Improving Your MIPS Cost Score

The Merit-based Incentive Payment System (MIPS) Cost Category of the Quality Payment Program (QPP) at a minimum should broadly be understood to facilitate increasing the cost score.

The MIPS cost category is calculated by CMS with data from the administrative claims submitted for payment by clinicians and thus, does not require any additional data to be reported by the clinician/practice.  In 2020 the Cost Category was re-weighted to 0% due to COVID. In 2021 the Cost Category is weighted at 20%.

Not all clinicians receive a cost score. If you are primary care, hospital based, or have a specialty related to any episode based measures you will have a cost score. The easiest way to check is to log in to the Quality Payment Program website to see if you have had a cost score previously.

At the most basic level, the measures in the MIPS cost category compare actual costs versus expected costs and the calculation is compared to a performance benchmark rather than a historical benchmark. Actual costs are based on Medicare allowable charges which include the portion Medicare pays, plus the patient’s deductible and/or co-pay for each service provided.

Expected costs are based on claims data that were submitted the year prior to the current performance year.  Expected costs are calculated by taking a baseline risk factor and adjusting it based on age, sex, dual Medicare/Medicaid eligibility, and selected chronic disease diagnoses to derive a Risk Adjustment Factor (RAF) for each Medicare beneficiary.  Using this method accounts for patient complexity and does not disadvantage a clinician or practice whose patient populations includes a higher-than-average percentage of dual-eligible patients with multiple chronic diseases.  The RAF is recalculated each year and is based on ICD-10 codes submitted by all clinicians and healthcare entities providing services to the beneficiary during the previous year.

Beneficiary costs are associated to a clinician/practice for the cost measures using an attribution method specific to the given cost measure.  Thus, a clinician may be attributed a given beneficiary for one measure but not another.

Cost Measures

Global measures which are broad and contain data from most beneficiaries.  There are two global measures in the QPP/MIPS.

  • Medicare Spending per Beneficiary Clinician (MSPB Clinician) is calculated on beneficiaries who were hospitalized during the performance year. Clinicians/practices must provide a specified percentage of the provider services during the hospitalization to have the patient attributed to them for this measure.
  • Total Per Capita Cost (TPCC) measure is calculated for most beneficiaries from all costs incurred in any given year. A beneficiary is attributed to a single clinician for this measure.  The attribution is based on the provider who has provided the most primary care services in the performance year.

Episode-based measures which are narrow and contain data only from specific acute or chronic conditions or specific procedures.  CMS has a process in place to build and evaluate new episode measures and clinicians may anticipate there will be new measures released over time and the total number of episode measures will grow.

For any cost measures and a cost score to appear on a MIPS feedback report, clinicians must meet a case minimum for the measures. Case minimums are a basic number of patients attributed to the clinician for a given measure.   Due to their narrow scope, most clinicians will be included in only one or two episodes measures at a time.

Hierarchical Category Codes (HCC) and the Quality Payment Program Cost Category

The Centers for Medicare & Medicaid Services (CMS) use Hierarchical Category Codes (HCC) to calculate a clinicians score for the Merit-based Incentive Program’s (MIPS) cost category. These categories are based on ICD 10 diagnosis codes. The higher the HCC code the greater the expected costs for a patient. This is the first step in improving your cost score.

HCC Basics

There are 86 HCC categories grouped together. Some examples are diabetes, mental health, and heart disease. There is a Risk Adjustment Factor (RAF) applied to each category based on average cost per patient in the previous year. Exacerbation increases the RAF (i.e. Diabetes with Nephropathy would be greater than the RAF for Diabetes without complications).

There are some discretionary exclusions of categories, and they must be:

  • Clinically relevant
  • Predictive of cost
  • Adequate sample size

The factors in calculating the HCC score are age, gender, dual eligibility, RAF, disability/institutionalization, disease interactions. Disease interactions have an overall combined score of each applicable disease.


The HCC score is used to calculate both the Cost category score as well as a Complex Patient bonus score.

The Complex Patient bonus score is calculated by taking the average HCC score from a clinician’s patient population then multiplying that by the percentage of those patients that are dually eligible for Medicare and Medicaid. This adjust the clinician’s score to account for a larger population of complex patients.

For the Cost category measures a clinician’s HCC score is applied to the cost of their patient population compared to the national average HCC score for each measure.

Coding Strategy

Use the suggestions below to accurately report the complexity of your patients to CMS:

  • Code to the greatest specificity.
  • Bill all applicable diagnoses annually – if something isn’t used annually CMS will not include it in calculations.
  • Only use ‘history of’ for past issues not for anything ongoing.

Use the Annual Wellness Visit to capture all appropriate diagnoses to the greatest specificity. This comprehensive visit ensures there is time to capture these, code to specificity, and ensure they are coded annually.

Finally perform internal audits to identify anyone that needs additional training on coding. Pull charts that will cover most diagnoses as well as running reports on those that are under coded.

Quality Improvement Domains

There are five areas or domains in which you can concentrate to improve your cost score. They are listed below.

  1. Care Coordination
  2. Hospital Readmissions
  3. Emergency Department Utilization
  4. Chronic Care Management
  5. Social Determinants of Health

Addressing these areas are the second best ways to impact your cost score. You can learn more about how to address these areas in our Traditional MIPS Cost Category Toolkit found here.

Additionally, our Office Hours this month will cover all of the ways to increase your cost score. Please join us on Wednesday Oct. 27 at 2 PM CT/3 PM ET. You can register here.

If you have additional questions or need any assistance with MIPS please call us at 844.205.5540 or email us at

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