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Hospital Value-Based Purchasing

Hospital value-based purchasing (HVBP) is a pay for performance program designed to reward hospitals for meeting certain performance thresholds, while establishing penalties for lower-performing hospitals. Established under Section 3001 of the Affordable Care Act (ACA) and managed by the Centers for Medicare & Medicaid Services (CMS), HVBP links performance based payment and quality measurement in order to transform Medicare from a passive payer to an active purchaser of higher quality, more efficient healthcare. HVBP affects payments for inpatient hospital stays and, as a result, impacts hospitalists. As inpatient providers, hospitalists are critical to the success of their institutions.

Quality Measures

The program uses quality measures from the hospital Inpatient Quality Reporting (IQR) program, which has been in existence since 2003. Individual HVBP measures are divided in several domains including clinical process of care, patient experience of care, outcomes measures and efficiency. For current and upcoming iterations of the program: the measures, measure domains and the relative weighting of each are available in the following charts.



Scoring Methodology

HVBP incorporates a two-tiered scoring methodology allowing a hospital to receive points for a given measure based on achievement or improvement. Achievement scores are relative to a national threshold and benchmark for the measure; improvement scores are based on relative scores compared to a hospital’s prior year’s performance.

Measure domains (clinical process of care, patient experience of care, outcomes measures) are scored separately, weighted, and aggregated to determine the hospital’s Total Performance Score.

Payment Adjustments

CMS translates the Total Performance Score into an incentive payment using an exchange function. The payment pool comes from a yearly withholding in hospital MS-DRG (Medicare Severity Diagnosis Related Groups) payments, which started at 1.0% in 2013, and will grow to 2.0% by 2017. The hospital VBP program is budget neutral for CMS, with the money used for incentive payments to be initially withheld and then returned based on performance results. Hospitals that meet or exceed the established standard for a performance period are eligible to earn back the money initially withheld and receive an increased base operating DRG payment for each discharge in the fiscal year.

What is the Society of Hospital Medicine (SHM) Doing?

  • Provides regular comments on the Hospital Inpatient Prospective Payment System Rule, which governs the development of the HVBP program.
  • Educating members about the program and how they can help their institutions be successful.