Physician Value-Based Payment Modifier

In an effort to begin moving away from traditional fee-for-service payment models and toward pay-for-performance, the Centers for Medicare and Medicaid Services (CMS) is aligning the Physician Quality Reporting System (PQRS) with a value-based payment modifier (VBPM) for physicians. The program would link a quality analysis of a set of measures with a payment modifier. The underlying concept is that Medicare should reimburse for value, not simply for quantity of services provided.

The VBPM, introduced under Section 131 of the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 and expanded under Section 3003 of the Affordable Care Act, is continuing to grow and change, making the sustained advocacy efforts of SHM critical. By 2017, the VBPM will be applied to all physicians.

Quality and Cost Measures

CMS uses quality measures from the PQRS to assess the performance of physicians. Within PQRS, physicians have the option to report on measures that are relevant to their practice and patient population. There are multiple reporting methodologies, including registries, claims, and the group practice reporting option (GPRO), each with a slightly different set of expectations and requirements.  Performance on these measures is compared against a national benchmark for all physicians who report the measure.

Cost measures, universally applied to all physicians, look at the total resource expenditures for a physician’s attributed Medicare beneficiaries. These measures include: total per capita costs and costs for specific conditions, including diabetes, COPD, coronary artery disease and heart failure. Performance in these measures is compared within specialty designation.

Physician feedback reports (Quality and Resource Use Reports, QRURs) use quality data from the PQRS and claims data from Medicare fee-for-service patients to illustrate the costs and quality of services provided to patients. As these reports are refined, they will form the feedback element of the payment modifier.

Learn more about quality measures and PQRS.

Payment Adjustments

The payment modifier is an adjustment to payments on the Medicare fee schedule that will be derived from the comparative quality data from the PQRS and the physician feedback reports. Similar to hospital value-based purchasing, the VBPM will withhold a percentage of the Medicare fee-for-service payments based on results from the performance year two years prior to the payment adjustment year.



Program Requirements

Penalty Amount


Performance year for 2016 VBPM for physicians in groups with more than 10 EPs.



Payment Adjustment applied to groups of 100 or more EPS. Performance year for 2017 VBPM for all physicians.



Payment Adjustment applied to groups of 10 or more EPs. Performance year for 2018 VBPM.



Payment Adjustment applied to all physicians. Performance year for 2019 VBPM.

Potentially >2.0%

2018 and Beyond

Program continues. Penalties can be increased by CMS.

Potentially >2.0%

What Can You Do?

  • Participate in PQRS. If a group or individual is not reporting, there are still incentive payments available in 2013 and 2014. Beginning in 2015, there will be a penalty for not participating/not reporting in the system. For more information about PQRS, visit the PQRS page.
  • Prepare. Learn more about when and how the modifier will begin to impact hospitalists at the group or individual levels.
  • Stay informed. PQRS and the value modifier is updated and refined each year through the federal rulemaking process.
  • Share experiences. Input shared will help inform the SHM’s position and frame its comments provided to CMS. Join discussions around quality reporting and the VBPM in the Advocacy and Public Policy Community of SHM’s Hospital Medicine Exchange (HMX).

What is the Society of Hospital Medicine (SHM) Doing?

  • Providing feedback to CMS as part of the normal rulemaking process for the Physician Fee Schedule.
  • SHM’s Performance Measurement and Reporting Committee (PMRC) is dedicated to engaging quality measurement and working to ensure measures make sense for hospitalist quality improvement.


Getting Ready for Physician Value-Based Purchasing
Patrick Torcson, MD, MMM, SFHM
View the presentation from SHM's Annual Meeting 2013

Measuring Up: Healthcare Reform and Physician Performance
Gregory B. Seymann, MD, SFHM
View the presentation available from The Institute for Medical Education (IME)