Expert Commentary

John Nelson: Peformance Key to Federal Value-Based Payment Modifier Plan


John Nelson, MD, MHM

For years, your hospital was paid additional money by Medicare to report its performance on such things as core measures. Medicare then shared that information with the public via Even if the hospital never gave Pneumovax when indicated, it was paid more simply for reporting that fact. (Fortunately, there were lots of reasons hospitals wanted to perform well.)

The days of hospitals being paid more simply for reporting ended a long time ago. Now performance, e.g., how often Pneumovax was given when indicated, influences payment. That is, things have transitioned from pay-for-reporting to a pay-for-performance program called hospital value-based purchasing (VBP).

I hope that at least one member of your hospitalist group is keeping up with hospital VBP. It got a lot of attention in the fall because it was the first time Medicare Part A payments to hospitals were adjusted based on performance on some core measures and patient satisfaction domains, as well as readmission rates for congestive heart failure (CHF), acute myocardial infarction (AMI), and pneumonia patients. The dollars at stake and performance metrics change will change every year, so plan to pay attention to hospital VBP on an ongoing basis.

Physicians’ Turn

Medicare payment to physicians is evolving along the same trajectory as hospitals. For several years, doctors have had the option to voluntarily participate in the Physician Quality Reporting System (PQRS). As long as a doctor reported quality performance on a sufficient portion of certain patient types, Medicare would provide a “bonus” at the end of the year. From 2012 through 2014, the “bonus” is 0.5% of that doctor’s total allowable Medicare charges. For example, if that doctor generated $150,000 of Medicare allowable charges over the calendar year, the additional payment for successful reporting PQRS would be $750 (0.5% of $150,000).

Although $750 is only a tiny fraction of collections, the right charge-capture system can make it pretty easy to achieve. And an extra payment of $750 sure is better than the 1.5% penalty for not participating; that program starts in 2015 and increases to a 2% penalty in 2016. If you are still not participating successfully in PQRS in 2015, the reimbursement for that $150,000 in charges will be reduced by $2,250 (1.5% of $150,000). So I strongly recommend that you begin reporting in 2013 so that you have time to work out the kinks well ahead of 2015. Don’t delay, but don’t panic, either, because you can still succeed in 2013 even if you don’t start capturing or reporting PQRS data until late winter or early spring.

At some point in the next year or so, data from as early as January 2013 for doctors reporting through PQRS will be made public on the Centers for Medicare & Medicaid’s (CMS) physician compare website: For example, should you choose to report the portion of stroke patients for whom you prescribed DVT prophylaxis, the public will be able to see your data.

John Nelson, MD, MHM

Table 1. Components of the Value-Based Payment Modifier program

The Next Wave of Physician Pay for Performance

As the name implies, PQRS is a program based on reporting. Now CMS is adding the Value-Based Payment Modifier (VBPM) program, in which performance determines payments (see Table 1). It incorporates quality measures from PQRS, but is for now a separate program. It is very similar in name and structure to the hospital VBP program mentioned above, but incorporates cost of care data as well as quality performance. So it is really about value and not just quality performance (hence the name).

For providers in groups of more than 100 that bill under the same tax ID number (they don’t have to be in the same specialty), VBPM will first influence Part B Medicare reimbursement for physician services in 2015. It will expand to include all providers in 2017.

But don’t think you have until 2015 or 2017 to learn about all of this. There is a two-year lag, so payments in 2015 are based on performance in 2013 and 2017 payments presumably will be based on 2015 performance. In the fall of 2013, CMS plans to provide group-level (not individual) performance reports to all doctors in groups of 100 or more under the same tax ID number. These performance reports are known as quality resource use reports (QRURs). QRURs were trialed on physicians in a few states who received reports in 2012 based on 2011 performance, but in 2013, reports based on 2012 performance will be distributed to all doctors who practice in groups of 100 or more.

The calculation to determine whether a doctor is due additional payment for good performance (more accurately, good value) is awfully complicated. But providers have a choice to make. They can choose to:

  1. Not report data and accept a 1% penalty (likely to increase in successive years and in addition to the penalty for not reporting PQRS data, for a total penalty of 2.5%);
  2. Report data but not compete for financial upside or downside; or
  3. Compete for additional payments (amount to be determined) and risk a penalty of 0.5% or 1% for poor performance.

Look for more details about the VBPM program in future columns and other articles in The Hospitalist. There are a number of good online resources, including a CMS presentation titled “CMS Proposals for the Physician Value-Based Payment Modifier under the Medicare Physician Fee Schedule.” Type “Value-Based Payment Modifier” and “CMS” into any search engine to locate the video.

Parting Recommendations

Just about every hospitalist group should:

  • Designate someone in your group to keep up with evolving pay-for-performance programs. It doesn’t have to be an MD, but you do need someone local that can guide your group through it. Consider becoming the most expert physician at your hospital on this topic.
  • Start reporting through PQRS in 2013 if you haven’t already.
  • Support SHM’s efforts to provide feedback to CMS to ensure that the metrics are meaningful for the type of care we provide.

Dr. Nelson has been a practicing hospitalist since 1988. He is co-founder and past president of SHM, and principal in Nelson Flores Hospital Medicine Consultants. He is course co-director for SHM’s “Best Practices in Managing a Hospital Medicine Program” course. Write to him at

Author’s note: For helping to explain all this pay-for-performance stuff, I once again owe thanks to Dr. Pat Torcson, a hospitalist in Covington, La., and member of SHM’s Public Policy Committee. He does an amazing job of keeping up with the evolving pay-for-performance programs, advocating on behalf of hospitalists and the patients we serve, and graciously answers my tedious questions with thoughtful and informative replies. He is a really pleasant guy and a terrific asset to SHM and hospital medicine.

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