MIPS Penalties 2025: A Provider’s Guide to Staying Compliant

Don’t let MIPS penalties eat into your Medicare revenue. Under the CMS Quality Payment Program, up to 9% of your Medicare Part B payments can be withheld for sub-75 scores, and CMS anticipates that about half of eligible clinicians will face penalties in Performance Year 2023, impacting their 2025 reimbursements.

Know what triggers them or risk costly setbacks. Falling below the 75-point performance threshold, missing key quality measures, or skimping on Improvement Activities can slide your adjustment down a linear scale score at or under 18.75 and earn the full 9% penalty.

But avoiding these pitfalls is simpler than you think. By proactively aligning your workflow with CMS reporting requirements, optimizing quality measure selection, documenting Improvement Activities, and ensuring timely data submission, you can dodge MIPS penalties and even unlock bonuses up to +8.25% for top performers

What are MIPS Penalties? 

MIPS penalties are payment reductions imposed by the Centers for Medicare & Medicaid Services (CMS) under the Merit-based Incentive Payment System (MIPS), a program that determines how much Medicare pays eligible healthcare providers.

If you don’t meet MIPS performance requirements (like submitting quality measures, improvement activities, promoting interoperability, and cost efficiency), you risk receiving a negative payment adjustment. For example:

• Scoring below the performance threshold (e.g., 75 points for the 2023 performance year) leads to a reduction in your Medicare Part B payments two years later.
  
• The penalty can be as high as 9%, depending on how low your score is.

What Triggers MIPS Penalties and Why They Happen

MIPS penalties aren’t just a setback, they’re a signal. They reflect gaps in reporting, performance, or engagement with CMS requirements. For healthcare providers, understanding the why behind these penalties is key to protecting your Medicare revenue.

• To encourage quality care, CMS uses penalties to push providers to improve care, reduce costs, and use health IT effectively.
  
• Non-compliance: Providers who don’t report required data or perform poorly on MIPS categories are penalized.
  
• Penalties help fund bonuses for high-performing clinicians in the budget-neutral program to balance the budget.

Understanding the Mechanics of MIPS Penalties

MIPS penalties are not random; they follow a structured process tied directly to your performance data. Here’s a quick breakdown of how they work:

Performance-Based Adjustments

Your final MIPS score (0–100) is compared to the CMS-set threshold (e.g., 75 points). If your score falls short, you’re hit with a negative adjustment.

Sliding Penalty Scale

The lower your score, the steeper the penalty, up to –9%. For instance, a score close to zero results in the full penalty, while one just under the threshold results in a smaller cut.

Two-Year Delay

MIPS operates on a delayed timeline. So, your performance in 2023 affects your Medicare payments in 2025.

Common Causes of MIPS Penalties

Healthcare providers can face MIPS penalties for several key reasons, often related to gaps in reporting or performance. Understanding these causes is essential to avoid financial setbacks.

Failure to Report

Providers who do not submit any MIPS data automatically receive the maximum penalty, which can be as high as 9%. This often happens due to misunderstandings about eligibility or missed reporting deadlines. Participation is critical to avoid automatic penalties.

Low Performance Score

Scoring below the CMS-established performance threshold, for example, 75 points in the 2023 performance year, results in a payment reduction. Performance is measured across multiple categories, including Quality, Cost, Promoting Interoperability, and Improvement Activities. Underperformance in any category can lower the overall score.

Inaccurate Data Submission

Submitting partial data, selecting inappropriate measures, or failing to meet the required case minimums can significantly reduce your MIPS score. Errors in documentation or coding also negatively affect scoring and increase the risk of penalties.

Insufficient Use of Certified EHR Technology

Failure to meet requirements in the Promoting Interoperability category, such as electronic prescribing or health information exchange, leads to zero points in this category. This is a common challenge, especially for smaller practices lacking robust EHR systems.

Neglecting Improvement Activities

Improvement Activities offer relatively straightforward opportunities to earn points. Providers who fail to document or attest to these activities miss out on an important chance to improve their overall MIPS score and reduce penalty risks.

The Cost of Not Reporting MIPS to CMS

The Merit-based Incentive Payment System (MIPS) is a key part of the Quality Payment Program (QPP) by the Centers for Medicare & Medicaid Services (CMS). It ties Medicare Part B payments to performance in areas like quality, cost, and technology use.

Failing to report MIPS data can have serious financial consequences for eligible clinicians and groups.

Penalty for Not Reporting MIPS

If you fail to report MIPS data for a given performance year, CMS will apply a:

• 9% negative payment adjustment

• On your Medicare Part B reimbursements

• In the payment year, two years later

Strategies To Avoid MIPS Penalties

Avoiding MIPS penalties requires more than just participation; it demands strategic planning, timely action, and accurate reporting. Here’s how healthcare providers can stay ahead:

Understand Your Eligibility and Requirements

Start by confirming your MIPS eligibility each performance year. CMS eligibility thresholds can change, so it’s important to verify whether you’re required to report and, if so, which categories apply to you.

Choose the Right Measures

Select quality measures that align with your specialty and patient population. Choosing measures that are easy to track and meaningful to your practice increases your chances of meeting benchmarks and scoring higher.

Optimize Your EHR and Promote Interoperability

Ensure you’re using 2015 Edition Certified EHR Technology and meeting all Promoting Interoperability objectives. This includes e-prescribing, patient access to health data, and secure messaging.

Complete and Document Improvement Activities

Take advantage of Improvement Activities, which can be easier to fulfill than other categories. Be sure to document everything properly and keep records in case of an audit.

Monitor Performance and Submit Early

Track your performance regularly throughout the year to identify gaps. Don’t wait until the last minute to submit your data; early submission allows time to fix errors and confirm successful reporting.

Work with a Qualified Registry or Consultant

Partnering with MIPS support services or registries can help improve data collection, ensure compliance, and maximize your final score.

Final Thought

MIPS penalties aren’t just numbers on a report, they’re direct hits to your bottom line. In a program designed to reward high performance and value-driven care, staying informed and proactive isn’t optional; it’s essential. With CMS holding up to 9% of your Medicare reimbursements at stake, the cost of inaction is simply too high.

The good news? Avoiding these penalties is absolutely within reach. By aligning your reporting strategy with CMS requirements, selecting the right measures, and ensuring complete, timely submissions, you can not only protect your revenue but also potentially earn meaningful bonuses.

Partner with Health Quest Billing for Expert MIPS Support and Peace of Mind

Dealing with the complexities of MIPS reporting can be overwhelming, but you don’t have to do it alone. Health Quest Billing offers specialized support to help healthcare providers optimize performance, avoid penalties, and maximize incentives. From selecting the right quality measures to ensuring accurate, on-time submissions, our team handles the heavy lifting so you can stay focused on patient care. Let us help you turn compliance into opportunity with tailored, end-to-end MIPS solutions.