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CMS Releases Estimates on Amount Available for Incentive Payments

CMS estimates that the hospital value-based purchasing program (VBP) will have approximately $1.8 billion dollars for value-based incentive payments for FY 2017 hospital discharges.


The incentive pool is funded by reducing the base operating Medicare Severity diagnosis-related group (MS-DRG) payment amounts that determine the Medicare payment for each hospital inpatient discharge. For fiscal year FY 2017, the applicable percent reduction rises from 1.75 to 2 percent of the base MS-DRG payment amounts for all participating hospitals. (CMS Hospital Value-Based Purchasing Program Results for Fiscal Year 2017, CMS.gov, November 1, 2016)


This is the fifth year of the hospital VBP Program, affecting payment for inpatient stays in approximately 3,000 hospitals across the country. Hospitals’ payments depend on:


  • How well they performed – compared to their peers – on important healthcare quality and resource use measures during a performance period
  • How much they have improved the quality of care provided to patients over time


Hospitals either break even, receive more than they put into the pool, or see less than they contributed. (“More Than 1,600 Hospitals to See Positive Quality Adjustment in FY 2017, CMS Says,” HFMA Weekly, November 4, 2016)


The domains for the FY 2017 Hospital VBP Program and the weighting for these domains were:


  • Clinical Care—Outcomes (25 percent); Process (5 percent)
  • Patient and Caregiver Centered Experience of Care/Care Coordination (25 percent)
  • Safety (20 percent)
  • Efficiency and Cost Reduction (25 percent)


“For FY 2017, more hospitals will have an increase in their base operating MS-DRG payments than will have a decrease. In total, over 1,600 hospitals will have a positive payment adjustment.” (CMS Hospital Value-Based Purchasing Program Results for Fiscal Year 2017, CMS.gov, November 1, 2016)


For FY 2016, CMS reported last year that 1,800 hospitals would have a positive adjustment.


“For FY 2017, about half of hospitals will see a small change in their base operating MS-DRG payments (between -0.5 and 0.5 percent). After taking into account the statutorily mandated 2 percent withhold, the highest performing hospital in FY 2017 will receive a net increase in payments of slightly more than 4 percent, and the lowest performing hospital will incur a net reduction of 1.83 percent.” (CMS Hospital Value-Based Purchasing Program Results for Fiscal Year 2017, CMS.gov, November 1, 2016)



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