---
kind: "section"
citation: "42 C.F.R. § 412.162"
title: "42"
number: "412.162"
heading: "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."
url: "https://uscodex.org/cfr/42/412.162"
---

# §412.162. 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](/cfr/42/412.160.md).
    - (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](/cfr/42/412.160.md) from the value-based incentive payment percentage and then adding that difference to one.

## Notes

### Amendments

[77 FR 53674, Aug. 31, 2012, as amended at 88 FR 59333, Aug. 28, 2023]

### Source

Source: 77 FR 53674, Aug. 31, 2012, unless otherwise noted.

### Authority

Authority: 42 U.S.C. 1302 and 1395hh.

### Source

Source: 50 FR 12741, Mar. 29, 1985, unless otherwise noted.

### Amendments

[77 FR 53674, Aug. 31, 2012, as amended at 88 FR 59333, Aug. 28, 2023]