Process for reducing the base operating DRG payment amount and applying the value-based incentive payment amount adjustment under the Hospital Value-Based Purchasing (VBP) Program.

(a) General. If a hospital meets or exceeds the performance standards that apply to the Hospital VBP Program for a fiscal year, CMS will make value-based incentive payments to the hospital under the requirements and conditions specified in this section. (b) Value-based incentive payment amount. (1) Available amount. The value-based incentive payment amount for a discharge is the portion of the payment amount that is attributable to the Hospital VBP Program. The total amount available for value based incentive payments to all hospitals for a fiscal year is equal to the total amount of base-operating DRG payment reductions for that fiscal year, as estimated by the Secretary. (2) Calculation of the value-based incentive payment amount. The value-based incentive payment amount is calculated by multiplying the base operating DRG payment amount by the value-based incentive payment percentage. (3) Calculation of the value-based incentive payment percentage. The value-based incentive payment percentage is calculated as the product of all of the following: (i) The applicable percent as defined in § 412.160. (ii)(A) For fiscal years before FY 2026, the hospital's Total Performance Score divided by 100; or (B) Beginning with FY 2026, the hospital's Total Performance Score divided by 110; and (iii) The linear exchange function slope. (c) Methodology to calculate the value-based incentive payment adjustment factor. The value-based incentive payment adjustment factor for each discharge is determined by subtracting the applicable percent as specified in § 412.160 from the value-based incentive payment percentage and then adding that difference to one. [77 FR 53674, Aug. 31, 2012, as amended at 88 FR 59333, Aug. 28, 2023]