As physician groups and other stakeholders work to finalize comment letters on the calendar year (CY) 2024 Physician Fee Schedule (PFS) proposed regulation by September 11, 2023, the Centers for Medicare & Medicaid Services (CMS) made an announcement that could also significantly affect clinicians’ Medicare reimbursement next year. CMS announced that clinicians could log in to their account on the Quality Payment Program website to view their performance score in the Merit-based Incentive Payment System (MIPS) for performance year 2022 and the corresponding payment adjustment they will receive in CY 2024.

I encourage clinicians to go online and check out their scores and payment adjustments. What they see may surprise them!

Before giving away the big surprise, let’s set the scene (so that you will know why the “surprise” is in fact a surprise!) MIPS, the main quality performance program for physicians and other clinicians in Medicare, includes four performance categories: 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 fares against a pre-established performance threshold, clinicians receive an upward, downward or neutral payment adjustment two years after the performance period. For example, performance in 2022 will impact Medicare payments in 2024.

Under MIPS, the maximum downward payment adjustment (i.e., penalty) is set at -9% of clinicians’ Medicare payments and the positive payment adjustment goes up to 9% (the maximum penalties or bonuses were less than 9% in the first few years of the program but are set at 9% going forward). MIPS is a budget-neutral program, and therefore the size of the positive payment adjustment is ultimately controlled by the amount of money available through the pool of negative payment adjustments. In other words, the 9% positive payment adjustment can be scaled up or down (capped at a factor of +3%). Performance year 2022 was the last year that 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.

In the first five years of MIPS (2017 through 2021), most clinicians qualified for a positive payment adjustment, so the size of the positive payment adjustment was relatively small. Many clinicians also scored above the exceptional performance threshold, so the $500 million pot was spread thin and did not make a significant difference in clinicians’ payment adjustment. Even if a clinician received a perfect score of 100 points, the positive payment adjustments ranged from about 1% to 2% during that period.

Performance from 2021 captures this pattern perfectly. Only 3.3% of clinicians received a penalty that year, with 96.7% avoiding one. Of the 96.7% that avoided a penalty, 10.6% received a neutral payment adjustment. These clinicians scored right at the 2021 performance threshold of 60 points. The remaining 86.1% of clinicians received an upward payment adjustment. However, of that 86.1%, the vast majority (77.9%) achieved a score higher than the exceptional performance threshold of 85 points. Since the $500 million was spread across 77.9% of clinicians, even clinicians with a perfect score only received a 2.34% bump in their payments in 2023.

With that as background, let’s get to the surprise! The pattern of small maximum bonuses did not hold true for 2022. A perfect score in 2022 will yield an 8.25% payment increase in 2024—far higher than in previous years!

So, what happened? While CMS has not yet released official reports or data, here’s what I know. Certain factors, some of which are unique to 2022, led to this large maximum bonus:

• Performance year 2022 was the first 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.
• Certain policies also made it harder to achieve a high score:
  • This year, CMS was able to score the Cost category of MIPS. In the last few years, CMS did not have enough data to determine a score for this category. Since the Cost category represents 30 percent of the total MIPS score, performing poorly in this category can definitely make it extremely difficult for a clinician to receive a high overall score.
  • CMS changed how it calculated the complex patient bonus. This bonus awards up to 10 bonus points based on patients’ medical complexity and social risk. In 2022, CMS updated its policy to include two distinct calculations that are added together: the average Hierarchical Condition Categories (HCC) risk score of a clinician’s Medicare patient population, and the proportion of a clinician’s Medicare patient population that is dually eligible for both Medicare and Medicaid. The complex patient bonus is now limited to clinicians with at least one risk indicator (either average HCC risk score or dual eligibility ratio) at or above the median risk indicator calculated for all clinicians from the previous year.
• Many clinicians scored around the threshold of 75 points, but few scored above the 89-point exceptional performance threshold. Therefore, a score between 89 points and 100 points yielded a high payment adjustment. This year was first time the additional $500 million exceptional bonus pool (triggered at 89 points) played a significant factor in giving clinicians higher positive payment adjustments.

So why does the high maximum bonus in performance year 2022 matter? First, as previously noted, 2022 was the last year with the exceptional bonus pool (unless Congress reauthorizes it), so bonuses may be lower going forward. However, at the same time, CMS is raising the bar in MIPS every year—making it harder to achieve a bonus and avoid a penalty. In the CY 2024 PFS proposed rule, for example, CMS is proposing to increase the 2024 performance threshold from 75 points to 82 points. Based on this increased threshold and other MIPS policies CMS is proposing for 2024, the agency estimates that 54% of all clinicians will receive a penalty in 2026 based on their performance in 2024. Smaller groups will fare worse than larger groups, as CMS estimates that over 60% of small practices will receive a penalty while only 50% of larger groups will. If these estimates come to fruition and the majority of clinicians receive a penalty, then those who are able to perform well will receive a higher bonus. In fact, CMS estimates that the maximum bonus will be 8.8% in 2026 based on 2024 performance. While this estimate is higher than the actual maximum bonus we saw in 2022, CMS has historically tended to overestimate the size of the MIPS bonuses. Thus, we will have to wait and see what the actual maximum bonuses are going forward without the exceptional bonus pool.

Second, it’s important to evaluate the MIPS performance adjustment in the context of the other PFS payment policies that are going into effect in 2024. CMS proposed a 3.3% cut to the Medicare PFS conversion factor in CY 2024. While CMS has not yet finalized the conversion factor, many clinicians expect to receive a payment cut next year. A large MIPS bonus in 2024 (based on performance in 2022) could offset any PFS conversion factor cut. Conversely, a MIPS penalty in 2024 would add insult to injury, as clinicians would see their Medicare payments reduced even more.

Once CMS releases data from the 2022 performance period, it will be interesting to see the percentage of clinicians who avoided a payment cut, scored between 75 and 89 points, or were high performers with a score between 89 and 100 points. If only larger physician groups were able to surpass the 89 points and receive some of the $500 million pot, that scenario could seem unfair to smaller groups that may not have the resources needed to receive a high score.

All in all, after we see the 2022 data, we will have a better idea of what overall Medicare payments for clinicians will look like next year.

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

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