American College Of Surgeons - Inspiring Quality: Highest Standards, Better Outcomes

Value-Based Payment Modifier

In 2017, the Centers for Medicare & Medicaid (CMS) merged its previous physician quality programs into the Merit-based Incentive Payment System (MIPS). MIPS includes four components:

  • Quality, formerly known as the Physician Quality Reporting System (PQRS)
  • Promoting Interoperability, formerly known as Advancing Care Information (ACI) or the Electronic Health Record Incentive Payment Program
  • Cost, formerly known as the Physician Value-Based Payment Modifier (VM) program
  • Improvement Activities, a new category

These four components combine to form a MIPS Final Score that determines a MIPS eligible clinician’s Medicare Part B incentive payment.

For 2018, the MIPS final score is composed of Quality for 50 percent, Cost for 10 percent, Promoting Interoperability for 25 percent, and Improvement Activities for 15 percent. For more information on the MIPS program, please visit the ACS Quality Payment Program Resource Center.

The VM, authorized under the Affordable Care Act, provided either bonus payments, penalties, or no bonus or penalties (neutral adjustment) to a physician’s Medicare fee-for-service payments based on the quality and cost of the care they provided. CMS applied the VM to all physicians.

Surgeons who successfully reported to the PQRS in 2016 will receive either a positive or neutral Value Modifier payment adjustment in 2018 based on their performance in 2016. Providers who failed to successfully report to the PQRS will receive a negative payment adjustment. Providers can receive an increase of either 1.0x percent or 2.0x percent, where “x” is the 2018 VM adjustment factor of 6.6 percent. An additional 1.0x percent adjustment is applied to physicians and groups who provided care to complex patients. This means surgeons could see an increase of between 6.6 percent and 19.9 percent to their Medicare physician fee schedule payments in 2018.

Know How You’re Performing

CMS distributes annual Quality and Resource Use Reports (QRURs)—confidential feedback reports that provide information about the resources used (cost) and the quality of care provided by physicians and group practices to Medicare fee-for-service patients. The reports show how groups and solo practitioners performed on the quality and cost measures used to calculate the VM and how the VM will be applied to physician payments. The reports are intended to provide comparative performance data that physicians can use to improve the care provided to Medicare beneficiaries. QRURs are made available to all group practices and solo practitioners nationwide. The last QRURs were released in 2017, and reflect a surgeon’s 2016 performance.

Learn more about QRURs and how to obtain yours on our QRUR page.

Components of the VM

There are two metrics used to calculate the VM: quality and cost.

Quality

The quality metrics are based in part on participation in the PQRS program as well as CMS-selected claims-based outcomes measures, listed below. It is important that surgeons satisfy the PQRS program requirements in order to avoid additional VM penalties.

PQRS Measures Selected by the Provider

CMS will use the measures reported on by providers for the PQRS program as part of the quality composite score.

Claims-Based Outcomes Measures Selected by CMS

In addition to the PQRS measures, CMS will calculate performance on selected claims-based outcomes measures. CMS uses a two-step attribution process to associate beneficiaries to a provider’s tax identification number (TIN) when assessing these measures. These measures include:

  • Composite of rates of potentially preventable hospital admissions for heart failure, chronic obstructive pulmonary disease, and diabetes
  • Composite rate of potentially preventable hospital admissions for dehydration, urinary tract infections, and bacterial pneumonia
  • Rates of an all‐cause hospital readmissions measure

CMS will assess the quality measures for which there are a minimum of 20 eligible cases and equally weight them to calculate a quality of care composite score. If a provider does not have enough data on the quality measures (or if the quality measure does not apply to them), they will be deemed to be “average” for the quality component.

Cost

The cost metrics used by CMS to calculate the cost performance include five total per capita cost measures and the Medicare Spending per Beneficiary measure. CMS uses a two-step attribution process to associate beneficiaries to a provider’s TIN when assessing these measures. The cost measures include:

  • Total per Capita Costs for All Beneficiaries evaluates all Medicare Part A and B costs associated with any beneficiary over a year. Beneficiaries are attributed to the group that provided the plurality of primary care services to that individual
  • Total per Capita Costs for Beneficiaries with Specific Conditions evaluates Part A and B costs for patients with specific conditions (heart failure, coronary artery disease, chronic obstructive pulmonary disease, and diabetes). Beneficiaries are attributed to the group that provided the plurality of primary care services to that individual
  • Medicare Spending per Beneficiary evaluates Part A and B costs spanning three days before an inpatient hospital admission through 30 days after discharge. Beneficiaries are attributed to the group that provided the plurality of Part B services during the inpatient stay

Similar to the quality measures, CMS will assess the cost measures for which there are a minimum of 20 eligible cases and equally weight them to calculate the cost composite score.

Both the quality and cost composite scores will be equally weighted to determine the VM score as shown in the graphic created by CMS below.

VBM flowchart

CMS will then divide each physician and physician group’s quality and cost composite scores into three tiers based on whether the score is above, at, or below the mean. This is known as “quality tiering” and this will determine whether they will receive a bonus, penalty, or no bonus or penalty under the VM.

2018 VM (for Performance Year 2016)

The 2018 VM will be applied to all physicians based on how they perform on their overall cost and quality performance in CY 2016.

Solo practice physicians and groups up to nine physicians will avoid VM payment penalties, but may see either of the following:

  • Bonus payment
  • Penalty
  • Neutral adjustment (no bonus or penalty)

Groups of 10 or more providers will be subject to one of the following:

  • Bonus payment
  • Penalty
  • Neutral adjustment (no bonus or penalty)

2016 performance year / 2018 PQRS and VM penalty assessment

Resources for VM

Quality and Resource Use Reports

CMS VM Website

VM Attribution Process