Last updated: November 2026
A hospital value-based purchasing program build is the owner map, baseline worksheet, monthly scorecard and appeal calendar that lets hospital leaders manage performance in the Medicare Hospital Value-Based Purchasing (VBP) Program under 42 CFR 412.160 through 412.167. It is for hospital quality, finance and clinical leaders who need a named owner for every domain and measure. Integral Healthcare Solutions (IHS) has three practice lines (Accreditation Consulting, Compliance Services and Program Development), and this build sits in Program Development. IHS drafts the program for your leaders to approve; your Chief Medical Officer and Chief Nursing Officer approve the clinical content.
What does the Hospital VBP Program require and how is it scored?
CMS withholds 2 percent of participating hospitals' base operating DRG payments, then pays that pool back as incentives according to each hospital's Total Performance Score. IHS opened these sources on November 5, 2026: eCFR sections 412.160, 412.162, 412.163, 412.164, 412.165 and 412.167 (built November 4), the CMS Hospital VBP page (footer date 09/10/2024), the August 2023 and August 2025 final rules and the FY 2026 score file.
How the money moves
The CMS page describes a withhold set by law, incentive payments funded from those reductions, and a claim-by-claim adjustment factor on the base operating MS-DRG payment for fee-for-service claims. Section 412.160 sets the applicable percent at 2.0 percent for FY 2017 and later. Section 412.162 sets the formula:
- Pool (b)(1): the total of the base-operating DRG payment reductions, as the Secretary estimates it.
- Incentive percentage (b)(3): the product of the applicable percent, the Total Performance Score divided by 110 beginning with FY 2026 (by 100 for earlier years), and the linear exchange function slope.
- Adjustment factor (c): subtract the applicable percent from the incentive percentage and add the difference to one.
The FY 2024 final rule set the score maximum at 110 so top hospitals could earn health equity bonus points. The August 4, 2025 final rule removed that adjustment effective with the FY 2026 program year, and section 412.165(b)(5) now caps the score at 100, yet section 412.162 still reads 110 in the eCFR text built November 4, 2026. Take the current figure from your CMS reports.
How points are earned on a measure
CMS scores each measure for achievement and for improvement, and the measure score is the higher of the two (CMS page). Section 412.160 defines the reference levels:
- Achievement threshold: the median (50th percentile) of hospital performance in a baseline period; for Efficiency and Cost Reduction measures, the median in the performance period.
- Benchmark: the arithmetic mean of the top decile, with the same baseline and performance-period split.
- Improvement threshold: the hospital's own performance on the measure in the baseline period.
Under section 412.165(a), CMS awards 1 to 9 achievement points at or above the achievement threshold but below the benchmark, 0 to 9 improvement points above the improvement threshold but below the benchmark, and 10 points at or above the benchmark. CMS calculates performance standards no later than 60 days before a measure's performance period starts.
Domains and minimum case counts
Points are awarded only on a measure where the hospital reports the applicable minimum (section 412.165(a)(1), Table 1).
| Domain | Measures in Table 1 | Minimum |
|---|---|---|
| Person and Community Engagement | HCAHPS | 100 completed surveys |
| Clinical Outcomes | MORT-30-AMI, -HF, -PN, -COPD, -CABG; COMP-HIP-KNEE | 25 cases each |
| Safety | CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, CDI | 1.000 predicted infections each, as calculated by the CDC |
| Safety | SEP-1 | 25 cases |
| Efficiency and Cost Reduction | MSPB | 25 cases |
Under section 412.165(b), CMS calculates a domain score when the hospital reports the minimum number of measures in it, normalizes it to a percentage of 100, weights it and sums the weighted scores to a maximum of 100. The FY 2024 final rule restates an equal 25 percent weight per domain for hospitals scored in all four. CMS's FY 2026 file lists 2,455 hospitals; IHS computed that 2,299 have all four domain scores, each weighted at one quarter, and that scores run from 0 to 94.7 with a median of 29.5.
Measures, corrections and appeals
- Measures: CMS selects them from the Hospital IQR Program measures, other than readmission measures, and posts data on each at least 1 year before its performance period (section 412.164). Performance periods are not in the sections IHS opened, so IHS dates them from the current CMS rule.
- Corrections: CMS gives each hospital confidential reports and discharge-level information, and the hospital has 30 days after CMS provides them to submit corrections (section 412.163).
- Appeals: within 30 days of CMS' decision to deny a corrections request under section 412.163, or within 30 days of the conclusion of the review and corrections period, as applicable (section 412.167(b)). Ten issues are appealable, and a hospital may then request an independent CMS review. Section 412.167(d) lists matters with no administrative or judicial review, including the payment methodology and the measures.
- Exceptions: a hospital may request an extraordinary circumstance exception within 60 calendar days of the event (section 412.165(c)).
Hospitals outside the program
The program applies to hospitals as section 412.160 defines them (section 412.161). For a given fiscal year, that definition leaves out a hospital if any one of these applies:
- It is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act, a provision within the Hospital IQR section (section 412.164(a)).
- The Secretary cited it for deficiencies that pose immediate jeopardy during the performance period, defined as citation on at least three surveys using Form CMS-2567.
- Too few measures apply to it for the performance period.
- Too few cases apply to its measures for the performance period.
Who needs this build and what triggers it
Any covered hospital needs a named owner for every domain, because no single department controls the score. Four situations start the work:
- The hospital receives its CMS reports and the 30-day correction clock starts.
- A rule change lands, such as the 110 divisor.
- A merger or acquisition, because open/closed status including mergers and acquisitions is appealable (section 412.167(a)(10)).
- Quality leadership turns over, or leaders move to a monthly scorecard.
How IHS helps
IHS's reading, which is not CMS's wording: a hospital controls its inputs and not the scoring, so the build assigns an owner to each domain and measure, sets a baseline and sets a monitoring cadence.
What IHS drafts
- An owner map by domain and measure, with a backup for each owner.
- A baseline-versus-benchmark worksheet with a minimum-count tracker.
- A monthly review agenda and scorecard template.
- A calendar for the 30-day correction and appeal windows and the 60-day exception request.
- An improvement plan template for leaders to approve.
What you supply
You supply the reports and data on the list above and the leaders who will own each domain.
The real limit
IHS does not replace CMS's scoring, file corrections, appeals or exception requests, or contact CMS, and does not promise outcomes or a payment result. Your hospital makes every submission.
What to have ready
Gather these first.
- Your latest confidential reports and discharge-level information from CMS (section 412.163).
- The payment adjustment you received and your Total Performance Score with its four domain scores (sections 412.162 and 412.165(b)).
- For each measure, your baseline, your performance-period result and the thresholds CMS reported (section 412.160).
- Your counts against each minimum: HCAHPS surveys against 100, cases against 25, predicted infections against 1.000 (section 412.165, Table 1).
- Your HCAHPS vendor contract and your infection, sepsis, mortality and spending data.
- Any corrections request you filed, CMS' decision and both dates (sections 412.163 and 412.167(b)).
- Any immediate-jeopardy citations on Form CMS-2567, with survey dates (section 412.160).
- The names of the leaders who will own each domain.
A free introductory call is the place to agree what IHS drafts first.
How it compares
This table states what each covers without telling you which to prioritize.
| Program | Governing text | What the text says drives the payment effect |
|---|---|---|
| Hospital VBP (this page) | 42 CFR 412.160 to 412.167 | Points against thresholds and a benchmark, then the adjustment factor |
| Hospital IQR | 412.140 | Data submitted as CMS specifies; chart-abstracted validation met at a 75-percent score as CMS determines it |
| Readmissions Reduction | 42 CFR 412.150 to 412.154 | The higher of a readmissions ratio or a 0.97 floor factor (FY 2015 on) |
| Hospital-Acquired Condition Reduction | 42 CFR 412.170 to 412.172 | 99 percent payment for the 25 percent of hospitals with the highest total scores |
The quality improvement program build covers a documented QI program; this build covers the Medicare VBP scoring rules.
What it costs
The sections and CMS page reviewed set no fee for taking part, and the 2 percent is a withhold, not a fee. The costs are consulting and your own staff time, in three parts.
- Authority fees: none stated.
- Consulting fees: IHS scopes each engagement after a free introductory call. Scope moves with the number of hospitals, the measures that need owners and the gaps the first review finds.
- Your internal time: quality, finance and clinical leaders review the owner map and run the monthly scorecard. IHS publishes no staff-hour estimate.
What this is not
- It is not legal advice. IHS is a consulting firm, not a law firm.
- It is not a scoring or submission service. Your hospital submits its own data, corrections, appeals and exception requests.
- It is not a promise of better outcomes or a particular payment result.
Frequently asked questions
What is Hospital Value-Based Purchasing?
It is the Medicare program under 42 CFR 412.160 through 412.167 in which CMS withholds 2 percent of participating hospitals' base operating DRG payments and pays that pool back as incentives based on each hospital's Total Performance Score. IHS builds the owner map and scorecard behind it.
How much payment does CMS withhold?
Section 412.160 sets the applicable percent at 2.0 percent for FY 2017 and subsequent fiscal years, and the CMS Hospital VBP page states 2%. It funds the incentive pool and is not a program fee.
How is the Total Performance Score turned into a payment adjustment?
Section 412.162(b)(3) multiplies the applicable percent, the Total Performance Score divided by 110 beginning with FY 2026, and the linear exchange function slope. Section 412.162(c) subtracts the applicable percent from that result and adds the difference to one.
What is the difference between achievement and improvement scoring?
Achievement compares a hospital with national performance and improvement compares it with its own baseline. Each measure gets both, and the CMS page says the measure score is the higher.
What are the minimum case counts for scoring a measure?
Table 1 in section 412.165(a)(1) sets 100 completed HCAHPS surveys, 25 cases for each mortality measure, COMP-HIP-KNEE, SEP-1 and MSPB, and 1.000 CDC-calculated predicted infections for each infection measure.
Which hospitals are excluded?
For a given fiscal year, section 412.160 leaves out a hospital if any one of four conditions applies: the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act, an immediate-jeopardy citation in the performance period (at least three surveys on Form CMS-2567), too few measures, or too few cases.
When can we appeal, and what can we appeal?
Section 412.167(b) sets 30 days from CMS' decision to deny a corrections request under section 412.163, or 30 days from the end of the review and corrections period, as applicable. Section 412.167(a) lists ten appealable issues.
Who should own each domain inside a hospital?
IHS suggests one executive owner per domain, one named person per measure and a backup for each; that is IHS's suggestion, not a CMS requirement. Your leaders assign the names.
How are measures added or removed?
Section 412.164(c) says CMS uses rulemaking for substantive specification updates, and a measure stays in the set unless CMS removes or replaces it through rulemaking. A patient-safety determination allows immediate removal with notice. IHS builds your map from the current rule.