Medicare Initiatives and You: Payment Adjustments

Medicare Payment Adjustment Information

The Medicare Access and CHIP Reauthorization Act (MACRA) was signed into law in April 2015. The law repeals the sustainable growth rate (SGR) methodology and paves the way for physician payment reform. MACRA establishes two payment pathways for physicians: alternative payment models (APMs) and the Merit-Based Incentive Payment System (MIPS). Under MIPS, three existing Medicare quality programs will be consolidated into one program. The key Medicare initiatives described here will remain in place through 2018 and will continue to present a unique opportunity for you to demonstrate the quality of care you provide. They potentially can increase your net revenue through payment adjustments that, in some cases, reward value in primary care rather than volume.

In order to potentially increase your net revenue now and help prepare yourself and your practice to become “MACRA Ready,” you should:

  • Report data on quality measures through the Physician Quality Reporting System (PQRS);
  • Know your Quality and Resource Use Report (QRUR);
  • Use your electronic health record (EHR) and attest to meaningful use (MU); and
  • If your practice doesn’t provide chronic care management (CCM) services, consider starting now.

Meaningful Use of the Electronic Health Record

The Medicare Electronic Health Record (EHR) Incentive Program provides bonus payments to eligible professionals who demonstrate meaningful use (MU) of certified EHR technology. The cumulative payment amount depends on the year in which a professional begins participating in the program. Physicians whose participation started in 2013 may receive up to $38,220 in cumulative payments; physicians who started in 2014 may receive up to $23,520. The last year to begin participation and receive incentive payments in the Medicare program was 2014. For the Medicaid program, 2016 is the last year to begin participation and receive incentive payments.

Negative payment adjustments for those who do not demonstrate MU of EHR began in 2015. Reporting options are available to satisfy both MU and the Physician Quality Reporting System (PQRS) reporting requirements.

Payment Year
EHR Reporting Period
Medicare Program Payment Adjustment
(percentage of total allowed charges for covered services during the reporting period)
Payment Year: 2016EHR Reporting Period: 2014
Medicare Program Payment Adjustment (percentage of total allowed charges for covered services during the reporting period): -2%
Payment Year: 2017
EHR Reporting Period: 2015
Medicare Program Payment Adjustment (percentage of total allowed charges for covered services during the reporting period): -2%
Payment Year: 2018
EHR Reporting Period: 2016
Medicare Program Payment Adjustment (percentage of total allowed charges for covered services during the reporting period): -3%

Physician Quality Reporting System

The Physician Quality Reporting System (PQRS) applies negative pay­ment adjustments to eligible professionals who fail to satisfactorily report data on quality measures for covered services provided to Medicare Part B fee-for-service beneficiaries. Individual eligible professionals may choose from multiple reporting options for either individual or group measures. Group practice reporting options are also available. Additionally, report­ing options are available to satisfy both MU and PQRS reporting require­ments. PQRS reporting deadlines are based on the method of reporting. If you qualified for PQRS bonuses in 2014, you will avoid negative pay­ment adjustments in 2016.

YearPayment Adjustment
Year: 2016Payment Adjustment: -2% based on 2014 reporting
Year: 2017Payment Adjustment: -2% based on 2015 reporting
Year: 2018Payment Adjustment: -2% based on 2016 reporting

*Eligible for an addtional +1.0x if average beneficiary risk score is in the top 25% of all beneficiary risk scores +The value of “x” represents the adjustment factor still yet to be determined and depends on the total sum of negative adjustments in a given year.

Value-based Payment Modifier Program

The Value-Based Payment Modifier (VBPM) Program adjusts payment rates under the Medicare Physician Fee Schedule based on an eligible professional’s performance on quality and cost categories. The Centers for Medicare & Medicaid Services (CMS) began phasing in application of the modifier in 2015. Starting in 2017, payment rates for all group and solo practitioners will be subject to the VBPM. In 2018, all group and solo practitioners will receive an upward, neutral, or downward payment adjustment based on quality-tiering. Physicians who do not demonstrate higher quality or lower costs may receive lower payments. The VBPM is based on performance two years prior (e.g., application of the VBPM in 2017 will be based on performance in 2015). Eligible professionals may avoid automatic downward payment adjustments by successfully partici­pating in the PQRS.

Current Payment Adjustments

Quality and Resource Use Reports (QRURs)

Through its Physician Feedback Program, CMS distributes Quality and Resource Use Reports (QRURs) to physicians to provide detailed information about their performance on the quality and cost of care delivered to Medicare fee-for-service patients. CMS sends QRURs to solo physicians and groups based on their Tax Identification Numbers (TIN). Each report includes performance information on PQRS quality measures, claims-based outcome measures, and claims-based cost measures, and compares performance to similar peer groups.

CMS uses the quality and cost data to calculate payment adjustments under the VBPM Program and eventually will deter­mine financial adjustments under the new Merit-based Incentive Pay­ment System. Use your QRUR to your advantage to inform care delivery to earn positive payment adjustments and avoid potential negative adjustments.

MACRA/Merit-based Incentive Payment System (MIPS)

Medicare initiatives are evolving to further promote a system that rewards value over volume. MACRA mandates that three major Medicare programs for physicians (PQRS, EHR Meaningful Use Program, and VBPM Program) be combined. Starting in 2019, these programs will be consolidated into one program called MIPS. The MIPS program will assess physician perfor­mance under four categories: quality, resource use, clinical practice im­provement activities, and meaningful use of certified EHR technology. The performance under these categories will determine whether an individual or group qualifies for a positive or negative payment adjustment.

The AAFP is working on the behalf of family physicians to ease the burden of Medicare programs. A few efforts include: administrative simplification; advocating that CMS implement a meaningful use program that promotes interoperability and allows providers to use their EHRs and electronic health information in a meaningful way; and working towards the harmoni­zation of quality measures across public and private payers.


CMS released the final HIPAA-mandated code set implementation date for the International Classification of Diseases, 10th revision, Clinical Modification (ICD-10-CM) October 1, 2015.

CMS announced in July 2015 that it would grant a one-year grace period for the ICD-10 transition. This means that while the implementation date is October 1, Medicare claims will not be denied based on which diagnosis code was selected as long as the physician submits an ICD-10 code from an appropriate family of codes.