The MIPS Penalty: What It Costs, Who Gets It, and How to Avoid It

MIPS is usually described as pay-for-performance, which suggests the upside and downside are of similar size. In the 2026 payment year, a perfect score of 100 earned a positive adjustment of 1.05 percent, the smallest in the program’s history, while a failing score carried the full statutory 9 percent penalty. For most practices the penalty is the part of MIPS with real money attached, so it is worth knowing exactly how it is calculated and applied.

How the MIPS Penalty Works

Your final MIPS score, 0 to 100, is compared to the performance threshold, which is 75 points through the 2028 performance year. Score below it and a negative payment adjustment applies two years later: 2026 performance sets the adjustment on claims with dates of service from January 1 through December 31, 2028.

Four mechanics decide what a penalty costs:

• It applies claim by claim, all year. The adjustment factor attaches to every Medicare Part B covered professional service you bill during the payment year. There is no cap and no year-end reconciliation, so the cost grows with your volume.
• It hits the Medicare paid amount, not the allowed amount. The reduction applies to what Medicare actually pays you and leaves the patient’s coinsurance and deductible unchanged.
• It follows the clinician. The adjustment attaches to the TIN/NPI performance history, which is why acquirers increasingly ask about MIPS scores in diligence.
• It shows up on the remittance. Adjusted claims carry MIPS-specific claim adjustment reason codes on the Remittance Advice, which is where many practices first learn about a penalty earned two years earlier.

The Score-to-Penalty Math

Penalties scale linearly from 75 points down to 18.75, and the 9 percent maximum applies to every score at or below that floor:

The floor of 18.75 is one quarter of the threshold. Non-reporters land at or below it, which makes submitting nothing the most expensive option in MIPS. Bonuses, meanwhile, are funded only by the penalties collected, because MIPS is budget-neutral by statute; the 2026 reporting guide shows why that kept the maximum at 1.05 percent.

What the Full Penalty Costs, by Revenue

Figures approximate exposure on paid amounts for covered professional services. The real number is usually worse than the table, for two reasons. The penalty repeats: a practice that ignores MIPS in 2026 and 2027 pays it in 2028 and again in 2029. And it lands on fee schedule payments that are already tightening, as we covered in our CY2027 proposed rule analysis. For many practices, 9 percent of Medicare revenue is roughly the whole margin on that revenue.

Who Actually Gets Penalized

The largest group is eligible clinicians who submit nothing and take the full 9 percent; every year, some of them never realized they were MIPS eligible. Small practices are hit hardest (the FAQ below has the numbers), mostly because of thin administrative staffing and data infrastructure.

Partial failures come next. Measures below the 75 percent data completeness standard or the 20-case minimum earn little or nothing, so incomplete data scores much like no data. Cost pulls down practices that reported everything else well: it is 30 percent of the score, calculated entirely from claims, and most practices first see it in the feedback report. Our Cost category analytics exist because this is the most common preventable failure we see. The rest miss the submission window, which closes March 31, 2027, at 8 p.m. ET; the deadline guide has the full calendar.

How to Avoid the MIPS Penalty for 2026

Seven moves for the rest of the 2026 performance year, dated ones first:

1. Start Improvement Activities by October 3. Two activities, or one with small practice or rural status, run for 90 continuous days and documented. A surprising number of penalized practices never claimed these 15 points.
2. Confirm you are actually eligible, at every TIN/NPI combination, using the QPP Participation Status Tool. Check again after the October QP update and when final eligibility posts in December.
3. File exceptions before December 31 if 2026 went wrong. The Extreme and Uncontrollable Circumstances exception reweights categories for practices hit by disasters, including cyberattacks. It cannot be filed retroactively once the year closes.
4. Report, even if imperfectly. For most practices, a competent quality set instead of nothing moves the result from -9 percent to safety. Small practices get a 3-point floor on any measure with at least one case and 6 bonus quality points for submitting at all.
5. Check your quality math against 2026 benchmarks, which reset in January: a measure that scored well last year can underperform this year at the same clinical performance.
6. Know your reweighting. Small practices get Promoting Interoperability reweighted automatically, shifting the score to Quality 40 percent, Cost 30, Improvement Activities 30; for other PI reweighting, Quality typically carries 55 percent.
7. Count the bonus points that exist. The complex patient bonus, applied automatically from your patient mix, can add up to 10 points, often enough to decide whether a score near the threshold clears 75.

We price every measure decision in points and dollars before you commit to it and validate the data before CMS sees it; the full approach is here.

Already Facing a Penalty?

A negative adjustment on your 2026 remittances traces to your 2024 score, and the window to contest it has closed: targeted review for the 2026 payment year ended November 14, 2025. The 2025 scores that set 2027 adjustments are a different matter. CMS released them on September 21, 2026, and targeted review for them closes 30 days after CMS releases the 2027 payment adjustment information, under 42 CFR 414.1385(a)(2). After that, the score and adjustment are final.

If your 2025 final score came in below 75, send us the final score report before that window closes. We will tell you whether anything in it is worth a targeted review request, and trace where the score broke so 2026 does not repeat it in 2028.

MIPS Penalty FAQs