The Hospital Value-Based Purchasing Program is designed as a budget-neutral program. CMS funds it by reducing participating hospitals' base operating DRG payments by 2% and redistributing the amount through value-based incentive payments based on program performance.

This mechanism is different from the HAC Reduction Program, which imposes a 1% reduction on applicable hospitals in the worst-performing quartile. The two programs should not be confused even though both connect hospital quality performance with Medicare reimbursement.

Hospital VBP performance encompasses multiple quality domains rather than simply determining whether individual HACs occurred. Documentation integrity is relevant because coded diagnoses and clinical information can contribute to risk adjustment and quality-measure calculations.

However, CDI professionals should not seek additional diagnoses merely to affect VBP performance. Their role is to ensure that documented and coded data accurately represent the patient's actual severity, comorbidities, treatments, and outcomes.

For FY 2026, CMS publishes actual Hospital VBP adjustment factors used for eligible discharges and includes those factors within its IPPS final-rule materials.

CCDS Reference Topics: Hospital VBP; IPPS; value-based reimbursement; quality measures; payment methodology.

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