Fact Sheets


For Immediate Release: Tuesday, November 01, 2011
Contact: CMS Media Relations




The Centers for Medicare & Medicaid Services (CMS) issued a final rule with comment period on Nov. 1, 2011 that updates payment policies and Medicare payment rates for services furnished by physicians, nonphysician practitioners (NPPs), and other suppliers that are paid under the Medicare Physician Fee Schedule (MPFS) in calendar year (CY) 2012.  The final rule addresses Medicare public comments on payment policies that were described in two separate proposed rules earlier this year—the Five-Year Review of Work Relative Value Units under the Physician Fee Schedule (published in the Federal Register on June 6, 2011) and the Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2012 (published in the Federal Register on July 19, 2011).  The final rule also addresses interim final values established in the CY 2011 MPFS final rule with comment period (published in the Federal Register on Nov. 29, 2010).   In addition, the final rule assigns interim final values for new and revised codes, as well as for potentially misvalued codes, for CY 2012 and requests comments on these values.  Finally, the final rule addresses comments on requirements for signatures on requisitions for clinical laboratory services.


This fact sheet discusses the provisions in the MPFS CY 2012 Final Rule with comment period addressing the Physician Feedback Program and the value-based payment modifier (Value Modifier).  The general provisions in the final rule with comment period and provisions relating to the Electronic Health Records Incentive Program, and the Physician Quality Reporting System, are addressed in separate fact sheets.




Background:  Section 3007 of the Affordable Care Act requires CMS to apply a Value Modifier, which compares the quality of care furnished to the cost of that care, to physician payment rates under the MPFS starting with specific physicians and physician groups in 2015 and expanding to all physicians by 2017.  The Act further requires CMS to publish by Jan. 1, 2012, the following items related to the value modifier (VM):


  • Quality of care measures;
  • Cost measures;
  • Dates for implementation; and
  • Initial performance period. 


Quality of care measures for the Value Modifier:  For individual physicians, CMS finalized its proposal to use the Physician Quality Reporting System core set (which focuses on cardiovascular conditions) and the core, alternative core, and additional EHR Incentive Program measures (which focus on several chronic conditions and preventive measures).   For physicians in group practices, CMS finalized its proposal to use the core set of the Group Practice Reporting Option measures (which also focus on chronic conditions and preventive measures) and measures of preventable hospital admissions for two ambulatory care sensitive conditions ‑ heart failure and chronic obstructive pulmonary disease.  These quality of care measures assess highly prevalent and high-cost conditions in the Medicare population.  CMS plans to update these measures, as appropriate through rulemaking next year.  CMS anticipates assessing physician performance for more conditions and/or by specialty in subsequent years after the methodology that will be used to calculate the value modifier has been finalized. 


Cost measures for the Value Modifier:   CMS finalized a policy to use both total per capita cost measures and per capita cost measures for selected conditions including chronic obstructive pulmonary disease, heart failure, coronary artery disease, and diabetes.  These per capita cost measures are adjusted for geographic differences and are risk adjusted to ensure geographic and clinical comparability. CMS realizes that it is important to assess value in a manner which accounts for the diversity of patient conditions and physician practices and to develop a reliable and valid measure of value that can be used to differentiate payment.


Implementation dates for the Value Modifier:  The Affordable Care Act requires CMS to begin implementing the Value Modifier during the 2013 rulemaking process for the MPFS.  The new payment modifier is intended to encourage physicians to focus on the relative value of each service they furnish or order, the cumulative cost of the services their Medicare patients receive, and the quality and outcomes of the care furnished to beneficiaries.  Before beginning the 2013 physician fee schedule rulemaking process, CMS will explore various ways to develop composites of cost and quality that could be used in the value-based payment modifier and will actively seek input from stakeholders through public meetings and other forums into constructing the modifier.  CMS plans to propose a methodology for the value modifier in the MPFS CY 2013 rulemaking cycle. 



Initial performance period for the Value Modifier:  CMS has finalized an initial performance period of calendar year 2013, that is, Jan. 1, 2013 through Dec. 31, 2013.  In other words, performance during 2013 would be used to calculate the modifier that would apply to items and services furnished by specific physicians and groups of physicians under the 2015 physician fee schedule.  CMS is seeking ways to close the gap between the performance period and the payment adjustment period for future years, but will use calendar year 2013 as the initial performance period.  By announcing the performance period now, CMS is giving physicians substantial lead time to prepare to report quality measures through either the Physician Quality Reporting System or the EHR Incentive Program, and to use the results to improve the quality of their care.





The value-based modifier builds on the Physician Feedback Program that was authorized by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) and expanded by the Affordable Care Act.   Under this program, CMS provides confidential feedback reports to physicians and physician group practices about the resource use and quality of care they provide to their Medicare patients.  The reports quantify and compare patterns of resource use and costs among physicians and physician group practices relative to the performance of similar medical professionals.CMS has scaled up production and dissemination of Physician Feedback reports, which include information on resource use and quality of care furnished to Medicare beneficiaries, in 2011.  These feedback reports are an important step in providing actionable and meaningful information to physicians while assisting CMS as it begins to reward physicians for providing high-quality, efficient care.


In September, 2011, CMS provided feedback reports to the 35 large medical group practices (each with 200 or more physicians) that participated in the Physician Quality Reporting System Group Practice Reporting Option in 2010.   In addition, CMS intends to provide Physician Feedback reports to individual Medicare fee-for-service physicians in Iowa, Kansas, Missouri, and Nebraska late in 2011.  These individual reports will provide physicians with information about their resource use and their performance on quality measures derived from administrative claims data and from the Physician Quality Reporting System. 


In future Physician Feedback reports, CMS intends to include episode based costs.  As required by the Affordable Care Act, CMS will develop a Medicare-specific episode grouper by Jan. 1, 2012.  An episode grouper combines clinically-related health claims data over a defined period of time into an episode of care, such as a hip replacement procedure.  CMS will test and validate the initial grouper software in 2012 with the intention to include episode-based costs in future Physician Feedback reports once this testing process is complete. 




The final rule with comment period will appear in the Nov. 28, 2011, Federal Register.  CMS will accept comments on those provisions that are subject to comment until  Jan. 3, 2012, and will respond in the MPFS for CY 2013.


For more information, see: 





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