CMS Fine Tunes Value Modifier as MIPS Prepares to Take the Stage

 Since the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) became law in April, all talk has been about the new Merit-Based Incentive Payment System (MIPS), which will replace the current Physician Value Modifier Program (VM Program) in 2019.  For the next 3 years, however, the VM Program will determine provider payments.

Earlier this month, the Centers for Medicare & Medicaid Services (CMS) released the 2016 Medicare Physician Fee Schedule (MPFS) Proposed Rule which, among other things, introduces several proposed rule changes and updates to the VM Program. The main theme of the VM Program section of the MPFS Proposed Rule is that CMS is clearly ready to move on from the VM Program and begin the process of developing MIPS[1] for its 2019 introduction.

Still, CMS proposes some fine-tuning to the VM Program.  These refinements are discussed below, organized by the implicated payment adjustment period. We also have included a “surprise factor” rating from 1 (“saw this coming from a mile away”) to 5 (“What just happened here?”).

For the CY 2016 VM and CY 2017 VM:

1.       CMS has been made aware that there are some groups that are participating in more than one Medicare Shared Savings Program (MSSP) Accountable Care Organization (ACO) (mainly specialist groups that do not bill for primary care services). As such, starting with CY 2017 VM, CMS proposes that groups that participate in more than one ACO will receive the quality composite score from the ACO with the highest composite quality score. This proposal gives the group the chance to score as high as possible—something that CMS has deemed fair for participants. Don’t expect too much disagreement from involved parties.

Surprise Factor: 1

2.       CMS proposes to update some of the minimum sample size thresholds for cost and quality measures. Starting in 2016, CMS proposes to raise the minimum episode count for the Medicare Spending per Beneficiary Measure from 20 to 100 episodes, based on a review of the reliability for different sample sizes. CMS indicated that it entertained other thresholds, and it is specifically requesting further comments/suggestions on this topic.

Surprise Factor: 3

3.       Since the inception of the VM Program, CMS was never particularly clear how it was determining tax identification number (TIN) size. (This was an important matter for determining to which groups the VM Program would apply as it was phased in.) Group size remains significant because the total adjustment factors vary based on group size; thus, CMS proposes to determine a TIN’s size by using the lesser of a PECOS-generated list (Provider Enrollment, Chain and Ownership System) and analysis of a group’s Medicare claims data.

Surprise Factor: 3

4.       Although MSSP participants are included in the VM program, CMS proposes to waive application of the VM Program for TINs with participants in Pioneer ACOs, the Comprehensive Primary Care (CPC) Initiative, and other similar Innovation Center models starting in 2017 VM.If finalized, this creates an interesting gap in the VM Program. Unlike MSSP participation, the aforementioned models allow “split TINs.”[2]  This MPFS Proposed Rule is meant to eliminate unnecessary program overlap, but it would also allow some individual providers’ participation in the VM Program be waived without further requirement to participate in another CMS advanced payment model.

Surprise Factor: 4

For the CY 2018 VM (and beyond):

1.       Starting with the 2018 payment adjustment period,[3] the VM Program will includenon-physician eligible professionals[4] (EPs) (e.g., nurse practitioners and physician assistants). CMS has slowly added physicians to the VM Program by phasing in physician groups of different sizes, starting with large groups and most recently working down to solo physicians. Since all physicians will be participating by next year, CMS now proposes to phase in non-physician EPs beginning in 2018. Like past years, there will be no downside risk for these first-year participants. For those following the program over the last few years, this is not a surprising proposal.

Surprise Factor: 1

2.       CMS is proposing to stick with the two-category approach for the 2018 VM Program, meaning that groups will continue to be separated by those who did participate in PQRS (Category 1) and those who did not participate in PQRS (Category 2). The biggest implication of this approach is that groups who fail to meet PQRS requirements will receive a double-penalty: one for PQRS and one for the VM Program. Groups in Category 1 will be subject to quality-tiering.

Surprise Factor: 1

3.       CMS has acknowledged a difference in calculations for certain quality measures reported through an Electronic Health Record (EHR) (considered to be “e-clinical quality measures” or  “eCQMs”) versus other reporting mechanisms. Differences involve the inclusion of all-payer data and varying update cycles for specific measures. To accommodate this difference, CMS is proposing to benchmark these eCQMs distinctly from other quality measures. To that, we say: “Makes sense.”

Surprise Factor: 1

4.       In last year’s final rule, CMS “slipped in”—without addressing it in the proposed rule—the provision that all groups and solo practitioners in an ACO who failed to meet quality reporting requirements would fall into Category 2, and thus receive the maximum penalty. CMS is proposing to continue this policy for the 2018 VM Program, given that it is the same policy for non-ACO participants. If you’re an ACO participant, this gives a little more incentive to make sure your ACO is submitting quality data on your behalf to avoid a VM Program penalty! It’s okay, however: CMS is proposing to add an extra +1.0x payment adjustment to ACO TINs with an average beneficiary risk score in the top 25% (as long as your cost/quality scores were such that you will already receive an upward adjustment).

Surprise Factor: 2

5.       Since the inception of the VM Program, CMS has proposed adjustment amounts for different subgroups of VM Program participants. Below are the tables[5] that indicate the proposed adjustment amounts by subgroups:

Surprise Factor: 2


Subgroup 1: Physicians, PAs, NPs, CNSs, and CRNA in Groups with 10+ EPs


Low Quality

Average Quality

High Quality

Low Cost




Average Cost




High Cost




*Groups eligible for an additional +1.0x if reporting PQRS quality measures and average beneficiary risk score are in the top 25% of all beneficiary risk scores, where ‘x’ represents the upward payment adjustment factor.

Subgroup 2: Physicians, PAs, NPs, CNSs, and CRNAs in Groups with 2-9 EPs and Physician Solo Practitioners


Low Quality

Average Quality

High Quality

Low Cost




Average Cost




High Cost




*Groups eligible for an additional +1.0x if reporting PQRS quality measures and average beneficiary risk score are in the top 25% of all beneficiary risk scores, where ‘x’ represents the upward payment adjustment factor.

Subgroup 3: PAs, NPs, CNSs, and CRNAs in Groups Consisting of Only Non-physician EPs (and PAs, NPs, CNSs, and CRNAs Who Are Solo Practitioners)


Low Quality

Average Quality

High Quality

Low Cost




Average Cost




High Cost




*Groups eligible for an additional +1.0x if reporting PQRS quality measures and average beneficiary risk score are in the top 25% of all beneficiary risk scores, where ‘x’ represents the upward payment adjustment factor.

The proposed rule changes to the VM Program for 2016 and beyond are not nearly as meaningful as those proposed (and implemented) in prior years. Expected changes consist of updates to include more providers and maintenance of overall adjustment factors for the CY 2018 VM. CMS proposes a few logistical changes to quality and cost-measure calculations, but it is fairly clear that CMS is turning the page on existing quality programs and is moving toward the development of MIPS.

[1] Effective January 1, 2019, the VM Program, the Physician Quality Reporting System (PQRS), and Meaningful Use will be repealed and MIPS will take their collective place as the exclusive value-based payment program for Medicare’s physician payments.

[2] “Split TINs” is a reference to instances where some providers under a TIN choose to participate in a given Medicare payment model, while other providers elect not to participate.

[3] Unless otherwise specified, a reference to the “CY 2018 VM” refers to the CY 2018 payment adjustment period with a CY 2016 performance period.

[4] CMS has elected to include only the following non-physician EPs for CY 2018 VM: physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists (CNSs), and certified registered nurse anesthetists (CRNAs).

[5] Source: Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2016

Mandatory Medicare Bundled Payments: Comprehensive Care for Joint Replacement

Medicare payment reform includes both voluntary programs and regulatory mandates.  Voluntary programs include, for example, the Medicare Shared Savings Program, the Health Care Innovation Awards, the Oncology Payment Model, and the Bundled Payment for Care Improvement Program.  Each program offers incentives for collaboration among providers to improve quality and efficiency in healthcare delivery.    

By contrast, regulatory mandates impose financial penalties on individual providers for poor performance on specified metrics (or reward them for above-average performance).  These programs include the Hospital Readmission Reduction Program, the Hospital Acquired Condition Reduction Program, and the Hospital and Physician Value-Based Purchasing Programs. 

Now, for the first time, the Centers for Medicare & Medicaid Services (CMS) proposes to convert one of the voluntary programs—Bundled Payment for Care Improvement (BPCI)—into a regulatory mandate.  Despite the limited evaluative data now available, CMS believes bundled payments hold great promise to improve quality and coordination of care through an entire episode of care.  To fully evaluate the impact of bundled payments in different markets, however, CMS believes the selection bias inherent in the current BPCI voluntary program, due to self-selected participation by providers, must be eliminated.  

Thus, CMS proposes to make bundled payments mandatory for a limited number of hospitals for a limited number of episodes.  On July 14th, the agency published its proposed rule for the Comprehensive Care for Joint Replacement Program (CCJR).  Under CCJR, CMS would bundle payments for nearly all Part A and B services related to hip and knee replacement surgeries performed at hospitals located in 75 selected metropolitan statistical areas (MSAs).

Approximately 800 hospitals will be subject to CCJR, and about 111,000 procedures annually—one-quarter of all hip and knee replacement surgeries performed for traditional Medicare beneficiaries— will be impacted by this new program.  CMS estimates CCJR will save $153 million, representing 1.2% of the $12.3 billion Medicare expects to spend on these procedures over the next 5 years.

Comments on the proposed rule are due September 8, 2015.  Presumably, CMS will publish its final rule implementing CCJR later in the fall, with the 5-year program commencing on January 1, 2016.    

What services are included and bundled for a CCJR episode of care?

A CCJR episode will start on the day a traditional Medicare beneficiary is admitted for hip or knee replacement surgery (limited to MS-DRGs 469 and 470), and will continue for 90 days following the beneficiary’s discharge from the hospital.  The episode includes all Part A and Part B services furnished to the beneficiary during this period (with the exception of certain excluded services that are clinically unrelated to the episode).

Which providers are subject to CCJR?

Any hospital located in 1 of the 75 selected MSAs that bills traditional Medicare for a hip or knee replacement surgery is subject to CCJR. (Maryland hospitals and other hospitals now participating in a risk-bearing phase of BPCI Model 2 or 4 for lower extremity joint replacements are excluded from CCJR.)  CMS selected the 75 MSAs (out of 338 MSAs identified by the U.S. Census Bureau) using a stratified, randomized process to ensure CCJR includes the broadest range of hospitals by facility size, geographic location, population, and historical costs.   

As a part of the CCJR proposed rule, CMS will require that hospitals bear the financial risk for the total cost of care furnished by all providers for the included episodes of care.  Individual providers (e.g., physicians, long-term care hospitals, skilled nursing facilities (SNFs), home health agencies, ambulance services) will continue to submit, and CMS will continue to pay, claims for services furnished during a covered episode of care.   

On an annual basis, CMS will compare the actual total cost of care for all episodes provided at a hospital to that hospital’s predetermined episode target price.  If the actual cost is less than the target price, the hospital will receive a reconciliation payment equal to the difference, subject to certain conditions.  If the actual cost is more than the target price, the hospital will be required to pay the difference to CMS (with the exception of Year 1, as described further below.)  The proposed regulations include certain guardrails to protect hospitals from what CMS characterizes as excessive risk.   

How will CMS calculate the target pricing? 

CMS proposes to calculate each hospital’s preliminary episode target prices annually based on 3 years of historical data.  In Years 1 and 2, the formula will be based two-thirds on hospital-specific data and one-third on regional data.  (CMS will calculate cost data for 9 different geographic regions.)  In Year 3, the formula flips: the target price will be calculated weighting one-third of the price on hospital-specific data and two-thirds of the target price on regional data.  In Years 4 and 5, the target price will be based exclusively on regional data. 

Once the preliminary episode target price is calculated, CMS then will apply a discount factor to account for Medicare’s share of reduced expenditures.  The discount rate will be 1.7% for hospitals that successfully submit patient-reported outcomes data for at least 80% of eligible patients for that performance year.  Non-reporting hospitals will be subject to a 2% discount.

With the exception of Year 1, CMS will communicate the target episode prices to each hospital prior to the beginning of the performance year.  CMS proposes to share with CCJR hospitals up to 3 years of retrospective claims data, including both summary and raw claims-level data.   Hospitals will be required to sign an appropriate data-use agreement to receive this data. 

To what degree of financial risk is a hospital exposed?

Recognizing that many CCJR hospitals will need time to analyze data and establish relationships with episode providers, CMS proposes no downside risk in Year 1.  Hospitals still will be eligible for reconciliation payments in Year 1 (and each year thereafter) if both:

(1)    The hospital has a positive net payment reconciliation amount (NPRA) (i.e., the actual adjusted episode payments are less than the episode target price).
(2)    The hospital meets or exceeds all 3 specified quality thresholds.

The 3 quality thresholds identified by CMS include:

(1)    Hospital-level risk-standardized complication rate following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA).
(2)    Hospital-level 30-day all-cause risk-standardized readmission rate following THA and/or TKA.
(3)    Yet-to-be-specified Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAPHS) measures.

Starting in Year 2, a hospital with a negative NPRA will be required to repay the difference to CMS, even if the excess cost is attributable to other providers.  Repayments are capped at 10% of the applicable target episode price in Year 2 and 20% thereafter.  CMS proposes a lower stop-loss limit for rural hospitals, sole community hospitals, Medicare dependent hospitals, and rural referral centers.      

What options are available to a CCJR hospital to manage this risk?

CMS intends to make reconciliation payments to, and require repayments from, hospitals only; the agency does not propose to hold other providers financially responsible.  Instead, CMS expects hospitals to engage other providers to manage these episodes of care efficiently.

Specifically, CMS encourages hospitals to enter into what it refers to as CCJR sharing arrangements with CCJR collaborators (including physicians and non-physician practitioners, skilled nursing facilities, long-term care hospitals, inpatient rehabilitation facilities, home health agencies, and outpatient therapy providers).  Under such a written contract, the CCJR collaborator would agree to participate in specific quality and efficiency initiatives relating to the episodes in exchange for “gainsharing payments,” i.e., the hospital’s agreement to share a portion of any reconciliation payment and/or a portion of the hospital’s internal cost savings generated through such initiatives. A CCJR collaborator also may agree to pay the hospital an “alignment payment,” i.e., a portion of any repayment the hospital owes to CMS.

The proposed regulations include several specifications for CCJR sharing arrangements, including caps on gainsharing and alignment payments, the timing of such payments, and detailed recordkeeping requirements.   Also, CMS proposes a narrow definition of internal cost savings for purposes of gainsharing payments.  Any such payments are limited to the hospital’s measurable, actual, and verifiable cost savings resulting from care redesign undertaken by the hospital in connection with the CCJR episodes.           

What opportunities does a CCJR hospital have to pursue care redesign?

CMS proposes to modify several Medicare payment rules to give CCJR hospitals greater flexibility in pursuing care redesign.  These include:

(1) A waiver of the requirement for a 3-day inpatient hospital stay prior to admission for a covered SNF stay under certain conditions.

(2) Allowing payment for certain physician visits to a beneficiary in his or her home via telehealth, regardless of whether the beneficiary resides in a rural or urban area.

(3) Allowing payment for certain types of physician-directed home visits by licensed clinical staff for non-homebound beneficiaries.

(4) Allowing CCJR hospitals to offer certain types of beneficiary inducements to promote compliance with the beneficiary’s plan of care. 

CMS also seeks comment regarding whether any specific waivers of the Anti-Kickback Statute, the Stark Law, or the Civil Money Penalties Act would be necessary for successful implementation of the CCJR.

So now what?

For hospitals, orthopedic surgeons, and post-acute care providers in the selected 75 markets, now is the time to start unpacking the details of the proposed CCJR program.  Hospital leaders should become educated regarding program requirements, appreciating some details may be refined in the final rule. These leaders, in turn, should invite potential CCJR collaborators into conversations regarding the program, thus beginning to build the trust relationships that will be key to success.   

To prepare for CCJR’s launch in 2016, providers should begin compiling and analyzing available data regarding the CCJR episodes to identify potential cost savings opportunities.  Once CMS makes historical claims data available to individual hospitals, these opportunities will come into clearer focus.

PYA has extensive experience supporting providers participating in BPCI, both with technical compliance and development and implementation of care redesign plans.  PYA can partner with your organization to develop and implement a successful CCJR strategy.

  • PYA offers interactive educational opportunities for leadership teams to understand the details of the CCJR program and its impact on the organization.
  • PYA Analytics’ computational scientists have deep and wide experience extracting knowledge from CMS claims data, including opportunities for greater efficiency and cost savings.
  • Drawing on its extensive experience in the development and operation of clinically integrated networks and clinical co-management and gainsharing arrangements, PYA can facilitate communications between a hospital and potential CCJR collaboratives, and support development of mutual strategies for success.
  • PYA provides financial modeling to help an organization understand and respond to the potential financial impact of CCJR. 

For additional information, please contact Martie Ross, David McMillan, or Laura Bond at PYA, (800) 270-9629.

14 Key Provisions Of the 2016 Medicare Physician Fee Schedule Proposed Rule

On July 8, the Centers for Medicare & Medicaid Services (CMS) released its 2016 Medicare Physician Fee Schedule Proposed Rule.  Because the Proposed Rule weighs in at 815 pages, we’ve had to expand the usual Top 10 list to the Top 14(we had to cut it off somewhere). 

Unlike prior years in which CMS focused on controlling costs associated with specialist care, diagnostic testing, and procedures, there is a heavy emphasis this year on supporting primary care.  CMS is announcing several initiatives intended to enhance care management and care coordination.    

1.           No More SGR.  Thanks to the Medicare Access and CHIP Reauthorization Act (“MACRA”), CMS no longer has to apply the sustainable growth rate (SGR) formula in calculating MPFS payments.  Instead, physicians will see an across-the-board 0.5% increase in all payments (with the exception of a small number of specific payment adjustments made as part of CMS’ ongoing Misvalued Code Initiative. 

2.           E/M Add-On Codes for Care Management.  Building on new Medicare payment for transitional care management (TCM) and chronic care management (CCM), CMS now is exploring appropriate ways to fairly compensate for the professional work of care management services.  While TCM and CCM pay physicians for “the work typically required to supervise and manage the clinical staff,” CMS recognizes there is unique value in  “the more extensive cognitive work that primary care physicians and other practitioners perform in planning and thinking critically about the individual chronic care needs of particular subsets of Medicare beneficiaries.”

CMS envisions “codes that could be used in addition to, not instead of, the current [evaluation and management (E/M)] codes.”   These codes would be “much like add-on codes for certain procedures or diagnostic test [that] describe the additional resources sometimes involved in furnishing those services.”  For example, these codes “could describe the professional time in excess of 30 minutes and/or a certain set of furnished services, per one calendar month for a single patient to coordinate care, provide patient or caregiver education, reconcile and manage medications , assess and integrate data, or develop and modify care plans.”

CMS “strongly encourage[s] stakeholders to comment on this topic to assist [the agency] in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017.”          

3.            Separate Payment For Collaborative Care.  Similarly, CMS recognizes that the management of complex patients “often requires extensive discussion, information-sharing and planning between a primary care physician and a specialist.”  The agency invites comments on “how to improve the accuracy of [Medicare]payments for care coordination particularly for patients requiring more extensive care….” 

Specifically, CMS is looking for recommendations regarding how such collaborations could be distinguished from current E/M services, what types of beneficiary protections are needed, how to address beneficiary financial liability, and whether there are key technology supports needed to support collaboration among providers.  As with the E/M add-on codes, CMS intends to address payments for collaborative care through rulemaking in 2016 for implementation in 2017. 

4.            Reducing Administrative Burden for CCM and TCM Services.   As it has done for the last several years, CMS emphasizes its commitment to making care management services broadly available to Medicare beneficiaries.  The agency recognizes, however, “that excessive requirements on practitioners” to provide and bill for transitional and chronic care management “could possibly undermine the overall goals of the payment policies.”  Therefore, CMS requests “stakeholder input in how [it] can best balance access to these services and practitioner burdens such that Medicare beneficiaries may obtain the full benefit of these services.” 

5.            MPFS Payment Rate for CCM Services.  Similarly, CMS requests stakeholders to provide information regarding the circumstances under which CCM is furnished, to determine whether the current payment rate adequately reimburses providers for the required resources.  CMS also indicates it may be willing to make payment for related CPT codes, including complex care coordination, based on its internal claims analysis and information furnished by providers regarding resource use.  

6.            RHC and FQHC Payments for CCM Services.  When CMS began making payment for CCM at the beginning of 2015, it refused to allow rural health clinics and federally-qualified health centers to bill for this service.  Now, CMS proposes to expand CCM to include RHCs and FQHCs, paying these providers at the MPFS national average non-facility payment rate (currently $42.91 per beneficiary per calendar month).

7.            “Incident To” Rules.  The “incident to” rules, under which certain services furnished by auxiliary personnel may be billed as if furnished by a physician or non-physician practitioner, are among the most complicated rules in the Medicare program.  CMS proposes to make these rules even more complicated by requiring “that the physician or other practitioner who bills for ’incident to‘ services must also be the physician or other practitioner who directly supervises the auxiliary personnel who provide the ’incident to‘ service.”   The current regulation now states the billing physician or other practitioner does not have to be the supervising physician or other practitioner. 

Last year, CMS amended the “incident to” regulations to require only general supervision for TCM and CCM (while direct supervision is required for all other services).  This provision now permits non-face-to-face care management services to be furnished through a centralized entity, so long as the staff is properly supervised by a physician or non-physician practitioner.  Under the proposed rule, however, the billing physician or other practitioner would have to be the supervising physician or other practitioner, making it significantly more difficult – if not impossible – to provide TCM and CCM in this cost-effective manner.    

8.            Expansion of CPCI. The Center for Medicare and Medicaid Innovation (CMMI) launched the Comprehensive Primary Care Initiative in seven regions in October 2012.  There are approximately 480 practices participating in this multi-payer initiative, which will conclude at the end of 2016.  Practices receive a monthly care management fee for each attributed patient to fund “a whole-practice care delivery transformation strategy” as well as the opportunity to receive shared savings payments.  CMMI makes available a range of support services to assist CPCI practices in meeting specified milestones.

Although first-year results were not overwhelming (cost savings were roughly equal to care management fees, no significant improvements in quality), CMS now is considering expanding CPCI to additional regions or even nationwide.  To that end, the agency is seeking comment on several considerations including practice readiness, practice standards and reporting, practice groupings, interaction with state-level initiatives, learning activities, and provision of data feedback to practices. 

9.            Advance Care Planning Services.  CMS previously has proposed paying physicians to provide advance care planning (ACP), but withdrew its plans in response to “death panels” criticism.  The agency now has decided to give it another go, requesting comments on “whether payment is needed and what types of incentives [payment for ACP] creates.”   

10.          MACRA Implementation.   In addition to repealing the SGR, MACRA calls for replacing the current physician value-based purchasing programs with the Merit-Based Incentive Payment System, or MIPS, beginning in 2019.   (Our on-demand webinar, De-Mystifying MACRA, provides a detailed introduction to MIPS.)  In the proposed rule, CMS begins the process of developing the regulations to implement MIPS.  Specifically, the agency seeks public input relating to the low-volume threshold, clinical practice improvement activities, and alternative payment models (APMs). 

11.          Physician VM Program.  Having spent the last several years developing the Physician Value Modifier Program – including the Physician Quality Reporting System (PQRS) and Physician Feedback Reports – CMS’ attention now seems diverted to the development of the MIPS program.  Physicians’ performance in 2016 will determine PQRS and VM Program payment adjustments in 2018.  Starting in 2017, physician performance will be subject to the yet-to-be developed MIPS measures. 

For 2016, CMS continues with the same policies announced last year, with only minor modifications.  One area of significant discussion in the Proposed Rule is the application of the VM Program to providers now participating in alternative payment models, including the MSSP and CMMI initiatives.   

12.          Expanded Coverage For Telehealth Services.  CMS continues to be stingy in response to growing demand for expansion of telehealth services.  The agency proposes to make only two minor additions to the list of telehealth services:  prolonged service inpatient (CPT codes 99356 and 99357) and ESRD-related services (90933 through 90936).  CMS continues to refuse to cover ICU telemedicine, claiming there is “no evidence that the implementation of ICU TM significantly reduce[s] mortality rates or hospital length of stay….”       

13.          New MSSP Quality Measure.  To be eligible forany shared savings under the Medicare Shared Savings Program, a participating accountable care organization (ACO) must achieve a certain level of performance on specified quality measures.   Since the MSSP began in 2011, CMS has reviewed and revised the measure set to align with updated clinical guidelines and other quality reporting programs.  For 2016, the agency proposes one new measure, statin therapy for the prevention and treatment of cardiovascular disease.   CMS requests comment on the proper manner to implement this measure.

14.          Stark Regulations.   Last – but not least – CMS proposes to fine-tune several provisions of the Stark regulations.  Most of these changes are intended to avoid the draconian consequences of a technical violation, such as failure to obtain proper signatures on key documents.  CMS also is proposing new exceptions for timeshare leases, recruitment of non-physician practitioners, and retention payments in underserved areas.     

Shifting gears, CMS also requests comments on the impact of the Stark Law on payment and delivery system reforms.  Under MACRA, CMS is required to issue two reports to Congress by April 2016: one addressing the application of the federal fraud prevention laws to alternative payment models and one proposing changes to these laws to permit gainsharing arrangements.

CMS solicits stakeholder input on these reports by presenting a challenging list of questions concerning the application of the Stark Law, the Anti-Kickback Statute, and the Civil Monetary Penalties Act in the context of alternative payment models.  These questions will be the subject of our later discussions regarding the Proposed Rule.

Comments on the Proposed Rule are due to CMS by mid-September.  Expect CMS to publish the final regulations in November.  For more information regarding any of the CMS proposals, or to discuss submission of comments, please contact Martie Ross, Laura Bond, or Lori Foley at PYA, (800) 270-9629.

7 Key Takeaways from Recent PQRS Experience Report

The Centers for Medicare & Medicaid Services (CMS) has released recent findings in its annual Physician Quality Reporting System (PQRS) and Electronic Prescribing (eRx) Experience Report, which highlights program participation and performance.  CMS implemented the PQRS (formerly the Physician Quality Reporting Initiative), in 2006. For a program that is just under ten years old, participation in 2013 was just over 50% of eligible professionals (EPs), an all-time high for the program.

The following are a few key takeaways from the most recent Experience Report, which is based on 2013 participation in PQRS.

  • The total number of providers earning incentive payments from PQRS increased by 35% from 2012 to 2013; and since its inception in 2007, the number of providers earning incentive payments has increased by more than 7 times (55,244 to 494,619).

This is great news for participating providers – participation in the program was rewarded with incentive payments. Don’t get too comfortable, though. Starting in 2015, CMS has eliminated the opportunity for incentive payments while still assessing a penalty for groups or individual EPs who do not participate.

  • The number of measures available for reporting in 2013 increased by about 10% from the prior year, up to 284.

This finding is interesting because, in spite of the increased number of measures, more and more specialists are finding it difficult to select applicable measures. The development of new, broadly applicable quality measures is particularly relevant thanks to additional funding from the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. More money will be available for the National Quality Foundation to develop better measures, which will hopefully make reporting easier for providers.

  • The providers that are receiving a PQRS penalty in 2015 (in general) knew the penalty was coming.

As for PQRS, most providers had a pretty good idea where they stood in terms of successful or unsuccessful reporting in 2013. Of the providers receiving a penalty this year, 98% made no attempt to participate. This means that only 2% of penalized providers attempted to participate but fell short of meeting requirements. While this result shouldn’t be surprising, one might speculate that this number will change in the coming years. As requirements become more stringent, the “attempted-but-failed” rate will likely increase.

  •  If you elected to use the Group Practice Reporting Option (GPRO), make sure you follow through.

In 2013, there were 677 practices that registered for the GPRO. However, just 80% of those practices actually successfully reported via the GPRO. Given that the deadline for GPRO registration was not long ago, make sure you are prepared to attest by the deadline if you have elected the GPRO for 2015. Once EPs have registered to report via GPRO, they no longer have the option to report individually.

  • Submitting quality measures with a 0% performance rate isn’t going to “fly” anymore.

Yes, it is pretty simple to report a measure and say: “Well, I tried, but I didn’t do it.” CMS has caught on to the idea that providers historically could choose any PQRS measure and report “Performance Not Met, No Reason Given.” While this is still a valid Quality-Data Code (QDC) for any PQRS measure, CMS has made it clear that it doesn’t count if your performance rate is 0%. In 2013, 25% of providers that reported via administrative claims had 0% performance rates across the board – that won’t count for successful reporting in 2015.

  • Make sure to submit the correct QDCs!

In 2013, over 90 million QDC codes were submitted across all providers, 9% of which were invalid. Another 8% were submitted with an incorrect procedure code. Typically, this type of error will not affect the EP’s reporting rate, but it is important to report as accurately as possible.

  • Submitting something is better than submitting nothing at all.

CMS has created a process known as Measure-Applicability Validation (MAV) to support EPs who may not have the patient population necessary to report the required number of quality measures. If you submit some number of measures below the required amount, CMS will automatically subject you to the MAV process, and will use your utilization data to see if there were additional measures that could have been reported. If CMS finds that all applicable measures were in fact reported, then you will not be subject to a penalty. Again, as the requirements become stricter (in 2015 and beyond), the MAV process will likely become more and more important.

Now, and in the future, this Experience Report is a useful tool for planning purposes – to instruct providers on methods to success and areas to avoid.   There are also many other interesting insights in the PQRS Experience Report.

Though the information is limited by the fact that it is two years old, one use of this report includes selecting measures popular by providers of the same specialty. For example, a nephrologist struggling to find 9 applicable measures in 2015 (the actual requirements) could start by looking at measures most commonly reported by nephrologists in 2013.

If you are not actively engaged in the 2015 PQRS measurement and reporting process, it is time to get started! EPs electing to report individual measures are required to report these measures for 50% of their Medicare patients. Now that we are just over halfway through 2015, the PQRS clock is really starting to tick. 

Million Hearts® Cardiovascular Disease Risk Reduction Model: Application Period Open Now

 On May 28, the Center for Medicare and Medicaid Innovation (CMMI) issued a Request for Applications seeking physician practices to participate in the Million Hearts® Cardiovascular Disease Risk Reduction Model (CVD Program).  This new program offers financial incentives for providers to use the American College of Cardiology/American Heart Association (ACC/AHA) Atherosclerotic Cardiovascular Disease (ASCVD) risk calculator to prevent heart attacks and strokes among Medicare fee-for-service beneficiaries. 


CMMI is seeking participation from a variety of practice types, e.g., private practices, community health centers and other community-based clinics, hospital-owned physician practices, hospital/physician organizations, and retail clinics.  Specialties may include general/family practice, internal medicine, geriatric medicine, multi-specialty care, nephrology, or cardiovascular care. 

To be eligible for the CVD Program, a practice must have at least one physician or non-physician practitioner who has attested to Stage 1 Meaningful Use.  CMMI looks to have approximately 720 practices participate in the CVD Program.


Applicants for the CVD Program will be randomly assigned to either the Intervention Group or the Control Group.  A participating practice’s obligations and compensation will depend on the group to which it is assigned.

Intervention Group

Obligations.  Intervention Group practices will be responsible for the following: 

(1) Screening eligible Medicare beneficiaries for their ten-year risk of heart attack or stroke using the ACC/AHA ASCVD pooled cohort risk calculator, engaging the patient in shared decision making, and preparing an individual risk modification plan.

(2) Providing ongoing management and treatment services to high-risk beneficiaries (i.e., those with an ACC/AHA 10-Year ASCVD risk score of 30% or more).  

Such ongoing management and treatment services include:

  • At least one re-assessment of the ACC/AHA 10-Year ASCVD risk score using the Treatment Benefit Equation.
  • A minimum of two annual follow-up beneficiary encounters to assess progress and make updates to the individual risk modification plan and to re-engage in shared decision making where necessary.

These services may be provided by any member of the care team through face-to-face or non-face-to-face encounters. Such interactions must be documented in the practice’s certified electronic health record. The practice must attest to provision of services and documentation through bi-annual reporting of clinical and quality measures.

Payment.  Payment to practices in the Intervention Group will be as follows:

  • A one-time CVD Risk Assessment (CVD RA) payment of $10 for each beneficiary assessed.
  • In Year 1, monthly CVD Care Management (CVD CM) payment of $10 per beneficiary per month for ongoing management and treatment of high-risk patients.
  • In Years 2 – 5:
  1. A one-time $10 per beneficiary CVD RA payment for risk score calculation for each new eligible beneficiary served by the practice.
  2. A monthly CVD CM payment of up to $10 (amount will vary based on the average cumulative absolute risk reduction of the practice’s high-risk beneficiary population).

Control Group

Obligations.  Control Group practices will not calculate or submit beneficiaries’ ACC/AHA 10-year ASCVD risk score.  Instead, Control Group practices will use a Data Registry Tool to report all information necessary for follow-up risk calculation for beneficiaries, including a set of clinical indicators and the cardiovascular health PQRI measure set.  Control Group practices must submit data for all eligible beneficiaries to CMS at the beginning of each year, with the exception of Year 4.

Payment.  Control Group practices will receive an annual payment of $20 for each beneficiary for whom the practice successfully reports.


In addition to the payments for screening, care management, and reporting activities, CVD Program participation provides free access to the data registry and data registry tool.  Participating practices may use the data registry platform to report additional measures to satisfy PQRS and other reporting requirements.


Because the CVD Program is a pay-for-outcomes approach, participation does not preclude a practice from participating in shared savings programs such as the Medicare Shared Savings Program (MSSP), Pioneer ACO, Financial Alignment Demonstration, or Comprehensive Primary Care models.  CMMI has indicated it will consider whether participants in other CMMI models may participate in the Program. 

Participation in the Program will, however, limit the ability of participants in the Intervention Group to bill for Chronic Care Management (CCM).  A participating practitioner cannot bill the CCM code for beneficiaries for whom the practitioner receives CVD CM payments.


Practices interested in applying for the CVD Program must submit a completed letter of intent and an application between July 6 and September 4. The letter of intent must be submitted to access the on-line application portal. 

PYA has extensive experience in assisting providers with participation in several CMMI programs, including the Health Care Innovation Awards, Bundled Payments for Care Improvement, the ACO Investment Model, and the Oncology Care Model.  For more information on applying for the CVD Program or other CMMI initiatives, contact Martie Ross  or Laura Bond

OIG Fraud Alert on Physician Compensation: Pay Attention to Fair Market Value

OIG Prompted by recent settlements with 12 individual physicians who were parties to questionable medical directorship and office staff arrangements, the Office of Inspector General (OIG) on June 9 released a fraud alert, Physician Compensation Arrangements May Result in Significant Liability.  The OIG is judicious in its publication of fraud alerts, and thus the subject matter merits special attention by providers.

The OIG strongly encourages physicians to confirm any financial arrangement with a hospital or other healthcare provider reflects fair market value for the services provided.  The enforcement agency warns that liability for an improper financial arrangement extends to the physician as well as the party making payment to the physician:

Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal health care program business.

To protect themselves from allegations of wrongdoing under the fraud and abuse laws, physicians should be prepared to demonstrate the fair market value of any financial arrangement with another healthcare provider, including employment agreements, medical directorships, staffing arrangements, and space and equipment leases.  Otherwise, the arrangement is subject to challenge as illegal remuneration for referrals. 

Important safeguards include having a written agreement that specifically defines the parties’ respective rights and responsibilities, maintaining contemporaneous documentation of services provided (e.g., time logs), and ensuring adequate research has been performed to demonstrate the agreement is at fair market value.  If in question, it is always advisable to secure a fair market value opinion from a qualified, independent third party. 

The OIG’s warnings regarding physician compensation arrangements are not hollow threats: the agency’s website details numerous enforcement actions involving alleged violation of the Anti-Kickback Statute.  These enforcement actions all have a common theme:  the parties to the arrangement are unable to prove fair market value for the goods or services involved.      

At the conclusion of the fraud alert, the OIG encourages anyone “with information about physicians or other providers engaging in any of the activities described above” to contact the OIG Hotline.  Providers should take appropriate action to ensure they don’t end up the subject of such a report. 

What Just Happened? CMS Publishes Final Rule Overhauling the Medicare Shared Savings Program

On June 4, the Centers for Medicare & Medicaid Services (CMS) released its anxiously anticipated 592-page final rule making many changes to the Medicare Shared Savings Program (MSSP).  In our white paper, A Dangerous Balancing Act—Proposed Changes to the Medicare Shared Savings Program, published in January, we highlighted our “Top Ten to Watch,” an analysis of CMS’ proposed changes that we believed would have the greatest impact on the future of the MSSP, as well as other payment and delivery system reforms.

With some notable exceptions, CMS now has finalized these changes.  While our detailed analysis of the Final Rule is forthcoming, the following summarizes CMS’ action on our previously identified Top Ten

1.            CMS-provided data on assigned beneficiaries  

Near the beginning of each performance year, each accountable care organization (ACO) receives from CMS information on each of its prospectively assigned beneficiaries, including name, sex, date of birth, and health insurance claim number.  Additionally, CMS provides the ACO with aggregated expenditure and utilization data for its entire beneficiary population. 

CMS now has significantly expanded the breadth and depth of the information to be provided.  First, these reports will include all beneficiaries for whom any ACO participant has provided a primary care service in the last 12-month period, not just those prospectively assigned to the ACO. 

Second, CMS will provide additional data points for each beneficiary, including: (1) additional demographic information (e.g., enrollment status); (2) health status information (e.g., chronic conditions); (3) utilization rates of Medicare services; and (4) expenditure information related to utilization of services.    

But wait, there’s more!  Currently, if an ACO wants to receive from CMS individually identifiable claims data for its prospectively assigned beneficiaries on a monthly basis, it must (among other things) mail to each such beneficiary a CMS-approved notice regarding his or her opportunity to opt-out of such disclosure of his or her information.  Thirty days after sending the notices, the ACO can request from CMS individually identifiable claims data.  It’s proven to be an expensive, time-consuming process which often creates confusion for beneficiaries. 

CMS now has eliminated this process.  ACO participants still will be required to provide written notice at the point of care, but CMS’ disclosure of claims data would not be dependent on any prior notification. 

2.            Beneficiary assignment, part 1

Beneficiaries are not assigned to an ACO in a traditional sense, as a beneficiary still may receive services from any Medicare provider he or she chooses, regardless of whether that provider is associated with the ACO.  Instead, CMS assigns beneficiaries to an ACO for the purposes of setting spending benchmarks and calculating whether the ACO has been successful in reducing total costs of care.   

Under the current regulations, CMS uses a two-step process to assign beneficiaries to an ACO for this purpose:               

Step one: Assign to an ACO any beneficiary who received any primary care service (as defined in the regulation) from one of the ACO’s primary care physicians (PCPs) during the most recent 12-month period, but only if the total allowed charges for primary care services furnished by the ACO’s PCPs during that time period are greater than the total allowed charges for primary care services furnished by PCPs outside the ACO.

Step two:  Attribute to an ACO any beneficiary who did not receive primary care services furnished by any PCP (inside or outside the ACO) during the most recent 12-month period but did receive pri­mary care services furnished by one of the ACO’s specialist physicians during that period, but only if the total allowed charges for primary care services furnished by all ACO physicians and non-physician practitioners during that time period is greater than the allowed charges for primary care services furnished by all physicians and non-physician practitioners outside the ACO. 

CMS now will implement three key improvements to the assignment process.  First, the definition of primary care services has been expanded to include transitional care management and chronic care management services.

Second, CMS has revised step one to include services furnished by non-physician practitioners (i.e., nurse practitioners, physician assistants, and clinical nurse specialists.)  Under the new step one, a beneficiary would be assigned to an ACO if any PCP in the ACO furnished a primary care service to that beneficiary during the most recent 12-month period, but only if the total allowed charges for primary care services furnished by the ACO’s PCPs and the ACO’s non-physician practitioners during that time period are greater than the total allowed charges for primary care services furnished by the same types of providers outside the ACO.

Third, step two of the current beneficiary assignment process now has been revised to limit the types of specialist physicians whose services would be considered for assignment purposes. 

These changes in the beneficiary assignment process will become effective at the beginning of 2016, and all benchmarks would be adjusted to reflect the new population of assigned beneficiaries.

 3.           Extension of Track 1   

To date, nearly all ACOs have opted for the one-sided risk model (Track 1) with the opportunity to receive 50% of any savings.  Under current regulations, these ACOs would be required to move to Track 2 – with its downside risk – at the end of their first three-year participation agreement – or leave the program.   

Rather than running the risk of a mass exodus by ACOs unable or unwilling to accept downside risk at the present time, CMS now will permit Track 1 ACOs to continue under the one-sided shared savings model.  This option, however, is limited to those ACOs that (1) satisfied quality performance requirements in at least one of its first two performance years, and (2) did not generate losses in both of its first two performance years. 

CMS did decide not to finalize its proposal that second-term Track 1 ACOs be eligible to receive only 40% of any savings; instead, that amount will remain at 50% during the second term. 

4.            Modification to Track 2

Under Track 2, an ACO is eligible to receive up to 60% of savings.  However, a Track 2 ACO bears the risk of having to repay up to 60% of any loss (i.e., actual total cost of care in excess of the ACO’s benchmark).  For the handful of ACOs currently participating in Track 2, the minimum loss rate protects them from having to repay a portion of any loss of less than 2%. 

Under the new regulations, a Track 2 ACO will have a choice among several options for establishing its maximum savings/loss rate (MSR/MLR): (1) 0% MSR/MLR; (2) symmetrical MSR/MLR in a 0.5% increment between 0.5 – 2.0%; and (3) symmetrical MSR/MLR that varies based on the ACO's number of assigned beneficiaries according to the methodology established under the one-sided model. 

5.            New Track 3

Rather than making changes to Track 2 to make it more attractive to potential risk-takers, CMS has established a new Track 3.  These ACOs would be eligible to receive up to 75% of savings, but also would be at risk for up to 75% of losses.  Track 3 ACOs will have the same MSR/MLR options as Track 2 ACOs.

A Track 3 ACO’s performance payment limit will be 20% of its benchmark and its upper loss limit would be 15% of its benchmark.  For example, if an ACO’s benchmark was $10,000, it cannot receive more than $2,000 in shared savings and will not be at risk for more than $1,500 of losses.  By contrast, a Track 2 ACO’s performance payment limit is 15% of its benchmark, and its upper loss limit is 10%. 

6.            Beneficiary assignment, part 2

CMS also will use a different beneficiary assignment methodology for Track 3 ACOs, borrowing from the Pioneer ACO Model.  As discussed above, CMS currently uses a two-step process to identify those beneficiaries to be assigned to an ACO.  CMS provides an ACO with a list of prospectively assigned beneficiaries at the beginning of the year based on the primary care services received during the preceding 12 months. 

Each quarter, CMS updates that list based on a rolling 12-month period.  A beneficiary prospectively assigned to an ACO may roll off its ranks if he or she receives primary care services from a provider outside the ACO. 

Three months after the end of the year (to allow sufficient time for all claims to be filed and paid), CMS makes a final, retrospective assignment of beneficiaries who received the plurality of their primary care services from the ACO during that year.  CMS then calculates the total cost of care for these beneficiaries, compares that amount to the benchmark, and determines whether the ACO is eligible for shared savings (or is liable for shared losses). 

As a result of this retrospective assignment, an ACO does not know for which beneficiaries it will be accountable during the performance year.  CMS reports that ACOs experience an average “churn” rate of 24%.  That means nearly a quarter of the names on the first prospective assignment list are different than the names on the end-of-the-year list.

By contrast, Track 3 ACOs will be accountable for the cost of care for those beneficiaries identified at the beginning of the year, with no end-of-the-year adjustments based on where these beneficiaries actually receive primary care services. 

7.            Risk rewards

Probably the most disappointing news in the final rule was CMS’ decision to finalize only one of its four waivers of Medicare reimbursement rules for ACO participants.  CMS will waive the rule that requires an inpatient hospital stay of no less than three consecutive dates for a beneficiary to be eligible for Medicare coverage of inpatient skilled nursing facility (SNF) care.  CMS has experimented with this waiver in the Pioneer ACO Model, and now is extending this opportunity to Track 2 and Track 3 MSSP ACOs. 

For the present, CMS decided against the proposed payment rules relating to telehealth, the homebound requirement for home health services coverage, and the prohibition against hospitals steering patients to specific, high-quality Medicare providers of post-hospital care services.  Instead, CMS intends to further study the impact of these and other payment waivers.

 8.   Split track ACOs

As CMS noted in the proposed rule, many ACOs have expressed a desire to split their participants into two tracks, allowing a subset of the ACO to move into a risk arrangement.  These ACOs emphasize the advantages of providers continuing to work together through the ACO infrastructure, even though some providers remain unwilling to accept risk.

CMS, however, was convinced there are too many unanswered questions regarding the impact of split track ACOs, and thus deferred any action until a later date.   

9.            Repayment mechanisms

Under the original MSSP regulations, a Track 2 ACO must establish a repayment mechanism equal to at least 1% of its total per capita Medicare Parts A and B expenditures for its assigned beneficiaries, as determined based on expenditures used to establish the ACO’s benchmark at the beginning of a performance period.   An ACO may demonstrate its ability to repay losses by obtaining reinsurance, placing funds in escrow, obtaining surety bonds, establishing a line of credit, or establishing another appropriate repayment mechanism that will ensure its ability to repay the Medicare program.

In publishing the final revised regulations, CMS declined the opportunity to require increases to the value of an ACO’s repayment mechanism based on changes to its benchmark.  The agency, however, has now limited repayment mechanisms to escrow accounts, lines of credit, and surety bonds, noting other mechanisms have proven impractical.   

10.          Benchmark adjustments

CMS has finalized its proposed modifications to the benchmark rebasing methodology, to include equally weighting the ACO's historical benchmark years, and accounting for savings generated in the ACO's first agreement period when setting the ACO's benchmark for its second agreement period.   

CMS also announced its intention to publish later this summer a proposed rule on a benchmark rebasing approach that accounts for regional FFS costs and trends in addition to the ACO's historical costs and trends.  CMS will seek comment on the components of and procedures for calculating a regionally trended rebased benchmark through this soon-to-be-published proposed rule.

Key Highlight:

This is only the first of the regulatory changes. It will require much more in-depth analysis to ensure long-term success of the MSSP. PYA has worked with dozens of organizations and ACOs and believes that regardless of specific provisions, long term-success will be based on the hard work and commitment of the providers versus the structure of the program. In light of CMS’ provisions to the MSSP, what remains is for providers to remain diligent and hardworking as they move forward into the future. 

You're Invited - CCM Town Hall Meeting

On Thursday, June 11, Tom Sullivan, Executive Editor at HIMSS Media, will moderate a virtual Town Hall meeting on chronic care management (CCM) and other value-based reimbursement initiatives. The one-hour Town Hall, sponsored by PYA and Kryptiq Corporation, will air at 2 pm EDT/11 am PDT. 

The Town Hall will feature an expert panel, including:

  • Lori Foley, Principal, PYA 
  • Barry Allison, Chief Information Officer, Center for Primary Care
  • Matt Johnson, Chief Administrative Officer, Wake Internal Medicine Consultants

Panelists will explore how the shifting regulatory environment and reimbursement guidelines are driving the growth of value-based care.  The panelists will also share practical and useful lessons learned by CCM early adopters for the benefit of Town Hall participants.  

You may register for the Town Hall here.  And don’t forget to submit your questions for the panelists when you complete the registration form!

Lessons Learned from Year One of the Medicare Physician Value Modifier Program

The results are in for the first year of the Medicare Physician Value Modifier Program (VM Program), and they are quite interesting.

Increasingly, providers are feeling the impact of the Centers for Medicare & Medicaid Services’ (CMS) value-based payment programs, and now these first-year results are moving into the limelight. Nationwide, there are approximately 1,000 groups with 100 or more eligible professionals that are subject to the VM Program in 2015, based on 2013 performance. However, only 127 groups elected to have their value modifier calculated using the “quality-tiering” approach, an option CMS afforded these groups in their first year of participation in the VM Program. The results for 106 of those 127 groups[1] are shown below:

The payment adjustment factor (“x”), to be applied by CMS to the participating groups’ reimbursement, is calculated after the performance period is over; the adjustment factor is based on the total amount of downward payment adjustments. There were 11 groups above (in bold) that will be penalized by either -0.5% or -1.0% based on quality-tiering.

In addition to these 11 groups, a total of 319 Taxpayer Identification Numbers (TINs) did not successfully report through the Physician Quality Reporting System (PQRS) in 2013, resulting in an automatic -1% VM payment adjustment. Those 319 entities (physician groups) combined for an aggregate penalty pool of almost $11 million. Based on that penalty pool, the upward adjustment factor for 2015 was determined to be 4.89%.

So, the end result? It pays (literally) to offer high-quality, low-cost care. In fact, it pays quite well. The 4.89% upward adjustment factor has resulted in a total of $11,377,858 in reward payments to be shared among 14 groups (each with 100+ providers), which equates to about $812,000 per TIN.

Here is some back-of-the-napkin math: let’s estimate that the average group size (for those 14 TINs) is 125 eligible professionals (EPs). Distributed equally, that would roughly result in a $6,500 bump in revenue for each EP. Not a bad annual bonus, right?


What Does This Mean?

There are several key takeaways from the first round of performance measurement under the value modifier program. Here are our thoughts:

  • In order to succeed… you must first participate in PQRS! The greatest amount of penalty dollars for 2013 is attributable to groups that did not successfully participate in PQRS. CMS is taking this very seriously, because those same groups are also getting a PQRS penalty in 2015 for failing to report 2013 PRQS measures (for those keeping track, that is an additional 1.5% penalty for not successfully meeting PQRS requirements). However you want to look at it, CMS can’t measure quality performance for a group if the group doesn’t first report the data. It is more important now than ever for groups to participate in PQRS (in 2015). Doing so will place a group in “Category 1”, making it eligible for an upward, neutral, or downward payment adjustment based on performance, but will ensure the group avoids the automatic penalty.

  • Insufficient data excludes groups from participation – is that good or bad? Because of the statistical nature of the benchmarking process, CMS is careful not to rate a group’s performance if there is not enough data to make a sound conclusion. There were 21 groups that elected quality-tiering, but did not have sufficient data to determine a cost or quality composite score. Don’t be alarmed if the Quality and Resource Use Report (QRUR) displays “insufficient data.” Keep in mind that this message is not necessarily an indication that a group will continue to have insufficient data. Medicare simply needs one measure with at least 20 cases to calculate a quality score, or a statistically significant result for costs based on the group’s Medicare claims.

  • As expected, most groups fell within the “average cost, average quality” tier. The program is, in nature, designed for the majority of groups to be classified as “average.” The VM seeks to reward those groups that are significantly better performers than their peers, and penalize those that fall significantly below the performance of their peers. In 2013, 76% of groups were average in both cost and quality. It takes a concerted effort to elevate performance high enough to earn an incentive payment; likewise, groups with substantially higher costs or lower quality will be penalized for lagging behind.

  • The financial impact of this program is real. These results, when coupled with other programs such as PQRS and Meaningful Use, represent dollars taken away from (or added to) a practice’s bottom line. It is also important to note that the adjustments are magnified in both directions for 2016 and 2017. For instance, the 12 “winning” practices for this program will see a nearly 5% rate increase for their Medicare Part B claims for 2015

  • More is on the way. In 2016, this program will extend to groups with 10 or more eligible professionals, and quality-tiering will be applied to all groups with 100+ eligible professionals (e.g., no voluntary opt in or out). The expectation is that, as PQRS becomes a more familiar program, more groups with fall into “Category 1.” Don’t be surprised, however, if the adjustment factor remains similarly large as it is this year. The 2016 adjustments will be based upon 2014 performance; and, if 2013 is any indication of 2014 participation, expect to see a similarly large proportion of groups that have not met PQRS requirements.


 A Brief Reminder of the Program – How Does it Work?

 As a quick reminder, the VM Program grades the quality and efficiency of care that healthcare professionals are providing. CMS takes the performance of each provider within a group practice (identified by TIN) to calculate the group’s overall score. Groups are then stacked against each other and are assigned a payment adjustment based on their relative quality and efficiency of care.

The QRUR, provided by CMS, gives groups an annual look into their performance. CMS recently released the performance of all groups for performance year 2013, which is impacting 2015 payments for groups with more than 100 eligible professionals.[2] You can expect CMS to release QRURs for 2014 performance in the fall.

Source: 2015 Value Modifier Results, Centers for Medicare & Medicaid Services

[1] Twenty-one groups had insufficient data to make a statistically significant determination about quality and cost performance.

[2] In 2015, only groups that elected quality-tiering were assigned an upward, neutral, or downward payment adjustment based on cost and quality performance. 

ACO Investment Model - Federal Funds Available for Rural ACO Development

Rural providers have until May 29 to submit a non-binding notice of intent to participate in the Medicare Shared Savings Program (MSSP) and to apply for funding through the ACO Investment Model (AIM) Program

This year, the Center for Medicare and Medicaid Innovation (CCMI), part of the Centers for Medicare & Medicaid Services (CMS), is making available more than $100 million to help rural ACOs participating in the MSSP develop operational infrastructure.  These ACOs are eligible for $1.4 to $2.5 million in advance payments, depending on the number of Medicare beneficiaries attributed to the ACO.  This money may be used, for example, to acquire needed technology and support services and hire care coordination staff.

To be accepted into the MSSP – and thus be eligible for AIM funding – a rural ACO must have at least 5,000 and no more than 10,000 attributed Medicare beneficiaries.  On their own, most rural communities cannot reach this threshold.  Two or more communities partnering together, however, can meet this requirement. 

The first step in such a partnership is forming the ACO as a new legal entity.  CMS regulations require that multiple taxpayer identification numbers (TINs) coming together to form an ACO must create a new legal entity for that purpose.  This is a relatively simple process, requiring the filing of a one- or two-page article of incorporation or organization with the Secretary of State, and securing a TIN by completing IRS’ on-line form.  This work usually can be completed in a day or two.    

Once the ACO entity is formed and has a TIN, the next step is to submit the non-binding notice of intent with CMS by no later than May 29.  Again, this is a relatively simple process:  it is an on-line form that takes only a few minutes to complete.

Next, the ACO entity will need to get to work on completing the MSSP application, which is due July 31.  This is not a simple process, as it requires detailed information on how the ACO intends to operate if accepted into the program.  Also, the ACO must secure signed participation agreements from each entity that will be part of the ACO in advance of submitting the application. (To learn more about the MSSP application process, please see PYA’s ACO Road Map.  It provides a complete summary of the regulatory requirements.)

Because Medicare beneficiaries are attributed to an ACO based on the physician who provides the “plurality” of primary care services to a beneficiary, an ACO must recruit a sufficient number of primary care physicians as participants.  This means a hospital must communicate with its medical staff regarding the opportunity presented by the MSSP and the AIM Program. 

CMMI has not yet released the AIM Program application or the timeline for submission of that application, but we expect it will be concurrent with the MSSP application process.  We do know the application will require a detailed spend plan for the funds received through the program.  The spend plan must be unique to the ACO and identify and address local needs.

Keep in mind the AIM Program funds are not free money.  CMS will withhold any shared savings earned by the ACO until the full amount has been repaid. If an ACO elects to leave the MSSP before the end of the three-year performance period, the ACO must repay any amount still owed to CMS.  However, if the ACO completes the performance period and exits the program, any remaining amount owed will be forgiven.     

The AIM Program offers a real opportunity for rural providers to collaborate with neighboring communities to develop sustainable infrastructure for new payment and delivery systems.  The competencies developed through active participation in new care payment models, such as ACOs, are key to success in population health management and value-based reimbursement.  

PYA is supporting several rural communities as they organize to pursue the MSSP and AIM Program.  Our deep knowledge of rural health issues and experience with the MSSP and CMMI application processes allow us to be effective partners in this process.  To discuss opportunities for your community, please contact Martie Ross ( or Jeff Ellis (