The Affordable Care Act requires the Secretary of Health and Human Services to develop an episode grouper that combines separate but clinically related items and services into an episode of care for Medicare beneficiaries. In September 2011, the Centers for Medicare and Medicaid Services (CMS) selected a contractor to develop its prototype grouper into a comprehensive episode grouper. Ultimately, that episode grouper will be used to provide reports to physicians (or groups of physicians) that compare their patterns of resource use to those of similar physicians.

The reports will reflect methodologies that attribute episodes of care in whole or in part to physicians, identify appropriate physicians for purposes of comparison, and aggregate episodes of care to a physician into a composite measure per individual. They will take into account differences in socioeconomic and demographic characteristics, ethnicity, and health status of individuals, and eliminate the geographic adjustments in payment rates.

Since 2010, CMS has provided physician feedback reports to certain physicians and groups of physicians. In September 2011, CMS provided Quality and Resource Use Reports (QRURs) to certain large medical group practices participating in the Physician Quality Reporting System (PQRS), and, more recently, in March 2012, CMS disseminated QRURs to individual physicians practicing in four pilot states: Iowa, Kansas, Missouri, and Nebraska. The QRURs use quality data from the PQRS and claims data from Medicare fee-for-service patients to compare physicians to other physicians within their specialty.

The physician feedback program also supports development and implementation of a budget-neutral payment system that will employ a value-based payment modifier (VBPM). The VBPM, which will be used to adjust physician fee schedule payments based on the quality and cost of care physicians deliver, will be phased in over a two-year period beginning in 2015.