Physician Quality Reporting System Update from Joy Newby

PQRS and Value-Based Payment Modifier and EHR, OH MY

By Joy Newby, LPN, CPC

Newby Consulting, Inc.

Like Dorothy following the Yellow Brick Road and worried about “Lions and Tigers and Bears,” in 2015, physicians are following the Red Brick Road also known as Payment Adjustments.

First Congress offered carrots, now as payment reductions begin in 2015, some physicians are feeling the stick(s). Before beginning the discussion of the new payment adjustments, we must remember that Medicare payments continue to be reduced by 2% due to Sequestration. At this time, we can expect this reduction to continue on all Medicare payments through CY 2022.

Beginning with dates of service 1/1/2015, in addition to the payment reduction due to Sequestration, the following payment adjustments may be applied to payments based on the Medicare Physician Fee Schedule (MPFS)

  • Physician Quality Reporting System (PQRS)
  • Electronic Health Records (EHR)
  • Value-Based Payment Modifier (VM) (Based on quality reporting performance and cost)

Please remember these payment reductions are accumulative and will be applied when the criteria are not met for the individual program. You will note the determination of which payment adjustments apply is based on the EPs’ actions taken two (2) years prior to the application of the payment adjustment. For example, if the EP did not report at least one (1) PQRS measure for one (1) patient in 2013, payments for services included on the MPFS are being reduced by 1.5%.

Information regarding the 2015-2017 Payment Adjustments has been put into tables that can be accessed here

Physician Quality Reporting System

The Affordable Care Act made a number of changes to the PQRS, including authorizing incentive payments through 2014 and, in 2013 eligible professionals who do not satisfactorily report PQRS or at least report to prevent the adjustment, the ACA requires a payment adjustment (penalty), beginning in 2015.

In 2013, physicians and other eligible professionals (referred to as eligible professionals from this point forward), who satisfactorily reported the required number of measures for the reporting option selected or satisfactorily reported a measures group, earned a 0.5% bonus payment and prevented the 1.5% payment penalty for 2015. To prevent an overwhelming number of eligible professionals (EPs) from being subject to the penalty, CMS determined that any EP who reported at least one (1) measure for at least one (1) patient during 2013 would prevent the 2015 payment penalty. (These EPs were not eligible for the bonus payment.)

In 2014, EPs were given several reporting options which specified the number of measures that had to be reported in order to earn the 0.5% bonus payment. Again, CMS established a reporting option that required fewer measures to prevent the 2% payment penalty in 2016.

For 2015, CMS has stepped up the game. Per the ACA, effective in 2015, there are no bonus payments scheduled for the future. The EPs who do not satisfactorily report PQRS measures (or satisfactorily participate using a qualified clinical data registry option) will be subject to a 2% payment penalty in 2017. 

There are several reporting options and the vast majority of these options require EPs to report at least 9 individual measures OR 1 measures group for 20 eligible patients OR 9 individual clinical quality measures (CQMs). If reporting individual measures, the EP must select measures covering at least 3 National Quality Strategy (NQS) Domains (each measure is assigned to 1 of 6 categories called domains).

Typically, when reporting individual measures, EPs will need to report each of the 9 measures at least 50% of the time the measure is applicable to Medicare beneficiaries with Original Medicare or Railroad Medicare coverage.

Group practices of 2 or more EPs can elect to use the Group Practice Reporting Option. Information about group reporting can be found in the Physician Quality Reporting System (PQRS) Group Practice Reporting Option (GPRO) available on the CMS website at

New to 2015 – If the EP has at least one face-to-face encounter with a Medicare beneficiary, the EP must report on at least one “cross-cutting” measure. CMS believes these measures will “collect data that provides a better picture of the overall quality of care furnished by eligible professionals, particularly for the purpose of having PQRS reporting being used to assess quality performance under the value-based payment modifier (VM).” Basically, the measures represent quality actions that apply to multiple specialties.

The requirement to report a cross-cutting measure does not mean EPs will be reporting 10 measures, it simply means that when selecting the 9 measures, at least one of the measures must be identified as a “cross-cutting” measure. For example, the following measure is assigned to the Patient Safety Domain and is also considered a cross-cutting measure.

Measure #130 (NQF 0419) - Documentation of Current Medications in the Medical Record:

Percentage of visits for patients aged 18 years and older for which the eligible professional attests to documenting a list of current medications using all immediate resources available on the date of the encounter.

  • This list must include ALL known prescriptions, over-the-counters, herbals, and vitamin/mineral/dietary (nutritional) supplements
  • AND must contain the medications’ name, dosage, frequency and route of administration.

CMS defines a face-to-face encounter as an instance in which the EP billed for services that are associated with face-to-face encounters under the Medicare Physician Fee Schedule (MPFS). This includes general office visits, outpatient visits, and surgical procedure codes; however, CMS does not consider telehealth visits as a face-to-face encounter.

Electronic Health Records

In the American Recovery and Reinvestment Act of 2009 (ARRA), Congress included $19.2 billion in incentives for hospitals, physicians and other eligible professionals to adopt electronic health records (EHR). The incentives were never meant to be a reimbursement of costs and, as such, maximum payments were set.

  • Total payments between May 2011 and December 2014 = more than $27.7 billion
  • More than $18.8 billion in Medicare EHR Incentive Program payments have been made between May 2011 and December 2014.
  • More than $8.9 billion in Medicaid EHR Incentive Program payments have been made between January 2011 (when the first set of states launched their programs) and December 2014.

As of December 2014, Indiana EPs had received $148,956,106 in Medicare payments and $138,586,893 in Medicaid payments. In compliance with the Health Information Technology for Economic and Clinical Health (HITECH) Act's requirement, CMS has posted the names, business phone numbers, and business addresses of Medicare eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs) that have successfully demonstrated meaningful use and received a payment. CMS has not posted information on group practices, as incentive payments are not provided at the group practice level.

Any provider that receives an EHR incentive payment for either the Medicare EHR Incentive Program or the Medicaid EHR Incentive Program potentially may be subject to an audit. Figliozzi and Company will be performing the meaningful use audits for CMS. If you are selected for an audit you will receive a letter from them with the CMS logo on the letterhead. Meaningful use audit questions can be directed to Peter Figliozzi at (516) 745-6400 x302 or by email at Figliozzi and Company’s website is

Figliozzi and Company will be performing the following audits to:

  • Eligible Professionals receiving incentive payments from
  • Medicare
  • Medicare Advantage (MA)

Under the Medicare incentive program, to receive the maximum incentive payment, eligible professionals must have started participation by 2012. The last year to begin participation and receive an incentive payment was 2014. Medicare eligible physicians have until February 28, 2015 to attest for Meaningful Use for 2014. See the section below for additional information about the Medicaid incentive program.

CMS established objectives for “meaningful use” that everyone must meet to receive an incentive payment. Providers have to show that they are “meaningfully using” their EHRs by meeting thresholds for a number of objectives in order to receive an EHR incentive payment. To qualify for incentive payments, eligible professionals must successfully demonstrate meaningful use for each year of participation in the program.

The EHR Incentive Programs consist of 3 stages of meaningful use. Each stage will have its own set of requirements to meet in order to demonstrate meaningful use. Eligible professionals always begin participating under Stage 1 requirements. Medicare eligible professionals can refer to My Participation Timeline to see the years they will demonstrate each stage of meaningful use.

The requirements in Stage 1 are focused on providers capturing patient data and sharing that data either with the patient or with other health care professionals. The focus for Stage 2 is advanced clinical processes and improved outcomes will be the focus for Stage 3.

Payment Adjustments

ARRA also mandated that payment adjustments be applied to Medicare eligible professionals, eligible hospitals, and critical access hospitals (CAHs) that are not meaningful users of Certified Electronic Health Record (EHR) Technology under the Medicare EHR Incentive Program.

If a provider is eligible to participate in the Medicare EHR Incentive Program, they must demonstrate meaningful use in either the Medicare EHR Incentive Program or in the Medicaid EHR Incentive Program, to avoid a payment adjustment. Medicaid providers who are only eligible to participate in the Medicaid EHR Incentive Program are not subject to these payment adjustments.

Medicare hospitals began to receive payment adjustments on October 1, 2014, and Medicare eligible professionals will begin to receive payment adjustments on January 1, 2015.

Eligible Professional Reconsideration Form

If you feel the Eligible Professional is subject to the payment adjustment for Medicare in error, please refer to the following instructions and application to apply for payment adjustment reconsideration for Calendar Year 2015 available on the CMS website at

  • Eligible Professional Payment Adjustment Reconsideration Instructions
  • Eligible Professional Payment Adjustment Reconsideration Application

Hardship Exceptions to Avoid Medicare Payment Adjustments

Eligible professionals and eligible hospitals may be exempt from payment adjustments if they can show that demonstrating meaningful use would result in a significant hardship.  To be considered for an exception, an eligible professional or eligible hospital must complete a Hardship Exception application along with proof of the hardship.  If approved, the hardship exception is valid for 1 payment year only.  A new application must be submitted if the hardship continues for the following payment year.  In no case may a provider be granted an exception for more than 5 years.

Eligible professionals can use the Hardship Exception Tool to determine if they will avoid the upcoming 2015 and 2016 Medicare EHR Incentive Program payment adjustments by demonstrating meaningful use, or if they should apply for a hardship exception.

Eligible Professional (EP) Hardship Exception Application

  • 2015 Eligible Professional Hardship application deadline was July 1, 2014
  • 2016 Eligible Professional Hardship application will be available soon.

Eligible Hospitals Hardship Exception Application

  • 2015 Eligible Hospital Hardship application deadline was April 1, 2014
  • 2016 Eligible Hospital Hardship application will be available soon.

Not All Providers Apply for Hardship Exceptions

Some providers will automatically be granted a hardship exception. CMS will use Medicare data on these providers to determine their hardship exception.

The following providers do not need to submit a hardship application:

  • New providers to the profession in their first year (both eligible professionals and eligible hospitals)
  • Eligible professionals who are hospital-based: a provider is considered hospital-based if he or she provides more than 90% of their covered professional services in either an inpatient (Place of Service 21) or emergency department (Place of Service 23) of a hospital*
  • Eligible professionals in which 90% of their claims include Place of Service 21, Place of Service 23 and certain observation services using Place of Service 22.
  • Eligible professionals with certain PECOS specialties (05-Anesthesiology, 22-Pathology, 30-Diagnostic Radiology, 36-Nuclear Medicine, 94-Interventional Radiology) 6 months prior to the first day of the payment adjustments. Eligible professionals should verify that their PECOS specialty is up to date.

Medicaid Incentive Continues

For the Medicaid EHR Incentive Program, an EP must be one of the following five types of Medicaid professionals: physicians, dentists, certified nurse-midwives, nurse practitioners, and physician assistants practicing in a Federally Qualified Health Center (FQHC) or a Rural Health Center (RHC) led by a physician assistant.

To be eligible to participate in the Medicaid EHR Incentive Program, an EP must either:

1.   Meet certain Medicaid patient volume thresholds; or

2.   Practice predominantly in an FQHC or RHC where 30 percent of the patient volume is derived from needy individuals.

Note: One exception to this rule is that a pediatrician may have at least 20 percent Medicaid patient volume and still qualify but at a reduced incentive

EPs may not receive EHR incentive payments from both the Medicare and Medicaid programs in the same year. In the event an EP qualifies for EHR incentive payments from both the Medicare and Medicaid programs, the EP must elect to receive payments from only one program and may only switch after receiving an incentive between the two programs once, and not after 2015. Furthermore, an EP who selects Medicaid must only receive incentive payments from one state in any payment year.

The last year to begin participating in the Medicaid EHR Incentive Program is 2016. EPs may receive Medicaid EHR incentive payments for up to six years; 2021 is the final year for Medicaid EHR incentive payments

Additional information is available on the CMS website at

For more information visit the Medicaid State Information page at

Value-Based Payment Modifier

Section 3007 of the Affordable Care Act mandated that, by 2015, CMS begin applying a value modifier (VM) under the Medicare Physician Fee Schedule (MPFS). Both cost and quality data are included in calculating payments for physicians. Congress and CMS believes this program supports the transformation of Medicare from a passive payer to an active purchaser of higher quality, more efficient health care through the value-based purchasing (VBP) initiative.

For 2015 and 2016, the value modifier does not apply to groups of physicians in which any of the group practice’s physicians participate in the Medicare Shared Savings Program, Pioneer ACOs, or the Comprehensive Primary Care Initiative. By 2017, the VM will be applied to all physicians who bill Medicare for services provided under the physician fee schedule. CMS estimates that its policies to apply the VM to physicians in all groups with two or more EPs and to all solo practitioners who are physicians in CY 2017 will affect approximately 900,000 physicians.

Based on the eligible professional’s (EP) quality of care and cost of care for services included on the MPFS in the Payment Year, CMS will calculate the VM that can result in higher, neutral, or downward adjustments in payments for MPFS services two (2) years later. For example, payment year 2014 affects payments in 2016; payment year 2015 affects payments in 2017.

The EP’s quality of care is based on his/her PQRS reporting. All EPs (including solo practitioners) who do not successfully report/participate PQRS measures in 2015 will automatically receive a downward adjustment to 2017 MPFS payments for all patients with Original or Railroad Medicare. Groups of 10 or more EPs will receive an automatic VM of -4%; groups of 2-9 and solo practitioners will receive an automatic -2% VM.

Quality Tiering

Quality tiering is the analysis used to determine the type of adjustment (upward, downward, or neutral) and the range of adjustment based on performance of quality and cost measures. Quality tiering will determine if a group practice’s performance is statistically better, the same, or worse than the national mean.

For the 2015 value modifier, group practices with 100 or more EPs could voluntarily choose to participate in quality tiering under the value modifier. Quality tiering could result in an upward, neutral or downward payment adjustment in 2015 for groups of 100 or more EPs. Those who did not choose quality tiering have a neutral value modifier, which has no impact on their 2015 payments under the MPFS. The downside to this decision is that these groups are not eligible for the upward adjustment; the upside to this decision is that these groups were also not eligible for the downward adjustment!

For the 2016 VM (based on payment year 2014), quality tiering is mandatory for groups with 10 or more EPs. Physicians in groups of 10 to 99 EPs will be subject to an upward or neutral payment adjustment, while groups of physicians with 100 or more EPs will be subject to an upward, neutral, or downward payment adjustment.

For the 2017 VM (based on payment year 2015), the quality tiering adjustment will be -4% to +4% for groups of 10 or more EPs subject to the VM.

In CY 2017, the quality tiering VM adjustment (based on payment year 2015) for groups of 2-9 EPs and solo practitioners will be -0% to +2%.

Cost and Quality Measures Used for Quality Tiering

Following is the latest information we have available that discusses the measures that will be used for the VM quality tiering.

Quality Measures

  • Measures reported through the GPRO PQRS reporting mechanism selected by the group OR individual measures reported by at least 50% of the eligible professionals within the group (50% threshold option)
  • Three outcome measures:
  • All Cause Readmission
  • Composite of Acute Prevention Quality Indicators (bacterial pneumonia, urinary tract infection, dehydration)
  • Composite of Chronic Prevention Quality Indicators (COPD, heart failure, diabetes)

Cost Measures

  • Total per capita costs measures (Parts A & B)
  • Total per capita costs for beneficiaries with 4 chronic conditions:
  • Chronic Obstructive Pulmonary Disease (COPD)
  • Heart Failure
  • Coronary Artery Disease
  • Diabetes
  • Medicare Spending Per Beneficiary measure (3 days prior and 30 days after an inpatient hospitalization) attributed to the group providing the plurality of Part B services during the hospitalization
  • All cost measures are payment standardized and risk adjusted.
  • Each group’s cost measures adjusted for specialty mix of the EPs in the group.

Cost Measure Attribution

  • 5 Total Per Capita Cost Measures
  • Identify all beneficiaries who have had at least one primary care service rendered by a physician in the group.
  • Followed by a two-step assignment process

v  First, assign beneficiaries who have had a plurality of primary care services (allowed charges) rendered by primary care physicians.

v  Second, for beneficiaries that remain unassigned, assign beneficiaries who have received a plurality of primary care services (allowed charges) rendered by any eligible professional

  • Medicare Spending Per Beneficiary (MSPB) measure – attribute the hospitalization to the group of physicians providing the plurality of Part B services during the inpatient hospitalization.

Timing for the Application of VM Based on Quality Tiering

  • Based on their performance in calendar year 2013, physicians in group practices of 100 or more eligible professionals (EPs) who submitted claims to Medicare under a single tax identification number (TIN) are subject to the value modifier in 2015.
  • Physicians in group practices of 10 or more EPs who participate in Fee-For Service Medicare under a single TIN will be subject to the value modifier in 2016, based on their performance in calendar year 2014.
  • All physicians who participate in Fee-For-Service Medicare will be affected by the value modifier starting in 2017.

Application of the Value Modifier to Non-Physician EPs

The ACA gives CMS discretion to apply the VM to EPs who are not physicians beginning in CY 2017. CMS will begin applying the VM to payments for nonphysician EPs in groups with 2 or more EPs and to nonphysician EPs who are solo practitioners beginning in CY 2018. The CY 2018 VM will be based on the 2016 payment year.

Physician Feedback Reports

Section 131 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) as modified by Section 3003 of the Affordable Care Act of 2010, requires CMS to create and make available physician feedback reports. These reports titled “Quality and Resource Use Report” (QRUR) provides information to physicians and group practices about the resources used and quality of care provided to their Medicare Fee-For-Service patients, including quantification and comparisons of patterns of resource use/cost among physicians and medical practice groups.

On September 30, 2014, CMS made available the 2013 Quality and Resource Use Reports (QRURs) to solo practitioners and group practices nationwide who met two criteria: (a) at least one physician billed under the tax identification number (TIN) in 2013, and (b) the TIN had at least one eligible case for at least one of the quality or cost measures included in the QRUR. These QRURs contain the quality of care and cost performance data for calendar year 2013.

In the late summer of 2015, CMS intends to disseminate QRURs based on CY 2014 data to all groups and solo practitioners. These reports will show how the TIN would fare under the policies finalized for the CY 2016 Value Modifier.

Authorized representatives can access the QRURs at using an Individuals Authorized Access to the CMS Computer Services (IACS) account with one of the following group-specific PV-PQRS System roles:

  • Primary PV-PQRS Group Security Official
  • Backup PV-PQRS Group Security Official
  • PV-PQRS Group Representative

Authorized representatives must sign up for a new IACS account or modify an existing account at Quick reference guides that provide step-by-step instructions for requesting each PV-PQRS System role for new or existing IACS account are available at

Joy’s Comments

I was very confused when CMS first began discussing the VM. Being a coder, when I think of a modifier, I think of coding modifiers appended to procedure codes to indicate the service or procedure has been altered by some specific circumstance but the alteration did not change the definition or code. Coders also append modifiers to comply with payment policy requirements for commercial insurers, Workers’ Compensation, Medicare, Medicaid, etc. For the life of me, I could not figure out how I would know when to apply the VM.

After listening to several presentations, I finally realized the VM does not change the claim filing process. It is more like a flag placed on the physician’s NPI to indicate the appropriate payment amount during the adjudication process. There are three (3) possible options:

  • Upward adjustment – physician’s payment will be based above the standard fee schedule
  • Neutral adjustment – physician’s payment will be based on the standard fee schedule
  • Downward adjustment – physician’s payment will be lower than the standard fee schedule

For additional information about the value-based payment modifier, see the information posted on the CMS website at