Author(s): Jaspal Singh, MD, Jack Haberl, MD, MBA, Vincent Thieu, MD
Originally published: September 11, 2015 Last updated: April 2, 2026
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Overview and Description

In 2017, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) permanently replaced the previous Sustainable Growth Rate Law, which threatened unsustainable payment cuts to the Physician Fee Schedule. Following the passage of MACRA, the United States healthcare system is continuing to transition from a fee-for-service system towards a pay-for-performance system that incentivizes physicians to provide high-value patient care.1 Since the update, the increasing shift towards value-based payment and care reaffirms functional outcomes as critical components of demonstrating value in rehabilitation practice. The ability to systematically measure functional improvement not only supports physician reimbursement but also demonstrates the unique clinical and economic value of physiatric care.

The Quality Payment Program (QPP) was created under MACRA to support value-based reimbursement, improve patient outcomes, control costs, reduce administrative burden, and provide performance metrics.2 Clinicians can decide how to choose to participate based on practice size, specialty, location, or patient population. Within the QPP, there are two primary participation tracks, with a new third evolving framework bridging the gap between the two

  • Merit Based Incentive Payment System (MIPS)
  • Advanced Alternative Payment Models (Advanced APMs)
  • MIPS Value Pathways (MVPs)

Merit Based Incentive Payment System (MIPS)

Under the MIPS program, CMS combines four performance categories to provide a performance score. The performance in these domains is compared against a group’s scores from previous years as well as against scores of their national peers. These comparisons ultimately result in an upward or downward adjustment annually in Medicare reimbursements for participating providers. The four reportable categories include

  • Quality (30%): This category replaced the Physician Quality Reporting System (PQRS). Quality is based on performance measures created by CMS, as well as medical professional and stakeholder groups. This requires clinicians to submit data for 75% of all eligible patients, regardless of payer.
  • Promoting Interoperability (PI) (25%): This category replaced the Medicare Electronic Health Record (EHR) Incentive Program (commonly known as “Meaningful Use” and has been renamed from the Advancing Care Information performance category. This category focuses on patient engagement and the electronic exchange of health information using certified electronic health record technology (CEHRT). Interoperability is achieved by proactively sharing information with patients or other clinicians, including test results, visit summaries, and therapeutic plans.
  • Improvement Activities (IA) (15%): This new category includes an inventory of activities that assess how care processes are improved, patient engagement is enhanced, access to care is increased. Activities appropriate to a practice, such as enhancing care coordination, patient and clinician shared decision-making, and expansion of practice access, may be chosen.
  • Cost (30%): This category replaces value-based modifiers (VBM). CMS calculates the cost of a provider’s care based upon Medicare claims and uses cost measures to gauge the total cost of care during a given year.3

For the 2024-2026 performance years, CMS has stabilized the MIPS Performance Threshold at 75 points. This new requirement requires clinicians to report 75% of the data for quality measures through 2026, which was previously 70%. Failure to comply with the program can result in a maximum negative payment adjustment of 9%.

Under the quality category, providers may report on CMS-approved performance measures or may report under a qualified clinical data registry (QCDR). A QCDR may be developed by a specialty society, regional health collaborative, large health system, or software vendor working in collaboration with one of these medical entities. QCDR submission differs from qualified registry submission in that QCDRs can submit non-MIPS measures, called QCDR measures, and submit data for the Promoting Interoperability and Improvement Activities. QCDR measures must be submitted to CMS for approval. QCDRs may submit measures for CMS approval that are

  • Not contained in the annual list of Quality Payment Program (QPP) measures.
  • Have substantive differences in the population covered by an existing QPP measure.
  • Have a different manner of submission of an existing QPP measure.
  • Developed by the QCDR, specialty societies, or regional quality collaboratives.
  • A National Quality Forum (NQF)-endorsed measure that is not part of MIPS.

QCDRs also are permitted to customize the Clinician and Group Consumer Assessment of Healthcare Providers and Systems (CAHPS) and may include non-Medicare beneficiaries. No more than 30 approved or provisionally approved QCDR measures for a clinician may be submitted. QCDRs must submit data through a secure submission method.

Advanced Alternative Payment Models (Advanced APMs)

Under the Advanced APM program, providers are exempt from participating in MIPS if they meet the following criteria

  • Requires participants to use certified technology.
  • Provides payment based on quality measures comparable to those used in the MIPS quality performance category.
  • Either: (1) is a Medical Home Model expanded under CMS Innovation Center authority OR (2) requires participants to bear a significant financial risk.4

Examples of advanced alternative payment models that include outpatient services are as follows

  • Bundled Payments for Care Improvement (BPCI): This initiative is comprised of 4 broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care.
  • Medicare Accountable Care Organization (ACO) Track 1+: This time-limited shared savings program encourages groups of doctors, hospitals, and other health care providers to come together as an ACO to provide coordinated, high-quality care to Medicare patients. Track 1+ Model ACOs assume limited downside risk.
  • Medicare Shared Savings Program (Track 2, Track 3, Level E of the BASIC track, the ENHANCED track): This model also encourages groups of doctors, hospitals, and other health care providers to come together as an ACO to provide coordinated, high-quality care to their Medicare patients. However, providers may share in savings or repay Medicare losses depending on performance. These ACOs take on the greatest amount of risk but may share in the greatest portion of savings if successful.
  • Next Generation ACO: Building upon experience from the Pioneer ACO Model and the Shared Savings Program, this model sets predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality standards of care.

From 2019 to 2024, physicians who participate in an alternative payment model (APM) previously received bonus payments of 5% of the Medicare-covered professional services annually. The incentive is currently reduced to 1.88% for the 2026 payment year. Participating groups are generally required by the alternative payment models to bear the financial risk.

Starting in 2026, qualified APM participants will receive a higher 0.75% annual update to their Physician Fee Schedule conversion factor, whereas non-qualifying participants will only receive 0.25%. To qualify, clinicians must meet 75% of payments or 50% of patients through an advanced APM.4

Physicians who do not participate in an alternative payment model must participate in the MIPS, unless they are exempt from the program.

MIPS Value Pathways (MVPs)

In 2023-2024, a new optional reporting framework called MIPS Value Pathways (MVPs) was created to reduce clinician burden and transition away from the traditional MIPS track. CMS intends to eventually replace MIPS with MVPs as the primary reporting method. MVPs provide a subset of measures and activities across quality, improvement activities, and cost performance categories focused on specific specialties, conditions, or patient populations.3 From a physiatric perspective, relevant MVPs include Optimizing Chronic Disease Management, Optimal Care for Patients with Episodic Neurological Conditions, Advancing Cancer Care, Coordinating Stroke Care to Promote Prevention and Cultivate Positive Outcomes, and others.5

Since 2025, physiatrists can opt into the “Quality Care for Patients with Neurological Conditions” MVP, which can impact physiatrists treating stroke, TBI, or other disease. This pathway is specifically designed for clinicians managing long-term neurological recovery and episodic neurologic conditions, as it provides a more relevant physiatry-first scoring model specific to stroke and neurodegenerative care measures. This inventory includes 17 qualities measures, of which clinicians are required to select and report 4 to fulfill the category requirements.

For outpatient physiatrists focused on orthopedic rehabilitation and pain management, the primary option “Rehabilitative Support for Musculoskeletal Care” MVP focuses on non-surgical and rehabilitative management of musculoskeletal impairments. Out of the 11 quality measures, most are patient-reports outcome measures, including functional status changes.5

Starting January 1, 2027, Ambulatory Specialty Model (ASM) will serve as a mandatory 5-year model that targets low back pain specifically and evaluates a provider’s risk-adjusted cost to Medicare. Participation will be mandatory for physiatrists in selected geographic regions who treat at least 20 episodes of low back pain per year. In this framework, Quality and Cost will each account for 50% of the total score. Metrics will include utilization of MRI, use of high-risk medications, and functional status improvement.6

If choosing the MVP pathway, physiatrists in large multispecialty groups will now be required to report as a subgroup starting in 2026, thus allowing for more specialty-specific scoring. This allows for scoring solely on physiatry-specific measures, resulting in payment adjustments reflected on the PM&R group’s clinical quality rather than the whole group’s aggregate score.

Inpatient Rehabilitation Facility (IRF) Updates

This recent trend towards high-value care has made significant impacts specific to the field of physiatry and how we provide quality care for our patients. The Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP) is a program developed by the Centers for Medicare and Medicaid Services (CMS) to improve the quality of care provided by inpatient rehabilitation facilities (IRFs) in the United States.5 The program requires IRFs to report data on certain quality metrics that assess various aspects of patient care in order to receive payment. The IRF QRP applies to all IRFs that are paid under the Medicare Part A program and have at least 20 patient stays per year.

Inpatient Rehab Facilities (IRFs) report on a variety of quality metrics. These metrics can be classified into two subtypes: process measures and outcome measures. Outcome measures, designed to assess effectiveness of care, include examples such as rates of infections (MRSA, Catheter-associated urinary tract infections or CAUTIs), in-hospital falls, pressure injuries, length of stay, and improvement in functional scores upon discharge. Process measures, evaluating procedures that IRFs use to deliver care, include examples such as the percentage of patients who receive a functional assessment within three days of admission, the percentage of patients who receive a discharge plan within two days of admission, and the percentage of patients who receive a vaccination for influenza.

The data reported by IRFs through the IRF QRP is publicly reported on the CMS Care Compare website (https://www.medicare.gov/care-compare/?providerType=InpatientRehabilitation), allowing patients and families to compare different IRFs using these metrics compared to national mean scores. This information can be used to help patients make informed decisions about where to receive care and can also be used by IRFs to identify areas for improvement in their own care delivery processes. IRFs may use a variety of different internal and shared software platforms to collect and compare their quality metrics and submit their data sets to CMS.  CMS has moved toward all-digital quality measures by 2025, which emphasizes the need for physiatry-specific Electronic Health Record tools that can auto-calculate scores like Short Physical Performance Battery (SPPB) Test and 6-Minute Walk Test (6MWT).7 A commonly used platform is E-Rehab-Data, offered to inpatient rehabilitation providers by the American Medical Rehabilitation Providers Association (AMRPA).

Although these metrics provide goals for providers to improve the quality of the care, many have argued that certain quality metrics may not serve as appropriate benchmarks for high quality care in these rehabilitation settings.8 For example, neurogenic bladder is a frequent complication of injury to the brain or spinal cord, a condition commonly treated in IRFs. Management of this condition often requires bladder training over the course of a rehab stay, including intermittent catheterization, void trials, and indwelling catheter placement. Neuro-rehabilitation patients have high incidences of UTIs while undergoing this bladder management regimen. Incentivizing the removal of these catheters too soon to avoid higher rates of CAUTIs could potentially harm these at-risk patients, leading to harmful conditions such as renal failure and autonomic dysreflexia.

Since fiscal year (FY) 2024, CMS has implemented several notable updates to Medicare payment policies and rates under the Inpatient Rehabilitation Facility (IRF), Prospective Payment System (PPS) and the IRF Quality Reporting Program. For example, CMS is increasing IRF PPS payment rates by 2.6% for FY 2026. IRFs that fail to report data on the required quality measures will face a 2-percentage point reduction in their Annual Increase Factor). Overall, CMS estimates that IRF payments for FY 2026 will increase by $340 million in aggregate IRF payments.9 Providers will continue to collect the IRF-Patient Assessment Instrument (PAI) assessment on all patients receiving care in an IRF, regardless of payer. Overall reporting requirements may also expand beyond just Medicare patients, and IRFs may be required to report quality metrics for all of their patients regardless of insurance type. Effective October 1, 2026, CMS has removed four social determinants of health items from the IRF-PAI assessment: Living Situation, Food, and Utilities. There will also be a new “extraordinary circumstance” extension that allows IRFs 30 days to request a reconsideration if they are determined to be non-compliant due to factors beyond their control.7

Function and Functional Health

The American Academy of Physical Medicine and Rehabilitation states that while physiatrists “evaluate and treat injuries, illnesses, and disability, and are experts in designing comprehensive, patient-centered treatment plans…, [they] utilize cutting‐edge as well as time‐tested treatments to maximize function and quality of life.” But just what is the definition of function? While the Merriam-Webster dictionary defines function as “the normal and specific contribution of a bodily part to the economy of a living organism,” function is more than the contribution of even all bodily parts. The World Health Organization developed the International Classification of Functioning, Disability and Health (ICF),10 which conceptualizes a person’s level of functioning as a “dynamic interaction between their health conditions, environmental factors, and personal factors.” Functioning and disability may be described on a continuum that includes body structures and functions, impairments, activities/activity limitations, and participation/participation restrictions. Environmental factors may range from physical (e.g., climate, terrain or building design) to social (e.g., attitudes, institutions, and laws). Personal factors may include race, gender, age, educational level, coping styles, etc., which independent of the health condition but still may influence how a person functions.

Thus, it is not surprising that physical medicine and rehabilitation focuses on functional health, or the ability to perform all of one’s activities of daily living.11 However, while the goal of improving the ability to perform daily functional tasks enjoyably and effectively may appear merely as an idea to strengthen the ability to use muscles, many factors go into performing a task well, with minimal pain (if any at all), and with enjoyment. To accomplish this successfully, two main factors, in addition to medical, must be considered

  • Physical Ability: including strength, conditioning, coordination, tone and spasticity, proprioception, and balance.
  • Psychological Status/Mood: affected by sleep, environmental factors, support, pain, motivation, and energy.

In terms of collecting data for performance measures, the former is easier to develop objective measures, while the latter will rely more on subjective self-reporting.12 In any case, the physiatrist can play a unique role in a patient’s care, with meaningful patient outcomes in medical, social, emotional, and vocational arenas. For instance, the physiatrist can recommend different exercise programs or prescriptions, and consultations to physical therapy, occupational therapy, speech-language pathology, neuropsychology, or prosthetics-orthotics. They can provide spasticity management when conservative pharmacological methods fail. They can provide education on sleep hygiene and medical sleep aids. They can prescribe appropriate pharmacological and non-pharmacological interventions for pain management. Mostly, they can coordinate complex interdisciplinary care and motivate patients and their support systems. The key to success in navigating pay-for-performance is utilizing the scales already developed for the multitude of conditions physiatrists treat throughout the course of treatment in order to demonstrate efficacy and tangible improvement in whatever is being measured.

Outcome Measures

The World Health Organization defines a health outcome as “a change in the health status of an individual, group or population which is attributable to a planned intervention or series of interventions, regardless of whether such an intervention was intended to change health status.”13 On a different level, the International Consortium for Health Outcomes Measurement (ICHOM) defines health outcomes as “the results that matter most to patients” rather than those that matter most to physicians and healthcare organizations.14 In either case, to measure health outcomes, providers must utilize outcome measures, simply defined as “tools used to assess a patient’s current status.

Choosing appropriate measures to monitor a condition is essential to validating outcomes. Measures should be valid and reliable. Measures should not place onerous burdens on providers and patients to collect. Mostly, measures should provide meaningful data to the outcome.

Outcome measures also should have key characteristics, including providing value for both providers and patients.14 Providers and patients should see value in collecting the data and be willing to commit the time to participate in its collection. Measures potentially can serve dual roles, such as in decreasing complications, improving patient satisfaction, and lowering cost of care. Measures should attempt to prevent unintended consequences, such as decreasing length of stay while attempting to decrease hospital readmissions. Overall, outcomes measures should be treated like a laboratory experiment so that interventions can be tested appropriate for efficacy while trying to minimize the impact of external and confounding variables that may place into question or invalidate results.

Of the CMS listed quality measures for outpatient care, Functional Outcome Assessment (CMIT ID: 641) is the most unique to physiatry.15 It calls for “documentation of a current functional outcome assessment using a standardized functional outcome assessment tool on the date of the encounter AND documentation of a care plan based on identified functional outcome deficiencies on the date of the identified deficiencies.” In explaining its rationale, the authors state that “utilization of the appropriate outcomes assessment, questionnaires, and tools enhances clinical practice by (1) identifying and quantifying body function and structure limitations, (2) formulating evaluation, diagnosis, and prognosis, (3) forming the plan of care, (4) assisting in evaluating the patient progress towards the goals and validating the benefits of treatment, (5) improving communication between client, clinician, and third party payer, (6) assisting to improve the documentation of care provided.” Because it does not delineate specific measures, it has the potential for application to many types of patients that physiatrists treat.

For IRFs, the primary outcome metric is the Discharge Function Score (CMIT Measure ID #01698), which consolidates multiple functional measures in mobility and self-care to reflect a patent’s functional status at discharge.7

In practice, there are hundreds of widely accepted and used outcome measures. Therefore, it is important that physiatrists develop a toolbox of standardized outcomes that can be used to improve patient care and be accurate measurements of outcome in order to provide appropriate reimbursements. For example, primary functional outcomes for rehabilitation have been well-established, including the Short Physical Performance Battery (SPPB),16 The 4-meter Habitual Gait Speed (HGS) (derived from the subcomponent of SPPB),17 and 6-Minute Walk test (6MWT).18 The SPPB is a reliable and valid measure of lower-extremity performance and predictive of adverse outcomes. The 6MWT is a widely used and reliable measure of mobility in patients, including those with multiple comorbidities. The HGS is predictive of disability and mortality among older adults. For the Neurological Care and Musculoskeletal Care MVPs, these functional outcome measures like the SPPB and 6MWT have become integrated as required inputs.

An example of a program using these outcome measures to test the effectiveness of their treatment strategies is the Live Long Walk Strong program designed to prevent mobility decline and its consequences through an innovative care model emphasizing rehabilitative care.19 This program centers in concept around the ICF with a full assessment corresponding to each domain of the ICF. Not only were the outcome measures predictive of important factors, such as mobility, mortality, functionality, but also the treatment plan to achieve meaningful clinical improvements was easily facilitated in the outpatient setting.

  • Physiatry risk stratification based on SPPB (which takes a total of 10 minutes to administer) and referrals to specific therapists and/or orthotists
  • Medical management of musculoskeletal concerns
  • Screening for cognitive impairment with the Mini-Cog
  • Motivating patients for engagement in the program and addressing any concerns that the patients or families may have with the overall program of care.

Assessments within the ICF domains (and some sub-categories) included Comorbidities, Polypharmacy, Depression, Activity, Body Functions and Structure, Participation, Personal Factors, and Environmental factors Appropriate and specific treatment plans were implemented for each domain.

These studies are important as they demonstrate realistic, reliable, and meaningful change that reflect improved patient function and quality of life. These outcome measures can be applied to the pay-for-performance system, with the potential of increased payment/reimbursement for physiatrists as patients demonstrate improvement from baseline scores through interdisciplinary treatment and pharmacological intervention.

References

  1. Sura A, Shah NR. Pay-for-Performance Initiatives: Modest Benefits for Improving Healthcare Quality. Am Health Drug Benefits 2010; 3(2): 135–142.
  2. Quality Payment Program. US Department of Health and Human Services. Centers for Medicare and Medicaid Services (CMS). Quality Payment Program. https://qpp.cms.gov/about/qpp-overview. Accessed, March 5, 2026..
  3. MIPS Overview. MIPS Overview. US Department of Health and Human Services. Centers for Medicare and Medicaid Services (CMS). Quality Payment Program. https://qpp.cms.gov/get-started/what-is-mips/about-mips. Accessed, March 5, 2026
  4. Advanced Alternative Payment Models (APM). Department of Health and Human Services. Centers for Medicare and Medicaid Services (CMS). Quality Payment Program. https://qpp.cms.gov/eligibility-participation/apm/overview. Accessed March 5, 2026.
  5. Quality Payment Program. MIPS Value Pathways (MVPs). Centers for Medicare & Medicaid Services. Updated February 20, 2026. Accessed March 5, 2026. https://qpp.cms.gov/mips/mips-value-pathways
  6. Centers for Medicare & Medicaid Services. Ambulatory Specialty Model. CMS Innovation Center website. Accessed March 6, 2026. https://www.cms.gov/priorities/innovation/innovation-models/asm
  7. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program (QRP). Centers for Medicare & Medicaid Services. https://www.cms.gov/medicare/quality/inpatient-rehabilitation-facility. Accessed March 5, 2026.
  8. Davis, M. When Quality Measures Put Patients with Spinal Cord Injury at Risk. TIRR Memorial Hermann Journal (Online). Spring 2016 Edition.  https://memorialhermann.org/services/specialties/tirr/healthcare-professionals/journal/2016/spring-2016/quality-measures-put-sci-patients-at-risk. Accessed April 19, 2023.
  9. Centers for Medicare & Medicaid Services. FY 2026 inpatient rehabilitation facilities prospective payment system final rule (CMS-1829-F) fact sheet. CMS website. Published August 1, 2025. Accessed March 5, 2026. https://www.cms.gov/newsroom/fact-sheets/fy-2026-inpatient-rehabilitation-facilities-prospective-payment-system-final-rule-cms-1829-f
  10. World Health Organization. International Classification of Functioning, Disability and Health (ICF). https://www.who.int/classifications/icf/en/. Accessed April 28, 2020.
  11. Functional Health & Disability: Definition & Major Issues. Psychology 108: Psychology of Adulthood and Aging / Psychology Courses. Chapter 3/Lesson 9. Study.com. https://study.com/academy/lesson/functional-health-disability-definition-major-issues.html. Accessed April 28, 2020.
  12. Dayton MR, Judd DL, Hogan CA, Stevens-Lapsley JE. Performance-Based Versus Self-Reported Outcomes Using the Hip Disability and Osteoarthritis Outcome Score After Total Hip Arthroplasty. Am J Phys Med Rehabil 2016; 95(2): 132-138.
  13. World Health Organization. Health Promotion Glossary. https://www.who.int/healthpromotion/HPG/en/. Accessed April 28, 2020.
  14. Ferguson J. The Who, What, and How of Health Outcome Measures. HealthCatalyst. https://www.healthcatalyst.com/the-who-what-and-how-of-health-outcome-measures. Accessed April 28, 2020.
  15. Functional Outcome Assessment. Centers for Medicare & Medicaid Services. Measures Inventory Tool. https://cmit.cms.gov/CMIT_public/ViewMeasure?MeasureId=641. Accessed April 28, 2020.
  16. Short Physical Performance Battery. Shirley Ryan AbilityLab Rehabilitation Measures Database. https://www.sralab.org/rehabilitation-measures/short-physical-perfromance-battery. Accessed April 28, 2020.
  17. Bohannon RW, Wang YC. Four-Meter Gait Speed: Normative Values and Reliability Determined for Adults Participating in the NIH Toolbox Study. Arch Phys Med Rehabil 2019; 100(3): 509-513.
  18. Six Minute Walk Test. Shirley Ryan AbilityLab Rehabilitation Measures Database. https://www.sralab.org/rehabilitation-measures/6-minute-walk-test. Accessed April 28, 2020.
  19. Brown LG, Ni M, Schmidt CT, Bean JF. Evaluation of an Outpatient Rehabilitative Program to Address Mobility Limitations Among Older Adults. Am J Phys Med Rehabil 2017; 96(8): 600-606.

Original Version of the Topic

Carl V. Granger, MD, Lynne M. Adamczyk, RN, BSN, MBA. Achieving Pay-for-Performance in Outpatient Practice through Measurement of Functional Health Outcomes.  9/11/2015.

Previous Revision(s) of the Topic

Richard D Zorowitz, MD, Kevin J Cipriano, MD, Robert J Maldonado, MD. Quality Payment Program. 7/31/2020

Jaspal Singh, MD, Jack Haberl, MD, MBA, Zach Danssaert, DO. Quality Payment Program/Pay for Performance. 5/3/2025

Author Disclosures

Jaspal Singh, MD
Nothing to Disclose

Jack Haberl, MD, MBA
Nothing to Disclose

Vincent Thieu, MD
Nothing to Disclose