CMS Report on 2013 PQRS Program: Participation Rates Increasing, Yet Many Providers Remain on Sidelines and Face Penalties

April 30, 2015

McDermott+Consulting

The report, released April 23, 2015, highlights the issues and challenges that the Centers for Medicare and Medicaid Services faces in its implementation of value-based provisions in the Medicare Access and CHIP Reauthorization Act of 2015.

On April 23, 2015, the Centers for Medicare and Medicaid Services (CMS) released a report finding that almost 40 percent of health care providers treating Medicare patients will receive a 1.5 percent payment penalty for not successfully participating in the Physician Quality Reporting System (PQRS). While the report provides a comprehensive summary of the experience of providers with the 2013 PQRS program, it may also be predictive of challenges facing CMS as the agency begins to implement the recently enacted Medicare Access and CHIP Reauthorization Act (MACRA) of 2015.

The MACRA legislation made headlines for repealing the sustainable growth rate (SGR), but may be more noteworthy for the provisions that will tie an increasing amount of a physician’s payment to reporting and performance. Significantly, MACRA collapses the three existing physician incentive programs—PQRS, the Value-Based Modifier and the Medicare Electronic Health Record (EHR) Incentive Program—into a new Merit-Based Incentive Program (MIP) and adjusts physician payments based on individual reporting and performance under the new program (Figure 1). If a significant number of physicians choose not to report, the goal of incentivizing different physician behavior may be compromised.

Report Highlights

Authorized under the Tax Relief and Health Care Act of 2006, PQRS initially was a voluntary, bonus-only quality reporting program for Medicare physicians and other qualified health care professionals. The Affordable Care Act (ACA) further transformed the program, authorizing bonus payments through 2014, but requiring a shift to a payment penalty beginning in 2015 such that physicians who failed to meet the reporting obligations would see Medicare payments reduced. The 2015 reporting penalty is based on reporting in 2013. Eligible professionals who failed to report or to report adequately will have Medicare payments reduced 1.5 percent. This penalty will increase to 2 percent in 2016, based on 2014 PQRS reporting performance.

In 2013, 641,654 eligible professionals (51 percent) participated in PQRS.

  • This number represents individuals who participated in PQRS as an individual or group, or as part of an accountable care organization (ACO), using one of the PQRS reporting methods.
  • The 2013 participation rate reflects a significant increase from the 2012 participation rate of 36 percent.

A total of $218,930 in PQRS incentive payments were earned in the 2013 program year by 494,619 eligible professionals within 48,313 practices.

  • Total incentive payments for the 2013 PQRS program year increased by 31 percent compared to 2012.
  • The PQRS bonus is paid in a lump sum. There was a wide range in the average incentive payment across specialties, from $8 for certified nurse midwives to $1,937 for radiation oncologists.

Despite growing participation in PQRS, 469,755 eligible professionals (40 percent) are subject to a 1.5 percent penalty in 2015.

  • Of those providers subject to the adjustment, 98 percent did not attempt to participate; 2 percent attempted to participate but were unsuccessful because they submitted invalid measures (i.e., measures were submitted but not on eligible instances).
  • Of the professionals subject to the 2015 penalty, 43 percent treated 25 or fewer Medicare beneficiaries in 2013. These providers may have made the deliberate choice to take the penalty over expending the resources necessary to participate in the Medicare quality reporting program.

Incentivizing Physicians to Participate in Value-Based Programs

Physician participation in and performance under the PQRS is especially relevant as CMS begins to link physician payments to reporting and performance through the implementation of MIPs and provider participation in alternative payment models.

Over the last decade, Congress and CMS have taken a number of steps to link Medicare fee-for-service payments to a variety of performance objectives in order to shift from volume-driven to value-driven incentives. The growth and development in the PQRS program illustrates both the progress that has been made over the years and the many challenges that remain.

CMS has developed a fairly sophisticated value-based purchasing program for acute inpatient hospitals. While this development was complex and challenging in its own way, the heterogeneity of specialties, practice types, patient makeup and a host of other factors inherent among physician practices make the transition for physician payments a significantly more challenging proposition. To that end, this report released by CMS on the PQRS program highlights a number of issues that must be tackled in order for CMS to transition physicians and other qualified health care providers to a more value-based payment model.

Designing Incentives and Aligning Various Quality Programs to Encourage Participation
The ultimate purpose of a program like PQRS is to enhance the quality of care provided to patients and reduce unnecessary costs. PQRS is designed to incentivize providers at different levels: financially (bonuses and penalties), via public/peer recognition and scrutiny (publicly posting names of providers who receive a PQRS bonus), and through feedback (individual feedback reports on PQRS performance). PQRS is not the only such program. Providers are facing a trio of these quality-related incentive programs. By 2017, providers who fail to successfully participate in PQRS, the Medicare EHR program and the Physician Value-Based Modifier program could face a total payment cut of 9 percent. Developing the proper balance among these various types of incentives (financial, public recognition and feedback) that is fair to the provider, yet compelling enough to motivate behavior change, is a major conundrum for CMS.

Another factor affecting provider behavior is the level of exposure to the payor. If a provider has low volume under traditional Medicare, the physician’s interest and therefore the program’s ability to encourage providers to participate will be diminished. With enrollment in Medicare Advantage increasing, this could become a growing problem for CMS if quality programs are rooted in the traditional fee-for-service environment. It can also be burdensome for providers when quality programs for various payors are not aligned.

Prior to the passage of MACRA, the Secretary of Health and Human Services (HHS), Sylvia Burwell, addressed the issue of improving alignment between Medicare and private payors, announcing a goal of tying 30 percent of traditional fee-for-service Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements, by the end of 2016, and tying 50 percent of payments to those models by the end of 2018. To make these goals scalable beyond Medicare, HHS established the Health Care Payment Learning and Action Network, which will work with private payors, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs.

Greater alignment of quality programs within Medicare and with other public and private payors has the potential to increase the capacity of CMS to encourage provider participation in these programs and reduce the burden of participation on providers. It also could improve the volume and quality of data generated by these programs, which could be then used for program improvement and the development of more meaningful programs.

The Role of ACOs
Among the 783,849 eligible professionals avoiding the 2015 payment adjustment, 48 percent were individual participants, 38 percent were part of a practice self-nominating to participate via the Group Practice Reporting Option, 11 percent were part of a Shared Savings Program ACO, and 3 percent were in a Pioneer ACO. CMS has identified ACOs as a critical factor in the transition away from traditional fee-for-service arrangements. While the Medicare ACO model is still evolving, CMS will need to consider the effect of ACOs on any value-based payment model.

Complex Set of Variables Possibly Affecting Provider Participation
CMS reported in its analysis that providers were more likely to be subject to the payment penalty if they were part of a smaller practice, had lower Medicare physician fee schedule charges and lower beneficiary volume, and were in practices with fewer specialties. For example, solo practitioners represented 31 percent of those subject to the penalty, but only 16 percent of the total number eligible for PQRS.

The factors affecting provider participation and success in value-based programs can be complex and variable. Incentive programs can also sometimes drive unintended changes to practice patterns or other undesirable results. Providers often struggle to keep pace with payment, coverage, coding and other regulatory changes. The complexity and fluid nature of these programs sometimes lead providers to opt-out. CMS will need to balance its objectives to create an environment that encourages participation in value-based programs.

As CMS has developed various quality programs, expanded the list of approved quality measures, and rolled out Medicare ACOs and other initiatives, the agency has developed and maintained effective dialogues with provider groups and other stakeholders. CMS will need to continue this dialogue as it begins to embark on implementing the provisions in MACRA.

For more information, please contact Eric Zimmerman at (202) 204-1457 / ezimmerman@mcdermottplus.com  or Sheila Madhani at (202) 204-1459 / smadhani@mcdermottplus.com

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