The Quality Payment Program (QPP) is a mandatory federal initiative established by the Centers for Medicare & Medicaid Services (CMS) to fundamentally change how Medicare pays for healthcare. It shifts away from the traditional fee-for-service model, which compensated providers based solely on the volume of services delivered. The program incentivizes medical professionals to focus instead on the quality and value of the care they provide to Medicare beneficiaries. This framework aims to improve patient health outcomes while controlling the long-term growth of healthcare costs for the Medicare system.
The Legislative Basis and Eligibility
The QPP was created under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), a bipartisan law that reformed the Medicare payment system. A primary goal of MACRA was to permanently repeal the deeply flawed Sustainable Growth Rate (SGR) formula, which had historically caused annual uncertainty regarding Medicare physician payment rates. By replacing the SGR with a value-based structure, the legislation introduced a predictable system that links provider reimbursement to performance metrics.
Participation in the QPP is required for clinicians designated as Eligible Clinicians (ECs), which includes physicians, physician assistants, nurse practitioners, and clinical nurse specialists, among others. Eligibility is assessed annually based on specific criteria tied to the provider’s volume of Medicare Part B services. However, many clinicians are exempted from the program through the Low Volume Threshold (LVT) exclusion.
To be required to participate in the MIPS track, a clinician must exceed all three LVT criteria during the 12-month determination period. These criteria require the clinician to bill more than $90,000 in Medicare Part B covered professional services, see more than 200 Medicare Part B patients, and provide more than 200 covered professional services to those patients. Clinicians who do not meet all three thresholds are excluded from mandatory reporting, though they may choose to opt-in and participate voluntarily to earn a potential payment adjustment.
The MIPS Structure and Performance Categories
The Merit-based Incentive Payment System (MIPS) is one of the two main participation tracks within the QPP and is the pathway most Eligible Clinicians follow. MIPS consolidates and streamlines three previous Medicare quality reporting programs—the Physician Quality Reporting System (PQRS), the Value-Based Payment Modifier (VM), and the Medicare Electronic Health Record (EHR) Incentive Program (Meaningful Use). Clinicians participating in MIPS receive a composite performance score from 0 to 100 points, which is calculated based on their results across four weighted performance categories.
Quality
The Quality category accounts for 30% of the total MIPS Final Score. It measures the extent to which clinicians adhere to evidence-based clinical guidelines and achieve positive patient outcomes. Clinicians must select and report on a minimum of six quality measures, which typically include one outcome measure. Data for this category can be submitted through various mechanisms, including qualified registries, certified EHR systems, or claims-based reporting.
Cost
The Cost category is weighted at 30% of the Final Score and evaluates the total cost of care provided to Medicare beneficiaries during a performance period. This category focuses on resource utilization and efficiency, using specific measures like total per capita cost for attributed beneficiaries and various episode-based cost measures. Clinicians are not required to submit any data for this category, as CMS calculates the scores entirely based on administrative claims data.
Promoting Interoperability (PI)
The Promoting Interoperability (PI) category accounts for 25% of the score. It assesses a clinician’s use of certified EHR technology to improve patient engagement and electronic data exchange. Clinicians must demonstrate active use of their EHR to manage patient health information, such as providing electronic access to health records and securely exchanging information with other providers. Scoring requires reporting on a set of objectives and measures for a minimum continuous 90-day period.
Improvement Activities (IA)
The Improvement Activities (IA) category makes up the remaining 15% of the Final Score. It rewards participation in activities that improve clinical practice. These activities are broad and include efforts such as:
- Care coordination
- Patient safety improvements
- Shared decision-making
- Patient-centered medical home recognition
Clinicians must attest to performing a combination of high-weighted and medium-weighted activities for a continuous minimum of 90 days during the performance year. This attestation is required to earn full credit in this category.
Advanced Alternative Payment Models
The second track of the Quality Payment Program is participation in Advanced Alternative Payment Models (APMs). APMs are designed for clinicians willing to take on more financial risk for patient outcomes. These payment approaches move beyond the fee-for-service system by providing incentives for delivering high-quality, cost-efficient care, often focusing on a specific clinical condition or patient population. Examples include certain Accountable Care Organizations (ACOs) and bundled payment arrangements.
For an APM to be considered “Advanced,” it must meet three specific criteria set by CMS. The model must require participating clinicians to use certified EHR technology to manage patient health information. It must also require the use of quality measures comparable to those used in the MIPS program, ensuring a focus on evidence-based quality standards. The most distinguishing criterion is that the APM must require participants to bear more than a nominal financial risk for monetary losses. This means the organization is financially accountable if healthcare spending exceeds set benchmarks or if quality targets are not met.
Clinicians who meet specific thresholds of payments or patients through an Advanced APM are designated as Qualifying Participants (QPs). QPs are automatically excluded from MIPS reporting requirements and the MIPS payment adjustment system. Instead, QPs receive a significant financial incentive, historically an annual 5% lump-sum bonus payment on their Medicare Part B services. This bonus rewards their commitment to innovative, risk-based payment models, though this specific bonus is transitioning to a higher Physician Fee Schedule update factor in future years.
Translating Performance Scores into Financial Adjustments
The final MIPS score, ranging from 0 to 100 points, directly determines the financial adjustment applied to a clinician’s Medicare Part B payments. This adjustment is applied two years following the performance year; for example, performance data collected in 2024 affects payments in 2026. CMS establishes a performance threshold (PT) each year as the benchmark for a neutral payment adjustment.
For the 2024 performance year, the PT is 75 points. A clinician achieving a score exactly equal to this threshold receives a neutral adjustment, meaning no penalty and no bonus. Scores below the PT result in a negative payment adjustment, or penalty, applied to all Medicare Part B reimbursements. The maximum negative adjustment is capped at -9%. Conversely, scores above the threshold result in a positive payment adjustment, or bonus, applied on a linear sliding scale up to a maximum of +9%. MIPS is designed to be budget-neutral, meaning that the total amount of positive adjustments awarded must be funded by the total amount of negative adjustments collected.