Be Sure to Read the CMS Fine Print

I am convinced that some of the best marketing I have recently witnessed is related to the materials published by the government regarding the various provider “incentive” programs. Let’s face it, these incentive programs are really penalty programs with just a taste of incentive in the early years. The names of these programs: EHR Incentive Program, PQRS Incentive Program, eRx Incentive Program… great marketing, but misleading. In fact, CMS does not usually use the word “penalty” when providing details about the programs; instead, the word of art is payment “adjustment”. Whether providers choose to participate early and take advantage of the initial incentive years or wait till later and run the risk of penalty may be based on how that provider responds to motivational queues.

According to Harvard University research related to behavioral economics and the relationship between financial incentives and motivation, one of the key concepts is loss aversion. Say you take the same amount of money and you offer it as a reward, or use it as a penalty; people are much more motivated by a loss than by gain! Someone at CMS has done their homework; if loss aversion is a great motivator, then there is plenty of potential loss to motivate a medical group to conform to the CMS programs.

I was recently listening to a high-ranking official that works for the CMS on the PQRS program; he related an interesting story regarding the power of penalties. A retired physician that stopped billing Medicare (he had zero dollars in Medicare payment) found himself on the list of providers that had not conformed to the eRx Incentive Program. Since he could not be monetarily penalized, there really was no actual penalty for not conforming except for being listed as a physician that failed the eRx Incentive Program. The “offending” physician fought “tooth and nail” to be removed from the list of doctors who had failed to comply with the program. For that doctor, the “loss” was simply being categorized as a poorly performing doctor, and, even without any economic consequence, the provider was motivated to “not fail” the program.

Penalties for non-conformists are not too far away. Since CMS does not make this material obvious, it is important for us to outline the magnitude of those penalties and how they could impact a medical practice. When reading CMS materials they mention the penalty rules, but they don’t highlight them, perhaps for political reasons.

The eRx Program Penalties

EPs (Eligible Professionals) who are not successful electronic prescribers (e-prescribers) and do not qualify for a hardship exception are subject to a payment adjustment (penalty) equal to 1.0 percent of MPFS (Medicare Physician Fee Schedule) allowed charges in 2012. The payment adjustment increases to 1.5 percent in 2013 and 2.0 percent in 2014. The key thing to remember is that the penalties are based on your performance in the prior year. For example, if you failed to e-prescribe successfully in 2011 the penalty is assessed in 2012. The eRx Program expires after all penalties are assessed for calendar year 2013 in the following year – 2014. Since this program expires in just a couple of years the long-term prospects for penalties are limited.

The PQRS Program Penalties

Penalties begin in 2015, BUT when CMS finalized its 2012 Medicare Physician Fee Schedule they established that 2015 program penalties would be based on 2013 performance. Therefore, those physicians who elect not to participate or are found unsuccessful during the 2013 program year, will receive a 1.5% payment penalty, and 2% thereafter. While the AMA is strongly advocating for removal of PQRs penalties, and specifically the linking of 2015 program penalties with 2013 performance, there is no indication that CMS will change the current program rules; therefore compliance in 2013 should be the target for every provider. Note: there is a 0.5% incentive in 2013, so participation in 2013 will mean a 2.0% swing for that year: 0.5% incentive (paid in 2014) + a 1.5% penalty assessed in 2015.

The EHR Program Penalties

They begin in 2015 at 1% based on 2013 performance for those that have successfully attested in a prior year and must use an EHR for a full year to comply. For those that are in their first year, they can use an EHR for 3 months in 2014 to avoid the 2015 penalty as long as they attest by July 2014.

The Long Term

By 2016 the PQRS penalties max out at 2%. The EHR penalties increase by 1% per year between 2015 and 2019 maxing out at 5%. The total penalty assessment beginning in 2019 will be 7% of Medicare revenue.

For a provider that bills Medicare $100,000.00 per year, this amounts to $7,000.00 per year. We believe that this is the minimum amount of penalties that providers can expect. The average practice has two providers, and if those providers practice for 30 years the impact is $420,000.00. We believe the impact from penalties will actually be greater than this because we expect that the Blues and commercial health plans will begin to assess penalties related to similar programs in the near future.

The table below is an excerpt from the CMS publication titled, Medicare EHR Incentive Program, Physician Quality Reporting System and e-Prescribing Comparison; it displays the year by year incentives and penalties related to those programs.

CMS Penalties for EHR, PQRS, ePrescribing Incentive Programs

As a vendor of a Meaningful Use certified technology and an approved PQRS EHR/EMR direct submitter, our team has a vested interest in EHR and PQRS adoption. We would like every provider to take advantage of the EHR incentives now and avoid penalties in the future. The pivotal year for PQRS is 2013 and we are advising our users to focus on preparing for 2013 since 2% of payments are at stake (in 2012 there is just a 0.5% incentive, too small to worry about).

In 2014 Stage 2 of Meaningful Use begins, and alignment of the PQRS and EHR programs will make it easy for providers to comply with both programs if they choose a vendor that is approved by CMS as a direct submitter for both programs. There are around 300 certified ambulatory Meaningful Use Program EHR/EMR vendors, but just a few dozen of them are CMS approved PQRS direct submitters. Remember when choosing an EHR, it is important to pick an EHR like MediTouch®; one that is approved for both programs, so that it is simple to avoid CMS program penalties.

I once met James Carville, the famous campaign adviser to Bill Clinton. It was right after the 1992 election, and when he was asked about his winning formula he recited the same “mantra” that he kept repeating throughout the campaign, “It’s the economy stupid.” I have a feeling if I asked him about the government physician incentive programs he would conclude, “It’s the penalties stupid.”