MIPS adjusts every fee schedule payment a clinician receives, two years after the fact, on a budget-neutral curve. Here is how the machinery works.
The Merit-based Incentive Payment System is the default quality program for clinicians billing the physician fee schedule who are not sufficiently participating in an Advanced Alternative Payment Model. It is the most direct answer to the question of how traditional Medicare tries to pay for value at the individual clinician level.
The four categories and the score
“Your performance is measured across 4 areas: quality, improvement activities, Promoting Interoperability, and cost.” Clinicians submit quality measures, improvement activities, and interoperability measures; CMS calculates cost measures from claims. The four categories combine into a final score from 0 to 100.
Categories can be reweighted to zero in defined circumstances, with their points reallocated. Promoting Interoperability is automatically reweighted for small practices, non-patient-facing clinicians, and hospital-based clinicians. Cost is reweighted for clinicians participating at the APM Entity level. Up to 10 bonus points are available based on the medical and social complexity of the patients treated.
The threshold and the adjustment
The threshold is fixed for several years: a score above 75 points earns a positive adjustment, exactly 75 is neutral, and below 75 is negative. 75 points is the performance threshold through the 2028 performance year and 2030 payment year.
| Final score | Payment adjustment |
|---|---|
| 0.00 to 18.75 | -9 percent, the maximum negative adjustment required by law |
| 18.76 to 74.99 | Sliding scale between -9 percent and zero |
| 75.00 | Zero |
| 75.01 to 100.00 | Positive, subject to a scaling factor |
The asymmetry is the point worth understanding. The downside is defined in statute at 9 percent. The upside is not defined at all, because “MIPS is required by law to be a budget neutral program, which generally means that the projected negative adjustments must be balanced by the projected positive adjustments.” When more clinicians fall below the threshold, high performers earn more. When most clinicians clear it, there is little to distribute.
The lag
Adjustments arrive two years after the performance they reflect. CMS states the timing directly: “if you collect data between January 1 and December 31, 2025 (i.e., the performance year), you must report your data by March 31, 2026, and you’ll receive a MIPS payment adjustment between January 1 and December 31, 2027.” The adjustment is then applied claim by claim to the Medicare paid amount.
Worth remembering: a two-year lag, a capped downside, an upside that cannot be forecast, and a threshold most clinicians clear together produce an incentive that is weak in exactly the way behavioral economics would predict. A practice cannot calculate the return on a quality investment because the payoff depends on how everyone else performs, and by the time the money arrives the clinical decisions that generated it are two years cold. That gap between the theory of pay-for-performance and its implementation is the substance of the criticism covered in the third lesson of this module.
Key takeaways
- MIPS scores clinicians from 0 to 100 across quality, cost, improvement activities, and Promoting Interoperability.
- The performance threshold is 75 points through the 2028 performance year and 2030 payment year.
- The maximum penalty is 9 percent by statute, while positive adjustments are scaled to preserve budget neutrality.
- Adjustments apply to claims two years after the performance year.
Sources
Check your understanding
A clinician scores 90 points in MIPS, well above the 75-point threshold. What positive adjustment will they receive?
MIPS is required by law to be budget neutral, so positive adjustments are multiplied by a scaling factor that depends on how many clinicians scored below the threshold. When few clinicians are penalized, there is little money to distribute and positive adjustments are small.