CMS recently issued a 104-page report to Congress outlining the Agency's plan to implement a Medicare hospital value-based purchasing ("VBP") program. The VBP program, which "proposes to transform the Medicare program from a passive payer of claims to an active purchaser of care," builds on the Reporting Hospital Quality Data for Annual Payment Update ("RHQDAPU") program which provides for differential payments to hospitals that publicly report on a defined set of inpatient quality measures. Under the VBP program, RHQDAPU would be phased out and a percentage of a hospital's base DRG payment (i.e., 2 to 5 percent) would be made contingent on performance on a specific set of measures. Hospitals would receive scores based on the higher of "attainment" compared with national thresholds and benchmarks or "improvement" compared with the hospital's own performance in the preceding 12-month baseline period. The percentage of incentive earned would be determined by the hospital's "total performance score." The transition from pay-for-reporting to incentive based completely on performance would occur over a three-year period and initially would apply to the treatment of conditions such as heart failure and pneumonia. Similar to the RHQDAPU program, public reporting of quality measures on Medicare's Hospital Compare site would remain an essential component of the proposed VBP program. The VBP program will require congressional action to implement, and CMS's report is a major step in getting such action.