Published 1/1/2011
R. Chad Mather, MD; Carolyn Hettrich, MD; Ryan Nunley, MD

Penalties coming under PPACA, PQRI

Quality initiatives are moving from incentives to penalties

The quality reporting movement has been gaining in strength and momentum for several years. Although quality reporting was initially voluntary and promoted solely through the use of incentive payments, more recent efforts to improve reporting of quality measures have also included penalties for nonreporting. Similarly, efforts to encourage adoption of electronic health records (EHR) and electronic prescribing (e-RX) have also included both incentives and penalties.

The Physician Quality Reporting Initiative
In 2007, the Centers for Medicare and Medicaid Services (CMS) established the Physician Quality Reporting Initiative (PQRI). The program provided a lump-sum incentive payment equivalent to 1.5 percent of an eligible professional’s total estimated allowable charges under the Medicare Part B Physician Fee Schedule (PFS), if the provider reported on at least three measures for at least 80 percent of eligible patients. The 2007 PQRI was a pay-for-reporting program that included claims-based reporting of data on 74 individual quality measures.

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) made the PQRI program permanent and authorized incentive payments through 2010. Under MIPPA, incentive payments increased to 2 percent of the provider’s total allowable Medicare PFS charges. MIPPA also included an additional 2 percent incentive for providers who successfully implemented e-RX programs. Thus, physicians who adopted e-RX technology and participated in PQRI could receive a Medicare payment bonus of up to 4 percent in 2009.

Provisions were made for public availability of this quality data beginning in 2010. CMS is now required by law to post on its Web site, in an easily understandable format, a list of the names of the eligible professionals who satisfactorily submitted data on quality measures under PQRI in 2009.

PPACA introduces penalties
The interplay of cost and quality is a focus of the Patient Protection and Affordable Care Act (PPACA). The projection that the PPACA will eventually be a cost-saving measure is rooted largely in the belief that high quality care costs less.

PPACA expanded the PQRI initiative and most notably, will transform the incentive structure from a positive to negative feedback. Bonus payments for quality reporting will be reduced to 1 percent in 2011, and 0.5 percent in 2012 through 2014. Beginning in 2015, providers who do not meet reporting requirements will see a 1.5 percent reduction in Medicare reimbursement. That penalty will increase to 2 percent in 2016 and beyond.

EHRs and meaningful use
The American Recovery and Reinvestment Act of 2009 included the Health Information Technology for Economic and Clinical Health (HITECH) Act. This act provides for incentive payments to providers who employ “meaningful use” of certified EHR technology—as much as $18,000 in 2011.

PPACA also aims to increase the use of EHRs and other forms of health information technology, not only to reduce costs over the long term, but also to make quality reporting easier. An incentive structure—similar to that used under the PQRI—was instituted to encourage adoption of EHRs by providers. PPACA also explicitly requires the Secretary of the Department of Health and Human Services to integrate reporting mechanisms for the PQRI into the meaningful use criteria of the EHR. Meaningful use criteria provide structure to the use of EHRs by providers.

PPACA extends incentives for EHR adoption and meaningful use criteria adherence. In 2011 and 2012, providers can earn a 1.5 percent bonus, decreasing to 1 percent through 2014. Beginning in 2015, a 1 percent reduction in payments will be applied for non-adopters, increasing to 2 percent in 2016 and to 3 percent in 2017. The total reduction in payments under the PQRI and EHR provisons cannot exceed 5 percent.

CMS finalized 175 individual measures and 13 measure groups for the 2010 PQRI reporting period. There are 19 clinical measures, 1 administrative measure, and 2 measure groups, perioperative care and back pain that may apply to orthopaedic surgeons (Table 1).

In 2007, CMS made quality reporting a priority, and PPACA expanded the PQRI. The bill did not make broad changes to the PQRI concept or structure, but did expand its use and introduce a penalty structure for failure to report, which will replace the current positive reward structure in 2015.

Several orthopaedic-specific quality measures are now in use and more are expected. The implementation of EHRs is expected to facilitate quality reporting and PPACA has clearly tied EHR and quality reporting together with incentives for both.

R. Chad Mather, MD; Carolyn Hettrich, MD; and Ryan Nunley, MD, are AAOS Washington Health Policy Fellows.

Additional links:
CMS EHR Incentive programs

Physician Quality Reporting Initiative