Physician Value-Based Payment Initiative Would Change Medicare Reimbursement


The healthcare market is saturated with fee-for-service reimbursement schemes. The Bureau of Labor Statistics estimates that 78% of employer-sponsored health insurance plans are some type of fee-for-service plan.1 In Medicare, about 75% of beneficiaries use the traditional fee-for-service program.2 Fee-for-service denotes that payments are made on individual services, billed separately, irrespective of outcome and, in some cases, necessity.

The physician value-based payment modifier (VBPM) is an initiative that will begin shifting Medicare reimbursement for physicians away from fee-for-service schemes and toward some type of pay-for-performance model.

For hospitalists, this will have a marked impact on HM practice and might have reverberating effects in the field itself.

Established under the 2008 Medicare Improvements for Patients and Providers Act (MIPPA) and expanded under the 2010 Affordable Care Act (ACA), the VBPM will be applied to all physicians by 2017.

The VBPM program is the physician version of hospital value-based purchasing; both are designed to move the basis of payment toward the quality of care delivered, not simply for the quantity of services rendered. By linking quality measurement with payment, the Centers for Medicare & Medicaid Services (CMS) hopes to start paying for value.

While legislation required the creation of pay-for-performance programs for physicians and hospitals, the design and implementation details have been delegated to CMS, part of the U.S. Department of Health and Human Services. Thus, CMS has oversight on the specifics of the program. These specifics are promulgated through the federal rulemaking process, which requires such agencies as CMS to seek input from the general public—as well as medical societies, including SHM—as rules are proposed and finalized. Generally, there is a 30- to 90-day period after a rule is proposed for public comment, after which a rule will be finalized.

For the VBPM and its performance period starting next year, the guidelines were published for public comment in a proposed rule for the fiscal-year 2013 Physician Fee Schedule. The final rule, which will provide more definitive guidance for hospitalists, is slated to come out in November.

Hospitalists should be cognizant of how quality measurements apply to their practice and find ways to participate in such quality measurement programs as the Physician Quality Reporting System (PQRS). PQRS will become the evaluative backbone of the VBPM. It is imperative that hospitalists stay abreast of these transformative changes in the healthcare system and work to ensure that their practice patterns, which fill critical gaps in patient care, are adequately represented in these changes.

Although legislation and legislative advocacy are undoubtedly important features of policymaking, participating in the federal rulemaking process is a vital tool for helping to shape healthcare. SHM actively pursues regulatory issues in order to advocate for hospitalists and their patients. The experiences and expertise of members are critical for SHM to be able to accurately represent the specialty.

By staying informed on health policy and being engaged with SHM, members can provide invaluable perspectives to help transform the field and revolutionize the healthcare system.

Josh Lapps is SHM's government relations specialist.


  1. U.S. Bureau of Labor Statistics. Program Perspectives: fee-for-service plans. U.S. Bureau of Labor Statistics website. Available at: Accessed Aug. 15, 2012.
  2. The Henry J. Kaiser Family Foundation. Medicare at a glance. The Henry J. Kaiser Family Foundation website. Available at: Accessed Aug. 29, 2012.

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