Medicare Limiting Charge: Historical EHR & PQRS Adjustments and Current MIPS Impact for Non-Par Providers

Understanding the intricacies of the Medicare limiting charge calculation is crucial for non-participating providers. This post delves into how the Medicare limiting charge has been affected by historical Medicare payment adjustments, specifically the EHR Incentive Program and the Physician Quality Reporting System (PQRS) penalties. We’ll also explore the current MIPS payment adjustments for non-par providers, ensuring a comprehensive understanding of current and past impacts on your billing practices.

Understanding Medicare Limiting Charge Calculation for Non-Participating Providers

Medicare has specific rules for how much non-participating (Non-Par) providers can charge beneficiaries. A Non-Participating (Non-Par) Provider is a healthcare professional who has not signed an agreement with Medicare to accept assignment for all Medicare-covered services. This means they can choose whether to accept assignment on a claim-by-claim basis.

When a Non-Par provider does not accept assignment, it’s called a Non-Assigned Claim. For such claims, Medicare pays the beneficiary directly, and the provider bills the beneficiary for the full charge. However, even without accepting assignment, Non-Par providers are subject to the Medicare Limiting Charge. This is the maximum amount a non-participating provider can charge a Medicare beneficiary for a covered service.

The calculation starts with the Medicare Physician Fee Schedule (MPFS) Allowed Amount, which is Medicare’s approved amount for a service. For Non-Par providers, this amount is 5% less than the participating provider fee schedule. The limiting charge is then 115% of this reduced MPFS allowed amount.

Baseline Example: Non-Par Non-Assigned Claim (No Historical Adjustments)

To illustrate the basic Medicare limiting charge calculation, let’s consider a scenario without any historical negative payment adjustments.

Original Fee Schedule Amount: $100
Step 1: Apply the 5% reduction for Non-Par Status. This is because non-participating providers receive 95% of the MPFS amount.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Adjusted Allowed Amount (before other adjustments): $100 – $5.00 = $95.00
Step 2: Calculate the Limiting Charge Allowed. Non-par providers can charge up to 115% of this adjusted allowed amount.
Limiting Charge Allowed: $95.00 x 1.15 = $109.25

Historical Medicare Payment Adjustments: EHR & PQRS Penalties Explained

It’s critical to acknowledge that the EHR Incentive Program (Meaningful Use) and the Physician Quality Reporting System (PQRS) are historical programs. Both were phased out by 2018 and largely replaced by the Merit-based Incentive Payment System (MIPS) under the Medicare Access and CHIP Reauthorization Act of 2015 (**MACRA**). The examples below reflect how these past programs impacted Medicare limiting charge calculations during their active years.

Historical EHR Incentive Program (Meaningful Use) Negative Adjustments (e.g., 2015-2017)

The EHR Incentive Program (also known as Meaningful Use) aimed to encourage healthcare providers to adopt and demonstrate meaningful use of certified electronic health record (EHR) technology. Providers who did not meet the program’s requirements faced negative payment adjustments. For Non-Par providers, this adjustment was applied after the initial 5% Non-Par reduction to the MPFS allowed amount.

Example: Non-Par Non-Assigned Claim with 1% EHR Adjustment (e.g., 2015)

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the 1% EHR negative adjustment. This penalty was applied to the initial allowed amount for non-participating providers.
1% EHR negative adjustment: $95.00 x 0.01 = $0.95
Total Adjustments (Non-Par + EHR): $5.00 + $0.95 = $5.95
Final MPFS Allowed Amount: $100 – $5.95 = $94.05
Step 3: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $94.05 x 1.15 = $108.16

Example: Non-Par Non-Assigned Claim with 2% EHR Negative Adjustment (e.g., 2015, including e-prescribing penalty)

In some years, penalties could stack. For instance, an additional penalty might apply for not e-prescribing, leading to a higher EHR negative adjustment.

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the 2% EHR negative adjustment (combining EHR and e-prescribing penalties).
2% EHR negative adjustment: $95.00 x 0.02 = $1.90
Total Adjustments (Non-Par + EHR): $5.00 + $1.90 = $6.90
Final MPFS Allowed Amount: $100 – $6.90 = $93.10
Step 3: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $93.10 x 1.15 = $107.07

Historical Physician Quality Reporting System (PQRS) Negative Adjustments (e.g., 2016-2018)

The Physician Quality Reporting System (PQRS) was a program that promoted the reporting of quality data by eligible professionals. Those who failed to report quality measures appropriately faced negative payment adjustments. Similar to EHR, the PQRS penalty was applied to the reduced MPFS allowed amount for Non-Par providers.

Example: Non-Par Non-Assigned Claim with 1.5% PQRS Adjustment (e.g., 2016)

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the 1.5% PQRS negative adjustment to the initial allowed amount.
1.5% PQRS negative adjustment: $95.00 x 0.015 = $1.43
Total Adjustments (Non-Par + PQRS): $5.00 + $1.43 = $6.43
Final MPFS Allowed Amount: $100 – $6.43 = $93.57
Step 3: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $93.57 x 1.15 = $107.61

Combined Historical Adjustments (EHR & PQRS)

In some historical periods, providers could be subject to both EHR and PQRS negative adjustments. These adjustments were typically applied sequentially to the Medicare allowed amount after the non-PAR reduction.

Example: Non-Par Non-Assigned Claim with EHR (1%) and PQRS (1.5%) Adjustments (e.g., 2016)

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the 1% EHR negative adjustment.
EHR Adjustment: $95.00 x 0.01 = $0.95
Amount after Non-Par and EHR Adjustments: $95.00 – $0.95 = $94.05
Step 3: Apply the 1.5% PQRS negative adjustment to the amount remaining after EHR.
PQRS Adjustment: $94.05 x 0.015 = $1.41
Total Adjustments from Original: $5.00 (Non-Par) + $0.95 (EHR) + $1.41 (PQRS) = $7.36
Final MPFS Allowed Amount: $100 – $7.36 = $92.64
Step 4: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $92.64 x 1.15 = $106.54

Example: Non-Par Non-Assigned Claim with EHR (2% including e-prescribing) and PQRS (1.5%) Adjustments (e.g., 2016)

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the 2% EHR negative adjustment (including e-prescribing).
EHR Adjustment: $95.00 x 0.02 = $1.90
Amount after Non-Par and EHR Adjustments: $95.00 – $1.90 = $93.10
Step 3: Apply the 1.5% PQRS negative adjustment to the amount remaining after EHR.
PQRS Adjustment: $93.10 x 0.015 = $1.40
Total Adjustments from Original: $5.00 (Non-Par) + $1.90 (EHR) + $1.40 (PQRS) = $8.30
Final MPFS Allowed Amount: $100 – $8.30 = $91.70
Step 4: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $91.70 x 1.15 = $105.46

Current Medicare Payment Adjustments: The Merit-based Incentive Payment System (MIPS) Impact for Non-Par Providers

Today, the primary program impacting Medicare payment adjustments for eligible clinicians, including many non-participating providers, is the Merit-based Incentive Payment System (MIPS). MIPS consolidates components of the former EHR Incentive Program and PQRS, alongside other quality initiatives, into a single program. Performance in MIPS determines whether a provider receives a positive, neutral, or negative payment adjustment to their Medicare reimbursements.

MIPS adjustments apply to the Medicare Part B payment amount. For Non-Par providers, this adjustment would be applied to the MPFS allowed amount *after* the 5% non-PAR reduction, similar to how EHR and PQRS penalties were applied historically.

Example: Non-Par Non-Assigned Claim with MIPS Negative Adjustment (e.g., 2024 Payment Year)

Let’s consider a hypothetical MIPS negative adjustment of -4% (a rate for a recent payment year) for a non-participating provider.

Original Fee Schedule Amount: $100
Step 1: Apply the 5% non-PAR reduction.
5% non-PAR reduction: $100 x 0.05 = $5.00
Medicare’s Initial Allowed Amount: $100 – $5.00 = $95.00
Step 2: Apply the MIPS negative adjustment (e.g., -4%). For the 2024 payment year, performance year 2022.
MIPS Negative Adjustment: $95.00 x 0.04 = $3.80
Total Adjustments (Non-Par + MIPS): $5.00 + $3.80 = $8.80
Final MPFS Allowed Amount: $100 – $8.80 = $91.20
Step 3: Calculate the Limiting Charge Allowed.
Limiting Charge Allowed: $91.20 x 1.15 = $104.88

For more detailed information on MIPS and current guidelines, refer to the official CMS QPP MIPS Overview.

Key Takeaways for Non-Participating Providers

Navigating Medicare’s billing rules, especially the limiting charge, requires careful attention to detail. For non-participating providers, understanding how various payment adjustments impact the maximum charge to beneficiaries is essential for compliance and financial health. While EHR and PQRS penalties are historical, the principles of how these adjustments modify the Medicare allowed amount, and subsequently the limiting charge, remain relevant for interpreting current programs like MIPS.

Stay Informed on MIPS: Regularly review current MIPS guidelines and performance requirements to understand how your practice’s quality reporting and performance will affect future Medicare payments.
Accurate Limiting Charge Calculation: Always ensure your billing practices correctly apply the 5% non-PAR reduction and any applicable MIPS adjustments before calculating the 115% limiting charge.
Provider Status Matters: Your choice of Medicare participation status (PAR vs. Non-PAR) significantly impacts reimbursement and billing limitations.