Preparing for Medicare’s PQRI

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By Dennis Padget
10/09/07

Preparing for Medicare’s PQRI

Dennis L. Padget, MBA, CPA, FHFMA

The Centers for Medicare and Medicaid Services (CMS), the federal agency responsible for administering the Medicare program for health-care services to the aged and disabled, believes the traditional fee-for-service approach to physician and allied provider payments frustrates the attainment of three essential national objectives: consistent delivery of high-quality healthcare, aggressive deployment of preventive care measures, and robust use of available, less costly care methods.

In his July 26, 2005, testimony before a U.S. House of Representatives subcommittee on health, former CMS Administrator Mark B. McClellan, M.D., Ph.D., said the following:

Medicare’s current physician payment system pays all physicians equally for a service regardless of its quality, its impact on patient health, or the efficiency with which services are furnished. Consequently, the current system does not provide more resources to physicians when they improve the quality of care or for preventing acute health problems that require expensive hospital admissions or other complications that lead to a greater volume and intensity of services. …[In fact, it] often has the effect of directing more resources to care that is not of the highest quality, such as duplicative tests and services and hospital admissions to treat potentially avoidable complications. Conversely, physicians who want to improve quality of care find that Medicare’s [traditional fee-for-service] payment system does not provide them with the resources or flexibility needed to do so. As a result, physicians may be discouraged from investing in activities that, properly implemented, have the potential to improve quality and avoid unnecessary medical costs. Linking a portion of Medicare payments to valid measures of quality and effective use of resources would give physicians more direct incentives to implement the innovative ideas and approaches that actually result in improvements in the value of care that people with Medicare receive.

By collaborating with private-sector stakeholders, such as the American Medical Association and its Physician Consortium for Performance Improvement, CMS was able to incorporate three dozen measures of quality physician care in a demonstration initiative. (Two other organizations that played a major role in developing the indices are the National Quality Forum and AQA, the latter formerly known as the Ambulatory Care Quality Alliance.) CMS launched its Physician Voluntary Reporting Program (PVRP) demonstration project on January 1, 2006. The program targeted acute and chronic heart conditions (e.g., acute myocardial infarction, coronary artery disease), diabetes, pneumonia, osteoporosis, urinary incontinence, renal disease, and COPD for quality performance impact monitoring during the demonstration period.

The PVRP didn’t offer physicians a financial incentive to participate, but it gave willing practitioners the opportunity to gain firsthand experience with quality measure reporting at no risk for mistakes made. It also gave CMS and its Part B claims administration contractors the chance to identify and correct problems with data capture and management, and other protocols, policies, and procedures they designed for this initial physician quality measurement effort. The “lessons” learned through the PVRP demonstration project allowed CMS to “hit the ground running” the moment it had permission to move forward with a more robust—and presumably permanent—version of the program.

Congress authorized CMS, via section 101 of the Tax Relief and Health Care Act of 2006, to undertake a formal Medicare pay-for-performance initiative starting July 1, 2007. The Physician Quality Reporting Initiative (PQRI) is the outgrowth of that authorization, and it has the same short- and long-term goals as were established for the PVRP demonstration: “…to substantially improve the health and function of [Medicare] beneficiaries by preventing chronic disease complications, avoiding preventable hospitalizations, and improving the quality of care delivered,” and to “ultimately…support new payment systems that provide more financial resources to provide better care, rather than simply paying based on the volume of services.” (CMS IOM Pub. 100-19, Transmittal #31, Nov. 2, 2005)

A 1.5 percent monetary bonus is offered to physicians who voluntarily participate in the PQRI during its initial reporting period (July-December 2007) and who successfully fulfill the quality-of-care reporting requirements for their specialty. The number of quality care indices available to participating doctors is double that provided under the PVRP, and they take into account stroke, eye conditions (e.g., glaucoma, macular degeneration), perioperative care, melanoma, and medication reconciliation in addition to the ailments and conditions considered by the forerunner demonstration project. None of the currently approved quality indicators applies to pathologists, so they’re not eligible to participate in the PQRI in 2007.

Key administrative and operating parameters for the PQRI applicable to the July-December 2007 reporting period are summarized below, and they presumably will extend into 2008 as well. (The PQRI is still something of a “work-in-progress,” so you’re advised to watch your Part B carrier bulletins and the PQRI page on CMS’s website—www.cms.hhs.gov/PQRI—for updates.) As explained in detail later herein, CMS plans to add two quality indicators to the 2008 dataset that relate to medical services by pathologists, so they’ll be eligible to participate starting January 1.

Only physicians and certain designated nonphysician providers are entitled to participate in the PQRI. Pathology assistants, Ph.D. clinical scientists, laboratory technologists/technicians, and other nonphysicians often associated with a laboratory are not among the “designated” nonphysician providers approved for participation in the PQRI.

A physician’s employer (e.g., independent laboratory, hospital, professional corporation or partnership) or principal in the case of a contract physician (i.e., IRS Form 1099 status) may not directly participate in the PQRI. However, if the physician has reassigned to the employer or principal his or her right to receive payment from Medicare, the employer or principal may report quality indicators on behalf of the physician and may also accept on its own account receipt of the bonus money that may be due as a result of the physician’s participation in the PQRI. In general, the bonus is paid to the person or entity whose federal tax identification number appears on the individual Form CMS-1500 (or electronic equivalent) claims filed during the reporting period.

A physician must have and report a national provider identifier (NPI) in order to participate in the PQRI. Accordingly, the physician must be “signed up” with Medicare, although it’s not a prerequisite that he or she be a “participating” physician.

Participation in the PQRI is voluntary, and the participation decision may be made physician-by-physician in a multiperson practice or other entity. Granted, the monetary incentive to participate isn’t impressive by most standards (the maximum bonus currently attainable is only $15,000 per million dollars of Medicare allowed charges), but the startup costs and ongoing expense of reporting quality indicators for a pathologist should be nominal under ordinary circumstances. Furthermore, it’s not unreasonable to assume that quality reporting will become mandatory in the not too distant future, so this is a prime time to “practice” and gain valuable internal and external benchmark quality data, while the downside risks are still virtually nil for the compliant practitioner. Warning: PQRI transactions are subject to the same Medicare fraud and abuse standards that apply to claims for “regular” medical services, so anyone caught “gaming” the system is subject to sanction.

A physician need not give notice of intent to participate in the PQRI, nor is application or registration required. To participate, simply start reporting the unique CPT Category II or HCPCS “G” codes that apply to your practice. The quality codes go on the same patient-by-patient claims that are associated with the CPT Category I procedure codes (e.g., 88305, 88331) and ICD-9-CM diagnosis codes representing the medical services you have rendered; there’s not a separate reporting process for the PQRI quality codes. Quality-code reporting is subject to validation and/or audit, the same as CPT Category I procedure codes.

Quality-codes (CPT Category II or HCPCS G-code as applicable) are reported in field 24D (or electronic equivalent) of the standard CMS-1500 hard copy form. A quality-code alone cannot be reported: At least one CPT Category I code must appear on the claim as well. Each quality code reported must have a date of service, place of service, unit count (must be “1”), ICD-9-CM diagnosis pointer, and charge (must be “0.00”) associated with it. A quality-code modifier may have to be reported, depending on the clinical circumstances. The rendering physician’s NPI must appear on the same field 24D line as the quality code, except when the NPI reported at the claim level in field 33a is that of the rendering physician.

In general, a pathologist must report a quality code for a minimum of 80 percent of all cases to which a quality code applies before he or she becomes eligible for a bonus payment. (For 2008, as currently proposed, only breast and colorectal cancer cases will be included in the denominator for PQRI participating pathologists; see the later discussion herein for details.) Hence, it’s imperative that a pathologist who wishes to take part in the PQRI start reporting quality codes as soon after January 1 as possible, and thereafter that such a code be reported for each eligible case. The PQRI bonus plan presently is set up as an “all-or-nothing” affair—you either earn the full 1.5 percent or you get nothing—but it’s possible for the maximum 1.5 percent bonus to be reduced for low-volume practitioners due to application of a limiting formula provided in the statute. Remember: Quality-code reporting (numerator and denominator) is subject to validation via statistical peer comparison, direct audit, and/or other means.

For the July-December 2007 reporting period, the 1.5 percent PQRI bonus factor will be applied to the participating physician’s total Medicare allowed charges (not the “usual and customary” billed charges, and not just the allowed charges associated with the claims that included a PQRI quality code), including the portion due from the beneficiary (or secondary insurer) as the deductible (if any) and coinsurance portions. If the allowed charges attributed to the participating physician include the technical component of the service (e.g., the charges are billed by an independent lab for nonhospital patients), the bonus will take the technical component-allowed charges into account, too. Only charges paid from the Medicare physician fee schedule are considered in the PQRI bonus calculation, so anything billed by an independent lab that’s paid from the Medicare clinical lab fee schedule (e.g., the technical component of molecular diagnostics or cytogenetics tests) will be excluded. Charges on account of Medicaid and other non-Medicare patients will not be taken into account, but those for Medicare patients when Medicare is the secondary insurer will be. The bonus will be paid as a lump sum to the physician or to his/her employer or principal, depending on whether the physician has given a reassignment to the employer or principal.

CMS points out on its Web site that the enabling legislation technically only covers the July-December 2007 reporting period, but industry leaders fully expect that the 1.5 percent PQRI bonus incentive will be extended to 2008. As earlier mentioned, the inventory of quality care measures proposed for 2008 include two that pertain to services by pathologists, so they’ll be eligible to participate in the PQRI starting January 1, 2008. The two pathology-related quality indices cover colorectal and breast cancer cases as follows:

Breast Cancer Cases. The breast cancer resection quality measure focuses on reporting the pT category (primary tumor) and pN category (regional lymph nodes) with histologic grade. A quality code is reportable for this measure only when a breast specimen is appropriately coded with CPT 88307 (e.g., lumpectomy) or 88309 (mastectomy with regional nodes). The reportable ICD-9-CM diagnosis code must be 174.0-174.9, 175.0, or 175.9. The performance ratio that will be compared to the 80 percent threshold is determined by comparing the total number of qualifying breast cancer resection cases signed out during 2008 that included the pT category, the pN category, and the histologic grade in the final pathology report to the total number of breast cancer resection cases for that year. The denominator is adjusted to exclude cases in which the pT category, the pN category, or the histologic grade didn’t appear in the final pathology report due to “valid medical reasons.” The CPT Category II code or the HCPCS “G” code to be reported for this measure has not yet been published. The participating pathologist must affix a modifier (1P, 2P or 3P) to the quality code to denote when the pT category, pN category, or histologic grade is omitted due to a valid medical or other permitted exclusionary reason. Another modifier (8P) must be used to report situations when the omission is not justified within PQRI parameters.

Colorectal Cancer Cases. The colorectal cancer resection quality measure also focuses on reporting the pT category (primary tumor) and pN category (regional lymph nodes) with histologic grade. A quality code is reportable for this measure only if a colorectal specimen is appropriately coded with CPT 88309 (total colectomy or segmental resection for tumor). The reportable ICD-9-CM code must be 153.0-153.9, 154.0-154.1, or 154.8. The performance ratio that will be compared to the 80 percent threshold is determined by comparing the total number of qualifying colorectal cancer resection cases signed out during 2008 that included the pT category, the pN category, and the histologic grade in the final pathology report to the total number of colorectal cancer resection cases for that year.

The denominator is adjusted to exclude those cases where the pT category, the pN category, or the histologic grade didn’t appear in the final pathology report due to “valid medical reasons.” The CPT Category II code or the HCPCS “G” code to be reported for this measure has not yet been published. The participating pathologist must affix a modifier (1P, 2P or 3P) to the quality code to denote when the pT category, pN category, or histologic grade is omitted due to a valid medical or other permitted exclusionary reason. Another modifier (8P) must be used to report situations when the omission is not justified within PQRI parameters.

This article has presented basic information about Medicare’s Physician Quality Reporting Initiative, the financial incentive offered to induce physicians to participate in the program, and the fundamental rules pathologists who elect to participate in 2008 will be expected to follow. A much more thorough treatment of this subject will be included in version 7.4 (October 1, 2007) of the Pathology Service Coding Handbook, available to subscribers at no additional charge

You can research the details and nuances of the initiative yourself by visiting the PQRI section of CMS’s website (www.cms.hhs.gov/PQRI). A 224-page instruction manual in PDF format, Coding for Quality: A Handbook for PQRI Participation, is downloadable from the CMS website as well (www.cms.hhs.gov/PQRI/Downloads/PQRI_Coding_for_Quality_Handbook_061807.pdf). Participation tools, including quality measure worksheets, are also available on the American Medical Association website (www.ama-assn.org/ama/pub/category/17432.html).