The Hospital VBP Program rewards acute care hospitals with incentive payments for the quality of care provided in the inpatient hospital setting. This program adjusts payments to hospitals under the Inpatient Prospective Payment System (IPPS) based on the quality of care they deliver

The program:

Withholds participating hospitals’ Medicare payments by a percentage specified by law (2%).
Uses the estimated total amount of those reductions to fund value-based incentive payments to hospitals based on their performance in the program.

Applies the net result of the reduction and the incentive as a claim-by-claim adjustment factor to the base operating Medicare severity diagnosis-related group (MS-DRG) payment amount for Medicare fee-for-service claims in the fiscal year associated with the performance period.

Hospitals are scored on measures such as:

Mortality and complications
Healthcare-associated infections
Patient safety
Patient experience
Efficiency and cost reduction

Each hospital may earn 2 scores on each measure—one for achievement and one for improvement. The final score awarded to a hospital for each measure is the higher of these 2 scores. We adjust a part of hospitals’ Medicare payments based on a total performance score that reflects, on a measure-by-measure basis:

How well they perform compared to all hospitals, or
How much they improve their own performance compared to their performance during a prior baseline period.