Value-based Payment Modifier: Quality vs. Cost

Value-based Payment Modifier: Quality vs. Cost

Accurate, complete coding just got more important than ever.

By Jean Acevedo, LHRM, CPC, CHC, CENTC
Section 1848(p) of the Affordable Care Act requires the Centers for Medicare & Medicaid Services (CMS) to establish a value-based payment modifier (VBPM) and apply it to certain physicians and physician group practices by January 1, 2015, and to all physicians — including solo practitioners — by January 1, 2017. The VBPM significantly raises the stakes for physicians to participate in and comply with the Physician Quality Reporting System (PQRS) and electronic health record (EHR) meaningful use.
What the VBPM Is and Isn’t
The VBPM is not a two-digit modifier to further explain a CPT® or HCPCS Level II code. Rather, it embodies the concept of using incentives to modify physician behavior, with the hope that this may have a positive impact on both the quality of care provided and the costs associated with that care. Physicians who work in a Medicare risk adjustment or an accountable care organization environment are already familiar with these concepts. From a coding perspective, the VBPM requires sound knowledge and application of diagnosis codes.
CMS stated in the 2013 Medicare Physician Fee Schedule (MPFS) final rule that the VBPM “has the potential to help transform Medicare from a passive payer to an active purchaser of higher quality, more efficient, and more effective healthcare by providing upward payment adjustments under the MPFS to high performing physicians and downward adjustments for low performing physicians.” By implementing this initiative, CMS seeks to reward high quality care and quality improvements, promote more efficient and effective care through the use of evidence-based measures, and reduce duplication and fragmented care.
It’s Been a Long Time Coming
If you have been involved in healthcare reimbursement for at least a decade, you know the VBPM is something that has been in the works for some time. Testifying before the Committee on Ways and Means, Subcommittee on Health on September 29, 2005, then CMS Administrator Mark B. McClellan, MD, PhD, stated that CMS believed an important component of delivering high quality care is the ability to measure and evaluate quality, and that CMS was committed to the development of reporting and payment systems that will support and reward quality.
That same year, as part of its overall quality improvement efforts, CMS launched the Physician Voluntary Reporting Program (PVRP). The PVRP initiated the process by which participating physicians could report quality data and receive feedback on their performance. Missing from this initiative was financial incentive for physician reporting. Not surprisingly, PVRP was short-lived.
Next up for physicians in 2005 was the Oncology Demonstration Program. CMS established three categories of G codes that physicians were to use to report symptoms of nausea and vomiting, fatigue, and pain associated with chemotherapy. Practices reporting data on all three factors qualified for an additional payment of $130, per encounter for chemotherapy administration. This demonstration was revised in 2006 and continued for a second year.
There was one common thread that seemed to run through the different attempts to measure quality: efforts and questions regarding physician use of EHRs.
These and some lesser-known demonstration projects may have provided real clinical information that physicians could use in treating their patients, but analysis and anecdotal evidence suggested that physicians would report on clinical quality measures if there was reimbursement to cover the costs of tracking and reporting. According to at least one study, the practice administrator primarily made this determination.
In more recent years, CMS has rolled out the e-prescribing, PQRS (formerly known as Physician Quality Reporting Initiative (PQRI)), and EHR incentive programs. Physicians who integrated e-prescribing and PQRS into their practices early on were rewarded with a combined incentive payment up to 4 percent of their total Medicare Part B allowed charges. For some early adopters, these programs added nicely to practice revenue. For example, a five-physician practice was delighted to receive two checks for slightly over $70,000 each for successfully reporting in both e-prescribing and PQRS programs.
VBPM Imposes a Cost for Failure to Report
The current fee schedule payment method does not offer incentives to physicians who focus on the quality of care, the relative value of each service they furnish, the cumulative costs of services or items they provide and order, or the services their patients receive from other providers. The VBPM goals are to improve quality and lower the per capita growth in expenditures — an important component in revamping how care and services are paid. To avoid any impact on beneficiary cost-sharing, the VBPM will apply only to MPFS services billed on an assignment basis and not to non-assigned claims.
The VBPM will be implemented in a budget-neutral manner, with payments increasing for some physicians but decreasing for others. The amount of money available for incentive payments will be limited to the amounts adjusted for high cost, low quality care. To help ensure data is meaningful, CMS does not include any information where fewer than 20 beneficiaries are involved, and from a cost perspective the dollars are risk adjusted. This initiative gives different weights to physician-directed patient care, versus patients for whom the doctor may only contribute some care. All of this is an attempt to help balance the data between costs a doctor can control and those the doctor cannot control.
Payment at risk is a negative 4 percent, with potential upward adjustment of up to 4.0x (“x” represents the upward payment adjustment factor). The upward adjustment factor will be contingent on the total calculated downward adjustment, as this latter element will determine the pot of money available for incentive payments under VBPM.
To begin filling that pot, physicians who do not report PQRS in 2015 are scheduled to incur an automatic 4 percent negative payment adjustment of all MPFS allowed charges in 2017. Clearly, PQRS takes on increasing importance in 2015.
QRURs Tell Where You Stand
To avoid surprising physicians with the impact of the VBPM, 2013 Quality and Resource Use Reports (QRURs) were made available to solo physicians and group practices. These reports contain quality and cost performance data for 2013. For physicians in groups of 100 or more physicians, the data in these reports will be applied to the physicians’ payments for services paid under the MPFS in 2015.
All physicians should take advantage of the opportunity to review the QRURs, which can be accessed at, using the user ID and password for the doctor or practice’s Individuals Authorized Access to the CMS Computer Services account. If needed, physicians can contact the QualityNet Help Desk for assistance at either (866) 288-8912 or via from 7 a.m. to 7 p.m. Central Time, Monday – Friday.
Each QRUR contains quality and cost information that will be used to determine where a physician, or physician group, falls on the “quality vs. cost” continuum. The information has been drawn primarily from claims data and information reported via PQRS. With that in mind, CMS stated, “We strongly encourage physicians to participate in the PQRS program and the EHR Incentive Program sooner rather than later and to choose to report quality of care measures that best reflect their practice and patient population.”
Think About How It Relates to Diagnosis Coding
The QRURs are fascinating to read from a coder’s perspective. Think about this measure: How many patients received a systemic steroid within seven days after being diagnosed with an exacerbation of chronic obstructive pulmonary disease (COPD)? Now that there is Medicare Part D, CMS can easily determine what medications a beneficiary has taken. A doctor’s claim starts the clock ticking for the “seven days” noted in this item (date of service), and the ICD-9-CM (or ICD-10-CM, beginning October 1, 2015) code on the first claim submitted tells Medicare when the diagnosis of an acute episode of COPD was first made (first treatment day). This is one of many similar examples found in a QRUR.
After reviewing the information provided in these reports, the need for ICD-10 becomes even more evident. Knowing that CMS risk adjusts the doctors’ scores emphasizes how critical diagnosis coding has become, even in a fee-for-service world. QRUR makes it clear that accurate and complete coding is more important than ever.
Be aware that the VBPM payment adjustment is separate from the PQRS payment adjustment, as well as payment adjustments from other Medicare sponsored programs. These program adjustments are cumulative. Think about some of the potential additional penalties: 2 percent for not reporting PQRS in 2015, and up to 3 percent for not meeting meaningful use in 2015. A physician’s revenue could conceivably be down as much as 9 percent or more in 2017, based on 2015 performance year calculations.
Much of this information is being published by CMS to educate beneficiaries to compare physicians of the same specialty. Beneficiaries can use the Physician Compare website to find a doctor, and soon they’ll have access to some of the quality metrics reported in PQRS and the QRURs. Transparency in government just got personal!

Jean Acevedo, LHRM, CPC, CHC, CENTC, is president and senior consultant of Acevedo Consulting, Inc.

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Renee Dustman, BS, AAPC MACRA Proficient, is managing editor - content & editorial at AAPC. She holds a Bachelor of Science degree in Media Communications - Journalism. Renee has more than 30 years' experience in journalistic reporting, print production, graphic design, and content management. Follow her on Twitter @dustman_aapc.

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