Hospital Value-Based Purchasing Program

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 the Hospital VBP Program work?

Hospital performance on quality and cost measures is linked to the Inpatient Prospective Payment System (IPPS). The IPPS makes up the largest share of Medicare spending, affecting payment for inpatient stays in approximately 3,100 hospitals across the country.

The Hospital VBP Program rewards acute care hospitals with incentive payments based on the quality of care they provide, rather than just the quantity of services they provide. The statutory requirements of the Hospital VBP Program are set forth in Section 1886(o) of the Social Security Act. The program uses selected measures that were first specified under the Hospital Inpatient Quality Reporting (IQR) Program.

Hospital VBP Program Reports

The Centers for Medicare & Medicaid Services (CMS) provides hospitals with reports reflecting the Hospital VBP Program’s impact for each fiscal year (FY).

CMS provides the Baseline Measures Report and Percentage Payment Summary Report to hospitals each fiscal year. The Baseline Measures Report (Baseline Report) allows providers to access their baseline period results and the performance standards for the measures included in the Hospital VBP Program. The Percentage Payment Summary Report (Performance Report) allows providers to access their baseline period results, performance period results, performance standards, measure scores, domain scores, Total Performance Score (TPS), and the value-based incentive payment adjustment factor that will be applied each Medicare patient discharge in the fiscal year.

CMS anticipates the publication of the upcoming fiscal year Percentage Payment Summary Report to be available by August 1, prior to the start of the same fiscal year.

Reports are available on the Hospital Quality Reporting (HQR) Secure Portal.

CMS also provides hospitals with a Mortality and Complication Hospital-Specific Report (HSR) and a Medicare Spending per Beneficiary (MSPB) HSR for each fiscal year’s performance period. The HSRs are provided so that hospitals may review and request correction to the calculations of the performance period measure results prior to the results being used to calculate a hospital’s Total Performance Score during a 30-day review and correction period. Reports are available for download through the HQR Secure Portal.

Hospital VBP Program value-based incentive payment adjustment factors

The Hospital VBP Program is funded through a reduction from participating hospitals' Diagnosis-Related Group (DRG) payments for the applicable fiscal year. The money that is withheld is redistributed to hospitals based on their TPS, as required by statute, and the actual amount earned by hospitals will depend on the actual range and distribution of all eligible/participating hospitals' TPSs. A hospital may earn back a value-based incentive payment percentage that is less than, equal to, or more than the applicable reduction for that program year.

We update the value-based incentive payment adjustment factors in Table 16B that applies to that year, and which is available on CMS.gov. We publicly post Hospital VBP Program results during the January refresh update to Care Compare and the Provider Data Catalog.

You can find past Hospital VBP Program value-based incentive payment adjustment factors as posted in Table 16B.

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.

Hospital VBP Program regulations & notices

In developing the VBP Programming, the Centers for Medicare & Medicaid Services (CMS) conducted extensive research and stakeholder outreach. Information outlining Hospital VBP was published in the CMS Final Rules.

Among other topics, these final rules include details on:

• program structure, including quality and cost measure categories ("domains")
• quality and cost measures selected for the program
• criteria for participating and non-participating hospitals
• periods of performance for quality measurement
• performance standards for all quality measures
• scoring methodology

Baseline period means the time period during which data are collected for the purpose of calculating hospital performance on measures to establish the improvement thresholds for each measure with respect to a fiscal year.

Performance period means the time period during which data are collected for the purpose of calculating hospital performance on measures with respect to a fiscal year.

Policy and Regulation Revisions in Response to the COVID-19 Public Health Emergency

To address the COVID-19 pandemic, CMS has excluded claims data from January 1, 2020, to June 30, 2020 (Q1 and Q2 2020), from its calculations for the Medicare quality reporting programs. The reporting periods for measures such as readmission, mortality, complication, payment, and EDAC have been revised accordingly to incorporate this policy. This modification was officially implemented in the final rule of the FY 2022 Hospital Inpatient Prospective Payment System/Long-Term Care Hospitals Prospective Payment System (IPPS/LTCH PPS).