CMS releases FY 2026 IPPS final rule, bumping rates 2.6%

CMS released the Fiscal Year (FY) 2026 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule. The rule finalized a 2.6% increase in IPPS operating rates for hospitals successfully participating in quality reporting programs, among other payment policies.

Hospitals that participate in the Hospital Inpatient Quality Reporting program and are meaningful EHR users under the Promoting Interoperability Program will see the full rate increase next year. The increase reflects a projected FY 2026 hospital market basket percentage increase of 3.3%, reduced by a 0.7 percentage point productivity adjustment.

CMS also said in the rule that it rebased and revised the IPPS operating and capital market baskets, accounting for a 2023 base year. Using the 2023 data, CMS also established a national labor-related share of 66%.

Overall, the rate hike and other policies in the final rule are expected to increase hospital payments by $5 billion in FY 2026, including a projected $2 billion increase in Medicare uncompensated care payments to disproportionate share hospitals.

Additionally, CMS estimated a $192 million boost to hospital payments for inpatient cases involving new medical technologies because of new technology add-on payments finalized in the rule.

CMS also stated that additional payments for Medicare-Dependent Hospitals and a temporary change in payments for low-volume hospitals will expire on Sept. 30, 2025. However, this depends on whether Congress extends the payment policies as it has in the past. If they are extended, CMS expects $0.5 billion to these hospitals in FY 2026.

Meanwhile, LTCHs will see a 2.7% increase to the standard payment rate, reflecting an LTCH PPS market basket percentage increase of 3.4%, reduced by a 0.7 percentage point productivity adjustment.

The final rule also contained key updates to the Transforming Episode Accountability Model (TEAM), a mandatory five-year bundled payment program starting in 2026. The rule finalized key changes, including capturing quality measure performance using patient-reported outcomes in the outpatient setting, modifying target price calculations and broadening the three-day skilled nursing facility waiver.

Changes to hospital quality reporting programs included modifications to four Hospital Inpatient Quality Reporting Program measures and the elimination of four others, including the COVID-19 Vaccination Coverage among Health Care Personnel measure and Screening for Social Drivers of Health. In the Medicare Promoting Interoperability Program, CMS finalized a new EHR reporting period of any continuous 180 days for eligible hospitals, as well as modified several measures and added an optional bonus measure around public health and clinical data exchange.

Stay tuned for additional coverage on this announcement as the story develops.