We’ve said before that “good medical coding is good business.” Not only does accurate and efficient medical coding ensure that health care providers are properly reimbursed for each and every service provided, but it can also open the door to “bonus” revenue.

The Physician Quality Reporting Initiative (PQRI), a program that started in 2007 under the Centers for Medicare and Medicaid Services (CMS), offers incentive payments to Medicare providers in exchange for their reporting of certain quality measures. (Note that in 2011, the program’s name is changing to Physician Quality Reporting System [PQRS].)

Now, why would the government be so interested in quality measures that it would pay providers for that information? Especially given our recent pmFAQtory blog discussion of diagnosis-related groups (DRGs), where you learned that the feds reimburse based on “episode” of care (volume), not on value or quality?

The reason is that many believe Medicare will ultimately shift toward paying for value rather than volume. Incentivizing health care organizations — via the voluntary PQRI program — to modify their IT infrastructures to report on quality measures lays the foundation for later tying Medicare reimbursements to those (or other) quality measures.

In 2010, providers were eligible for an extra payment of 2 percent of their total Medicare Part B (Medicare Physician Fee Schedule) allowed charges. An incentive payment of 2 percent may sound nominal, but not for health care organizations that are routinely breaking even, or losing money, each time they see a Medicare patient.

To earn the incentive payment, providers have to choose at least three quality measures from a list of more than 200, and then report on each of those measures in at least 80 percent of eligible cases for the year. Standardization of this quality information is done through medical coding.

Health care providers report quality measures to CMS by adding CPT Category II codes to Medicare Part B claims, in addition to the appropriate CPT Category I codes and ICD-9-CM codes that would already be part of the claim. (Remember that CPT Category I codes are used to classify outpatient procedures, while ICD-9-CM codes are used to classify diagnoses.)

It’s important to recognize that the incentive payment today is not based on anything the government learns from the quality reporting (that is, whether the organization’s quality metrics show high- or low-quality patient care). It’s only based on whether the provider took part in reporting.

For health care organizations hoping to earn, or continue to earn, the PQRI incentive payment, it’s imperative that their medical coding and billing software is able to properly capture the quality measures via CPT Category II codes.

Want to enter the PQRI game or ensure you’re playing it right? Call pmFAQtory today.