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The Value-Based Payment Modifier

The newest government quality incentive program and what it means to you.


After reading this article you will know how to:

  • Define the federal government's VBPM
  • Recognize the quality and resource use report
  • Understand the VBPM impact on Medicare payments

View related pearls


A new government-led quality incentive program — the Value-Based Payment Modifier (VBPM) — expands this year to include the practices of most physicians and other eligible professionals (EPs) who provide services to Medicare patients. The third of the federal government's major quality initiatives in recent years, the VBPM's incentives are tied to whether physicians meet, exceed or lag certain performance marks as defined by the government.

Like the government's other incentive programs — the Physician Quality Reporting System (PQRS) and the Electronic Health Records (EHR) Incentive program — the VBPM offers a bonus payment – up to four percent tied to Medicare reimbursement for successful performance – or a downward payment adjustment of four percent for those who fail to participate or do so unsuccessfully. 

The VBPM is not a code modifier in the sense of adding a -25 modifier to a CPT® code. It is an adjustment applied to reimbursement based on two factors - quality and cost. The government designed measures to assess these two factors for Medicare patients attributed to your practice. The program's intent is to modify your Medicare reimbursement – up or down – based on your performance related to quality and cost.

The timing of the payment – or penalty - depends on the size of a practice. The government is phasing in the program, with groups of 100-plus EPs being impacted initially, followed by 10 to 99, then one to nine. Groups of 100 or more eligible professionals are already seeing their first adjustments under the program in 2015, based on their 2013 reporting, with groups of 10 or more experiencing VBPM's impact on reimbursement in 2016, based on their 2014 performance. All physicians will be impacted in 2017, based on your performance this year. 

The QRUR
The size of a medical practice will influence when the VBPM adjustments will impact the practice, but it's vital to anticipate the effect regardless of the timing of the adjustment. The first step is to download your practice's Quality and Resource Use Report (QRUR), which previews the performance scores that CMS will use to calculate the VBPM applied to your practice based on your 2013 performance. Think of your QRUR as a "heads up" from the government about the impact of the VBPM on your practice.

The QRUR displays a practice's "Quality and Cost Composite Scores" based on data that CMS has been gathering about the management of resources used by Medicare patients and the quality of care furnished to those patients. Unlike the EHR Incentive Program, data are drawn from the medical practice level, using the practice's Taxpayer Identification Number (TIN) to delineate the activity. CMS issued quality reports for 2013 for all of the TINs in its database where at least one physician had billed under the TIN during the year and had at least one case eligible for the new program's quality or cost measures. The only exceptions were TINs where practices were participating in the Medicare Shared Savings Program, Pioneer ACO Model or Comprehensive Primary Care Initiative.

Attributing Patients
CMS evaluates your VBPM performance based on the number of Medicare patients attributed to your medical practice. A patient is attributed to the practice that provides the plurality of non-hospital evaluation and management (E/M) services to the patient during the reporting period – regardless of specialty. In other words, if your practice saw a Medicare patient the most outside of the hospital, those patients are attributed to you.

For the cost measure portion of VBPM, patient attribution is based on spending per hospital patient with Medicare. That is, patients are attributed to a practice on the basis of the practice being the one that provided more professional (Part B) services to those patients during the index hospitalization event than any other practice. In other words, if you saw the patient the most in the hospital, the patient lands on your report.

Based on the attribution methodology chosen by the government, medical practices with primary care physicians will likely receive more patient attributions for the quality metrics, while specialists – particularly surgeons – will likely get more patients attributed to them on the cost portion of the report.

Measuring Quality
Reading and understanding the QRUR is an important first step; the quality indicators are measured based on six equally weighted domains:

  • Clinical process/effectiveness,
  • Patient and family engagement,
  • Population/public health,
  • Patient safety,
  • Care coordination and
  • Efficient use of healthcare resources.

For those in the initial year of the program, quality is synonymous with the Quality Composite Score that is stated for the medical practices reporting data to PQRS via the Group Practice Reporting Option(GPRO). For other practices, CMS calculates the quality score based on their performance on a set of 14 pre-defined administrative claims-based quality measures, as well as performance on three gauges of outcomes: two of which are composite measures of hospital admissions for ambulatory care sensitive conditions (one for chronic conditions and one for acute conditions – bacterial pneumonia, urinary tract infection and dehydration), and one that measures all-cause hospital readmissions.

Measuring Cost
In addition to quality, the QRUR also measures cost. The three categories related to cost are: total per capita, condition-specific, and spending per hospital patient. "Cost" reflects the payments that CMS makes on behalf of its beneficiaries for their medical care; in other words, total allowed charges.

When interpreting your QRUR cost measures, remember that CMS includes all costs of care – from the office to the hospital, from home health to durable medical equipment (DME) – not just those associated with professional services. Costs for Medicare Part D – outpatient prescription drugs – are the only costs that are not included.

Calculating Bonuses and Penalties
How is CMS using these data to determine bonuses – or penalties? The calculation is complicated — the government is essentially comparing your practice's data with that of other practices using a weighted mean for each category. Only measures with at least 20 patients are eligible for inclusion in the calculations of the composite scores. The QRUR available to you now compares quality measures to a peer group of all practices across the country; in contrast, the cost measures break the comparison into two peer groups – one is for practices with one to 99 EPs; the other is for practices with 100 or more. Download more information about the program's methodology from CMS.gov.

Take Action
If you haven't already done so, download your 2013 QRUR today. You'll need an IACS user ID and password – that stands for "Individuals Authorized Access to the CMS Computer Services." 

If the report shows poor performance compared to your peer groups, review the program rules and look for opportunities to improve. It's also wise to review your report with eye to its accuracy: review everything, from the physicians reported as billing under your TIN to the Medicare patients attributed to you. Remember that it will determine your future Medicare reimbursement.

Key VBPM Dates

January 2015: Payment is adjusted based on VBPM for physicians in groups of 100-plus eligible professionals (EPs) (based on performance in 2013).

Summer 2015: For all group practices and solo practitioners, CMS will make available QRURs based on data from calendar year 2014, showing the value-based payment adjustment for Medicare Physician Fee Schedule reimbursements in 2016 as appropriate. 

January 2016: Payment is adjusted based on VBPM for physicians in groups of 10-99 and 100-plus EPs (based on performance in 2014).

Summer 2016: For all group practices and solo practitioners, CMS will make available QRURs based on data from calendar year 2015, showing the value-based payment adjustment for Medicare Physician Fee Schedule reimbursements in 2017 as appropriate. 

January 2017: Payment is adjusted based on VBPM for all physicians, including solo practitioners and small practices (one to nine EPs), based on performance in 2015.

Summer 2017: For all group practices and solo practitioners, CMS will make available QRURs based on data from calendar year 2016, showing the value-based payment adjustment for Medicare Physician Fee Schedule reimbursements in 2018 as appropriate

Pearl: Get to know QRUR

Depending on the size of your medical practice, the Value-Based Payment Modifier might impact Medicare reimbursement this year – or in 2016 or 2017. To preview the impact of the payment modification on your practice, download your Quality and Resource Use Report (QRUR) today. Available to download at no cost, these reports were issued in September 2014 by the federal government. Although the government has announced a few "tweaks" to the program, this report is the best snapshot of what to expect from the program in the future. Download your QRUR.

Pearl: How Much Does It Cost?

For the first time ever, the federal government is evaluating the cost of care. The new incentive program, the Value-Based Payment Modifier (VBPM), attributes Medicare patients to medical practices, assigning all costs associated with caring for those patients. These assigned costs include all payments that Medicare made during the year on behalf of those patients that are associated with inpatient, outpatient, skilled nursing facility, home health, hospice, durable medical equipment, and non-institutional provider/supplier services. What are the only costs that are not attributed to the practice? The Answer: Payments for Part D outpatient prescription drugs. In addition to payment from Medicare, the cost measures include contributions from beneficiaries (e.g. copays and deductibles), and third-party private payers serving as Medigap policies.

Pearl: Lag Time

For the government's new Value-Based Payment Modifier incentive program, there is a two-year lag between your performance and the financial impact of the program, with larger groups already beginning to see the positive or negative impact on their Medicare reimbursement in 2015. In 2017, the VBPM based on 2015 performance will apply to all medical practices regardless of size. Even though your payments won't be impacted for another two years, 2015 is the year on which your performance will be judged.

Pearl: The We of EP

"Eligible professional" is a term that we've come to see from the government, as it relates to their incentive programs. For the Value-Based Payment Modifier, the definition of EP is different than the Physician Quality Reporting System (PQRS) and the EHR Incentive Program, because the government's newest program incorporates more health care professionals, including advanced practice providers, physical and occupational therapists, speech pathologists and audiologists. If your practice only has seven physicians, but also includes three physician assistants, for example, you will be in the "10 to 99" EP tier, and thus subject to the VBPM in 2016, based on your performance last year (2014).

United States