Despite uncertainties in the healthcare ecosystem created by last year’s
presidential election, value-based payment programs are here to stay. For many healthcare
leaders, however, the financial implications and mechanics of value-based payment
programs, including those that comprise the Merit-based Incentive Payment
System (MIPS), remain elusive and poorly understood.
MIPS was legislated by Congress as part of the highly bipartisan
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). For the 2017
performance year, CMS will calculate and publish MIPS performance scores for
more than 400,000 Medicare clinicians. Each clinician will receive a score out of a possible 100 points,
based on three performance categories: quality (60 percent), advancing care
information (25 percent), and clinical improvement activities (15 percent). Cost
will also be analyzed as a performance category but will have a 0 percent weight
in 2017 before accounting for 10 percent of the score in 2018.
The financial impacts of these scores can amount to millions of dollars
per organization and will significantly grow over the course of the next several
years. Penalties assessed for poor performance or noncompliance will be used to
fund incentive payments for high performers, so the “winners” effectively will be
paid by the “losers.” Notably, because there essentially is no MIPS point value
at which a clinician will receive a neutral payment adjustment, everyone will
be a winner or a loser and every MIPS point will have an impact financially.
Healthcare leaders need to develop a detailed understanding of the MIPS payment
adjustment rules to fully appreciate the impact of this program on their Medicare
Part B payments. Looking at the cumulative financial impacts over a four-year
period, many organizations will find that the gap between potential penalties
and potential incentives can add up to an extremely significant competitive
advantage or disadvantage.
There are two parts to the MIPS payment adjustment: a base incentive or
penalty and an exceptional-performance bonus. The base incentive is calculated
based on clinicians’ MIPS score and how it compares to a performance threshold
annually calculated by CMS. This threshold score marks the dividing line
between those receiving a penalty and those receiving an incentive. MIPS scores
that exceed a higher threshold qualify for an additional boost to payment via
the exceptional-performance bonus.
The chart below illustrates the impact of the MIPS score on payment. In
this chart, the assessed penalty or incentive (expressed as a percentage of
Part B payment) is represented by the line extending from the bottom-left
corner of the chart up to the top-right. As illustrated, clinicians with MIPS
point scores that are less than 25 percent of the performance threshold will
receive the maximum penalty. For those reaching the exceptional-performance
bonus threshold, there is a payment jump of 0.5 percent of Part B, which
continues to scale up in an accelerated manner to the maximum bonus for the
For the 2017 and 2018 performance years, CMS has discretion to set the
performance and the exceptional-performance-bonus threshold scores to arbitrary
values. For 2017, CMS has set the performance threshold to an artificially low
value of 3—to make avoiding a penalty relatively easy—and the threshold for
exceptional performance to 70. Starting with the 2019 performance year, the
performance threshold will be equal to the historical mean or median, and the exceptional-performance
threshold will be the 25th percentile of historical scores for clinicians
above the performance threshold.
The maximum penalty will be -4% of Part B payments for the 2017
performance year, escalating to -9% by 2020. Given that many provider
organizations have single-digit Part B margins, potential MIPS penalties
threaten financial sustainability.
All incentives and penalties will be applied to Part B claims in the
second calendar year after the respective performance year, so the 2017
performance year will impact revenue in 2019.
The exhibit below shows the maximum possible total incentives and
penalties for the first four years of the program for a hypothetical
organization with 100 clinicians and $100,000 in Part B payments per clinician.
The table also calculates the average percentages of the incentives and
penalties over those years, along with average payments and the total potential
variation in Part B dollars.
Note that the 2017 maximum possible base incentive shown in the exhibit,
0.856 percent, and the maximum exceptional-performance bonus, 1.523 percent, reflect
CMS’s estimates for that performance year. As the performance threshold
increases each year, more clinicians will fall below it and be penalized,
increasing both the total amount of penalties and the base-incentive pool funded
by those penalties. For performance years after 2017, the table above uses
assumed values for the maximum incentives, which may increase or decrease when
CMS publishes performance thresholds and maximum-incentive estimates for each respective
In the exhibit below, we show how the maximum base incentive increases
in proportion to a “budget-neutrality adjustment factor (X)” for Medicare. This
factor is calculated by CMS for each performance year to ensure that the national
base-incentive pool is equal to the amount of national penalties assessed. As the
number of penalized clinicians increases, “X” increases and, thereby, the
maximum incentive increases.
The maximum base incentive is 4 percent times “X” for the 2017
performance year and increases to a maximum of 9 percent times “X” for 2020. CMS
caps “X” at 3, whereas the table, conservatively, assumes that “X” does not
The exhibit below also shows how the payment adjustment changes for an
assumed set of MIPS points. For instance, if an organization has 200 eligible
clinicians, then the total payment adjustment would be $570,189 x (200 eligible
clinicians / 100 eligible clinicians) = $570,189 x 2 = $1.14M. Under ranges of
reasonable assumptions, it is hard to avoid the fact that the potential financial
impacts of MIPS scale quickly to significant amounts.
Understanding the financial
mechanics of MIPS is crucial for healthcare leaders seeking to develop
successful strategic planning and accurate revenue forecasts. For most
organizations, the numbers here represent a very large potential impact on
margins that are already thin.
MIPS will have long-term impacts
on forecasting, public reputation, and potential M&A activity. Organizational
leaders should take the time to understand the program and dedicate the
resources necessary to ensuring strong performance on MIPS scores in 2017 and
S. Lee, PhD, is CEO and
founder, SA Ignite, Chicago.
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6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
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Revenue Cycle Payment Clarity
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Key Capital Considerations for Mergers and Acquisitions
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Yuma Regional Medical Center case study
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Denials Deconstructed: Getting Your Claims Paid
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Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
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