- Quelin Billing LLC
MIPS Payment Adjustment Codes: A Guide for Healthcare Providers
April 23, 2025
In today’s complex healthcare reimbursement landscape, programs like the Merit-based Incentive Payment System (MIPS) are pivotal in determining how medical practices are paid for Medicare services. MIPS, part of the Centers for Medicare & Medicaid Services (CMS) Quality Payment Program, adjusts payments based on clinicians’ performance in key areas such as quality, cost, improvement activities, and promoting interoperability. For practices participating in MIPS, understanding how these payment adjustments are communicated is critical to maintaining accurate billing and optimizing revenue cycle management.
A key component of this process is recognizing MIPS Payment Adjustment Codes, which appear on Remittance Advices (RAs) to indicate whether a payment has been increased or decreased due to MIPS performance. These codes help billing teams understand payment variations and ensure financial records align with expectations. In this blog, we’ll explore what MIPS Payment Adjustment Codes are, how they function, and share practical strategies for managing them effectively in your practice, with insights from Quelin billing.
What is MIPS?
The Merit-based Incentive Payment System (MIPS) is a CMS initiative designed to promote value-based care by incentivizing high-quality, cost-effective healthcare delivery. Eligible clinicians are evaluated on their performance across four categories:
- Quality: Measures clinical outcomes and patient experience.
- Cost: Assesses the cost of care provided to patients.
- Improvement Activities: Evaluates efforts to enhance care processes.
- Promoting Interoperability: Focuses on the use of certified electronic health record technology.
Clinicians receive a final score based on their performance in these categories, which determines their payment adjustment for Medicare Part B services two years later. For example, performance in the 2023 calendar year impacts payments in 2025. A higher score can lead to a positive adjustment (increased payments), while a lower score may result in a negative adjustment (reduced payments).
Understanding MIPS Payment Adjustments
MIPS payment adjustments are percentage-based changes applied to Medicare payments for each claim submitted during the payment year. These adjustments are determined by comparing a clinician’s final MIPS score to a performance threshold set by CMS:
- Above the Threshold: Clinicians receive a positive adjustment, increasing their payment.
- At the Threshold: Clinicians receive a neutral adjustment, with no change to payment.
- Below the Threshold: Clinicians receive a negative adjustment, decreasing their payment.
The exact percentage of the adjustment depends on the final score and a scaling factor determined by CMS, which ensures budget neutrality. For instance, in the 2025 payment year, adjustments are based on 2023 performance, and clinicians with exceptional performance may receive additional bonuses from a separate funding pool.
To communicate these adjustments, CMS uses specific codes on RAs, which appear alongside the service code and payment amount. These codes are essential for billing staff to identify and record the adjustments accurately.
MIPS Payment Adjustment Codes
When a MIPS payment adjustment is applied to a claim, the following codes are used on the Remittance Advice:
These codes clearly indicate whether the payment has been adjusted upward or downward due to MIPS performance, allowing practices to track financial impacts.
Decoding the Codes
To fully understand these codes, here’s a breakdown of their meanings:
- Group Code CO (Contractual Obligation): This code signifies that the adjustment results from a contractual agreement or regulatory mandate, such as the MIPS program rules. It categorizes the adjustment as a required change rather than an error or discretionary action.
- CARC 144 (Incentive Adjustment): Used for positive adjustments, this code indicates that the payment has been increased as an incentive for high performance in MIPS. It reflects the financial reward for exceeding the performance threshold.
- CARC 237 (Legislated/Regulatory Penalty): Applied to negative adjustments, this code denotes a reduction in payment due to a regulatory penalty, in this case, for falling below the MIPS performance threshold.
- RARC N807 (MIPS Payment Adjustment): This remark code explicitly links the adjustment to the MIPS program, eliminating ambiguity about the reason for the payment change.
By recognizing these codes, billing staff can accurately account for adjustments in the practice’s financial records, ensuring transparency and compliance.
Best Practices for Handling MIPS Payment Adjustments
Managing MIPS payment adjustments effectively requires proactive steps to integrate these codes into your billing processes. Here are five best practices to consider:
- Update Your Practice Management System: Configure your billing software to recognize and process MIPS adjustment codes (CO, CARC 144/237, RARC N807). This may involve adding new adjustment codes or updating existing ones to reflect MIPS-specific adjustments. Check with your software vendor to ensure compatibility.
- Train Your Billing Staff: Educate your team on identifying these codes on RAs and posting adjustments correctly. Training should cover the implications of positive and negative adjustments and how they affect the practice’s revenue. Regular refreshers can keep staff informed about CMS updates.
- Regularly Review Remittance Advices: Establish a routine for reviewing RAs to verify that expected adjustments are applied correctly. This helps identify discrepancies early, such as missing or incorrect adjustments, which can be addressed through CMS’s targeted review process if necessary.
- Monitor MIPS Performance: Stay informed about your clinicians’ MIPS scores and anticipated payment adjustments. CMS notifies clinicians of their scores annually, typically in July, allowing practices to forecast revenue and address performance gaps. Resources like the CMS Quality Payment Program provide score details.
- Partner with Revenue Cycle Experts: Managing MIPS and payment adjustments can be complex. Partnering with a revenue cycle management specialist like Revantage Healthcare can streamline compliance, optimize MIPS participation, and maximize reimbursements. Our team offers tailored solutions to enhance your financial performance.
Real-World Application: How Codes Appear on RAs
On a Remittance Advice, MIPS payment adjustments are typically listed alongside the service code, allowed amount, and payment amount. For example:
- Positive Adjustment Example: A claim for a service with an allowed amount of $100 might show an additional $2 (assuming a 2% positive adjustment) with codes CO, CARC 144, and RARC N807, indicating a MIPS incentive.
- Negative Adjustment Example: The same claim might show a reduced payment of $98 (assuming a 2% negative adjustment) with codes CO, CARC 237, and RARC N807, signaling a MIPS penalty.
By cross-referencing these codes with the practice’s MIPS score, billing staff can confirm the adjustment’s accuracy and update financial records accordingly.
Addressing Discrepancies
If a practice believes an adjustment is incorrect, CMS allows clinicians to request a targeted review within 60 days of score notification (typically around July). Common reasons for appeals include:
- Errors in performance data submitted.
- Eligibility issues, such as being incorrectly included or excluded from MIPS.
- Incorrect application of special status (e.g., low-volume threshold exemptions).
Revantage Healthcare can assist in reviewing RAs and preparing appeals to ensure your practice receives the correct adjustments.
Conclusion
Navigating MIPS Payment Adjustment Codes is a vital part of maintaining a robust revenue cycle for medical practices. By understanding codes like CO, CARC 144, CARC 237, and RARC N807, and implementing best practices, practices can ensure accurate billing, minimize errors, and optimize financial outcomes.
At Revantage Healthcare, we specialize in helping healthcare providers manage complex reimbursement programs like MIPS. Our expertise in revenue cycle management can support your practice in achieving compliance, maximizing payment adjustments, and enhancing overall financial health.
Ready to simplify your MIPS processes and boost your revenue cycle? Contact Revantage Healthcare today to learn how we can help!
Key Citations
- 2025 MIPS Payment Year Payment Adjustment User Guide
- MIPS Payment Adjustment Codes Explained AdvancedMD
- FAQs on MIPS Feedback Reports and Adjustments MDinteractive
- Detailed Explanation of MIPS Payment Adjustments Patient 360
- Guide to Checking MIPS Payment Adjustments AAPC Knowledge Center
- CMS Guidance on 2019 MIPS Payment Adjustment Codes AAFP
- Overview of Adjusting Payment Under MIPS AHA
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