CMS's Value-Based Reimbursement Explained

In a Notice of Proposed Rulemaking (NPRM) released in July 2012, the Centers for Medicare and Medicaid Services (CMS) rolled out a plan for phasing in the physician Value-Based Modifier (VBM) payment program. Mandated by the Affordable Care Act and still in use today, the VBM compensates physicians differentially based upon a composition of quality— defined by clinical quality measure reporting— and costs. As VBM is Medicare budget-neutral, this step in payment reform results in some providers experiencing an increase in reimbursement for performing high quality at a low cost, while others see decreases in reimbursements for failing to hit the performance guidelines.

Physician performance is measured by clinical data reported through the Physician Quality Reporting System (PQRS) between 2015 and 2017. The rule also further aligns Meaningful Use clinical quality measure reporting with EHR Direct PQRS, helping to ease the burden on physicians and make it easier to participate in both PQRS and one of the EHR Incentive Programs.

VBM represents -1 percent in CY2015 for groups of more than 25 physicians that do not participate in PQRS in CY2013, which is the performance period for the initial VBM. This provider performance will be used to compute the VBM for supplies and services furnished under the Medicare Part B Physician Fee Schedule (MPFS). Provider groups participating in PQRS fall into one of two tiers. The first tier includes high-performing providers, or those who deliver high-quality services at low costs. Providers in this tier have the potential for an upward VBM adjustment. The second tier includes lower-performing providers, who have low quality scores and high costs. Providers in this tier are subject to a VBM adjustment of -1 percent, the same as the penalty for failure to participate.

In addition to determining differential pay, provider performance data is shared with the public online. Data used to create the modifier is posted to the CMS Physician Compare website so the public can view and compare quality scores of physicians. Providers who participate in EHR-based PQRS reporting are in the strongest position for success as the U.S. continues its transition into this new reimbursement model with public transparency on performance.

While claims-based and registry-based PQRS reporting are still accepted, both are known to have data integrity issues. Claims-based reporting not only delivers limited data, it can be impeded from barriers such as rejected claims or system configuration. Registry-based PQRS reporting was noted to be "too narrow" to meet the CMS goals under the Final Rule for Stage 1 Meaningful Use. 

Want to learn more about the value-based modifier program, the Physician Quality Reporting System and the EHR Incentive Programs? Enter your information to download a free white paper or access a free recorded webinar.