Health Law News From Arnold & Porter
Health Law News From Arnold & Porter
October 25, 2016
3 min read

Boo! PQRS, Value Modifier penalties for 2017 sure to scare you

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From international law firm Arnold & Porter LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

On Sept. 26, CMS posted 2017 payment adjustment notices for the Physician Quality Reporting System (PQRS) and Value-Based Payment Modifier (Value Modifier) programs on the CMS Enterprise Portal. For some providers, downward payment adjustments under both programs may be as high as –6% of all Medicare services paid under the Physician Fee Schedule (PFS) in 2017 (–2% for PQRS and –4% for Value Modifier). Providers have until Nov. 30 to submit informal review requests to CMS if they believe they have been incorrectly assessed a negative payment adjustment under either program.

Allison W. Shuren

PQRS is a quality reporting program under which eligible professionals (EPs) report on certain quality measures for Medicare patients throughout a reporting year. EPs can choose to report as individuals or as a group. Depending on whether EPs choose to report individually or as a group, quality measures must be reported in different ways. For example, individual EPs can report PQRS data using claims-based reporting, whereas groups that choose the group practice reporting option (GPRO) may not. EPs who participate in an accountable care organization (ACO) must report quality measures through the ACO.

Beginning in 2015, providers that do not successfully report on applicable quality measures are assessed a negative payment adjustment on all Part B Medicare payments. Payment adjustments apply in the calendar year that is 2 years after the reporting year. In other words, downward payment adjustments in 2017 (the payment adjustment year) are based on PQRS reporting in 2015 (the reporting year). For 2017, EPs are subject to a downward –2% payment adjustment for failing to satisfy PQRS requirements.

The Value Modifier program provides differential payment to physicians or groups of physicians at the taxpayer identification number (TIN) level based upon quality of care compared to cost of care during the performance period. The quality component of Value Modifier performance is based on PQRS performance. For EPs who choose to report PQRS data as individuals, CMS looks at whether at least 50% of EPs avoided a payment adjustment under the PQRS program. For EPs who choose to report PQRS as a group, CMS looks at whether the group received a PQRS penalty or avoided a penalty. In other words, satisfactorily reporting under PQRS is a condition to receiving either a neutral or positive bonus payment under the Value Modifier program.

Victoria M. Wallace

In 2016, Value Modifier payment adjustments applied only to physicians in groups of 10 or more EPs. In 2017, payment adjustments will be expanded to apply to solo practitioners and physicians in groups of two or more EPs, based on 2015 performance. Unlike PQRS, the Value Modifier program is a budget-neutral program, meaning that providers can either receive an upward, neutral or downward adjustment (as opposed to the neutral or negative adjustment under PQRS). For TINs with 10 or more EPs, the downward adjustment for failing to participate in PQRS or unsatisfactorily participating in PQRS is –4% in 2017. For solo practitioners and TINs with two to nine EPs, if the TIN or solo practitioner did not participate in PQRS at all in 2015, there is an automatic downward payment adjustment of –2%; if the TIN or solo practitioner participated, but did so unsatisfactorily, the TIN or solo practitioner will receive a neutral payment adjustment — meaning they will neither receive bonus payments nor penalties on their 2017 Part B claims under the Value Modifier program.

Providers should check their PQRS report and Value Modifier Quality and Resource Use Report (QRUR) to see whether they will be subject to payment penalties in 2017 and whether it appears CMS has made a mistake in assessing penalties under either program. Sometimes, CMS imposes penalties based on technical errors, which seem unfair and inconsistent with the goals of promoting quality. In the case of the PQRS program, those technical errors (such as choosing GPRO but reporting using claims-based reporting) lead not only to PQRS penalties, but automatic Value Modifier penalties as well. Providers that believe CMS has made an error or that there is a reason they should not be subject to the PQRS and/or Value Modifier penalties should consider submitting informal review requests before Nov. 30. Instructions for requesting an informal review for PQRS are available here, and for Value Modifier here.

Allison W. Shuren, MSN, JD , a partner at Arnold & Porter LLP, can be reached at

Victoria M. Wallace, an associate at Arnold & Porter LLP, can be reached at