Hospital VBP Program aggregate payment adjustments
The Department of Health and Human Services (HHS) is required by law to publish aggregate information on hospitals’ value-based incentive payments under the Hospital VBP Program.
The tables on the following webpages show aggregate information on adjustments made to Medicare Inpatient Prospective Payment System (IPPS) claim payments, under the FY 2018 Hospital VBP Program. The adjustments were made to claims with dates of service from October 1, 2017 through September 30, 2018.
The Hospital Inpatient Value-Based Purchasing ("Hospital VBP") Program adjusts Medicare’s payments to reward hospitals based on the quality of care that they provide to patients. The program operates by 1) reducing a portion of participating hospitals’ Medicare payments for hospital base operating diagnosis-related group (DRG) payments by a specified percentage for the applicable fiscal year, then 2) using the estimated total amount of those payment reductions to fund value-based incentive payments to the same hospitals for discharges in that fiscal year based on their performance under the program.
First, a percent reduction is made to participating hospitals’ base operating diagnosis-related group (DRG) payment amounts for the applicable fiscal year. The applicable percent reduction to participating hospitals’ base operating DRG payment amounts increased by 0.25 percent each federal fiscal year (FY), starting at a 1.0 percent reduction in the first year of the Hospital VBP program until it reached 2.0 percent. The following lists the applicable percent reductions, by year:
For FY 2013: 1.0 percent;
For FY 2014: 1.25 percent;
For FY 2015: 1.5 percent;
For FY 2016: 1.75 percent; and
For FY 2017 and subsequent years: 2.0 percent.
Second, payment adjustments are applied to participating hospitals on a claim-by-claim basis, and each hospital’s value-based incentive payment percentage that the hospital earns for the applicable fiscal year is determined based on that hospital’s Total Performance Score (TPS) on the Hospital VBP measures. The hospital’s TPS is converted to a value-based incentive payment adjustment factor, and that factor is then multiplied by the base operating DRG payment amount for each Medicare fee-for-service discharge in a fiscal year to calculate the adjusted payment amount that applies to the discharge for that fiscal year.