Pass through payment cuts to providers?

The Medicare Physician Quality Reporting System (PQRS) has teeth. Says CMS: “Eligible professionals who do not satisfactorily report data on quality measures for covered professional services will be subject to a payment adjustment under PQRS beginning in 2015…Accordingly, eligible professionals receiving a payment adjustment in 2015 will be paid 1.5% less than the MPFS [Medicare Professional Fee Schedule] amount for that service. For 2016 and subsequent years, the payment adjustment is 2.0%.”

The question for health plans is how to react to this? Do their provider contracts allow them to pass along this cut to physicians? Or do they becomes a sanctuary from the PQRS penalty? WE can expect that the benchmarks will eventually reflect the impact of this penalty, so it’s reasonable for plans to determine how they want to react.

A related question is whether plans want to work with participating professionals to help them comply with PQRS and avoid the penalty. This might make particularly good sense if a plan is also passing through the payment reduction.

And, since PQRS also has reward payments, do plans want to include these in payments to physicians who qualify?

As with sequestration, this cut applies only to the Medicare part of the physician’s payment. The patient will still pay cost sharing based on Medicare allowable amounts, gross of the PQRS reduction. So docs will still get $20 from patients for a $100 service. But the $80 form Medicare will be cut by 1.5%, or 2%. This comes on top of the 2% sequestration. Payments from Medicare plans that seek to mirror CMS, will need to limit their cuts to the Medicare portion of their payment (the $80 amount in my example).

This raises the larger question of how should plans word their provider contracts. Should they pay a percent of “Medicare allowable,” or a percent of what Medicare would pay. In other words, should provider contracts be worded to clearly allow plans to pass cuts like sequestration and the PQRS penalty along to providers?

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