While much has been written about the Center for Medicare & Medicaid Services (CMS) plan to shift its payment system away from fee for service and toward a “value-based” structure, most physicians in small and solo private settings have given little, if any, thought to its potential impact on their practices. That is about to change.

The principal vehicle for the CMS plan is something called the Value-Based Payment Modifier (VBM), a component of the Affordable Care Act (ACA). The VBM has been off the radar of smaller private practices, because up until now it has applied only to groups with more than 10 providers. Starting this year, it applies to everyone. If you accept Medicare patients, regardless of the size of your practice, VBM will become part of your life – because your 2017 Medicare payments will be adjusted based on your 2015 VBM “score.”

That score will be based on your “quality of care” (as defined by the CMS) and how much your care costs the system, compared with care provided by other physicians. The quality component will be calculated from measures reported through the Physician Quality Reporting System (PQRS). Your practice will then be “tiered” to determine whether your performance is statistically better, the same, or worse than the national mean. The CMS has not shared all the details of its “quality tiering” formula, but you can get an idea of their general criteria by reviewing the recently released “Quality Benchmarks for the 2015 Value Modifier” at CMS.org.

To calculate the cost component, the CMS will evaluate measures that include total overall costs per beneficiary, and total costs for a composite of chronic conditions, such as (for internists) chronic obstructive pulmonary disease, heart failure, coronary artery disease, and diabetes; no one has speculated on which diseases might be used for dermatology. Practitioners are eligible for a 1% bonus if their average score is in the top 25% of all scores nationwide. You can get some sense of where you stand in the national hierarchy by studying your Quality Resource and Use Report (QRUR), which gathers information about each practice’s quality and performance rates for the VBM. Reports for the first half of 2014 were released by the CMS in April, and can be downloaded from the QRUR section of CMS.gov.

The ACA requires that the program be budget neutral – which means that all bonuses to physicians in the highest 25% must be offset by penalties – “negative adjustments” – to those in the lowest 25%. The good news is that groups with two to nine providers, and solo practitioners who report successfully for PQRS, receive only the upward or neutral adjustment for 2017, with no downward adjustments. That means you will have at least one penalty-free year to determine where you stand in the VBM pecking order – and perhaps earn a bonus.

So in summary, here is what you have to do now, in 2015, to maximize your chances of earning that upward adjustment in 2017:

• If you haven’t already, make sure your practice data are correct in the Medicare Provider Enrollment, Chain, and Ownership System (PECOS). This is where CMS will gather data for the VBM and the Physician Feedback Reports.

• Study the Quality Benchmarks and download your practice’s QRUR, as mentioned.

• Report successfully for PQRS in 2015, which will also avoid an automatic penalty of 4% in 2017.

Are there serious potential consequences inherent in this unprecedented new system? I think so. For all the talk that the transition from fee-for-service to “value-based” reimbursement would result in better care at a lower cost, there is little evidence that care is improving, and even less that costs are decreasing.

In essence, the VBM establishes arbitrary practice standards and spending ceilings. It creates new incentives to practice “cookbook” medicine, and new disincentives to order tests, consults, or medications, even when doing so would clearly be in a patient’s best interest. Physicians who have the temerity to practice medicine as they see fit, irrespective of the costs involved, will be punished.

Patients will certainly not welcome their physicians’ new reluctance to recommend appropriate interventions for fear of generating excessive costs, and should a less-than-thorough work-up lead to a missed diagnosis, the ACA offers no protection at all from any resulting malpractice litigation.

All of that said, the VBM is a reality, and can no longer be ignored if you treat Medicare patients.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters..

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