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  • Ashley Geary, Esq.

MIPS and the Impact on Billing Arrangements

Updated: Jun 21

Pursuant to the new Merit-based Incentive Program System (“MIPS”), payment adjustments are applied to Medicare fee-for-service claims for practices’ performance on certain quality, improvement, information technology and cost measures. We are now seeing the first payment adjustments being applied to 2019 claims based on 2017 performance. Prior to the payment adjustments occurring, practices probably did not consider how such adjustments would impact their relationships with vendors, specifically those that they may rely on to achieve the performance requirements and that are compensated based on a percentage of the collections impacted by the adjustments – i.e., billing companies.


Except in those few states that prohibit percentage-based arrangements for billing companies, the majority of healthcare billing contracts provide for services in exchange for a percentage of collections. Before MIPS, this made sense. The more claims submitted by the billing company, the more services the billing company had to provide, and the more money the practice collected. However, now that reimbursement for claims (at least Medicare claims) is being adjusted based on performance metrics of the practice, practices may begin to wonder whether it still makes sense to pay the billing company a percentage of all collections. Below are three (3) key issues to take into consideration when negotiating compensation rates for billing companies given the new MIPS payment scheme:

  1. Reporting method. Practices have a number of options available for purposes of reporting their MIPS data. One of these options is through their Medicare Part B claims submissions, thereby requiring assistance from their billing company. The other four (4) options do not involve the submission of claims and therefore do not require the assistance of the billing company. Further, only small practices (i.e., with 15 or less providers) can use the claims reporting mechanism, and that mechanism can only be used for certain quality measures (and not for improvement, information technology or cost measures). Accordingly, it does not make sense for the billing company to get a percentage of any positive payment adjustment that a practice receives. Even if the practice chooses to submit data via Part B claims, such submissions have a limited impact on the practice’s achievement of the positive adjustments. It may make more sense to carve out any payment adjustment reimbursement before calculating the percentage-based fee due to the billing company. To the extent that the billing company is legitimately performing additional services, the practice can pay the billing company an additional, reasonable flat fee for those services.

  2. Liability for failure to meet benchmarks. This issue is two-fold. First, the billing company may, in some instances, be directly responsible for the practice’s failure to receive a positive adjustment (or for the receipt of a negative adjustment) if the billing company performed the claims submissions and erred in doing so. In such instance, should the sole remedy to the practice be that the billing company receives a lesser reimbursement for those claims due to the negative or neutral adjustment? Or, should the billing company be penalized further for those errors? For instance, should the billing company be required to provide a performance guarantee related to the MIPS submissions, and if so, what is the penalty for failing to fulfill those guarantees? Second, in the event that the practice does not use the billing company to submit data, and the practice’s performance results in a negative payment adjustment due to its own failures, should the billing company be entitled to some remedy for the lower reimbursement that they will receive as a result of such adjustment?

  3. Addressing retrospective re-adjustments. As practices may have already seen, there may be instances in which CMS makes incorrect adjustments to a practice’s claims and is required to retrospectively re-adjust the claims to account for such error. In those instances, chances are that the billing company has already received their compensation based on the incorrect adjustment amount. The practice is now forced to “chase” after the billing company for a refund of any overpaid fees. Had the practice carved out the adjustments before calculating the billing company’s fees, this could have been avoided.

These three (3) issues only touch on the impact that MIPS has on billing company arrangements. Further, similar considerations may apply to other vendor arrangements (e.g., EHR vendors responsible for tracking performance data). Accordingly, practices must not only dedicate resources to achieving MIPS incentives, but also to reviewing and possibly renegotiating agreements that are impacted by their MIPS performance.


If you are concerned about the impact that MIPS has on your practice’s vendor agreements, contact our firm for assistance.

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