Physician Payment and Reimbursement

The Physician Value-Based Payment Modifier: Summary of National Provider Call

December 16, 2013 2:05 pm

Medicare payments to physicians will soon be adjusted based on the quality and cost of care provided.


About a week to the day of releasing the final physician payment rates for 2014, the Centers for Medicare & Medicaid Services (CMS) hosted a National Provider Call to provide an overview of the finalized policies for the value-based payment modifier (VM) under the final rule. 

During the Dec. 3 call, CMS representatives discussed plans to continue to phase in and expand application of the VM in 2016 (based on performance in 2014), described how the VM is aligned with the reporting requirements under the physician quality reporting system (PQRS), and reviewed the VM cost measures.  

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Mandated by the Affordable Care Act (ACA), the VM is a new payment adjustment that considers both the quality of care provided and the cost of care. Under this payment mechanism, physicians are rewarded for providing higher-quality and more efficient care. 

The VM will be phased in over a period of three years, beginning in 2015, and fully implemented by 2017. The 2015 VM will be based on the 2013 performance period and the 2016 VM on the 2014 performance period. 

Implementation of the VM is based on participation in the Physician Quality Reporting System (PQRS). The VM is budget neutral.

Call Highlights

  • CMS clarified that the VM payment adjustment is separate from the PQRS payment adjustment and from other Medicare-sponsored programs. 
  • The VM is a work in progress that will be refined over several years.

2015 Policy

  • CMS clarified that the VM will not be applied to payments to those groups that have physicians who participate in accountable care organizations (ACOs).
  • In 2015, all physicians groups with 100 or more eligible professionals (EPs) will be subject to the value modifier based on their 2013 performance.
  • Groups of 100 or more eligible professionals (EPs) needed to self-nominate/register and select one of the following PQRS group reporting mechanisms by Oct. 15, 2013, in order to avoid a 1 percent downward payment adjustment:
    • Group practice reporting option (GPRO) web-interface
    • CMS-qualified registry
    • PQRS administrative claims  (quality measures)


  • Groups of 100 or more EPs interested in electing the quality-tiering option should have done so by Oct. 15, 2013, in order to avoid the 1 percent downward payment adjustment. If a group chose this option, calculation of the VM could result in an upward, downward, or no payment adjustment based on 2013 performance.
  • The exhibit below displays the financial outcomes if quality tiering is selected:
  • Quality/Cost Low Cost Average Cost High Cost
    High quality +2.0x* +1.0x* +0.0%
    Medium quality +1.0x* +0.0% -1.0%
    Low quality +0.0% -1.0% -2.0%


    * Eligible for an additional +1.0x if reporting clinical data for quality measures and average beneficiary risk score in the top 25 percent of all beneficiary risk scores

  • Outcome measures for VM calculation include:
    • Composite of acute prevention quality indicators: bacterial pneumonia, urinary tract infection, dehydration
    • Composite of chronic prevention quality indicators (PQIs): chronic obstructive pulmonary disease (COPD), heart failure, and diabetes
    • All cause readmission: rate of provider visits within 30 days of discharge from an acute care hospital


  • Cost measures for VM calculation include:
    • Total per capita costs measure (annual payment standardized and risk-adjusted Part A and part B costs)
    • Total per capita costs for beneficiaries with COPD, heart failure coronary artery disease, and diabetes
      • All cost measures are payment standardized and risk adjusted (age, dual eligibility, ESRD qualified, etc.)



2016 Policy

  • The VM applies to groups of physicians with 10 or more EPs.
  • 2016 physician group quality-reporting mechanism options include:
    • GPRO-web interface
    • CMS-qualified registries
    • EHRs
    • 50 percent of EPs reporting measures individually


  • Administrative claim option not available for the 2014 performance year/2016 base year.
  • PQRS CAHPS measures are available as an option for groups with 25 or more EPs.
  • Quality tiering will be mandatory; no longer optional.
    • Groups with 10-99 EPs receive upward or no payment adjustment based on quality tiering.
    • Groups with 100 or more EPs receive an upward, neutral, or downward adjustment based on quality tiering.
    • Groups that do not self nominate for the GPRO web interface, CMS-qualified registries, or EHR—or that have the 50 percent threshold (see discussion below) and fail to avoid the 2016 PQRS payment adjustment—will receive a downward adjustment of -2.0 percent
    • If a group decides not to select the group reporting option, they can get an upward adjustment depending on performance as long as at least 50 percent of the EPs report on quality measures individually and have avoided the 2016 PQRS payment adjustment.


  • Outcome measures:
    • Same as those for 2015


  • Cost measures:
    • Same as 2015, and Medicare Spending per Beneficiary Measure, which includes costs during the three days before and 30 days after an inpatient hospitalization


Quality Tiering

  • CMS is required to come up with a quality score and a cost score for each group.
  • Groups will receive two composite scores (quality and cost) based on standardized performance.
  • Quality of care and cost composite scores will be classified into low, average, and high categories.
  • Cost measures will be adjusted for specialty composition.
  • Cost comparisons will be made by looking at specialty physician performance.
  • To receive the 2 percent payment increase, the best place for a group to be is high quality and low cost.


  • CMS will not apply the VM to any group of 10 or more EPs who are a part of an ACO in 2014.
  • CMS will have information on whether the VM applies to physician groups that do not participate in Medicare. Those interested should check the physician feedback program information on the CMS website at
  • CMS will issue physician feedback reports, also known as Quality and Resource Use Reports (QRURs) containing CY13 data to groups of physicians subject to the VM in late summer of 2014. These reports will be the basis of the 2015 VM.
    • CMS is accepting feedback and suggestions to consider in the future with regards to the QRUR at [email protected].


  • More information about group and individual reporting options will be contained in December 17th PQRS policies.

More Information



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