Performance Year 2023 MIPS Payment Adjustments: A Return to Normal

Performance Year 2023 MIPS Payment Adjustments: A Return to Normal

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August 29, 2024 – While the phrase “return to normal” is used in many different contexts, interestingly, it can now also be applied to the maximum payment adjustments that clinicians receive through the Merit-based Incentive Payment System (MIPS) based on their performance in the program.

Before digging into why that’s the case, let’s first provide a quick refresher on MIPS. MIPS is the main quality performance program for physicians and other clinicians in Medicare. It’s four performance categories are Quality, Cost, Improvement Activities, and Promoting Interoperability (formerly Meaningful Use). Performance on these four categories (which are weighted) rolls up into an overall score out of 100 points. Based on how that score compares to a pre-established performance threshold, a clinician receives an upward, downward, or neutral payment adjustment two years after the performance period. For example, performance in 2024 will impact Medicare payments in 2026. The maximum downward payment adjustment (i.e., penalty) is set at -9% of a clinician’s Medicare payment, and the positive payment adjustment goes up to 9%. (The maximum penalties and bonuses were smaller in the first few years of the program, but they are set at -/+9% going forward).

MIPS is a budget-neutral program, so the size of the positive payment adjustment is ultimately controlled by the amount of money available through the pool of negative payment adjustments. In the first five years of MIPS (2017 – 2021), most clinicians qualified for a positive payment adjustment, so the adjustment was relatively small. Even if a clinician received a perfect score of 100 points, the positive payment adjustments ranged from about 1% to 2% during that period. However, as discussed in a previous Regs & Eggs blog post, a perfect score in performance year 2022 yielded an 8.26% payment increase in 2024 – far larger than in previous years.

And why was that? Performance year 2022/payment year 2024 was special, and several factors led to the large maximum bonus:

• It was the last year that the Centers for Medicare & Medicaid Services (CMS) had an additional $500 million to award exceptional performers. In addition to establishing a performance threshold that clinicians must meet to avoid a penalty, CMS set a separate performance threshold for high performers, called the exceptional performance threshold. If a clinician scored higher than that threshold, they could receive their share of the $500 million pot.
• It was the first year since 2018 in which a hardship exemption for COVID-19 did not apply automatically, and not everyone knew to manually apply for one. Therefore, more clinicians received a downward payment adjustment than in previous years, and the pool of penalties was bigger.
• The performance thresholds increased. The regular performance threshold increased from 60 points to 75 points, and the exceptional bonus threshold increased from 85 points to 89 points. CMS also adopted certain policies that made it harder to achieve a high score, leading to fewer clinicians breaking the exceptional bonus threshold and receiving a perfect score.

Based on the results from performance year 2022/payment year 2024, high MIPS performers have probably been feeling pretty good. Groups that had the resources available to invest in MIPS reporting were finally able to get some return on that investment. When the 2022 results became known in August 2023, many stakeholders (including me) raised the question of whether these high bonuses would last. You can likely guess the answer based on the title of this post.

CMS recently announced that clinicians could log in to their account on the Quality Payment Program website to view their 2023 MIPS performance score/ 2025 payment adjustments—and based on what we’ve heard from clinicians, a perfect score in 2023 will only yield a 2.15% payment increase in 2025. While we won’t know the maximum 2025 payment adjustment for sure until CMS officially reports it, it likely will be around that percentage.

If you are wondering why the maximum payment adjustment dropped again, the answer could be a simple one: performance year 2022/payment year 2024 might have been a fluke, and the performance year 2023/payment year 2025 maximum payment adjustment could signal a return to normalcy. However, even if the answer is that basic, it’s worth discussing its implications. So let’s explore what the return to the norm (if that’s indeed the case) means for the future of MIPS and value-based care more generally.

If the maximum MIPS payment adjustments will be in the 2% range going forward, that could impact clinicians’ business case for taking the steps required to achieve perfection. Clinicians and groups that may need to invest a significant amount of capital to succeed in the program may wonder if the “juice is worth the squeeze.”

Such a scenario, where clinicians decide not to invest in MIPS and are fine with a lower score (since a perfect score wouldn’t lead to a significantly larger award), could raise some significant policy questions:

• Will potentially lower MIPS scores lead to lower quality care for Medicare beneficiaries, since the stated goal of MIPS is to improve patient outcomes and lower costs?
• Will clinicians who are able to make the jump from MIPS to participation in Advanced alternative payment models (APMs) feel more financially compelled to do so?
• Will Congress or CMS take any steps to increase the financial incentives tied to MIPS, or will they be “ok” with lower MIPS bonuses and possibly lower MIPS scores as a result?

These questions are tough, and I can’t give you the answers for sure – however, I’ll try.

With respect to the first question, it is unclear whether there is a strong correlation between high MIPS scores and higher quality of care (or vice versa). Generally speaking, clinicians participating in MIPS are focused primarily on avoiding penalties and receiving any type of bonus. In order to achieve these goals, clinicians may be motivated to select quality measures and activities on which they are most likely to perform well, rather than measures and activities that would have the greatest impact on cost and quality of care.

On the second and third questions, the overarching objective of the Quality Payment Program (QPP) established under the Medicare Access and CHIP Reauthorization Act was for clinicians to start in MIPS in order to grow accustomed to being held accountable for cost and quality of care, then eventually transition to Advanced APMs. However, that simply may not be feasible for everyone. There are no opportunities for most specialists to directly participate in APMs, and even primary care providers in APMs may be reticent to take on financial risk – which is required in order to be in an Advanced APM and be exempt from MIPS under the QPP construct. Thus, many clinicians, despite not being able to receive a high payment adjustment under MIPS, are stuck there and have no other real options.

Based on where we are now, Congress and CMS may decide to take action. One way to create greater financial incentives in MIPS would be for Congress to replenish the $500 million pool to award exceptional performers. Doing so would bump up the maximum bonus that high performers could receive overall. CMS could double down on that congressional action by making it more difficult for clinicians to obtain a perfect score. The tougher MIPS is, the higher the share of the $500 million pot that would likely be available to clinicians who are able to achieve perfection. Alternatively, Congress and CMS could decide that they don’t want to make MIPS more financially attractive to high performers and could instead prioritize reducing administrative burden and ensuring that most clinicians avoid a penalty.

Another option (which isn’t necessarily mutually exclusive from those mentioned above) would be for Congress to try to make it more financially advantageous to participate in an APM. The 2022 performance period/2024 payment year was the last year with a 5% payment bonus available for participating in an Advanced APM. The bonus will decrease to 3.5% in the 2025 payment year and 1.88% in the 2026 payment year, and then, without congressional action, there won’t be any bonus starting in 2027 – only a slightly higher conversion factor update under the Medicare Physician Fee Schedule. Once the APM bonus fully expires, the financial incentive for being in an Advanced APM won’t be much larger than it is for MIPS, which is probably not ideal if the goal is for clinicians to make the leap from MIPS into these models.

As noted in another Regs & Eggs blog post, there is congressional interest in reforming MIPS and the Advanced APM bonus. For example, the Senate Finance Committee released a white paper in May 2024 that lays out a series of questions about how to restructure the QPP. To help address the relative financial incentives for participating in an Advanced APM versus MIPS, the white paper seeks comment on bringing back the Advanced APM bonus. It even states that the committee is “considering repealing or scaling back the MIPS program to relieve physicians’ administrative burden and alleviate churn from A-APMs (Advanced APMs) back to MIPS.” Despite congressional members and committees receiving input from stakeholders on these issues, the chance of any meaningful reform to MIPS and the Advanced APM bonus this year is limited.

On the regulatory front, we are in the midst of the Physician Fee Schedule rulemaking process for 2025, which includes QPP policy updates. Notably, CMS proposed to keep the MIPS performance threshold stable in 2025. If CMS finalizes that proposal, it will likely help more clinicians avoid a penalty, and at the same time it will likely lead to a low maximum payment adjustment in 2027 based on performance in 2025. CMS is also seeking comment on fully transitioning the Traditional MIPS reporting option to the MIPS Value Pathways (MVPs) by 2029. CMS’s intention for moving towards MVPs is to make the MIPS reporting process more streamlined and to help clinicians eventually move into APMs. To help address the gap in available APMs for specialists, CMS is also seeking comment on creating a new specialty care APM that builds on specialists’ participation in MVPs. Based on feedback from these comment solicitations, CMS could shape a more definitive strategy for MIPS and APMs going forward. And this strategy, in turn, could start to shed some light on how CMS plans address the important policy questions that come with the “return to normal” of low maximum MIPS payment adjustments.

Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.

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Jeffrey Davis

Washington, DC

Email / +1 (202) 204-1467
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