value-based modifier penalty

Value Based Payment Modifier

Just when you thought there were enough CMS incentive programs to worry about, along comes a new program that small and solo practices will need to comply with: the Value-Based Modifier.

Introduced as part of the Affordable Care Act, the Value-Based Modifier program (VBM) is designed to assess both quality of care furnished and the cost of that care under the Medicare Physician Fee Schedule.

The VBM has not been on the radar of most small and solo practices before now because it was only applied to groups with more than 10 providers for the first two years.

But starting in 2015, all providers who participate in Fee-For-Service Medicare need to prepare for VBM because their 2017 Medicare payments will be adjusted based on their 2015 performance.Free Webinar - The Value-Based Modifier

How is the value-based modifier calculated?

VBM is calculated using:

  1. a quality composite score and
  2. a cost composite score

The quality composite score will be calculated based on measures reported through PQRS. This “Quality Tiering” will determine if group performance is statistically better, the same, or worse than the national mean in order to reward or penalize a group based on quality and cost.

For more information on the types of benchmarks CMS will be using to determine the VBM adjustment, you can review the recently released Quality Benchmarks for the 2015 Value Modifier and the 2013 Quality and Resource Use Reports.

To calculate the cost composite score, CMS will evaluate five measures including:

  1. Total Overall Costs per Beneficiary
  2. Total Costs per Beneficiary for Chronic Conditions Composite:
    1. Total Costs per Beneficiary with COPD
    2. Total Costs per Beneficiary with CHF
    3. Total Costs per Beneficiary with CAD
    4. Total Costs per Beneficiary with Diabetes

In order to achieve the legislatively-mandated budget neutrality for the program, positive adjustments to groups of physicians would be offset by negative adjustments to other groups of physicians.

Calculation of the Value Modifier Using Quality Tiering

Without PQRS

Low Quality

Average Quality

High Quality

Low Cost





Average Cost





High Cost






The value of “x” will depend on the total sum of negative adjustments in a given year

* Eligible for an additional +1.0x if reporting clinical data for quality measures and average beneficiary risk score in the top 25 percent of all beneficiary risk scores.

Wondering how your practice will measure up? CMS has released Quality Resource and Use Reports (QRURs) that will preview information about a practice’s quality and performance rates for the VBM. CMS made the first of these reports, based on care provided in 2012, available approximately a year ago for group practices with 25 or more eligible professionals.

Unfortunately, CMS announced on September 26, 2014, that the latest QRUR reports were not yet available. The agency announced that providers should “stay tuned for updates to the Physician Feedback/Value Modifier website for announcements about the availability of the 2013 QRURs.”

QRURs are confidential reports that provide physicians with comparative information focusing on three areas:

• The portion of their Medicare fee-for-service (FFS) patients who have received indicated clinical services

• How their patients have used various types of service such as inpatient hospital stays, outpatient visits to physicians, etc.

• How Medicare spending for their patients compares to average Medicare spending across the region and specialty

What you need to do

Now that you know the ins and outs of the program, here’s what you need to do:

1. Check PECOSFree Demo - Award Winning MediTouch EHR and Billing Software

If you haven’t already, make sure your practice data is correct on PECOS (Medicare Provider Enrollment, Chain, and Ownership System . This is where CMS will gather data for the VBM and the Physician Feedback Reports.

2. Report successfully for PQRS in 2015

Not reporting successfully for PQRS in 2015 will result in an automatic payment reduction of 4% under the VBM program.

There is some good news

The good news is that groups with 2-9 providers and solo practitioners that DO report successfully for PQRS receive only the upward or neutral value-based adjustment for 2017—no downward adjustment. But chances are that won’t stay the same for 2018, as the program has progressively included each size group, going from requiring downward adjustments only for groups with 100+ providers in 2015 to including groups with 10+ providers in 2016.

There is also some upside in the Value-Based Modifier program, but it is extremely limited:

As noted above, practitioners are eligible for an additional +1.0% if their average beneficiary risk score is in the top 25 percent of all beneficiary risk scores nationwide.

Clearly, the 4% penalty is the most onerous part of the program, especially for the work you do in 2015. This is why our team at MediTouch has worked so hard to make it easy for you to create compliant reports for PQRS and Meaningful Use. With MediTouch, it’s easy to evaluate your performance—we make it easy to understand how many patients are in the numerator for each measure, with drill down capabilities to help you understand why particular patients pass or fail for Health Maintenance, PQRS or Meaningful Use.

If your EHR software doesn’t provide these capabilities, contact us today for an online demonstration of how MediTouch can make PQRS and Value-Based Modifier reporting simpler.

PQRS for Dummies

PQRS is a pay-for-reporting program that gives eligible professionals incentives and payment adjustments if they report quality measures satisfactorily. Although CMS is no longer offering incentive dollars for PQRS reporting, 2016 and beyond will see penalties for non-reporting. CMS established the PQRS program as a voluntary program where eligible professionals could report on quality health measures for covered professional services provided to Medicare beneficiaries in return for incentive for successful reporting. Failure to successfully report PQRS measures will result in a payment adjustment or reduction of the Medicare Part B Physician Fee Schedule amounts.

Meaningful Use for Dummies

The CMS EHR Incentive Program began in 2011 in order to produce better clinical outcomes, improve health outcomes, increase transparency and efficiency, empower patients and provide more robust data on health systems. Meaningful Use sets specific objectives that eligible professionals (EPs) and hospitals must achieve to qualify for Centers for Medicare & Medicaid Services Incentive Programs. EPs and hospitals must meaningfully use their EHR to improve quality, safety, efficiency and reduce health disparities, engage patients and their families, improve care coordination, population and public health, and maintain the privacy and security of patient health information.

Meaningful Use evolves in three stages over five years. Stage 1 encompasses data capturing and sharing, Stage 2 addresses advanced clinical processes and finally, Stage 3 is meant to support improved outcomes.

Additional Resources

More information about the Value-Based Modifier program is available at:

More information about the PQRS program is available at:

Free Demo - Award Winning MediTouch EHR and Billing Software