When it comes to the Merit-based Incentive Payment System (MIPS), 2025 data reveals a striking disparity: small and rural medical practices were disproportionately penalized, facing significantly higher penalties than their larger, urban counterparts. While the vast majority of MIPS-eligible clinicians (86%) successfully avoided penalties this year, based on their 2023 data, those who did incur a penalty were overwhelmingly from smaller, less resourced practices. This highlights a critical flaw in the MIPS program, particularly its administrative complexity, which places an undue burden on these vulnerable practices.
The Unequal Burden of MIPS Penalties
The recently released data from the Medicare Quality Payment Program, which includes high-level metrics on participation, scoring, and Medicare payment adjustments from MIPS and advanced alternative payment models (APMs), paints a clear picture. Despite the overall success of most MIPS-eligible clinicians in avoiding penalties, a significant 14% were hit with a penalty of up to negative 9% of their Medicare paid amount for covered services. A closer look reveals that this 14% is heavily skewed:
- Nearly half (49%) of solo physicians were penalized.
- 29% of small practices faced penalties.
- 18% of rural practices were penalized.
Even more concerning, among those receiving a penalty, 13% of small practices and a staggering 29% of solo practices received the maximum negative 9% MIPS penalty. This financial impact can be devastating for practices already operating on thin margins, potentially jeopardizing their ability to provide essential care to their communities.
The Role of RCM Services in Mitigating MIPS Impact
For small and rural practices, the administrative hurdles of MIPS are immense. This is where robust Revenue Cycle Management (RCM) services become not just beneficial, but crucial. Effective RCM services go beyond simple billing and coding; they encompass a holistic approach to managing the entire financial process of a medical practice, from patient registration and appointment scheduling to claims submission, payment posting, and denial management.
In the context of MIPS, a strong RCM service provider can significantly alleviate the burden on practices by:
- Optimizing Data Submission: RCM experts can ensure accurate and timely submission of quality and performance data required for MIPS reporting, reducing the risk of errors that lead to penalties.
- Identifying and Addressing Gaps: By analyzing performance metrics, RCM services can pinpoint areas where a practice might be underperforming in MIPS categories, allowing for proactive adjustments.
- Streamlining Workflows: Efficient RCM processes can free up valuable staff time that would otherwise be spent on complex MIPS compliance tasks, allowing practices to focus on patient care.
- Maximizing Reimbursement: Beyond avoiding penalties, effective RCM can help practices identify opportunities to maximize their MIPS scores and potentially earn positive adjustments, improving their overall financial health. This includes ensuring all billable services are captured and coded correctly, and that claims are submitted cleanly to minimize denials.
- Providing Analytics and Reporting: Advanced RCM platforms offer detailed analytics that can help practices understand their MIPS performance, track progress, and make data-driven decisions to improve scores.
The Call for MIPS Reform
The American Medical Association (AMA) has been a vocal advocate for MIPS reform, emphasizing that the program, despite being implemented in 2017, has yet to demonstrably improve health outcomes or lower avoidable spending. The AMA’s February letter to the Centers for Medicare & Medicaid Services (CMS) highlighted the substantial compliance costs imposed on physicians, citing a 2021 JAMA Health Forum study that found physicians spent an estimated $12,800 and 202 hours per year to comply with MIPS. These figures underscore the critical need for regulatory changes, especially for small and rural practices that often lack the resources of larger institutions.
The AMA successfully advocated for expanded access to hardship exceptions in MIPS in 2023 due to the COVID-19 public health emergency and maintained the performance threshold needed to avoid a penalty. However, they continue to urge the Trump administration to implement further regulatory changes to ease the burdens of MIPS and create a more equitable playing field.
Key Takeaways from the Data:
Beyond the penalty statistics, other significant findings from the recently released data include:
- The number of qualifying APM participants exempt from MIPS rose to 463,669 in 2023, up from 384,105 in 2022, indicating a growing trend towards alternative payment models. These participants will receive a 3.5% lump-sum APM incentive payment in 2025.
- The maximum bonus for MIPS-eligible clinicians who achieved a perfect score was a modest 2.15%, a decrease from the previous year due to the expiration of the $500 million exceptional performance bonus pool.
- Out of 541,421 MIPS-eligible clinicians in 2023, a relatively small number (20,484) reported via the MIPS Value Pathway (MVP), with 6,790 receiving their final score from an MVP. Interestingly, those scored based on an MVP generally performed slightly better than participants in traditional MIPS.
- APM entities in MIPS consistently achieve higher scores due to their exemption from the cost-performance category, which had a lower average score (61%) compared to the quality performance category (75%).
A Proposed New System for Medicare Payments:
To address these systemic issues, the AMA has proposed an innovative “data-driven performance payment system,” which has garnered widespread support from state medical societies and national specialty societies. This proposed system aims to:
- Benefit small, rural, and safety-net practices by eliminating the current “win-lose tournament model” inherent in MIPS.
- Reduce the maximum penalty from negative 9% to one-half of a physician’s annual payment update, significantly lessening the financial risk for practices.
- Foster more relevant and accurate measures by encouraging CMS to share quarterly data that physicians can leverage to improve their performance on quality and cost measures.
Ultimately, the ongoing challenges faced by small and rural practices under MIPS underscore the urgent need for comprehensive reform. Integrating robust RCM services can provide immediate relief and strategic advantage, but systemic changes are essential to ensure the long-term viability and equitable treatment of all medical practices within the Medicare payment system.