MACRA is a federal law passed in 2015 that changed how Medicare pays healthcare providers, shifting from a system that rewarded quantity of services to one that rewards quality of care. MIPS is the main program created under MACRA to measure provider performance and adjust their Medicare payments accordingly. Together, they form the framework that determines whether clinicians receive a bonus or a penalty on their Medicare reimbursements each year.
What MACRA Changed
The Medicare Access and CHIP Reauthorization Act (MACRA) replaced an older payment formula called the Sustainable Growth Rate, which Congress had been patching with temporary fixes for years. The old system, like most of Medicare, was pure fee-for-service: providers billed for each service they performed, and Medicare paid based on volume. More tests, more visits, more procedures meant more revenue, regardless of whether patient outcomes improved. MACRA passed with overwhelming bipartisan support (392 to 37 in the House, 92 to 8 in the Senate) and fundamentally restructured this arrangement.
Under MACRA, Medicare evaluates the cost and quality of the care providers deliver. Clinicians who score well earn financial bonuses on their Medicare payments. Those who score poorly face penalties. This created the Quality Payment Program (QPP), which gives providers two main paths to participate: MIPS and Advanced Alternative Payment Models (APMs).
How MIPS Works
The Merit-based Incentive Payment System is the track most Medicare clinicians fall into. Each year, providers collect and submit performance data across four categories, and CMS uses that data to calculate a composite score. That score then determines whether the clinician’s Medicare reimbursement goes up, stays neutral, or goes down in a future payment year.
The four performance categories and their current weights are:
- Quality (30%): Clinicians select six measures relevant to their practice and report data for the full calendar year. These might track things like how well blood pressure is controlled, whether patients receive appropriate screenings, or how effectively chronic conditions are managed.
- Cost (30%): CMS calculates this automatically from Medicare claims data. Providers don’t submit anything for this category. It reflects how much Medicare spends on the patients a clinician treats, compared to similar providers.
- Promoting Interoperability (25%): This measures how effectively a practice uses electronic health records. Clinicians report a set of measures covering a continuous 180-day period, including things like electronic prescribing, health information exchange, and patient access to records.
- Improvement Activities (15%): Clinicians choose at least two activities from a CMS-approved list and perform them for a continuous 90-day period. These activities focus on care coordination, patient engagement, and population health management.
The Two-Year Delay Between Performance and Payment
One detail that catches many providers off guard is the timeline. MIPS operates on a two-year lag between when you collect data and when it affects your payments. The performance year runs from January 1 through December 31. You then submit your data in the first few months of the following year. The payment adjustment kicks in the year after that.
For example, data collected during the 2025 performance year gets submitted in early 2026. The resulting bonus or penalty applies to Medicare payments throughout 2027. This means the work you do today won’t show up in your reimbursement for roughly two years.
Who Has to Participate
MIPS covers a broad range of clinician types billing Medicare Part B. The list includes physicians (MDs, DOs, dentists, podiatrists, and optometrists), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, physical therapists, occupational therapists, clinical psychologists, speech-language pathologists, audiologists, registered dietitians, clinical social workers, and certified nurse midwives.
Not every clinician of these types is required to participate. CMS applies a low-volume threshold: if you don’t bill enough to Medicare in a given year (measured by both dollar amount and patient count), you’re excluded from the program and won’t face any payment adjustment. Clinicians can check their eligibility status through the QPP website using their National Provider Identifier.
If you are eligible and don’t submit any data, you’ll automatically receive a negative payment adjustment. Simply participating and reporting, even imperfectly, is typically enough to avoid a penalty.
Reporting Options: Traditional MIPS, MVPs, and the APP
There are now several ways to fulfill your MIPS reporting requirements, and they vary in flexibility and complexity.
Traditional MIPS is the original reporting option. You choose your own quality measures and improvement activities from the full MIPS inventory. This gives you the most flexibility but also the most decisions to make. CMS has signaled that Traditional MIPS will eventually be phased out.
MIPS Value Pathways (MVPs) are a newer, more streamlined option. Each MVP bundles a smaller set of measures and activities around a specific specialty or medical condition. Instead of picking from the entire MIPS catalog, you report on a focused, cohesive group of measures relevant to what you actually do. This is where CMS is steering the program long-term.
The APM Performance Pathway (APP) is available to clinicians who participate in certain alternative payment models but still fall under MIPS. The APP uses predetermined measure sets and automatically gives full credit for improvement activities, so there’s less reporting burden. Notably, the cost category is weighted at 0% under the APP, with quality weighted at 50%, improvement activities at 20%, and promoting interoperability at 30%.
How MIPS Differs From Advanced APMs
MACRA’s Quality Payment Program has two tracks, and MIPS is only one of them. The other is Advanced Alternative Payment Models. These are arrangements like accountable care organizations or bundled payment programs where providers take on financial risk for patient outcomes. Clinicians who participate sufficiently in an Advanced APM are exempt from MIPS entirely and historically received a separate incentive payment.
The key difference is the level of financial risk. In MIPS, your payment adjustment is based on your performance score. In an Advanced APM, you’re agreeing to a fundamentally different payment structure where your organization shares in the savings (or losses) that result from how efficiently and effectively you deliver care. Most clinicians, particularly those in smaller or independent practices, participate through MIPS rather than an Advanced APM.
How Data Gets Submitted
Clinicians don’t have to manually send data to CMS themselves. There are several submission mechanisms available. Many practices use qualified clinical data registries (QCDRs) or qualified registries, which are third-party organizations approved by CMS to collect and submit performance data on behalf of providers. Electronic health record systems can also transmit data directly. For some measures, CMS pulls information automatically from Medicare claims, which is how the cost category works entirely.
The choice of submission method often depends on practice size and the technology already in place. Larger health systems tend to use EHR integration, while smaller practices frequently rely on registries or claims-based reporting.
What the Scores Mean in Practice
Your MIPS final score falls on a scale from 0 to 100 points. CMS sets a performance threshold each year. Score at or above the threshold and you receive a neutral or positive payment adjustment. Score below it and you face a penalty. The farther above the threshold you score, the larger your bonus; the farther below, the larger the penalty.
The program is designed to be budget-neutral, meaning the penalties collected from low scorers help fund the bonuses paid to high scorers. In practical terms, this means the size of your bonus depends not just on your own score but on how everyone else in the program performs. If most clinicians score well, the available bonus pool gets spread thinner.
For clinicians who have most of their performance categories reweighted to 0% (due to special circumstances like being in a small practice with limited applicable measures), CMS assigns a score equal to the performance threshold, resulting in a neutral payment adjustment rather than a penalty.