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Hospital Value-Based Purchasing


Hospital Value-Based Purchasing (VBP) is part of the Centers for Medicare & Medicaid Services’ (CMS’) long-standing effort to link Medicare’s payment system to a value-based system to improve healthcare quality, including the quality of care provided in the inpatient hospital setting.  

The program attaches value-based purchasing to the payment system that accounts for the largest share of Medicare spending, affecting payment for inpatient stays in over 3,500 hospitals across the country.    

Participating hospitals are paid for inpatient acute care services based on the quality of care, not just quantity of the services they provide. Congress authorized Inpatient Hospital VBP in Section 3001(a) of the Affordable Care Act. The program uses the hospital quality data reporting infrastructure developed for the Hospital Inpatient Quality Reporting (IQR) Program, which was authorized by Section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.


CMS considers future measures for the Efficiency and Cost Reduction domain in the FY 2015 IPPS/LTCH Proposed Rule

CMS has posted the FY2015 IPPS/LTCH Proposed Rule. In it, CMS discusses six potential future measures to supplement the Medicare Spending per Beneficiary (MSPB) measure in the Efficiency domain of the Total Performance Score (TPS). See the “Downloads” section below for the “Hospital-Based Episode Supplemental Documentation” file, which provides technical details on these potential future measures.

Payment Adjustments

CMS Publishes HVBP-based Incentive Payment Adjustment Factors for FY 2015

CMS has continued implementation of the Hospital Value-Based Purchasing (VBP) Program in the FY 2015 Inpatient Prospective Payment System (IPPS) rule (see 79 FR 50049). In that final rule, CMS relied on the finalized methodology to calculate the value-based incentive payment adjustment factor and the portion of Medicare’s IPPS payments that will be subject to the adjustment factor, which was adopted in the FY 2013 IPPS rule (see 77 FR 53573-76). In accordance with the Hospital VBP statute, CMS also updated the applicable percent for the FY 2015 Program, which is 1.50 percent. For more information on these payment-related policies, please refer to the FY 2015 IPPS Final Rule and FY 2013 IPPS Final Rule in the “Related Links” section below.

The value-based incentive payment adjustment factors for the FY 2015 payment adjustments under the Hospital VBP Program may be found in the “Related Links” section below. The link will redirect to the FY 2015 IPPS Final Rule Tables page. The FY 2015 payment adjustments for the Hospital VBP Program may be found in Table 16B.  Tip: The list of payment adjustment factors is organized by CMS Certification Number (CCN). If you are unsure of your hospital's CCN, please visit the CCN listing at

Regulations and Notices

CMS Finalizes Program Provisions for FYs 2015 and 2017-20 of HVBP

On August 22, 2014, CMS announced the display of the FY 2015 IPPS Final Rule, which included a number of policies related to the Hospital VBP Program. Specifically, we finalized payment and operational details for FY 2015, the third year in which value-based incentives are available under the program. We also finalized new policies for FY 2017, including (1) new measures, (2) performance periods, (3) performance standards, (4) domain weighting, and (5) domain structure based on the National Quality Strategy and its priorities of better patient outcomes, quality, safety, and lower cost for Medicare payments.

The final rule also included policies related to certain measures for FY 2018 through FY 2020, including select performance periods and performance standards for those program years. For more information on these payment-related policies, please refer to the FY 2015 IPPS Final Rule in the “Related Links” section below.