CMS will pay $1.9 billion to hospitals in value-based payments for inpatient care

Susan Morse for Healthcare Finance

Hospitals will receive $1.9 billion in value-based incentive payments for inpatient care, the Centers for Medicare and Medicaid Services announced yesterday.

More hospitals will receive positive payment adjustments in 2020 than negative, CMS said. More than 1,500 hospitals (over 55%) will receive higher Medicare payments under the Hospital Value-Based Purchasing Program.

For FY 2020, close to 60% of hospitals will see a small change of between -0.5 and 0.5% in their Medicare payments. The average net payment adjustment is 0.16%.

The highest performing hospital in FY 2020 will receive a net increase in payments of 2.93%, and the lowest performing hospital will incur a net decrease in payments of -1.72%.


The Hospital Value-Based Purchasing Program is one of many quality programs CMS has established to tie Medicare payment to quality and cost measures.

The Hospital VBP Program works by adjusting what Medicare pays hospitals under the Inpatient Prospective Payment System based on the quality and cost of inpatient care provided to patients.

Hospitals’ payments depend on how they performed compared to their peers; on healthcare quality and cost measures during a performance period; and how much they have improved the quality of care provided to patients over time.

For fiscal year 2020, the law requires that 2% of the payments for all participating hospitals be withheld and redistributed to the hospitals based on their performance, on a previously announced set of quality and cost measures.

CMS has posted the Hospital VBP Program incentive payment adjustment factors for each participating hospital.


The total performance score is based on four measurement domains. Each contributes 25% to the total score. The measurement domains are clinical outcomes; safety; person and community engagement; and efficiency and cost reduction.

The actual amount of incentive payments earned back by participating hospitals will depend on the following three values: each hospital’s total performance score; each hospital’s value-based incentive payment percentage; and the total amount available under the program for payments.

For FY 2020, the average total performance score across all participating hospitals increased from 38.1 in 2019 to 38.5. On average, rural hospitals performed better in the safety, person and community engagement and efficiency and cost reduction domains, while urban hospitals performed better in clinical outcomes.


This is the eighth year of the Hospital VBP Program, affecting payment for inpatient stays in approximately 2,700 hospitals across the country.

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