Care Transformation Center Blog

With PQRS penalty increases, it's time to rethink your quality strategy

by Steve Bloom, Clinovations and Nicole MacMillan

We recently worked with a community health system in the Southeast that had acquired several independent medical practices over the last few years. Operating on four different electronic health record (EHR) platforms, with some practices still using paper records, Physician Quality Reporting System (PQRS) experience varied widely across this newly consolidated institution.

At the start of 2015, CMS began to apply penalties from the failure of several practices to report PQRS data in 2013. And the leadership team was surprised by how much PQRS impacted their bottom line. They quickly took action to improve 2015 reporting as much as possible before the year’s end to prevent penalties in 2017.

An easy program to deprioritize

This scenario is not uncommon. When the PQRS was first introduced in 2006, CMS rewarded successfully reporting physicians and groups with a 1.5% increase in professional billing payments. It was only starting in 2015 that this incentive shifted to a penalty. There is also a two-year difference between the time of documentation and the application of penalties. explains it like this:

Beginning in 2015, the program will apply a negative payment adjustment to individual EPs and PQRS group practices who did not satisfactorily report data on quality measures for Medicare Part B Physician Fee Schedule (MPFS) covered professional services in 2013. Those who report satisfactorily for the 2015 program year will avoid the 2017 PQRS negative payment adjustment.

For some health systems, this combination of factors has created the illusion that PQRS is a minor incentive program without much consequence. However, penalties are quickly becoming more severe. Including a new pay for performance adjustment called the Value Based Payment Modifier (Value Modifier), penalties are up to 6% for larger medical groups in 2017 for 2015 reporting, and rise to 9% in 2018 for 2016 reporting under a newly consolidated quality reporting program called the Merit Based Incentive Payment System (MIPS).

According to CMS, 5,418 medical groups will receive a Value Modifier automatic payment adjustment of “-2.0%” in 2016, because they did not meet the minimum reporting requirements. On the flip side, the 128 groups that met the minimum reporting requirements and reported high quality, low cost will receive an upward adjustment of “+15.92%” or “+31.84%” for all Medicare professional billings next year. The upside of getting PQRS right is significant!

Meaningfully selecting and reporting measures

It might be tempting to try to measure and report on all quality measures across the organization. However, provider networks struggle with this approach because it’s difficult to focus their efforts on what will be meaningful and impactful to improve performance and to not get penalized. It’s better to be prescriptive, particularly for health systems that need to make a quick impact.

With our client in the Southeast, we focused on two primary factors: size and current success.

Knowing that a 4% Value Modifier penalty would hit the entire group practice if less than 50% of providers reported on PQRS measures, we targeted reporting improvement for the largest practices. It allowed the health system to focus efforts on impacting a large, but feasible, number of providers.

We also established a baseline of performance by analyzing data available in the EHR. With it, we were able to identify the measures for which the health system was close to meeting benchmarks—prioritizing what would yield the greatest return with the least amount of effort.

Going beyond PQRS/MIPS with quality measures

PQRS/MIPS is in place to ensure providers are pursuing effective quality improvement, but CMS recognizes there are other mechanisms for evaluating a provider’s commitment to quality. Health systems should carefully consider which value-based payment model best fits organizational goals.

For example, if by 2018, over 50% of professional billing payments come from “alternative payment models,” including CMS-sponsored Accountable Care Organizations, the health system is exempt from the 9% penalty for failure to report quality under MIPS. Additionally, those alternative payment model participants who meet certain requirements can receive an extra incentive payment of 5% per year on professional billings through 2024.

Health systems should plan their reporting strategy carefully to make sure that they select the correct measures to meet the requirements of PQRS/MIPS or their alternative payment model. Those who are moving toward alternative payment models, but may not yet meet the 50% threshold, should implement a quality strategy that takes into account all programs that could assess penalties for failure to report. As a guideline when identifying what quality measures to include, consider the following questions:

  • Does the measure reflect quality of care delivered?
  • Does the measure assess high volume or high risk populations?
  • Do multiple disciplines and/or care settings contribute towards results?
  • Can improvement efforts impact the results?
  • Can we get the data?
  • What is the burden of data collection?
  • Will improvement on this measure impact contract performance?

It’s clear that CMS will continue to mandate providers’ adoption of value-based care. Now is the time to get your strategy in place before more extreme penalties sneak up on you.

What you need to know about quality reporting

We’ve compiled a list of quality reporting programs for physicians and hospitals, as well as the data sources needed to report on each program.

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