Value-Based Purchasing Program

Our last post provided an overview of 3 programs created by the Affordable Care Act (ACA) to improve care, healthy people and communities, and affordable care.1 This post will focus on the Value-Based Purchasing Program.

The VALUE-BASED PURCHASING PROGRAM (VBP) is a performance-based payment strategy that links financial incentives to acute-care hospitals’ performance on a defined set of measure domains (categories) including2 :


NOTE: In fiscal year (FY) 2019, the CAUTI and CLABSI measures in the safety domain will expand beyond the ICU to “select wards” (ie, Medical/Surgical Units, etc.)

VBP is the only program established by the ACA that can reward or penalize a hospital for the quality of care they provide to Medicare beneficiaries.3 The Centers for Medicare & Medicaid Services (CMS) imposed a 2% reduction to base Diagnosis-Related Group DRG payments to create a pool for bonuses to be paid. In 2017, the payment increases added up to about $1.8 billion.3

  • the quality of care provided to Medicare patients
  • how closely best clinical practices are followed
  • how well hospitals enhance patients’ experiences of care during hospital stay

Each hospital earns 2 scores on each measure—one for achievement and one for improvement.3 The final score awarded to a hospital for each measure is the higher of the 2 scores. A part of hospitals’ Medicare payments is adjusted based on a total performance score that reflects3:

  • how well they perform compared to other hospitals, or
  • how much they improve their own performance compared to their performance during a prior baseline period

CMS bases hospital performance on an approved set of measures and dimensions grouped into specific quality domains.2 The applicable domains and their weighting changes for 2017 and 2018 and beyond are listed below:

Included in the Safety domain are the following conditions:

  • CAUTI | Catheter Associated Urinary Tract Infections
  • CLABSI | Central Line Associated Bloodstream Infections
  • CDI | Clostridium Difficile Infection
  • MRSA | Methicillin-Resistant Staphylococcus Aureus Bacteremia
  • SSI | Surgical Site Infections
    • Abdominal hysterectomy
    • Colon surgeries

What does it all mean? Let’s look at an average 300-bed Community Hospital with 48% of their patients being Medicare beneficiaries. If they have an inpatient Medicare revenue of $26,000,000 and received a $20,000 payment reduction for a condition/diagnosis, a maximum 2% penalty would be $400. That same reduction would be applied to EVERY inpatient Medicare claim submitted during the fiscal year and could result in a penalty of $520,000.

You might remember from our last blog that these measures are penalized in multiple programs—here, in VBP as well as the Hospital-Acquired Conditions (HAC) Reduction Program.

According to the World Health Organization (WHO), infections in healthcare settings are the most frequently occurring adverse event worldwide, leading to significant mortality and financial losses for healthcare systems.4

WHO reports that several factors can cause healthcare-associated infections (HAIs)4:

  • prolonged and inappropriate use of invasive devices and antibiotics
  • high-risk and sophisticated procedures.
  • immunosuppression and other severe underlying patient conditions
  • insufficient application of standard and isolation precautions

Join us for our next installment, “The Readmissions Reduction Program: How Are We Doing?”

Minimizing infection risk is an essential part of optimizing “The Triple Aim” of the Affordable Care Act. Eloquest Healthcare is committed to providing solutions that can help you reduce risk of conditions like a CAUTI, CLABSI, or SSI.


  1.  Berwick, DM, Nolan TW, Whittington J. The triple aim: care, health, and cost. Health Affairs 27, no.3(2008):759-769. Doi: 10.1377/hlthaff.27.3.759.
  2. Hospital Value-Based Purchasing. Department of Health and Human Services, Centers for Medicare & Medicaid Services. Published September 2016. Accessed January 16, 2017.
  3. Whitman E. Fewer Hospitals Earn Medicare Bonuses Under Value-Based Purchasing. Modern Healthcare. Published November 1, 2016. Accessed January 16, 2017.
  4. Health care-associated infections Fact Sheet. World Health Organization. Accessed March 30, 2017.