Financial penalties nearing for physician incentive programs

Primary care physicians (PCPs), already squeezed by years of stagnant reimbursements and rising overhead costs, will face a new challenge to their bottom lines starting next year. That’s when government financial incentives aimed at encouraging physicians to use electronic health records and report quality metrics will turn into penalties.

In addition, two government programs targeted specifically at primary care -the Medicare Primary Care incentive program and the Medicare/Medicaid parity program, are scheduled to expire in the near future. Taken all together, they could add up to a significant drain on practice finances, especially for practices that have chosen not to participate in the Medicare meaningful use (MU) or physician quality reporting system (PQRS.)

On the bright side, however, 2015 will be the first year in which Medicare will begin paying PCPs for the time they spend coordinating the care of patients with multiple complex conditions.

READ: The meaningful use stage 2 challenge

The “carrot and stick” policy reflects CMS’ long-term goals of encouraging physicians to make greater use of health information technology, and of moving the healthcare system away from rewarding physicians based on the volume of services they perform and towards an emphasis on quality and outcomes.

“If you want to see something happen, you make sure that what you pay for reflects what you’d like to see happen,” says Stuart Guterman, vice president, Medicare and cost control at The Commonwealth Fund. “All these efforts are attempts to kind of shift payments at the margins, to send the message that we want to start paying for the things that should be happening in the healthcare system, rather than just continuing to reward providers for doing more complicated stuff.”

The payments available to doctors under the meaningful use program, Guterman adds, are designed to create a business case for using health information technology. “And that means, especially at the beginning, overcoming the initial cost of buying the equipment, and the psychic cost of having to change the way you organize your office and practice medicine.”

While the actual dollar figures may seem small-especially to a multi-provider practice-sometimes money is only part of the incentive, notes David Harlow, JD, MPH, principal of the Harlow Group consulting firm in Newton, Massachusetts.

“Physicians seem to be motivated by seeing that they’re in better compliance than other groups or others within their group,” Harlow says. “Even seeing that information without a financial kicker seems to have moved some behavior, so the idea of adding an incentive, or increasing the penalties, does make sense in general terms.”

The real question, Harlow says, is whether the actions and behaviors the programs are meant to incentivize are the right ones to actually improve the nation’s healthcare systems.

“It does make sense on some basic level that humans are motivated by financial incentives, and the $2.8 trillion question is, what are the right incentives? How do we define better care? And that’s still a work in progress.”

Next: Meaningful use

1. Meaningful use

The “stick” that will probably have the biggest impact for most practices comes from not participating in the meaningful use program.

Eligible professionals (EPs) who have not demonstrated meaningful use of electronic health records (EHRs) will face a 1% penalty (or “payment adjustment,” in government-speak) in their Medicare reimbursements in 2015. Penalties are due to increase by 1% each year until 2019, when they will plateau at 5%.

For EPs also not participating in Medicare’s electronic prescribing program, the penalties start at 2% in 2015, also plateauing at 5% in 2019.  In addition, all EPs must continue to demonstrate meaningful use every year through 2019 to avoid penalties.  A one-time demonstration is not sufficient. 

According to the Centers for Disease Control and Prevention, 78% of office-based physicians were using some form of EHR by the end of 2013, and 69% had applied or planned to apply for meaningful use incentives. Data from the Medical Economics Continuing Survey, meanwhile, show that physicians not using EHRs tend to be in smaller practices with lower income and to be older than age 50.

Next: PQRS penalties

2. PQRS

The second program due to switch from paying incentives to imposing penalties is the PQRS.

First adopted in 2006, and made permanent in 2008, it has paid doctors bonuses of between 0.5% and 2% of their annual reimbursements for reporting data from their practice on a broad array of quality measures. (Physicians have been eligible for an additional 0.5% incentive payment for participating in a maintenance of certification program.)

Starting next year, however, physicians and practices that had not reported PQRS data by 2013 will be subject to a 1.5% adjustment to their Medicare reimbursements, rising to 2% in 2016. Also beginning in 2015, under the Centers for Medicare and Medicaid Services’ (CMS) Value-based Modifier Program, Medicare reimbursements for group practices consisting of 100 or more EPs that have not reported PQRS data by 2013 will be reduced by an additional 1%.

Groups that have reported PQRS data will either receive a bonus or penalty, or see no change, depending on how they chose to report their data and how they performed under the quality metrics they reported on. Bonuses can range as high as 2%, while penalties can be up to 1% of Medicare reimbursements as specified in Medicare’s Physician Fee Schedule (PFS.) Although it’s too late for non-participants to avoid the 2015 or 2016 penalties, they can avoid penalties in 2017 by beginning participation next year.

Next: Medicaid parity and primary care incentive program

3. Medicaid parity and primary care incentive program

While these financial carrots and sticks will affect physicians across all specialties next year, two other developments-one taking place next year, and the other scheduled for 2016-are of particular concern to PCPs. On January 1, 2015, the two-year program under which Medicaid reimbursements for PCPs were equalized with those of Medicare is scheduled to expire.

Numerous medical societies, including the American Academy of Family Physicians (AAFP), American College of Physicians, and American Osteopathic Association have been lobbying Congress to have the program extended or made permanent. Robert Wergin, MD, FAAFP, incoming AAFP president, says he is optimistic that Congress will act on the societies’ request, although it probably won’t do so until after the November elections. “I think they understand that improving access to primary care saves money in the long run,” he says.

A year later, the Primary Care Incentive Program, under which PCPs are eligible for a bonus equal to 10% of their Medicare reimbursements, is due to expire. Earlier this year the Medicare Payment Advisory Commission recommended replacing it with a per-patient stipend to PCPs for primary care services.