Published 1/1/2007

Getting your share of the CMS P4P 2007 bonus payments

The program is still voluntary, but is the payoff enough to elicit physician participation?

By Robert H. Haralson III, MD, MBA

Pay-for-performance (P4P) is no longer just a buzzword; it’s a reality. Spurred by double-digit increases in medical costs during the past few years and a perception of less-than-stellar-quality medicine practiced in the United States, many payors have developed P4P programs, even though their success in reducing costs and increasing quality is unclear.

P4P programs for hospitals have resulted in substantial payments over the past several years. Unfortunately, we’ve yet to see improvements in quality as a result of these programs. More effective efforts—including the 100,000 lives campaign, run by Donald M. Berwick, MD and the Institute for Health Improvement—focus on instituting standard processes, such as ensuring that patients with heart attacks receive beta blockers and that patients on respirators in intensive care units receive routine standard pulmonary care. In fact, the 100,000 lives campaign, which concluded this past June, claims to have exceeded their goal and actually saved 120,000 lives.

In 2006, the Centers for Medicare and Medicaid Services (CMS) instituted the Physicians Voluntary Reporting Program (PVRP)—the first step in developing a Medicare P4P program. Physicians who voluntarily reported on any of 36 performance measures received a report showing how they did in comparison to peers. They did not, however, receive any increase in reimbursement. Despite a robust advertising campaign and encouragement from some specialty societies, including the AAOS, participation was less than spectacular.

Pay for Performance 2007

The Tax Relief and Healthcare Act of 2006, passed on the last day of the 109th Congress, mandated that CMS implement a P4P program. The 2007 Physician Quality Reporting Initiative (PQRI) is still voluntary, but participating physicians could receive 1.5 percent bonus at the end of the year.

Exact details of the program—including all of the reporting requirements—have not yet been finalized, so there may still be some changes in the final program. This article is the first in a series designed to help AAOS members understand the program as it develops.

Of the 66 measures in the PQRI, the following seven directly relate to orthopaedic surgeons:

  1. Falls: Screening for fall risk (Measure #4)
  2. Perioperative care: Timing of antibiotic prophylaxis—ordering physician (Measure #20)
  3. Perioperative care: Selection of prophylactic antibiotic—first or second generation cephalosporin (Measure #21)
  4. Perioperative care: Discontinuation of prophylactic antibiotics (non-cardiac procedures) (Measure #22)
  5. Perioperative care: Venous thromboembolism (VTE) prophylaxis (when indicated in ALL patients) (Measure #23)
  6. Osteoporosis: Communication with the physician managing ongoing care post fracture (Measure #24)
  7. Osteoporosis: Counseling for vitamin D, calcium intake and exercise (Measure #42)

Orthopaedists who treat osteoporosis might also use the other osteoporosis measures—Osteoporosis: Management following fracture (Measure #40) and Osteoporosis: Pharmacological therapy (Measure #41).

Links to full descriptions of all measures, reporting instructions, a description of what is required to meet the criteria, (for instance what constitutes thromboembolic prophylaxis) and a list of CPT codes covered by the measure can be found on both the CMS Web site and the AAOS Web site.

An example of the measures and instructions (although not the applicable CPT codes) can also be found on the AAOS Web site. Note that the numerator and denominator are defined very specifically. G-codes have been developed by CMS; CPT Level II codes are being developed by the AMA CPT editorial panel to replace the G-codes. Because it takes up to to two years to develop CPT codes, CMS sometimes issues G-codes for expediency. The G-codes are specified and the CPT codes are identified by CPT II XXXXF. (CPT codes for reporting performance measures will be alphanumeric and end in F.)

Ordering the antibiotic, administering it within the proper time or specifying why the antibiotic was not given (appropriate exclusion) all have separate codes. A specific G-code represents one of the three appropriate exclusions. Physicians should append one of the following modifiers to the appropriate CPT Level II code if the measure is not reported:

  • 1P—A medical reason exists for not reporting the measure, including not indicated (absence of organ/limb, already received, other) or contraindicated (patient allergic history or potential adverse drug reaction)
  • 2P—Patient reasons exist for not reporting the measure (patient refused, economic, social or religious reasons, or other patient reasons)
  • 3P—System reasons exist for not reporting the measure (resources to perform the services are not available, insurance coverage or/payor related limitations, or other reasons attributed to health care delivery system).

Getting in on the action

Physicians who wish to participate in the PQRI program must report up to three measures. If only one or two measures apply to your practice, you must report on them. If three or more apply, you may report on as many as you wish, but you must report on at least three. If you report on more than three measures, CMS will use the three that reach the highest threshold when it determines your eligibility for a bonus.

Whether or not you must report on the procedures that represent the highest volume in your practice has not been determined. For instance, orthopaedic surgeons who do total joints must report on at least three of the four measures that relate to total joints. Subspecialists with a limited practice may have fewer options. None of the perioperative measures apply to hand surgeons, for example, because the listed CPT codes do not include any for hand surgery. These practitioners may have to use the osteoporosis measures or the falls risk assessment to qualify for the program. Other physicians may not be eligible at all until performance measures are developed that cover the entire spectrum of medical practice.

Report the measures by appending either a G-code or a level II CPT code to the CMS 1500 billing form, along with the CPT code for the procedure. Report osteoporosis or the falls screening measure codes along with the appropriate evaluation and management visit code.

Begin reporting on July 1, 2007, and continue through the end of the year. CMS will then validate each physicians reporting and decide who is eligible for a bonus. The bonus will be issued as a lump sum equal to 1.5 percent of all Medicare billings for those who meet all the criteria. The check should be issued sometime in February 2008.

CMS has not yet decided whether to track by individual physician or by pay number. If the pay number is used, practices with multiple physicians who use the same pay number will have to determine how to distribute the bonus within the practice.

Maximum payment

In many instances, physicians will have a limited number of eligible patients in the program. The CMS formula caps bonus payments at 300 percent of the national Medicare average payment per quality code, as estimated by CMS. CMS intends to calculate the average payment per quality code by estimating the total allowable codes for Medicare services reported with quality codes nationwide and dividing by the total number of quality codes to be reported. The bonus for physicians who report very few codes will be capped at some level below the 1.5 percent level.


In summary, reporting for the 2007 Physician Quality Reporting Initiative will begin July 1, 2007. To be eligible for a bonus from Medicare of 1.5 percent of all your Medicare billings for the period July 1 to Dec. 31, 2007, you must report on up to three performance measures in 80 percent of your eligible patients. A lump sum payment will be made in approximately mid-February 2008.

Whether a 1.5 percent bonus is enough to entice physicians to institute the procedures necessary to capture the required reporting information is still unknown. Orthopaedists who have computer billing systems should not find this a particularly burdensome task if the reporting is part of a routine. Some larger practices with high Medicare patient volumes may find this a worthwhile undertaking. Although the PQRI is expected to increase quality of care, we will need to wait and see how effective it is in achieving this goal.

For more information on the program, visit the AAOS Web site (www.aaos.org/research) or the CMS Web site, http://www.cms.hhs.gov/.asp# Scroll to the bottom of the page and click on “2007 Physician Voluntary Reporting Program (PVRP) Quality Measures” for a list of the measures or “2007 Physician Voluntary Reporting Program (PVRP) Quality Measure Specifications, Effective January 1, 2007” for full descriptions, reporting instructions, a description of what is required to meet the criteria, and covered CPT codes.

Robert H. Haralson III, MD, MBA, is the AAOS medical director. He can be reached at haralson@aaos.org.