Show Me the Money: 9 Healthcare Incentive & Penalty Programs

The large number of incentive and penalty programs in healthcare make it challenging to keep them all straight. We compiled a list of the big players in national healthcare incentive and penalty programs to get a better understanding of what they are all about, to help providers qualify for the most incentives and hopefully avoid penalties!

9 Healthcare Incentive & Penalty Programs to know

1. Meaningful Use

“The Medicare and Medicaid EHR Incentive Programs provide financial incentives for the ‘meaningful use’ of certified EHR technology.” (1) Providers must select which program they plan to participate in, with an option to switch between the two programs  as long as it’s done prior to 2015.  Providers cannot receive incentive payment from both programs in the same year.  These incentive programs are broken down into three phases, with incentive payments available at every stage. To earn these incentives, providers must prove  they are meaningfully using their EHR systems by meeting predetermined measures, established by CMS. Starting in 2015, penalties will be given to providers who are not meeting these measures.

2. Physician Quality Reporting System(PQRS)

PQRS uses both incentive payments and penalty adjustments to promote the reporting of quality information by medical professionals.  Incentive payments are given to practices with eligible professionals that report data on quality measures for covered services provided to Medicare Part B beneficiaries. In 2015, payment adjustments will be applied as a penalty to eligible professionals who do not report on these quality measures.


This incentive program was created to promote electronic prescribing.  If providers failed to report in 2010 or 2011, penalty adjustments were seen starting in 2012. The incentive program ended in 2013, but providers are able to see adjustments into 2014 from reporting in 2012 and in the first six months of 2013.

4. Medicare Sequestration

Starting on April 1st, 2013, Medicare provider payments were cut by 2 percent in accordance with the Budget Control Act of 2011.

5. Value Based Modifier (VBM)

The VBM is a -1% value modifier adjustment to a group’s physician fee schedule. Starting in 2015, groups of physicians (100+) who submit claims to Medicare under a single tax identification number (TIN) will be subject to the value modifier. In order to avoid the 2015 payment adjustment, groups must register and participate in one of three PQRS reporting methods. January 2014 Update: The negative one percent adjustment will affect both participating and non-participating Medicare providers in the group.

6. Affordable Care Act Primary Care Physician Rate Increase

This incentive program increases the rate at which eligible Medicaid Primary Care physicians are reimbursed for selected E&M and vaccine administration codes provided between January 1, 2013 and December 31, 2014. Attestation is required to receive this rate increase.

7. Medicare Shared Savings Program (MSSP)

This incentive program was created specifically for Medicare providers participating in an Accountable Care Organization to help reduce unnecessary costs and increase patient satisfaction. Accountable Care Organizations (ACOs) are groups of providers who agree to share responsibility for the care and cost of healthcare for a certain population. Medicare uses previous billing history from the ACO to get a baseline of previous costs. If the group bills less than the baseline by a certain percentage, they receive a financial incentive. The size of the incentive depends on the ACO model the group is following. In the one-sided model, you receive up to 50% of your cost savings once you hit the predetermined benchmark. In the two-sided model, ACOs also take into account the possibility of shared losses. When the benchmark is met in the two sided model, these healthcare organizations receive up to 60% of their cost savings as an incentive. However, if there are shared losses at the end of a reporting period, the ACO is responsible for paying a percentage of those losses to CMS. The bigger the risk; the bigger the payout. The providers continue to bill the normal fee for service charges during this time and are required to report data to prove that they are meeting a certain threshold of patient care.

8. Primary Care Case Management (PCCM)

This Medicaid system of managed care requires a primary care provider to monitor and approve the care of enrolled Medicaid beneficiaries. In turn, said providers collect a small monthly case management fee in addition to fee-for-service reimbursement for treatment.

9. Patient Centered Medical Home (PCMH)

PCMH is a care delivery model created to better coordinate a patient’s overall care by connecting their primary care and other specialty doctors in order to optimize care. The Patient Centered Medical Home Model combines traditional fee for service fees with a three part payment model. This three part model includes a monthly care coordination fee for the work that is done outside of the face to face visits, a visit based fee-for-service fee, which encourages providers to see the patient in the office when appropriate, and the performance-based component that recognizes the achievement of quality and efficiency goals within the PCMH.

To find more information about these incentive/penalty programs and how to get started in the reporting process, visit It is important to make sure you and your organization are up to date on all of the deadlines and changes in incentive programs so you can qualify for your maximum incentive monies and avoid penalties. In working toward meeting these various programs’ standards, we are ultimately improving the quality of care we deliver to our patients.

Samantha Holland
Consultant, MBA HealthGroup

(1) EHR Incentive Programs, n.d. Web 4 April. 2014.