The MIPS Cost category, explained

By Naomi Levinthal, Practice Manager, and Ye Hoffman, Consultant

For the more than 600,000 clinicians subject to the Merit-based Incentive Payment System (MIPS), 2018 marks the first year that their cost data will affect their future Medicare payments under MACRA's Quality Payment Program (QPP).

Here's what you need to know about the MIPS Cost category. For more on MACRA, register for our 30-minute March 27 webconference to get answers to frequently asked questions, action items for your organization, and more.

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What are the basics of MIPS?

Physicians in the MIPS track are reimbursed largely through the traditional Medicare Part B fee-for-service structure—but CMS adjusts eligible professionals' pay based on how they "score" in four categories of metrics: advancing care information, cost, improvement activities, and quality. Providers whose total MIPS score is above the so-called "performance threshold" will be eligible for bonuses; those scoring below the performance threshold will receive penalties.

Providers face a two-year lag between their performance and payment adjustment: Performance in 2018 will affect payment in 2020. Clinicians who qualify for MACRA's Advanced Alternative Payment Model track are exempt from the MIPS payment adjustment altogether.

For a refresher on MIPS, read our explainer

How much will cost data affect provider payments?

When MACRA first became law in 2015, it allowed CMS flexibility to apply a relatively low weight to the MIPS Cost category during the first two years of the program. The agency chose to weigh the Cost category at 0% of providers' final MIPS score in performance year 2017 and 10% in 2018. Under current law, CMS can weigh the Cost category anywhere between 10% and 30% through 2021, and will be required to set the category at 30% from 2022 on.

Some MIPS clinicians will not be scored on Cost measures, such as those participating in certain CMS payment models.

How will CMS determine providers' cost scores for 2018?

CMS uses claims data to assess MIPS Cost performance, so there is no additional reporting required beyond what clinicians already do through the Medicare reimbursement process.

For performance year 2018, providers' Cost category scores are based on two metrics, and the way CMS determines which cases a clinician is responsible for (i.e., attributed) works differently for each Cost measure:

  • Total per capita cost (TPCC) of Medicare Part A and B for all attributed beneficiaries. CMS attributes patients to clinicians based on who provides the most primary care services. But that doesn't mean specialists are necessarily in the clear—if a patient doesn't see their primary care provider, then they could be assigned to a specialist who provides the most primary care services, which CMS defines broadly to include many types of visits that are billed by specialists.
  • Medicare spending per beneficiary (MSPB) for Part A and B claims during an episode of care (from three days prior to a hospital admission through 30 days post-discharge). Cases are attributed to clinicians based on who provides the most Medicare Part B professional services during the inpatient admission.

CMS will compare their performance on each Cost measure to other MIPS-eligible clinicians' and groups' performance. For more details on how Cost measures are scored, see this CMS guide.

If clinicians don't meet the minimum case numbers for either cost measure (20 cases for TPCC and 35 cases for MSPB), the Cost category won't affect their MIPS scores at all.

What are ways to inflect improvement in the Cost category?

The Cost measures are risk-adjusted, and providing care to riskier patient populations will increase your Cost benchmarks—but only if CMS gets the necessary claims data to reflect patients' medical complexity. This means that accurate documentation and coding of Hierarchical Condition Category (HCC) codes is critical, since they are directly tied to risk adjustment.

Clinicians can use CMS-provided information on the Quality and Resource Use Reports (QRURs) from the legacy Value-Based Payment Modifier program to identify initial opportunities for cost improvement. For example, reducing preventable readmissions and collaborating with acute and post-acute partners may be good places to start. Other initiatives such as Appropriate Use could also help clinicians cut costs due to unnecessary testing and procedures.

Get 9 tips to increase your MIPS score

How could CMS change the way it measures costs in future years?

In addition to the weighting of the Cost category, there are two anticipated changes to keep an eye on for future years.

1. Episode-based cost measures. CMS has been field testing eight episode-based cost measures to potentially use in the MIPS Cost category in future years:

  • Elective Outpatient Percutaneous Coronary Intervention (PCI);
  • Knee Arthroplasty;
  • Revascularization for Lower Extremity Chronic Critical Limb Ischemia;
  • Routine Cataract Removal with Intraocular Lens Implantation;
  • Screening/Surveillance Colonoscopy;
  • Intracranial Hemorrhage or Cerebral Infarction;
  • Simple Pneumonia with Hospitalization; and
  • ST-Elevation Myocardial Infarction with PCI.

2. Rewards for Cost category performance improvement. Under the 2018 QPP final rule, providers starting in 2018 were going to be rewarded for year-over-year performance improvement in the Cost category. The Bipartisan Budget Act of 2018 delayed those improvement rewards until 2022.

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