Fiscal Year (FY) 2016 Results for the CMS Hospital Value-Based Purchasing Program

Hospital Value-Based Purchasing (VBP) Program Overview
The Hospital Value-Based Purchasing (VBP) Program adjusts what CMS pays hospitals under the Inpatient Prospective Payment System (IPPS) based on the quality of care they give patients. For FY 2016, the law requires that the applicable percent reduction, the portion of Medicare payments available to fund the program’s value-based incentive payments, go up from 1.50 to 1.75 percent of the base operating Medicare Severity diagnosis-related group (MS-DRG) payment amounts to all participating hospitals. We estimate that the total amount available for value-based incentive payments in FY 2016 will be approximately $1.5 billion.

The Hospital VBP Program is one of many Affordable Care Act programs Medicare is putting into place to pay for quality instead of quantity. For FY 2016, it gives a snapshot of how hospitals are performing on several important patient care domains.

The Hospital VBP Program is part of our long-standing effort to structure Medicare payments to improve healthcare quality, including hospital inpatient care. This is the fourth year of value-based purchasing for the largest share of Medicare spending, affecting payment for inpatient stays in over 3,000 hospitals across the country. We now pay hospitals for inpatient acute care services based on the quality of care, not just the quantity of services provided.

We’ve been increasing the program’s number of quality domains and measures used to evaluate performance. Our goal is to include a broader, richer set of measures over time and aligning with the National Quality Strategy (NQS).

The quality domains for FY 2016 were:

  • 10 percent: Clinical process of care
  • 25 percent: Patient experience of care (HCAHPS survey)
  • 40 percent: Outcome (hospital mortality measures for acute myocardial infarction, heart failure, and pneumonia, the central line-associated bloodstream infection measure, the catheter associated urinary tract infection measure, the surgical site infection strata, and the AHRQ PSI-90 Composite)
  • 25 percent: Efficiency (Medicare Spending per Beneficiary measure)

We believe the program will result in improved patient outcomes, safety, and patients’ care experience.

Fiscal Year 2016 VBP Program Results
We have posted the Hospital VBP incentive payment adjustment factors for FY 2016 at .

We’ll pay most hospitals more or less for each Medicare fee-for-service discharge in FY 2016 than they would’ve been paid in the absence of the program. Hospitals’ payments will depend on:

How well they measured up to their peers on important health-care quality measures during a performance period.
How much they have improved over time.
We will not include those hospitals excluded from the Hospital VBP Program in FY 2016 in the payment adjustment factors table. Hospitals excluded from the Hospital Value-Based Purchasing Program do not incur the reduction of 1.75 percent and are not eligible to receive other incentives.

Hospitals around the country are tracking their performance on Hospital VBP measures because they want to give better care. They use external performance dashboards to continuously monitor the care they give and their incentive payment adjustment. Hospitals’ focus on giving better care should benefit patients.

For FY 2016, more hospitals will have a positive change in their base operating MS-DRG payments than will have a negative change. In total, over 1,800 hospitals will have a positive payment adjustment which will provide increases to approximately 600 more hospitals in comparison to reductions in the fiscal year.

In FY 2016, about half of hospitals will see a small change in their base operating MS-DRG payments (between -0.4 and 0.4 percent). The highest performing hospital in FY 2016 will receive a net change in payments of slightly more than 3 percent after 1.75 percent is withheld. The worst performing hospital, receiving a Total Performance Score (TPS) of 0, will see the maximum reduction of 1.75 percent and will not receive an incentive payment.

Computing the VBP Score
The Hospital VBP Program is funded each year from a reduction of participating hospitals’ base operating MS-DRG payments for the applicable fiscal year. These payment reductions are redistributed to hospitals as incentive payments, based on their TPS as required by the statute. The actual amount earned by each hospital will depend on:

  • Its TPS.
  • Its value-based incentive payment percentage.
  • On the total amount available for value-based incentive payments.

Hospitals may earn back a value-based incentive payment percentage that is less than, equal to, or more than the applicable percent reduction for that program year. This means hospitals could see an increase, a decrease, or no change to its Medicare IPPS payments for the applicable fiscal year.

The estimated amount of base operating MS-DRG payment amount reductions for FY 2016 and the amount available for value-based incentive payments for FY 2016 discharges is about $1.5 billion.

In FY 2016, hospitals’ total performance scores were based on four domains:

  • Clinical process of care.
  • Patient experience of care.
  • Outcome.
  • Efficiency.

Hospitals’ TPSs were subject to minimum case and measure requirements. Also, they had to have a domain score for at least two of the four domains, in order to have a TPS calculated. Hospitals that do not meet the minimum requirements do not have their payments adjusted in the corresponding fiscal year. For every measure, each of the hospitals participating in the Hospital VBP Program receives an improvement score or achievement score, whichever is higher.

New Program Requirements
CMS adopted the following policies that will modify the FY 2017 Hospital VBP Program:

  • Addition of two new Safety measures;
  • Addition of one new Clinical Care – Process measure;
  • Re-adoption of the current version of the CLABSI measure; and
  • Removal of six “topped-out” clinical process measures.

Over 78 percent of the measures in the Hospital VBP Program will assess health outcomes, patient experience and cost.

We will adopt two new outcome measures for the new Safety domain:

  • Hospital-onset methicillin-resistant Staphylococcus aureus (MRSA) bacteremia and Clostridium difficile infection.
  • Clinical Care – Process measure: early elective deliveries (PC-01).

FY 2017 Domain Weighting
We have finalized new quality domains based on the NQS and domain weighting for FY 2017. Due to the large number of “topped out” measures that we are removing from the FY 2017 measure set, the finalized FY 2017 domain weighting for hospitals that receive a score on all domains reduces the weight of the Clinical Care – Process subdomain to five percent and increases the weight of the Safety domain to 20 percent.

We have finalized a policy to require hospitals to receive domain scores in at least three of the four domains in order to be eligible to receive a TPS and payment adjustments, a change from the policy requiring at least two of the four domains in FY 2015 and FY 2016.

FY 2018 Measures, Domains, & Weighting
The FY 2018 measure set adds a three-item Care Transition dimension to the Patient and Caregiver Centered Experience of Care/Care Coordination domain. We will normalize the scores in the domain to account for the new dimension. We have also removed the AMI-7a and IMM-2 measures from the Clinical Care – Process subdomain and will move the remaining PC-01 measure to the Safety domain. When we removed the AMI-7a and IMM-2 measures from the Hospital VBP Program and moved the PC-01 measure to the Safety domain, we finalized the proposal to remove the Clinical Care – Process subdomain entirely.

We have included four domains for the FY 2018 Hospital VBP Program:

  • Clinical Care.
  • Patient Experience and Caregiver Centered Experience/Care Coordination.
  • Safety.
  • Efficiency and Cost Reduction.

Each domain will be weighted at 25 percent of a hospital’s TPS. We will continue to require hospitals to receive domain scores in at least three of the four domains in order to be eligible to receive TPS and payment adjustments.

FY 2019, 2020, 2021, & 2022 Measures
We have adopted one new hospital-level risk-standardized complication rate following elective hip and knee arthroplasty measure with:

  • A 30-month performance period for FY 2019.
  • A 36-month performance period for FY 2020.

We have also adopted one new hospital-level risk-standardized mortality measure monitoring mortality rates following Chronic Obstructive Pulmonary Disease (COPD) hospitalizations for FY 2021. Hospitals will be measured based on a 36-month performance period in FY 2021.

Moving Forward
As we more closely link patient outcomes and treatment costs to value-based hospital payment, it’s important to remember that the Hospital VBP program not only aims for quality gains on paper, it also aims to promote a culture focused on the needs of patients.

Value-based purchasing in Medicare continues to move ahead, improving health care for people with Medicare now and creating a health care system that will ensure quality care for generations to come.

Additional Information
To see the FY 2016 value-based incentive payment adjustment factors, please visit: .