of the Social Security Act.

Below are some highlights of the recommendations and concerns from the meeting:

  • In developing the modifier, CMS should be clear about the modifier’s goals and be transparent in its methods. Is the goal to improve quality and reduce cost, or primarily to save money for Medicare? How will CMS define terms in the ACA’s provisions such as “budget neutrality” and “systems-based care?” Will CMS begin to pay physician groups instead of individual physicians, as it currently does? If so, how will it parse accountability for physician groups and individual physicians?
  • CMS should give physicians actionable data and support to improve their performance.
  • The new payment system should not create a disadvantage for single-physician practices in underserved communities, who do not have the resources to develop ongoing quality improvement efforts.

The new Medicare physician payment system must be budget-neutral and will be phased in over a 2‐year period beginning in CY 2015. The quality and cost measures CMS selects will be risk adjusted and geographically standardized.  CMS must take into consideration the special circumstances of rural providers.

In 2013, CMS is required to circulate its resource use and quality metrics for the new payment system in the Federal Register, where the CMS has already published a proposed rule for the effort. By January 1, 2015, CMS must begin applying the new method in Medicare payments to select physicians and physician groups.

In 2017, the new system will expand to cover all Medicare Part B fee-for-service payments to physicians and physician group practices.  It may apply to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse‐midwives, clinical social workers, clinical psychologists, registered dietitians or nutrition professionals, physical and occupational therapists, qualified speech‐language pathologists. and qualified audiologists.


Kip Piper is a Medicare, Medicaid, and health reform consultant, speaker, and author.  He advises health plans, health systems, states, drug and device manufacturers, and investment firms throughout the U.S.  For more, visit  Follow on Twitter at @KipPiper and connect with Kip on LinkedIn.