(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: the applicable percent as defined in §412.160, the hospital's Total Performance Score divided by 100, and the 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 from the value-based incentive payment percentage and then adding that difference to one.