Linking quality to payment

Linking quality to payment

Medicare is changing the way it pays hospitals for services provided to people with Medicare. Instead of only paying for the number of services a hospital provides, Medicare is also paying hospitals for providing high quality services.

The Centers for Medicare & Medicaid Services (CMS), the federal agency that runs Medicare, is changing the way Medicare pays for hospital care by rewarding hospitals for delivering services of higher quality and higher value.

Get more information about hospitals’ performance in Medicare’s value-based purchasing programs:

NOTE: To make decisions about where to get care based on measures of quality and efficiency, go to the Hospital Compare home page and start a search. This section provides information about how hospitals perform in certain Medicare value-based purchasing programs.

  • Hospital Readmissions Reduction Program - The Affordable Care Act authorizes Medicare to reduce payments to acute care hospitals with excess readmissions that are paid under CMS's Inpatient Prospective Payment System (IPPS), beginning October 1, 2012. The program focuses on patients who are readmitted for selected high-cost or high-volume conditions and procedures, namely, heart attack (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), hip/knee replacement (THA/TKA), and coronary artery bypass graft surgery (CABG).

    The Hospital Readmissions Reduction Program is designed to improve quality of care and care transitions by incentivizing the reduction of hospital readmissions. Learn more about Medicare’s Hospital Readmissions Reduction Program.

  • Hospital Value-Based Purchasing (VBP) Program – Medicare now has information about how the quality of a hospital's care affects the payments it gets from Medicare. The Hospital VBP Program, established by the Affordable Care Act, implements a pay-for-performance approach to the payment system that accounts for the largest share of Medicare spending – affecting payment for inpatient stays in approximately 3,000 hospitals across the country.

    Under the Hospital VBP Program, Medicare adjusts a portion of payments to hospitals beginning each fiscal year based on either:
    • How well they perform on each measure compared to all hospitals, or
    • How much they improve their own performance on each measure compared to their performance during a prior baseline period.
    The Hospital VBP Program is designed to promote better clinical outcomes for hospitalized patients and improve their experience of care during hospital stays. Learn more about the Hospital VBP Program.

  • Hospital-Acquired Condition (HAC) Reduction Program – The Affordable Care Act authorized Medicare to reduce payments to subsection (d) hospitals that rank in the worst-performing quartile of subsection (d) hospitals with respect to hospital-acquired conditions (HACs). The worst-performing quartile is identified by calculating Total HAC Scores based on hospitals’ performance on risk-adjusted quality measures. Hospitals with a Total HAC Score greater than the 75th percentile of the Total HAC Score distribution (i.e., the worst-performing quartile) will be subject to a 1 percent payment reduction on Medicare fee-for-service claims during the subsequent fiscal year.

    The HAC Reduction Program is designed to encourage hospitals to improve patient safety by creating an incentive for them to reduce the incidence of HACs and adverse patient safety events. Learn more about the Hospital-Acquired Condition Reduction Program.