MIPS Penalties Explained: What Triggers Them & How to Avoid

MIPS penalties can quietly drain your revenue if you’re not prepared. 

For many providers, one missed measure or reporting erroris all it takes to see medicare payments lowered. At DocVaz Medical Billing, we help practices know what addresses MIPS Penalties Explained: What Triggers Them & How to Avoid! More importantly, how to avoid them – so you can protect your repayments and concentrate on patient care.

What AareMIPS penalties? 

MIPS stands for Merit-Based Incentive Payment System. MIPS penalties are basically the cuts to your medical payments. These may happen when the doctor or nurse does not follow the rules and regulations set by the Centers for Medicare Services. The main objective of MIPS is to pay the medical providers for providing optimal treatments and best care to their patients, not just for attending to more patients. 

It works very simply. The doctor who gives good performance to MIPS will be paid more; on the other hand, the doctors who do not follow the rules may face a loss in money through penalties. 

The penalty basically decreases in payment, which depends on the performance of the provider.

Why is There a Need For MIPS Penalties? 

CMIS applies MIPS penalties to take medical care towards outcome-based care. This results in the best outcomes, less medical costs, and precise documentation. It is a financially balanced program. The amount taken from the charged doctors is provided to good performers as a reward. New rules and regulations are raised every year. A minor mistake can lead to financial loss. 

Working Of MIPS Penalties: 

It simply works in four stages. Every stage is separately scored and added up to one number, which is called CPS. Every different stage holds different work, which is discussed below: 

• Standard or Quality: 

This is the first step, which holds a 30% score. It helps to determine how much care is provided to the patients by the medicare providers.

• Enabling Data Sharing: 

This stage holds a 25% score, which focuses on data sharing.

• Enhancement in Activities:

The third stage holds a 15% score. It focuses on improvement in different activities, which result in more accurate and better care for the patients. 

• Expenditure: 

This stage focuses on the medical expenditure spent for the patient’s comfort and care and holds a 30% score. 

Performance Threshold: 

CMS sets a different score every year. In 2023, the threshold was 75 points. If your CPS does not cross the threshold score, no penalty is applied, and there is a chance of a bonus; if CPS crosses the threshold level, a penalty applies. 

What Are The Reasons that trigger the MIPS Penalty? 

The following are the reasons that doctors get penalized: 

• When the information doesn’t fulfill the requirements, it can lower the score. 

• Providing poor care and poor-quality treatment can decrease the score. 

• Even a minor point difference can result in a penalty. 

• Wrong data entry or technical issues lead to financial loss. 

• Not understanding the new rules can lead to penalties.

What Happens If You Don’t Report MIPS?

If you’re MIPS-eligible and fail to report any data, CMS assigns a score of zero, resulting in the maximum 9% penalty.

For example:

• $250,000 in medicare Part B billing.
• 9% penalty, $22,500 lost.

This reduction applies to each Medicare Payment throughout the year, not on a time-free basis.

Does Practice Size Affect MIPS Penalties?

Yes, small and solo practices are hit hardest. Smaller practices often lack the staff, technology, and resources required for full MIPS compliance. Larger organizations generally have devoted teams and systems to control reporting efficiently. Even within group practices, failure to report correctly at the individual or group level can still lead to penalties. Some providers are automatically exempt, including:

• First-year medicare provider.
• Low-volume providers (under CMS thresholds).
• Participants in advanced alternative payment models (APMs).

MIPS Penalty Trends Over Time

Since MIPS began, CMS has steadily increased performance thresholds and penalty complexity. What began as a low participation bar has evolved into a demanding system needing persistent performance. By 2022, the threshold reached 75 points, and penalties reached their maximum 9%, where they have stayed today. This trend indicates one thing clearly: preventing penalties is becoming harder, not easier. 

The Real Impact of MIPS Penalties

The impact of MIPS penalties goes beyond lost revenue:

• Increased administrative burden.
• Higher compliance prices.
• Providers’ burnout due to low scores.
• Damage to reputation and patient trust.

Studies evaluate MIPS compliance, price physicians over $12,000 per year, and consume more than 200 hours annually in Medical Billing Services, time that can be spent on patient care. 

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