Medicare’s new value-based payment method for reimbursing physicians will begin in 2015 to affect physician groups with at least 25 eligible professionals. Groups will have the option to participate in a tiered payment system, which would adjust Medicare Part B fee schedule payment rates by an as-yet undetermined amount or could decrease reimbursements by up to 1 percent. Groups can simply report quality and cost data to the Centers for Medicare and Medicaid Services (CMS) through the Physician Quality Reporting System (PQRS), without tiered payments, which would keep their reimbursement rates unchanged. Those who do not meet the PQRS requirements would be penalized with a 1 percent reimbursement reduction.

The new payment method is part of a developing trend toward value-based Medicare reimbursements for physicians and other providers. The new method replaces the traditional fee-for-service reimbursement in which providers get paid the same amount regardless of clinical or economic performance. It is required under Section 3007 of the Affordable Care Act (ACA) health reform law and section 1848(p) of the Social Security Act.

Proposed Performance Measures

In a conference call with physicians, CMS shared its proposed rules for the payment modifier and solicited feedback. Staff members described how CMS intends to evaluate outcome and cost measures, as shown in the CMS payment modifier presentation:

Outcome Measures:

Cost Measures:

  • Total per capita Medicare cost measures
  • Total per capita costs for beneficiaries with four chronic conditions:
    • Chronic obstructive pulmonary disease (COPD)
    • Heart failure
    • Coronary artery disease
    • Diabetes
  • Proposed Attribution Method: Plurality of charges with a minimum of two Evaluation and Management (E/M) services.

CMS will use those measures to create composite scores, which will be compared to the national average scores. CMS will focus on rewarding or penalizing groups of physicians on the extreme ends of both quality and cost. Groups providing relatively expensive yet low-quality service will see a 1 percent decrease in reimbursement rates. Groups with high-quality, low-cost performance will be rewarded with an increase in reimbursements worth up to three times a payment adjustment factor, the value of which would be tied to the total amount of payment decreases for ill-performing physician groups.

In other words, increased payments to physicians with high-value service would be paid for with the reduced payments to groups that give expensive, low-quality service or that do not meet the reporting system’s requirements.

Five Methods to Report Data

Physician groups may elect to participate in the new Group Practice Reporting Option (GPRO), which would require them to choose one of five methods to report data through CMS’s quality reporting system, PQRS. Physician groups that have between 25 and 99 eligible professionals may choose to report data from claims, registries, or electronic health records. They may also choose which data to report from those sources.

Groups with 100 or more eligible professionals must use either the PQRS online interface – which has 22 measures that focus on preventive care and chronic disease – or they must use administrative claims data with 15 preventive and chronic care measures calculated by CMS.

CMS in its presentation defined the term “eligible professionals” as:

  • Physicians, including MDs, DOs, podiatrists, optometrists, dentists, and chiropractors
  • Practitioners, including physician assistants, MPs, clinical nurse specialists, certified registered nurse anesthetists, certified nurse midwives, clinical social workers, clinical psychologists, registered dietitians, nutrition professionals, and audiologists
  • Therapists, including PTs, OTs, and qualified speech-language therapists
CMS to Expand Value-Based Modifier Use

CMS staff in the conference call with physicians projected 4,000 to 6,000 groups would participate in the first phase of value-based payments. Only practices with 25 or more eligible professionals would be affected by the new payment modifier in 2015. To do so, they will need to report data from 2013 through CMS’s quality reporting system, PQRS. 2013 data will be used to calculate quality-based payments in 2015. 2014 data will be used to calculate 2016 payments, and so on.  In 2017, the new payment rules will expand to cover all Medicare Part B fee-for-service payments to physicians and group practices.

Q&A Highlights

Roughly 700 people called in to CMS’s presentation. Here are several paraphrased questions and answers from the call:

Question: Will there be one mean of quality scores (against which group performance will be compared) that includes all data reported through all five of the reporting methods? Or will each reporting method have its own mean score?
From representative of: American Medical Association
Answer: CMS will calculate one mean per quality (or outcome) measure, regardless of what method is used to report the data.

Question: How will emergency physician groups of greater than 25 successfully be able to report data under this new guideline? The group practice reporting measures described are longitudinal, preventive care measures that can’t really be applied to emergency medicine.
From representative of: American College of Emergency Physicians
Answer: A practice of emergency physicians could select to participate by reporting data through the claims-based reporting method. They could report the same measures that they have been reporting.

Question: An anesthesiologist group with more than 99 practitioners would be required to submit data through the PQRS system’s online interface using certain measures of preventive care and chronic disease. But those don’t apply to anesthesiologists. What would happen in that instance?
From representative of: American Society of Anesthesiologists
Answer: Practitioners in groups have the option to report as a group or as individuals. In lieu of participating using the PQRS online interface, the individuals in the group practice could participate individually using self-defined metrics in from claims, registries, or electronic health records. However, they would be subject to a maximum 1 percent payment reduction, which is the penalty for practitioners who file as individuals when they are part of a group of more than 25 practitioners.

Question: How would groups with fewer than 25 qualified professionals be affected?
From representative of: Pulmonary and Sleep Physicians (location unspecified)
Answer: They are exempted from the value modifier payment system in 2015 and will face no change in reimbursements.


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.