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Hospital Value-Based Purchasing

Hospital Value-Based Purchasing (VBP) 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 Hospital VBP works

How hospitals perform on quality and resource use 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 for the quality of care they give to people, not 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 the hospital quality data reporting infrastructure that was developed for the Hospital Inpatient Quality Reporting (IQR) Program, authorized by Section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

The latest Hospital VBP update

We recently posted Percentage Payment Summary Reports for the Fiscal Year (FY) 2018 Hospital VBP. The FY 2018 Hospital VBP Percentage Payment Summary Report gives hospitals their Total Performance Score and value-based incentive payment percentage for each Medicare fee-for-service patient discharge in FY 2018.

The Hospital VBP Program is funded by reducing participating hospitals’ base FY 2018 operating Medicare severity diagnosis-related group (MS-DRG) payments by 2%. Any leftover funds are redistributed to hospitals based on their Total Performance Scores (TPS). 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’ve updated the value-based incentive payment adjustment factors for FY 2018 in Table 16B, available on We plan to publically post the FY 2018 Hospital VBP Program results during the December 2017 update to the Hospital Compare website.

Measure & domain updates

We added this measures for FY 2018:

  • Care Transition, Patients who "Strongly Agree" they understood their care when they left the hospital (Patient and Caregiver Centered Experience of Care/Care Coordination domain)

We removed these measures for FY 2018:

  • AMI-7a, Fibrinolytic Therapy Received within 20 Minutes of Hospital Arrival
  • IMM-2, Influenza Immunization
  • Pain Management, Patients who reported that their pain was "Always" well controlled

We strive to put patients first, by using measures that are important to them and their healthcare providers, and by making quality data transparent in order to give them choice in their decisions about where to receive their care. We’ve been continuing to shift away from chart-abstracted and process measures and towards outcome measures to determine hospital performance in the Hospital VBP Program. Our goal is to have a set of measures that align with the patient-centered National Quality Strategy (NQS).

We applied these quality domains and weights for FY 2018:

  • Clinical Care (25 percent)
  • Patient and Caregiver Centered Experience of Care/Care Coordination (25 percent)
  • Safety (25 percent)
  • Efficiency and Cost Reduction (25 percent) 

Find more information about the Hospital VBP Program on QualityNet.

2018 payment adjustments

FY 2018 Hospital VBP-based incentive payment adjustment factors

In the FY 2018 IPPS final rule, we're continuing with the Hospital VBP Program's settled methodology to determine the:

  • Value-based incentive payment adjustment factor, adopted in the FY 2013 IPPS rule.
  • Part of Medicare’s IPPS payments that will be adjusted.

To meet the Hospital VBP statute, we set the applicable percent withhold for FY 2018 to 2%

You can find more details on the FY 2018 IPPS final rule or see the FY 2018 Hospital VBP payment adjustments. 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.

2018 Hospital VBP regulations & notices

Final FY 2018 Hospital VBP Program plans & future Hospital VBP plans

On August 2, 2017, we posted the FY 2018 IPPS final rule, which included a number of Hospital VBP Program policies:

  • Final FY 2018 payment and operational details for FY 2018 and future years
  • Final FY 2020 policies for:
    • Measures
    • Performance periods
    • Performance standards
    • Domain weighting