Key Takeaway

A MIPS payment adjustment is a percentage increase or decrease applied to your Medicare Part B reimbursements based on your Composite Performance Score from two years prior. Your 2026 performance data determines the adjustment applied to your 2028 Medicare payments. The maximum negative adjustment is -9%. Non-reporting triggers the maximum penalty automatically.

Every year, thousands of outpatient physical therapy, occupational therapy, and speech-language pathology clinics submit MIPS data to CMS — or, in many cases, fail to submit anything at all — without a clear understanding of what that decision costs them two years later. A MIPS payment adjustment is not an abstract compliance concept. It is a concrete, calculable percentage change applied to every Medicare Part B reimbursement your clinic receives in a given payment year.

Understanding how MIPS payment adjustments work for therapy clinics means understanding three things precisely: how your score is calculated, how that score translates into a payment modifier, and why the two-year lag between performance and payment makes early preparation non-negotiable. This guide covers all three in plain language, using the 2026 performance year and the finalized CMS payment rules as the reference framework.

What Is a MIPS Payment Adjustment?

A MIPS payment adjustment is a percentage modification applied by CMS to the Medicare Part B allowed charges paid to an eligible clinician or group during a payment year. It is administered through the Quality Payment Program (QPP), which was established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

The adjustment is derived from your Composite Performance Score (CPS) — a 0–100 point score that CMS calculates based on your reported data across four performance categories: Quality, Cost, Improvement Activities, and Promoting Interoperability. Your score is compared against a performance threshold set by CMS. Scores below the threshold result in a negative adjustment. Scores at the threshold produce no change. Scores above the threshold are eligible for a positive adjustment.

What a MIPS Payment Adjustment Is — and Is Not

• It is not a bonus check.A positive adjustment means CMS reimburses a higher percentage per claim — it modifies your future payment rate, not a lump sum payment.
• It is not applied immediately.The adjustment from your 2026 performance is applied to your Medicare remittances in 2028 — a two-year lag.
• It applies to all Medicare Part B allowed chargesduring the payment year — not just to claims for services that were reported as MIPS measures.
• It is calculated by CMS automaticallybased on your submitted data and applied to Medicare Remittance Advice statements. CMS does not send advance notification before applying it.
• Non-reporting is not neutral.Failing to submit any data results in the maximum negative adjustment — currently -9% — applied automatically to the payment year.

How MIPS Payment Adjustments Work for Therapy Clinics

The mechanics of MIPS payment adjustments follow a three-stage cycle that many clinic owners misunderstand — particularly the two-year separation between when data is collected and when it financially impacts the practice.

The two-year lag is the most consequential misunderstanding in MIPS compliance for therapy clinics. A clinic that underperforms or fails to report in 2026 will not feel the financial impact until 2028 — which can create a dangerous false sense of security. By the time the penalty appears on a remittance advice statement, the opportunity to prevent it is two years past.

Why the Two-Year Lag Is a Risk Multiplier

Because the financial impact is delayed, clinics often underinvest in MIPS preparation. The 2026 performance window closes December 31, 2026. No retroactive data collection, documentation amendments, or late submissions will change your score after that date. Planning for your 2028 payment adjustment must happen in 2026 — not in 2027 when feedback reports are released.

What Is the Maximum MIPS Payment Adjustment?

The maximum negative MIPS payment adjustment for the 2026 performance year — which affects 2028 Medicare payments — is -9%. This cap is established under MACRA and has been maintained at this level as the program has matured.

The -9% maximum penalty is triggered when a clinician scores at or below one quarter of the performance threshold. For 2026, with a performance threshold of 75 points, the maximum penalty threshold is 18.75 points. Any composite score at or below 18.75 results in the full -9% adjustment. Scores between 18.76 and 74.99 receive a proportionally smaller negative adjustment.

Clinicians who do not submit any data are assigned a score of zero — which is below 18.75 — and automatically receive the maximum -9% penalty. This is the single most important reason why non-reporting is not a neutral choice for eligible therapy clinics.

Positive Adjustments: Budget Neutrality and the Exceptional Performance Pool

MIPS operates as a budget-neutral program. The negative adjustments collected from penalized clinicians are redistributed as positive adjustments to those who score above the performance threshold. Because the distribution of positive adjustments depends on how many clinicians score above threshold nationally — and by how much — precise positive adjustment percentages cannot be predicted in advance with accuracy.

CMS has separately funded an exceptional performance bonus for clinicians who score at a certain level above the threshold, but the specific percentages are determined annually based on available funding. The key principle: scoring above 75 points makes your clinic eligible for a positive adjustment, but the exact percentage is determined post-hoc by the national performance distribution.

2026 Performance Threshold for Therapy Clinics

CMS finalized the MIPS performance threshold at 75 points for the 2026 performance year, and confirmed this threshold will remain at 75 points through the 2028 performance year as part of the CY 2026 Medicare Physician Fee Schedule Final Rule (November 2025). This stability is a meaningful policy signal — CMS has chosen to hold the threshold rather than increase it, providing a consistent planning target for therapy clinics.

For therapy clinics, achieving a score of 75 is not a stretch goal — it is the floor below which money is actively lost. The Quality category (30% of the composite score) and the Improvement Activities category (15%) together represent 45% of your total score and are the most controllable inputs for a private practice outpatient clinic. A clinic that selects well-benchmarked quality measures and attests to relevant improvement activities has a credible path to the 75-point threshold with deliberate but manageable effort.

How MIPS Payment Adjustments Impact Therapy Revenue

Abstract percentages become concrete when applied to real clinic revenue. The following scenarios illustrate the financial stakes of MIPS performance — and non-performance — for outpatient rehab therapy practices‍

The $27,000 loss at maximum penalty for a $300,000 Medicare revenue base is a straightforward calculation. What is less obvious is the compounding effect in group practices. A clinic with four MIPS-eligible therapists, each generating $200,000 in annual Medicare revenue, has an aggregate Medicare exposure of $800,000. At the maximum -9% adjustment, that represents a $72,000 annual loss — a material impact on any practice's operating finances.

Group reporting can partially buffer this by pooling performance data — but it also means every clinician under the TIN receives the same composite score. A high performer in a group does not receive individual credit if the group score falls short of the threshold.

The Compounding Problem for Multi-Provider Clinics

• Each additional MIPS-eligible provider under a TIN multiplies the financial exposure proportionally
• A single weak performer in a group can pull the composite score below threshold for all clinicians in that group
• Individual reporting isolates performance — but also isolates penalties, meaning a weak individual performer bears the full penalty on their own Medicare revenue
• The group vs individual reporting decision should be made strategically based on the relative performance distribution of clinicians under the TIN

Why Many Therapy Clinics Underestimate the Risk

Despite the financial clarity of MIPS payment mechanics, a significant number of eligible therapy clinics consistently underestimate their exposure. Four recurring misconceptions drive this underestimation — all of them factually incorrect.

“We are too small to be affected.”
MIPS eligibility is determined by Medicare billing volume — not clinic size. If a two-therapist practice exceeds $90,000 in Part B charges, treats more than 200 unique beneficiaries, and bills more than 200 covered services in a year, it is required to participate. Once those thresholds are crossed, size is irrelevant.

“We bill Medicare, but not that much.”
Even moderate Medicare revenue becomes significant when a -9% payment adjustment is applied. A clinic generating $150,000 in annual Medicare revenue would lose $13,500 per year under the maximum penalty. That loss compounds annually if not addressed.

“Our EMR handles MIPS automatically.”
An EMR can assist with data collection, but it cannot independently ensure proper measure selection, benchmark performance, data completeness, or timely submission. The clinic retains full responsibility. Many practices discover too late that their data was captured in a format incompatible with their submission pathway.

“If we ignore it, nothing happens right away.”
Nothing happens immediately — and that delay is structural. A failure to report in 2026 results in a reduction applied to every Medicare remittance in 2028. By the time the penalty appears, the opportunity to prevent it has already passed.

What Determines Your MIPS Adjustment Score?

Your Composite Performance Score — which determines the magnitude and direction of your payment adjustment — is calculated from four weighted categories. Each contributes a specific percentage of the total score, though exact weights can shift based on practice size and eligibility for category-specific exemptions.

The composite score is not a simple average of these categories. Each category's point contribution is weighted and then summed. Understanding which categories you perform strongest in — and where your score is most at risk — is the foundation of any effective MIPS performance strategy.

Individual vs Group Payment Adjustments

MIPS payment adjustments can be applied at the individual NPI level or at the group TIN level, depending on how the clinic chooses to report. This decision has meaningful financial implications, particularly for multi-provider practices.

For multi-location rehab businesses operating under a single TIN, the group reporting decision warrants careful analysis. The optimal choice depends on the variance in individual clinician performance — groups with relatively uniform performance often benefit from the administrative simplicity of group reporting, while groups with significant performance variance may benefit from individual reporting to isolate both penalties and bonuses at the clinician level.

Can Therapy Clinics Avoid a MIPS Penalty?

Yes — and the path to avoiding a negative adjustment is well-defined. Meeting the 75-point performance threshold is achievable for most outpatient therapy clinics that approach MIPS participation with deliberate preparation rather than last-minute compliance.

The Minimum Requirements to Avoid a Negative Adjustment

• Confirm eligibility first.Use the CMS QPP Participation Status Tool at qpp.cms.gov to verify whether you are required to participate based on your NPI and TIN. Ineligible clinicians do not receive adjustments — positive or negative.
• Select quality measures strategically.Choose 6 measures from the PT/OT specialty set, including at least one outcome measure, with a focus on measures where your clinic can perform at or above the median national benchmark. Measure selection is the highest-leverage preparation decision available.
• Collect data for the full performance year.Quality measure data must meet a 75% data completeness threshold across eligible encounters. Starting data collection mid-year is a reliability risk — begin January 1.
• Attest to improvement activities.The IA category (15% of score) is the most attainable category for most clinics. Select activities that align with existing workflows — telehealth use, care coordination, non-opioid pain management documentation.
• Submit by March 31, 2027.Submission after the deadline is treated as non-reporting. Target submission at least two weeks before the deadline to avoid portal congestion. Late submission — regardless of reason — receives a score of zero.

Partial Reporting Is Not the Same as No Reporting — But It Does Not Guarantee Safety

Submitting some data is better than submitting none — it prevents a zero score and the automatic maximum penalty. However, partial data submission without strategic measure selection and data completeness can still result in a below-threshold score and a negative adjustment. Reporting six measures without an outcome measure, or reporting measures with fewer than 20 denominator cases, will reduce your ability to earn Quality category points.

MIPS Payment Adjustment Timeline

The full lifecycle from data collection to payment impact spans three years. The following timeline maps the key milestones for the 2026 performance year through its 2028 payment year conclusion.

FAQs

How much can therapy clinics lose under MIPS?

The maximum negative MIPS payment adjustment is -9% of all Medicare Part B allowed charges for the payment year. For a clinic generating $300,000 in annual Medicare revenue, that equals a $27,000 reduction in a single year. A clinic with $500,000 in Medicare revenue loses $45,000 at the maximum penalty. Lower-scoring clinics face proportionally smaller penalties, but any score below the 75-point threshold triggers a negative adjustment whose exact percentage scales with how far the score falls below threshold.

Are MIPS payment adjustments permanent?

No. MIPS payment adjustments are recalculated independently for each performance year. A poor score in 2026 results in a negative adjustment applied to 2028 payments — but it does not affect 2029 or later payments, which are determined by 2027 performance. Each performance year produces an independent adjustment that applies only to its corresponding payment year. However, consecutive years of poor performance produce consecutive years of penalties — there is no structural average that carries forward.

Do MIPS bonuses offset penalties nationally?

MIPS operates as a budget-neutral system at the program level. The total negative adjustments collected from penalized clinicians are redistributed as the pool for positive adjustments to high performers. This means the exact positive adjustment percentage for any given year is not fixed — it depends on the national distribution of scores. More clinicians performing above threshold reduces the per-clinician bonus. This is why precise positive adjustment percentages cannot be reliably predicted in advance.

If I improve my MIPS score next year, does it fix a prior year penalty?

No. Each performance year stands alone. A strong 2027 performance will generate a positive adjustment for 2029 payments — but it does not offset or cancel the negative adjustment applied to 2028 payments based on 2026 performance. CMS has no mechanism to retroactively correct or reduce a prior year penalty based on subsequent improvement. The only way to prevent a 2028 penalty is to perform above threshold in 2026.

Does Medicare notify clinics before applying a MIPS payment adjustment?

No. CMS does not send advance notice before applying a MIPS payment adjustment to Medicare remittances. Responsibility for monitoring MIPS performance and ensuring compliant participation lies entirely with the clinician or practice. CMS does release performance feedback reports after the submission period — which show scores and category breakdowns — but these are informational and are released after the adjustment has already been determined. The adjustment then appears silently on remittance advice statements beginning January 1 of the payment year.

MIPS Payment Adjustments: What Therapy Clinics Must Do Now

The mechanics of MIPS payment adjustments are not complicated — but the two-year lag between performance and payment creates a persistent risk that eligible therapy clinics systematically underestimate until the penalty arrives on a remittance statement.

The 2026 performance window is live. Every patient encounter, every quality measure documentation, and every CPT claim filed from January 1 through December 31, 2026 contributes to the composite score that will modify your 2028 Medicare reimbursements. There is no retroactive correction.

The threshold is 75 points. Below it, your Medicare revenue shrinks. At it, you break even. Above it, you earn. The Quality and Improvement Activities categories — the most directly controllable inputs — together represent 45% of your composite score and are where most outpatient therapy clinics have the greatest room to improve their position.

Data infrastructure determines outcomes. The difference between a 68-point score and a 78-point score is rarely a difference in the quality of clinical care. It is almost always a difference in documentation discipline, measure selection strategy, and the visibility a clinic has into its own performance before the year closes.

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