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Hospital Value-Based Purchasing

Hospital Value-Based Purchasing (HVBP) 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) 2017 Hospital VBP. The FY 2017 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 2017.

The Hospital VBP Program is funded by reducing participating hospitals’ base FY 2017 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 2017 in Table 16B of the FY 2017 IPPS rule. We plan to publically post the FY 2017 Hospital VBP Program results during the December 2016 update to the Hospital Compare website.

Measure & domain updates

We added these measures for FY 2017:

  • PC-01, Elective Delivery Prior to 39 Completed Weeks Gestation (Clinical Care – Process subdomain)
  • CDI, Clostridium difficile Infection (Safety domain)
  • MRSA, Methicillin-Resistant Staphylococcus aureus (Safety domain)

We removed these measures for FY 2017:

  • PN-6, Initial Antibiotic Selection for CAP in Immunocompetent Patient
  • SCIP-Card-2, Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period
  • SCIP-Inf-2, Prophylactic Antibiotic Selection for Surgical Patients
  • SCIP-Inf-3, Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time
  • SCIP-Inf-9, Postoperative Urinary Catheter Removal on Post-Operative Day 1 or 2
  • SCIP-VTE-2, Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery

We’ve been regularly increasing the number of quality and resource use measures used 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 added these quality domains and weights for FY 2017:

  • Clinical Care
    • Outcomes (25 percent)
    • Process (5 percent)
  • Patient and Caregiver Centered Experience of Care/Care Coordination (25 percent)
  • Safety (20 percent)
  • Efficiency and Cost Reduction (25 percent) 

Find more information about Quality Net and the Hospital VBP Program.

2017 payment adjustments

FY 2017 Hospital VBP-based incentive payment adjustment factors

In the FY 2017 IPPS rule, we’re continuing with the Hospital VBP Program. In the final rule, we used the 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 also updated the applicable percent for FY 2017 to 2%

You can find more details on the FY IPPS Final Rule Tables or see the FY 2017 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.

2017 Hospital VBP regulations & notices

Final FY 2017 Hospital VBP Program plans & future Hospital VBP plans

On August 2, 2016, we posted the FY 2017 IPPS final rule, which included a number of Hospital VBP Program policies:

  • Final FY 2017 payment and operational details for FY 2017 and future years
  • Final FY 2019 policies for:
    • Measures
    • Performance periods
    • Performance standards
    • Domain weighting