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CMS Value-Based Modifier: Ready or Not?


Medicare's value-based modifier is a new fee schedule adjustment that will reward or penalize physicians for quality of care in 2015.

By now you are probably aware that there is a big push to move away from paying for care on a "fee-for-service" basis and toward paying for value and quality of care instead. To ensure that the market could move toward value more effectively, the Affordable Care Act required Medicare to establish a "value modifier (VM)" that provides for differential payment to providers based upon the quality of care furnished to Medicare beneficiaries compared to the cost of that care during a performance period.


The value modifier is a new per-claim adjustment under the Medicare Physician Fee Schedule. High performers receive incentives and low performers receive penalties. The value modifier is based on the Physician Quality Reporting System (PQRS). The value modifier bonus or penalty - which went into effect for certain physician groups Jan. 1, 2015 - is in addition to the adjustments made for participating or not participating with the PQRS. The value modifier is composed of quality tiering and cost tiering measures. The value modifier is calculated for a group using a quality composite score and a cost composite score.

1. Quality tiering

Quality tiering is the analysis used to determine the type of adjustment (upward, downward, or neutral) and the range of adjustment based on performance on quality and cost measures.

Quality tiering will determine if a group practice's performance is statistically better, the same, or worse than the national mean. The quality composite scores are derived from six quality domain scores; each domain score is based on performance scores for PQRS measures reported, using its associated domain.

2. Cost measures

Medicare Spending per Beneficiary (3 days prior and 30 days after an inpatient hospitalization) is attributed to the group providing the plurality of Part B services during the hospitalization.

All of the cost measures are payment standardized and risk adjusted. Each group's cost measures will also be adjusted for the specialty mix of the EPs in the group. No measures/no score = average cost.


The value modifier will first be applied to physicians in groups with 100 or moreeligible professionals (EPs) beginning on Jan. 1, 2015 for Performance Year 2013.

Beginning on Jan. 1, 2016, the value modifier will apply to physicians in groups with 10 or moreEPs for Performance Year 2014. And it will apply to all physicians and groups of physicians beginning no later than Jan. 1, 2017 for Performance Year 2015.

1. What is PQRS and how is it related to value modifiers?

The Physician Quality Reporting System (PQRS) is a reporting program that uses a combination of incentive payments and payment adjustments (penalties) to promote reporting of quality information. Although PQRS is a standalone "pay for reporting" program, it drives other CMS programs that require quality reporting that are "pay for performance," including the Value-Based Payment Modifier Program.

Information on performance is provided to participants in the form of Physician Quality & Resource Use Reports (QRURs). These reports are used to monitor the potential value modifier adjustment, and to improve performance.

2. I participate in the PQRS Program, what do value modifiers mean for me?

If you successfully participate in PQRS reporting and successfully participate in the PQRS Maintenance of Certification (MOC) Incentive Program, you can receive the 0.5 percent PQRS incentive payment and an additional incentive payment of 0.5 percent for PQRS - MOC in 2015.

Tip: Contact your medical specialty society to see if you are eligible for this year's PQRS - MOC bonus.

3. I don't participate in the PQRS program. Is that a problem?

Yes. In addition to the value modifier, if you have not been participating in the PQRS, you will be facing penalties. Physicians who elected not to participate (or were unsuccessful) during the 2013 program year will receive a 1.5 percent payment penalty in 2015. Physicians who did not participate in PQRS in 2014 will receive a 2 percent penalty in 2016.


If you do not currently participate in PQRS, make sure you start doing so without delay! Once you have data in and start receiving QRURs, use those to determine what your value modifier adjustment will be and adjust your performance to improve over time.

If you choose not to participate in PQRS, either, you will continue to earn less than you should, by being penalized for not doing so, or you may want to consider opting out of Medicare altogether.

PQRS BONUS / PENALTY (All practice sizes)




In 2015

0.5% bonus or

1.5% penalty


In 2016

0% bonus or

2% penalty


In 2017

0% bonus to

4% penalty


VM Applies


Less than 100 physicians:

No, not applicable to groups less than 100 in 2015.


(Only the 1.5% PQRS penalty, if you did not report in 2013.)

Greater than 100 physicians: Yes.

If you did not report PQRS in 2013 = 0% increase plus 2% penalty.

If you did report in 2013 = 0% to 2% increase based on performance.


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