MIPS Payment Adjustment – Calculations and Implications

2017 being the introductory year of MIPS, there is still some confusion regarding the incentive distribution under this program which is termed as the "Positive Payment Adjustment". It is unlike bonus in Meaningful Use program which could be earned if certain boxes were checked, and required criteria satisfied. MIPS is a comparative and competitive program in which Composite Performance Score (MIPS Score) would be the primary determinant of payment adjustments. The calculation of the payment adjustment under MIPS is not straightforward because:

 MIPS is a comparative and competitive program in which Composite Performance Score (MIPS Score) would be the primary determinant of payment adjustments.
  • It's pay-for-performance, not pay-for reporting. MIPS is unlike Meaningful Use, under which the providers got paid just for reporting on the measures. Under MIPS, performance matters and is assigned a score. 
  • It’s a composite, weighted score across four performance categories. Commonly referred to as MIPS score, the Composite Performance Score (CPS) is a weighted sum of points in the four performance categories (Quality, ACI, IA, and Cost) which ranges from 0-100.
  • Payment adjustment is not a set amount, and is determined by the score. It is a percentage of a provider’s Medicare Part-B billings. So the reward and penalty will not be identical for everyone. Higher scores will earn a higher bonus (positive adjustment) percentage. 
  • It’s comparative. Earning a particular score doesn’t guarantee you certain bonus. It would be a fair distribution of the available monies among everyone who lands up in that score segment.
  • The thresholds will move every year. 2017 performance year has low thresholds and category score requirements only because it is the transition year. Requirements will get tougher and thresholds might be higher. Also, the maximum reward and penalty percentages will both increase in the coming years.

With that in mind, let’s take a look at the positive and negative payment adjustments for Payment Year 2019 based on the scores in Performance Year 2017.

Payment Adjustments

Although MIPS is a budget-neutral program, there is additional $500 million annual budget allocated from year 2019 through 2024 to incentivize exceptional performers. So MIPS participants can earn two types of payment adjustments:

1.      Budget Neutral Payment Adjustment – All the money collected as penalties (negative payment adjustments) will be given out as positive payment adjustment. (-4% to +4% of your Medicare Part-B Billings)

2.      Exceptional Performance Payment Adjustment –  $500 Million annual budget will be utilized for additional positive payment adjustment, on top of the budget-neutral payment adjustment, that exceptional performers can earn. (up to 10% of your Medicare Part-B Billings)

2017 Payment Adjustment Calculation

Based on your MIPS Score (CPS), you will earn either a positive payment adjustment or a negative payment adjustment.  Here is a simplified representation of the payment adjustment distribution based on 2017 Performance Year scores for Payment Year 2019.

 MIPS Payment Adjustment – Calculations and Implications. Understanding how the payment adjustments work is vital to understanding the financial impact of MIPS on your practice.

CPS 0 – 0.75: Maximum negative payment adjustment (-4%) will apply

 Source: 2017 MACRA Final Rule

Source: 2017 MACRA Final Rule

CPS 0.75 – 2.9: Negative payment adjustment gradually decreasing on a linear sliding scale from -4% to ~0% will apply (as depicted in Figure A)

CPS 3: Payment adjustment of 0%

CPS 3.1 – 100: Providers will receive the budget-neutral component of positive payment adjustment which is scaled from 0% to 4%. A scaling factor (up to a max of 3) will be used to equitably distribute every single cent of the penalties collected. It means that there is a potential to earn a maximum of 12% positive adjustment, provided there is enough money collected as penalties. 

CPS 70 - 100: The providers whose score lie in this range, will earn an additional exceptional performance positive payment adjustment. This bonus will be given out from $500 million annual budget up to a max of +10% even if there is money left over. Another scaling factor will be utilized to ensure a fair distribution of the monies, i.e. more money for a higher score and stay within the annual budget of $500 million.

Monetary Implications

Realistically speaking, as per CMS estimates, the budget-neutral part of payment adjustment of up to 4% could be around 1% for 2017.

Rationale - Not only is the bar low with performance threshold of 3, but achieving it been made so easy that most of the participants would easily score more than 3. This means, that very little money will be collected as penalties and CMS will need to slice the pie thinner to ensure every deserving provider gets a fair share of the pie. Thus, CMS anticipates that the payment adjustment for MIPS eligible clinicians with a final score of 100 points would most likely be less than 4 %.

Silver Lining – Did you begin wondering that if that’s the case, why should you even bother with MIPS? Or are you thinking of doing just enough to avoid the penalties? Let me shock you out of penalty avoidance mode. Remember that there is still the $500 million for exceptional performers and up to 10% positive payment adjustment to be earned. 

Although, that alone would be big enough reason for you to keep your eyes on the prize, your MIPS score has much greater significance.

Reputation and Other Implications

Very soon, MIPS Score would mean much more than penalty avoidance and earning exceptional performance bonus. It would be every eligible healthcare provider’s REPORT CARD. CMS has declared that MIPS scores of all eligible providers would be made public on the Physician Compare website. In the longer run, higher score would afford clinicians higher bargaining power in multiple situations. For instance: 

  • For mergers, acquisitions, and sale of practices

  • For clinician recruitment

  • For negotiating fee with healthcare insurance companies or to be on their preferred provider list

  • As a decision making tool for provider selection -  If one needed healthcare services, they can make their decision based on the provider’s MIPS score.

Still not convinced? Consider this. All other factors being similar, if you had to pick one healthcare provider for yourself or your family, whom would you pick - Someone who has a score of 94 or someone who has a score of 5?

Although you can’t control what percentage you would earn for positive payment adjustments, you can definitely take charge of your MIPS Score and be proactive about it. Understand where you stand today, and what you need, to be your best. Act now! 


Learn how you can find out the financial impact for your organization, and get help with MIPS to maximize your MIPS score and the payment adjustment.  

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