Revenue Cycle Management Blog | GroupOne Health Source

The Merit-Based Incentive Program: What You Need to Know

Written by Jeff Jones, CPHP | January 27, 2016

The healthcare industry has unveiled another addition to the already enormous alphabet soup. This new addition goes by the name MIPS, or more properly, Merit-based Incentive Payment System and it is quickly moving healthcare provider towards value-based reimbursement. Here's how.

SGR Repeal and MACRA

The Merit Based Incentive Payment System (MIPS) may routinely be cited under the Medicare Access and CHIP Reauthorization Act of 2015, also known as MACRA.

The MACRA act specifically aims to “amend title XVIII of the Social Security Act to repeal the Medicare sustainable growth rate and strengthen Medicare access by improving physician payments and making other improvements, to reauthorize the Children’s Health Insurance Program, and for other purposes” (MIPS Legislation). For the purpose of this blog we will be aiming our focus to the Medicare portions of the legislation.

April 15, 2015 – Congress and President Obama approve one of the most significant and highly bi-partisan bills in the history of U.S. healthcare reform. Nicknamed the “doc fix” bill, aims to repeal the Medicare Part B Sustainable Growth Rate (SGR) reimbursement formula and replaces it with a value-based payment system: MIPS.

To refresh our memories, the Medicare SGR was a method used by Center for Medicare and Medicaid (CMS) to control spending by Medicare on physician services. The SGR was enacted by the Balanced Budget Act of 1997, and replaced the Medicare Volume Performance Standard (MVPS), which was the previous method that CMS used, in an attempt to control costs. This method was to ensure that the yearly increase in the expense per Medicare beneficiary did not exceed the growth in GDP.

Moving to Merit Based Incentives

So how does MIPS plan to succeed in controlling spending by Medicare on physician services, where other pieces of legislation have failed? It plans to utilize three existing programs (Meaningful Use, the Physician Quality Reporting System, and the Value-Based Modifier (VM) Program) and one new program (called Clinical Practice Improvement Activities).

In short, MIPS consolidates and strengthens the financial impacts of these programs, while continuing their performance measurement and reporting mechanisms that have become familiar to providers over the last few years.

How Your MIPS Score Impacts Your Reimbursement

MIPS further goes on to annually measure Medicare Part B providers in these four performance categories to derive a “MIPS score”, from 0 to 100, which can significantly change a provider’s Medicare reimbursements in each payment year. The categories are:

  1. Quality
  2. Advancing Care Information
  3. Clinical Practice Improvement Activities
  4. Resource Use


There is a significant potential for additional revenue with MACRA’s Quality Payment Program (QPP), which begins on January 1, 2017. The program includes two different payment pathways: the Merit-based Incentive Payment System and the (Advanced APMs).

With MIPS, providers can earn a 4% bonus on top of their Medicare fee schedule in 2019, which is based on 2017 performance. This bonus gradually increases to 9% for the payment year 2022 and beyond.

Furthermore, this bonus could be increased up to a multiple of 3 if the percentage of clinicians receiving penalties is higher than those receiving bonuses (Budget-Neutrality Factor). Finally, exceptional performers in MIPS can receive additional bonuses of up to 10% on top of their initial performance bonuses. With Advanced APMs, clinicians and practices can receive a 5% lump sum bonus in addition to potential bonuses available through the APM’s themselves.

[Also: How to Pick Your Pace for the Quality Payment Program]

Why You Need to Know About MIPS

It is crucial that providers who serve Medicare Part B beneficiaries take the necessary action steps and do their due diligence on MIPS. Even if you do not serve Medicare Part B beneficiaries it is imperative that you begin your research on MIPS now.

Once the big dog (CMS) barks the other dogs (commercial insurance companies) are sure to follow. Meaning the switch from Fee-for-Service to Pay-for-Performance is underway in the healthcare industry, and it goes by the name MIPS.