Skip to content
1-866-359-4458 Log In
Get Started

APM Incentive Payments Explained: Impact of Quality Scores, Physician Fee Schedule, ACO REACH & more

In this week’s episode, Dr. Dan Mingle answers a handful of listener questions about APM incentive payments featuring insight into incentive payments for ACO REACH participants, how quality scores affect incentive payments, and incentive payments in the Physician Fee Schedule.

Click play below to listen to this episode now:

Question One: APM Incentive

Jason asks: “We are a REACH ACO confused about the APM incentive. Is the APM incentive going to be 5 percent? Were REACH ACOs at risk of not getting this at one point, but CMS decided to keep it?”

There is nothing specific happening or intended for the REACH Model ACOs.

You are currently seeing a change to the APM Incentive Payment applicable to all advanced APMs. The change combines a scheduled change in the payment mechanism and a correction of an oversight.

The Quality Payment Program, when it started in 2017, included a 5% Incentive Payment for Qualified Participants in advanced APMs.

Here is a quick review of how this Incentive Payment works:

  • There is a Performance Year in which you qualify
  • The following year, the dollar amount of your incentive is set, based on your Medicare billings and payments
  • The next year, the payment is made

This recurring pattern applies to all aspects of the Quality Payment Program:

  • There is a performance year
  • Followed by a year to collect and analyze data
  • Followed by a payment year

The initial legislation targeted the 2022 Performance Year as the last year to which the 5% APM Incentive Payment was to apply. It will be replaced by a favorable conversion factor in the Physician Fee Schedule starting in the 2026 Payment Year to Qualified Participants in any advanced APM.

The rules inadvertently left the 2025 year without an Incentive Payment. This was corrected in legislation and reflected in the 2023 Final Rule by adding a 3.5% incentive earned in the 2023 Performance Year to be paid in the 2025 Payment Year.

Again, these changes apply equally to REACH ACOs and all other advanced APMs:

  • All Qualified Participants in 2022 will get a 5% incentive bonus in 2024
  • All Qualified Participants in 2023 will get a 3.5% incentive bonus in 2025
  • All Qualified Participants in 2024 will get a favorable Conversion Factor on Physician Fee Schedule charges in 2026

Since Medicare does the QP determination quarterly, there may be a faster turn-around on the favorable Conversion Factor. We should know a lot more about it from the 2024 rulemaking cycle.

Question Two: APM Incentive & Physician Fee Schedule

Jason asks: “How will the APM incentive work when it is delivered through the Physician Fee Schedule?”

I’ll start with a quick review of the annual dynamics of the Physician Fee Schedule.

In 1999, Medicare started building Resourced Based Relative Value Units (RBRVUs or simply RVUs) in the Physician Fee Schedule and was paying entirely on the Relative Value System by 2002.

The Physician Fee Schedule, or PFS, is available from CMS on their website. CMS publishes the annual schedule in January with all significant changes. They then post quarterly updates and corrections when indicated.

The PFS is a large table with over 30 columns and nearly 18,000 rows.

Each row represents a unique billing code broadly described as a Healthcare Common Procedure Coding System (HCPCS) code. It includes CPT, dental, and Medicare-specific codes for various purposes, including QDC codes.

The table indicates codes that are:

  • Active or inactive
  • Payable or not payable by Medicare

Relative Value Units for each code are represented by:

  • Work RVUs
  • Practice Expense RVUs
  • And Malpractice RVUs

And the location of care, specifically facility or non-facility.

A separate schedule provides geographic adjustments in each RVU type to reflect regional differences in each number.

A single conversion factor applies to all payable codes, so that for a payable code:

  • Find the code in the schedule
  • Choose the facility or non-facility RVUs based on your circumstances
  • Apply the geographic modifier specific to your region and the RVU type: Work, PE, or ME
  • Add them together
  • Multiply the sum by the conversion factor
  • And this calculation equals the Medicare Payable Amount.

Expect a second conversion factor column for the 2026 Physician Fee Schedule and beyond. The second column will apply to Qualified Participants of advanced APMs. The original column will apply to everyone else.

I’ve yet to see how the advanced APM conversion factor will compare to the standard. Nor if some codes pay the same to QPs as to all others.

Expect to see more details in 2024 rulemaking.

Question Three: Quality Scores & APM Incentive Payments

Gloria asks: “We are an advanced APM preparing for our 2023 quality measure submission. How will our quality scores affect our APM Incentive payments?”

Your quality score does not affect your advanced APM Incentive Payment.

Every Qualified Participant (QP) in an advanced APM will get – should get, and is eligible for – the APM Incentive Payment. That’s:

  • 5% in 2023 for 2021 participation
  • 5% in 2024 for 2023 participation
  • 3.5% in 2025 for 2023 participation
  • A higher conversion factor on the Physician Fee Schedule in 2026 for 2024 participation

Your quality score will affect how much of your shared savings you will collect and how much of your shared losses you will have to pay. But it does not affect your APM Incentive Payment, which is due to your participating providers just for participation, no matter how well or poorly your APM performs.

There are only two requirements that determine eligibility for the APM incentive:

  1. The Alternative Payment Model, or APM, must be an advanced APM.
    • As a reminder, your APM is an advanced APM if:
      • Not only do you stand to gain financially from favorable cost performance
      • But you also stand to lose more than a nominal amount of revenue if cost performance is unfavorable
  2. The provider must be a Qualified Participant or QP in your APM.
    • Providers are Qualified Participants for 2023, eligible for the APM Incentive Payment in 2025 if:
      • ≥50% of Medicare payments for professional services were for patients attributed to your Advanced APM
      • OR ≥35% of Medicare patients seen were attributed to your Advanced APM

Question Four: CCLF Files

John asks: “Dr. Mingle, you’ve explained that your favorite source of data for quality measure denominators is from practice 837 billing files. But Medicare makes their applicable claims files available to Alternative Payment Model (APM) entities. It seems to me to be easier to access the data for our participating practice all at once from Medicare than to reach out to each practice individually for a copy for their claims submissions. Why won’t this work?”

It would be great if it were that easy.

There are multiple ways to access Medicare’s claims records. Medicare calls them “Clinical Claims Line Feeds” (CCLF) files. It represents all claims involving Medicare beneficiaries, no matter where the claim was generated.

CCLF is a wonderful source of data that approximates all health care costs of your patients wherever those costs are generated. With it, you can generate reliable data about:

  • The total annual cost of care for each Medicare patient in your patient panel
  • The specific services, the diagnoses driving those services, the source of those services, and the dollar value of each element of care accessed by your Medicare patients
  • And you can do leakage analysis with data about where your patients are going for specific services that your organization provides

But, now that quality reporting for all Medicare value-based programs under the Quality Payment Program are all-patient and all-payer, the fatal flaw for you with CCLF files is that they are Medicare patients only.

It is technically possible to get all claims from all insurers of all the patients of each of your participating practices and providers. But that is a monumental task with many failure points.

There are no business or regulatory requirements that demand the availability of global or all-payer claims data. And with 900 distinct healthcare insurers, each with the potential of multiple insurance products serving 50 States and 5 Territories, it’s easy to see how an all-payer claims system is not currently practical.

Send us your value-based care questions!

If you’d like to ask a question about the APP transition, MIPS, ACO quality reporting, or any other Alternative Payment Model, you can reach out to us in three ways:

You can leave your questions in a YouTube comment under any episode of Ask Dr. Mingle.

On LinkedIn, leave your questions in a comment on any of our posts.

And you can reach out directly by sending an email to

Want to learn more about MIPS Value Pathways?

MIPS Value Pathways (MVPs) are the newest reporting option implemented by CMS for MIPS-eligible clinicians to fulfill their reporting requirements. Download our latest PDF guide to increase your understanding of MIPS Value Pathways in 2023.

Access the Guide
Get Helpful News & Resources
  • This field is for validation purposes and should be left unchanged.