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Medicare: Small and Rural Practices' Experiences in Previous Programs and Expected Performance in the Merit-based Incentive Payment System

GAO-18-428 Published: May 31, 2018. Publicly Released: Jul 02, 2018.
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Fast Facts

Medicare provides payment incentives to physician practices that provide efficient and high-quality care. In 2017, it consolidated its previous payment incentive programs into a new Merit-based Incentive Payment System (MIPS).

We found that small practices did not perform as well as larger practices in the previous incentive programs. Medicare estimates that small practices will do better under MIPS in part because the new system offers increased flexibility, such as allowing practices with 10 or fewer providers to participate as a virtual group that can work together and share resources with small practices in other areas of the country.


Patient filling out forms at a doctor's office

Patient filling out forms at a doctor's office

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What GAO Found

According to 2015 data from the Centers for Medicare & Medicaid Services (CMS)—the most recent available at the time of GAO's review—small physician practices with 15 or fewer providers in rural or non-rural areas were more likely to receive a negative payment adjustment in legacy Medicare payment incentive programs GAO reviewed than were larger practices. These legacy programs, which paid physicians in part based on reporting quality information and providing high-quality, efficient care rather than the traditional approach of paying only based on the volume of care, have been consolidated into the Merit-based Incentive Payment System (MIPS) in 2017. MIPS is designed to further incentivize efficient, high-quality care. CMS projected the effect of MIPS in 2017 and 2018 for practices using legacy program data and estimated that a higher percentage of larger practices would be successful in MIPS (defined by GAO as positive or neutral payment adjustments) than small practices. CMS also projected that small practices would be more successful in MIPS than they had been in the legacy programs. CMS assumed that small practices would increase their participation in MIPS because of the flexibilities built into the program that would help make practices successful. If CMS assumed that small practices would participate in MIPS at historical legacy program participation rates, a lower percentage of small practices would be expected to receive a positive or neutral payment adjustment under MIPS.

Based on interviews with 23 stakeholders, GAO identified challenges faced by small and rural practices that participated in Medicare legacy programs. GAO categorized challenges into three categories.

Examples of Challenges Faced by Small and Rural Physician Practices, by Key Topic Area


Example of challenge


Practices may purchase electronic health record systems that are not the best suited to meet their needs

Financial and staff resources

Practices lack the financial resources to hire additional staff to manage program participation

Legacy program requirements

Practices with fewer staff to monitor changing program requirements may have difficulty staying current

Source: GAO analysis of stakeholder interviews. | GAO-18-428

In addition, stakeholders suggested actions related to the design of MIPS, technical assistance, and outreach and education efforts that CMS could take to improve small and rural practice participation.

CMS officials told GAO that they heard challenges and suggestions related to small and rural practices' participation in MIPS similar to those GAO heard for legacy programs. Additionally, CMS officials told GAO that CMS has actions underway that they believe address these challenges. For example, CMS has developed educational resources; contracted with organizations to provide technical assistance to small and rural practices; and incorporated flexibility into MIPS, such as allowing practices with 10 or fewer providers to participate as a virtual group that can work together and share resources.

Why GAO Did This Study

In 2017, CMS phased out three legacy payment incentive programs and consolidated them into MIPS to further incentivize efficient, high quality care. Stakeholders have raised questions about small and rural physician practices' readiness and ability to participate in MIPS.

GAO was asked to review a number of aspects related to small and rural practices' participation in legacy programs and in MIPS. This report describes (1) how small and rural physician practices performed in legacy Medicare programs and the projected effect of MIPS; (2) stakeholders' views on challenges that small and rural practices experienced in Medicare legacy programs and on how CMS can aid small and rural practices' participation in MIPS; and (3) CMS's efforts to help small and rural practices participate in MIPS.

GAO analyzed the most recently available CMS data on legacy programs and MIPS. GAO interviewed 23 stakeholders, including small and rural physician practices, and physician associations; and CMS officials. GAO identified stakeholders through research and referrals from other stakeholders interviewed.

The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.

For more information, contact James Cosgrove at (202) 512-7114 or

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Electronic health recordsFinancial incentivesLegacy systemsMedicaid servicesMedicareMedicare paymentsParticipation ratesPayment systemsPhysician servicesPhysiciansReporting requirementsRural healthRural hospitalsStaff utilizationStaffing levels