Navigating CMS incentives, penalties, and deadlines

Answers in Practice

Rachna Chaudhari

Rachna Chaudhari is the AAD's practice management manager. Her column offers tips in response to common member questions.

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Dermatology practices today face constant pressure to keep up to date with regulatory changes in an environment of increased administrative burdens and decreased revenue. This article will outline the most important changes in the next several years.

Most of the regulatory changes are due to laws passed by Congress, which are later overseen by the Centers for Medicare and Medicaid Services (CMS). There are four distinct CMS incentive programs that all dermatology practices need to understand:

  • the Electronic Prescribing (eRx) Incentive Program,
  • the Electronic Health Record (EHR) Incentive Program,
  • the Maintenance of Certification (MOC) Incentive Program, and
  • the Physician Quality Reporting System (PQRS), formerly known as PQRI.

CMS has structured these programs so they operate independently of each other. Thus, as a practice, you must participate in each program if you wish to receive the incentive and avoid a penalty in the future.

E-Prescribing Incentive Program

The eRx Incentive Program is the first to be implemented, with the penalty for not participating starting Jan. 1, 2012. All dermatology practices should be aware of this and begin e-prescribing immediately if they do not meet any of the exclusion criteria for the program. Providers, including physician assistants and nurse practitioners, who do not have at least 100 eligible cases, mostly encounters coded as office visits, will automatically be excluded from the program’s penalties. Providers who practice in a rural area without sufficient high-speed Internet access can report the code G8642 to be excluded; providers who practice in an area without sufficient access to pharmacies that accept electronic prescriptions can report the code G8643. [pagebreak]

To begin e-prescribing, providers can either purchase a stand-alone e-prescribing software system or use an EHR with an e-prescribing component integrated within it. If you do not currently have an EHR in your practice, you can visit to search for stand-alone e-prescribing products or use a free e-prescribing system at (The free system does not provide technical support.)

Once providers begin e-prescribing, they will have to notify CMS by reporting G8553 on their Medicare claim form in box 24D at least 10 times for each provider before June 30, 2011 and 15 additional times before Dec. 31, 2011. An E/M code must be also listed on the claim form for the same date of service as the e-prescribing code. If reporting is successful, the providers in the practice are eligible to earn a 1 percent incentive on their total Medicare Part B allowed charges for this year and will avoid a 1 percent penalty in 2012 and a 1.5 percent penalty in 2013. (A penalty of 2 percent is scheduled for subsequent years for non-e-prescribers.) There are some exemptions available to dermatologists; more information is available at [pagebreak]

EHR Incentive Program

The EHR Incentive Program is significantly more complex than the e-prescribing incentive program. Only physicians are eligible, and they must meet several requirements to obtain the $44,000 in incentive funds, including:

  • using a certified system (a list of certified systems is available at,
  • using their system in a meaningful way (which will be determined through the reporting of various measures), and
  • reporting clinical quality measures.

Dermatologists can register for the EHR Incentive Program on the CMS website at, and will only need to perform the required measures for 90 days in the first year of reporting. Thus, a provider would need to begin using certified EHR technology in a meaningful way by Oct. 1, 2011 to receive the incentive funds this year. For a full list of the measures you will be required to report and more information, visit [pagebreak]

MOC Incentive Program

The MOC Incentive Program requires dermatologists to meet certain guidelines through the American Board of Dermatology to obtain the 0.5 percent incentive available from now until 2014. These guidelines include participating in an MOC program, completing additional CME, participating in an approved registry, attesting that they will complete the MOC exam, and completing a qualified MOC practice assessment. In addition to these objectives, providers would also have to participate in the PQRS program in the same year. Visit the ABD website at for more information. For more on the Academy’s MOC-D resources, visit

PQRS Program

PQRS allows physicians to be eligible for a bonus payment of 1 percent of their total Medicare Part B allowed charges if they report on at least three quality measures in 2011. Dermatologists can report on melanoma measures 137, 138, and 224, which measure whether providers have a recall system for melanoma patients, how care is coordinated with the physician providing continuing care, and how often imaging studies are ordered for asymptomatic stage 0 or 1A melanoma patients. Descriptions of each measure appear in the sidebar above; they reflect recommendations that are also included in the Academy’s guidelines of care for melanoma.

The PQRS measures can be reported only through a qualified electronic registry. If dermatologists choose to report on the three melanoma measures, they must report on at least 80 percent of their eligible patients for measures 137 and 224, and on at least 80 percent of their eligible visits for measure 138. Each of the quality measures must have at least one eligible instance for a dermatologist to qualify for the incentive. Since the only applicable diagnosis for measure 138 is a new diagnosis of melanoma, dermatologists must see at least one patient with a new diagnosis of melanoma (who is also a Medicare patient) in order to report measure 138 successfully. Additionally, you must successfully meet the measure for at least one patient per measure. [pagebreak]

The Academy continues to provide practice support by offering an online reporting registry the Quality Reporting System (QRS) for members to report their PQRS data to CMS. Participants will be able to choose either a one-year reporting period, Jan. 1 Dec. 31, 2011, or a six-month reporting period, July 1 Dec. 31, 2011. The incentive will be based only on claims filed during the chosen reporting period. The final day to purchase the Academy’s registry ($249) will be Dec. 16, 2011 and the final day to enter and submit all data into the registry is Jan. 31, 2012. All associated claims must be processed by the end of February 2012. Visit to read more about the quality measures or purchase the 2011 Physician Quality Reporting System Melanoma Reporting module.

HIPAA 5010

In addition to the programs instituting incentives and penalties through Medicare, CMS has also made significant regulatory changes to HIPAA. Beginning Jan. 1, 2012, all entities in the health care industry that submit electronic claims will have to operate under a new technical version labeled 5010 to process all claims, remittance advice, referrals, eligibility standards, and authorizations. This change will require installing an update to your practice management software system to allow the practice to operate under the new technical standards. Practices need to be aware of this update since claims will not be processed after Jan. 1, 2012 if the update is not installed. Additionally, minor data changes may be required on all claims since the 5010 standards require providers to list a physical address for their billing address instead of a post office box, submit nine-digit ZIP codes, and list an NPI number for all providers. Your practice management system may also require additional data entries. Practices should contact their vendors immediately to formulate a plan of action in advance of the implementation date of Jan. 1, 2012.


The most significant regulatory change to affect medical practices in the next several years will be the implementation of ICD-10-CM. ICD-10-CM will replace the current ICD-9-CM code system for all diagnosis codes. ICD-10-CM consists of more than 68,000 codes, compared to the approximately 13,000 ICD-9-CM codes. This will allow for greater granularity, more specificity, and enough clinical detail to provide information for clinical decision making and outcomes research. [pagebreak]

ICD-10 codes are three to seven characters in length, with the first character being alpha, the second numeric, and the third through seventh either alpha or numeric. The first three characters have common traits, and each additional character adds specificity. ICD-10’s alphanumeric system allows for the creation of a post-procedural category, description of which side of the body is affected, and other factors that can affect health (e.g., lifestyle, socioeconomic, family relationships). Despite the differences between the two classification systems, however, the coding process is the same.

Starting Oct. 1, 2013, health care claims will be submitted to payers using ICD-10-CM diagnosis codes. ICD-10-CM will have a significant impact on dermatologists. There will be changes involving claims software programs, fee schedules and contracts, coding documentation, claim forms, and superbills. Physicians and staff will need to be trained on all of the new coding guidelines as well as documentation standards. Productivity will be affected when the ICD-10-CM code set goes into effect, so it is to the practice’s benefit to be as prepared as possible. The Academy plans to release additional educational materials, training webinars, and other resources to aid practices in their preparation.)

For further assistance with any of these topics, email

Cindy Bracy, Alison Shippy, and Scott Weinberg contributed to this column.

PQRS melanoma measures

Measure #137 Melanoma: Continuity of Care Recall System

Percentage of patients, regardless of age, with a current diagnosis of melanoma or a history of melanoma whose information was entered, at least once within a 12-month period, into a recall system that includes:

  • A target date for the next complete physical skin exam
  • A process to follow up with patients who either did not make an appointment within the specified timeframe or who missed a scheduled appointment

Measure #138 Melanoma: Coordination of Care

Percentage of patient visits, regardless of patient age, with a new occurrence of melanoma who have a treatment plan documented in the chart that was communicated to the physician(s) providing continuing care within one month of diagnosis.

Measure #224 Melanoma: Overutilization of Imaging Studies in Stage 0-IA Melanoma

Percentage of patients, regardless of age, with Stage 0 or IA melanoma, without signs or symptoms, for whom no diagnostic imaging studies have been ordered related to the melanoma diagnosis.

Overall CMS incentives available to providers

 Year  EHR Incentive*  eRx Incentive*  PQRS Incentive*  MOC Incentive*  Total Incentives Available
 2011  $44,000 (dispersed over a 5 year period)  1%  1%  0.5%  2.5% OR $44,000 + 1.5%
 2012  $44,000 (dispersed over a 5 year period)  1%  0.5%  0.5%  2% OR $44,000 + 1%
 2013  $39,000 (dispersed over a 4 year period)  0.5%  0.5%  0.5%  1.5% OR $39,000 + 1%
 2014  $24,000 (dispersed over a 3 year period)  0%  0.5%  0.5%  1% + $24,000

Percentages based on Medicare Part B allowed charges.

*EHR and e-prescribing incentive cannot be combined. Providers must select one program to participate in.

Overall CMS penalties applicable to providers

Year EHR Penalty  E-Prescribing Penalty  PQRS Penalty  Total Penalties 
 2012  0%   1%  0%   1% 
 2013  0%  1.5%  0%   1.5% 
 2014  0%   2%   0%  2%
 2015  1%  2%  1.5%   4.5%
 2016  2%  2%  2%   6% 
 2017 and beyond  3%  2%  2%  7%

Percentages based on Medicare Part B allowed charges.

Timeline of penalties and incentives

June 30, 2011: Deadline to submit e-prescribing information to CMS to avoid penalty in 2012 

Oct. 1, 2011: Deadline to register for the EHR Incentive Program to obtain incentive dollars in 2011

Dec. 16, 2011: Deadline to register for the AAD PQRS registry to obtain bonus for 2011

Dec. 31, 2011: Deadline to attest for the EHR Incentive Program for participation in 2011

Dec. 31, 2011: Deadline to participate in the MOC incentive program to obtain bonus for 2011 

Jan. 1, 2012: E-prescribing penalty of 1% goes into effect

Jan. 1, 2012: Deadline to adopt HIPAA 5010 standards

Jan. 31, 2012: Deadline to submit PQRS measures to AAD registry

Oct. 1, 2012: Deadline to register for the EHR Incentive Program to obtain the maximum incentive dollars

Dec. 31, 2012: Deadline to attest for the EHR Incentive Program for the maximum incentive dollars

Jan. 1, 2013: E-prescribing penalty of 1.5% goes into effect

Oct. 1, 2013: Deadline to adopt ICD-10-CM standards

Oct. 1, 2013: Deadline to register for the EHR Incentive Program for 2013 incentive dollars

Dec. 31, 2013: Deadline to attest for the EHR Incentive Program for 2013 incentive dollars

Jan. 1, 2014: E-prescribing penalty of 2% goes into effect permanently

Oct. 1, 2014: Deadline to register for the EHR Incentive Program to obtain minimum incentive dollars

Dec. 31, 2014: Deadline to attest for the EHR Incentive Program to obtain minimum incentive dollars

Jan. 1, 2015: PQRS penalty of 1.5% goes into effect

Jan. 1, 2015: EHR penalty of 1% goes into effect

Jan. 1, 2016: PQRS penalty of 2% goes into effect permanently 

Jan. 1, 2016: EHR penalty of 2% goes into effect

Jan. 1, 2017: EHR penalty of 3% goes into effect permanently



PQRS melanoma measures
Overall CMS incentives available to providers
Overall CMS penalties applicable to providers
Timeline of penalties and incentives
PQRS melanoma measures
Overall CMS incentives available to providers
Overall CMS penalties applicable to providers
Timeline of penalties and incentives