The Stunning Rise of the Medicare Part B Value-Based Payment Modifier

Guest post by Tom S. Lee, Ph.D, CEO and founder, SA Ignite

Tom Lee, Founder and CEO, SA Ignite
Tom Lee

The Value-Based Payment Modifier (VBM) is one of the most impactful yet least understood components of the portfolio of value-based programs under Medicare Part B. Provider organizations widely know that their Physician Quality Reporting System (PQRS) quality measures must be reported to CMS in order to avoid significant VBM penalties. Yet, few organizations understand the value-based payment modifier rules well enough to know how to improve their value-based payment modifier quality and cost scores, which directly impact Part B reimbursement. And, the stakes are high as the 2015 VBM can have a +/-4 percent or greater impact on Part B, and starting in 2017, value-based payment modifier comprises 60 percent of the reimbursement impact of the newly-passed Merit-Based Incentive Payment System (MIPS). MIPS rolls up value-based payment modifier, meaningful use and other value-based programs into a single score for each provider that can impact Part B reimbursement up to approximately 30 percent based upon cost and quality performance relative to peers.

One way to understand the growing importance of VBM is to compare the rules and metrics of the 2013 program to those of CMS’ proposed 2016 program. The rise is stunning and reminiscent of the rapid expansion of other game-changing programs, such as meaningful use, but where the financial and reputational impacts are even greater.

The growing number of providers subject to VBM penalties

VBM penalizes providers falling into the lowest tier of quality performance among peers nationally, as determined by PQRS and other quality measures. In 2013, approximately 30,000 providers were subject to value-based payment modifier quality-performance penalties. In 2016, CMS projections and proposals taken together indicate that 1.25 million providers will be subject to such value-based payment modifier penalties, representing a 40-fold increase in the span of 4 years.

Why the growth? It’s all about regulatory change. In 2013, this quality-performance penalty only applied to groups with more than 100 providers, which opted into quality tiering, and it excluded organizations in the Medicare Shared Savings Program (MSSP), Pioneer ACO Model, or the Comprehensive Primary Care Initiative (CPCI). Furthermore, penalties were only applicable to Part B payments to physicians (MD, DO), not payments to non-physician providers (nurse practitioners, physician assistants, etc.) In 2015, CMS cast the net wider by expanding quality-performance penalties to apply to all groups down to only 10 providers in size and including participants in MSSP ACOs, Pioneer ACO Model and CPCI. For 2016, CMS is proposing that the size threshold be removed entirely such that all groups and solo physicians be subject to quality-performance penalties and that the penalties should be applied to Part B payments to non-physicians as well, not just physicians.

The amplification of VBM incentive and penalty dollars

The sizes of the maximum incentives and penalties in 2013 were 9.8 percent and -1.0 percent, respectively. The national incentive pool is set to be equal to the national penalties assessed in order to keep value-based payment modifier as an overall budget-neutral program. Hence, the “winners take from the losers,” where “losers” also include those providers who simply did not meet the minimum PQRS reporting requirement imposed by value-based payment modifier. This non-reporting percentage was about 30 percent of eligible providers in 2013, and CMS projects about the same percentage for the 2016 performance year. Hence, assuming that the proportion between winners and losers remains about the same in 2016 as compared to 2013 (about 13 percent), and factoring in the proposed 2016 value-based payment modifier rules, the maximum value-based payment modifier performance-based incentive could rise to as high as 20 percent, while the maximum penalty would be -4 percent, respectively representing 2 times and 4 times increases from 2013. As mentioned above, MIPS further increases the potential financial impact to 30 percent or even more of Part B payments.

The widening of VBM quality and cost performance measures reported to consumers

Although the VBM direct incentives and penalties are most obvious to CFOs and CEOs of provider organizations, perhaps the most far-reaching and sustained impacts to organizations’ ultimate viability stem from the public reporting of quality and cost measures to consumers. Think of it like the new consumer-oriented “Rotten Tomatoes” (for movies) or “Amazon star ratings” (for products) for provider performance. The breadth and depth of quality and cost measures gathered by value-based payment modifier and other Part B value-based programs are immense, and the doors are being thrown wide open. Consider that for 2013, none of the PQRS quality measures utilized by value-based payment modifier were reported in provider-identifiable ways to the public.

Fast forward to 2016, and there will be a lot of “alls”: all 2015 PQRS quality measures gathered through all reporting methods and for all groups and solo providers will be reported publicly through the Physician Compare website in a provider-identifiable way. A consumer will be able to see how many “stars” their provider has on a given measure compared to local competing providers. Any third-party organization will be able to download the approximately 10 gigabyte zip file containing all the data to repurpose through their own website, such as how the Weather Channel or WeatherBug monetize weather data sourced freely from the National Weather Service. The reputational and consumer-choice impacts on provider organizations have the potential to dwarf the direct financial impacts of value-based payment modifier incentives and penalties. Healthcare is increasingly becoming a winner-take-all game, and the value-based payment modifier intensifies the plane of competition.

The game has changed and will change even further

The passage of MIPS by a 95-5 bipartisan Congressional margin this April was a watershed moment in the history of Medicare. It permanently ensconced value-based payment modifier, meaningful use, MSSP, and a number of other value-based programs, into the fabric of Medicare Part B for years and decades to come. It also raises the financial and reputational stakes of competing against peers on quality and cost dimensions. All provider MIPS scores, on a scale of 0 to 100, will also be publicly reported. Consumers understand “number of stars” and “x out of 100”. It’s both a huge threat and huge opportunity for provider organizations. MIPS is actually modeled on some of the key aspects of value-based payment modifier, which partly explains why value-based payment modifier comprises 60 percent of the MIPS score. So, getting a head start on optimizing a provider organization’s decisions and performance to maximize value-based payment modifier scores and reimbursement is a great way to be prepared for the even bigger changes starting with MIPS in 2017.

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