Hospital Value-Based Purchasing

The Hospital Value-Based Purchasing (VBP) Program is part of our ongoing work to structure Medicare’s payment system to reward providers for the quality of care they provide. This program adjusts payments to hospitals under the Inpatient Prospective Payment System (IPPS), based on the quality of care they deliver.

How does Hospital VBP work?

Hospital performance on quality and cost measures is linked to the IPPS. The IPPS makes up the largest share of Medicare spending, affecting payment for inpatient stays in approximately 3,000 hospitals across the country.

Hospital VBP rewards acute care hospitals with incentive payments based on the quality of care they provide, rather than just the quantity of services they provide. Congress authorized the Inpatient Hospital VBP in Section 3001(a) of the Affordable Care Act. The program uses selected measures that were first specified under the Hospital Inpatient Quality Reporting (IQR) Program, which was originally authorized by Section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

The latest Hospital VBP update

We presented Percentage Payment Summary Reports for the Fiscal Year (FY) 2020 Hospital VBP Program to each participating hospital, followed by a 30 day review and corrections period. The FY 2020 Hospital VBP Percentage Payment Summary Report gives hospitals their Total Performance Score and value-based incentive payment percentage that will be applied to each Medicare fee-for-service patient discharge in FY 2020.

The Hospital VBP Program is funded by reducing participating hospitals’ FY 2020 base operating Medicare severity diagnosis-related group (MS-DRG) payments by an estimated 2%. The sum total amount of those reductions is then redistributed to hospitals based on their Total Performance Scores (TPS) that they earn for the year based on their performance on quality and resource use measures. What hospitals earn depends on the range and distribution of all eligible/participating hospitals’ TPS scores for a FY. It’s possible for a hospital to earn back a value-based incentive payment percentage that is less than, equal to, or more than the applicable reduction for that FY.

We applied these quality domains and weights for FY 2020:

  • Clinical Outcomes (25 percent)
  • Person and Community Engagement (25 percent)
  • Safety (25 percent)
  • Efficiency and Cost Reduction (25 percent) 

Find more information about the Hospital VBP Program on QualityNet.

FY 2020 Hospital VBP value-based incentive payment adjustment factors

We’ve updated the value-based incentive payment adjustment factors for FY 2020 in Table 16B that applies to that year and which is available on CMS.gov. We plan to publicly post the FY 2020 Hospital VBP Program results during the January 2020 update to the Hospital Compare website.

You can also find past Hospital VBP Program value-based incentive payment adjustment factors:

The payment adjustment factors are listed by CMS Certification Number (CCN). If you don’t know your hospital's CCN, you can look it up.

2020 Hospital VBP regulations & notices

Final FY 2020 Hospital VBP Program plans & future Hospital VBP Program plans

On August 2, 2019, we issued the FY 2020 IPPS/LTCH final rule, which included a number of Hospital VBP Program policies:

  • Final FY 2020 payment and operational details for FY 2020 and future years
  • Final FY 2022 policies for:
    • Measures
    • Performance periods
    • Performance standards
    • Domain weighting
Page Last Modified:
10/29/2019 12:50 PM