Medicare Initiatives: Bonuses & Penalties

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Medicare Bonus & Penalty Information

Medicare initiatives present a unique opportunity for you to both demonstrate the quality of the care you provide and avoid decreases to your net revenue. Some, such as the value-based payment modifier, offer bonus payments that reward value in primary care rather than volume.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) establishes a merit-based incentive payment system (MIPS) that consolidates many of these existing Medicare initiatives. MIPS is scheduled to begin in 2019.

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 have received up to $38,220 in cumulative payments; physicians who started in 2014 may have received up to $23,520. Incentives end in 2017.

Penalties for those who do not demonstrate MU of EHR begin in 2015.

Physician Quality Reporting System

The Physician Quality Reporting System (PQRS) includes a penalty for eligible professionals who do not satisfactorily report data on quality measures for covered services provided to Medicare Part B Fee-for-Service beneficiaries. Penalties are based on performance two years prior (e.g. application of a penalty in 2015 is based on physician performance in 2013). If you qualified for PQRS bonuses in 2013 and 2014, you will avoid penalties in 2015 and 2016, respectively.

PQRS reporting deadlines are based on the method of reporting. Individual eligible professionals may choose from multiple reporting options for either individual or group measures. Group practice reporting options are also available.  PQRS data is partially used to determine the application of the value-based payment modifier.

You should also consider:

Value-based Payment Modifier Program

Now in 2015, payment rates under the Medicare Physician Fee Schedule for groups of 100 or more eligible professionals are subject to a value-based payment modifier (VBPM). By 2017, this modifier will be implemented for all physicians.

The VBPM is based on cost and quality performance two years prior (e.g., application of the VBPM in 2015 will be based on physician performance in 2013).


On October 1, 2015, ICD-10 is scheduled to become the HIPAA-mandated code set for reporting diagnoses and conditions. To receive payment from Medicare, Medicaid, and all private payers, you must code all claims using ICD-10 for dates of service on or after October 1, 2015. Failure to do so may result in claim denials.

The conversion from ICD-9 codes to ICD-10 codes will be significant for you and your staff. You can ensure a smooth transition and avoid an interruption in payment by educating yourself and your staff about the new code set and planning early for conversion.

The Centers for Medicare & Medicaid Services (CMS) is taking steps to facilitate your transition to ICD-10. For instance, CMS is establishing a communication and collaboration center that will include an ICD-10 Ombudsman to help receive and triage physician issues. Likewise, for 12 months after implementation, Medicare review contractors will not deny physician claims through medical review based solely on the specificity of the ICD-10 code as long as the physician used a valid code from the right family.