On April 29, 2011, CMS released its final rule to implement a Hospital Value-Based Purchasing (VBP) program, as mandated by the ACA. The VBP program will build on the current pay-for-reporting program by tying Medicare payments to the quality of hospital services. Specifically, under the rule, starting in FY 2013 (which begins October 1, 2012), CMS will make value-based incentive payments to acute care hospitals based either on: (1) how well the hospital performs on certain quality measures, or (2) how much the hospital’s performance improves compared to its performance during a baseline period. The rule addresses the proposed quality measures, performance standards, scoring scheme, and framework for translating scores into value-based incentive payments. In general, the higher a hospital’s performance or improvement during the performance period for a fiscal year, the higher the hospital’s incentive payment will be. The initial measures CMS is adopting are a subset of the measures being used for the existing IQR program. As mandated by the ACA, the VBP program is deficit-neutral; that is, aggregate hospital VBP payments are funded through a reduction in base DRG payments for each discharge. The DRG reduction will be 1% in FY 2013 ($850 million, which is redistributed in VBP incentive payments), rising to 2% by FY 2017. CMS anticipates that out of 3,092 participating hospitals in FY 2013, payment increases will range from 0.0236% to 1.817%. When the base DRG payment reduction is factored in, about half of participating hospitals will receive a net increase in payments and half will receive a net decrease in payments, with no hospital experiencing a net change of more than 1%. The official version of the rule will be published May 6, 2011.