Hospitals are getting a 2.4% payment increase in the Centers for Medicare and Medicaid Services' 2026 Hospital Inpatient Prospective Payment System proposed rule.
The rate reflects a 3.2% projected increase in the hospital market basket, reduced by a 0.8% productivity adjustment. The productivity adjustment results from anticipated improvements in efficiency, CMS said, and the proposed payment reflects the most accurate, updated data on the cost of goods, services and labor.
Last year, CMS proposed a 2.6% payment increase for acute care hospitals, a rate the American Hospital Association called "woefully inadequate."
The AHA voiced concern about this year's rate and, in particular, "an extremely high proposed productivity cut of 0.8%," said Ashley Thompson, the AHA's senior vice president of Public Policy Analysis and Development. "We are very concerned that this update will hurt our ability to care for our communities. Indeed, many hospitals across the country, especially those in rural and underserved communities, already operate under unsustainable financial situations, including negative margins."
The AHA urged CMS to reconsider its policy in the final rule.
CMS said it expects the proposed changes in operating and capital inpatient payment rates, in addition to other changes, will increase hospital payments by $4 billion.
This includes a projected increase in Medicare uncompensated care payments to disproportionate share hospitals in 2026 of approximately $1.5 billion, CMS said.
New technology add-on payments are projected to add about $234 million to inpatient payments.
Additional payments for Medicare-Dependent Hospitals (MDHs) and the temporary change in payments for low-volume hospitals will expire on Sept. 30. In the past, legislation has extended these payments, and if they were to be extended, CMS estimates that these hospitals would receive payments of approximately $0.5 billion in FY 2026.
Long-term care hospital payment
For 2026, long-term care hospitals will get a proposed annual update of 2.6% to the standard payment rate, which reflects a projected market basket percentage increase of 3.4%, reduced by a 0.8 percentage point productivity adjustment.
CMS expects long-term care hospital payments will increase by approximately 2.2%, or $52 million, due primarily to the 2.6% annual update and a projected 0.3% decrease in high-cost outlier payments.
This compares to a proposed 3% last year.
CMS is proposing an increase to the long-term care hospital outlier threshold for 2026, consistent with increases in recent years. The increase is needed to ensure that estimated outlier payments are approximately 8% of total payments, as required by statute, CMS said.
"Finally, the AHA is concerned that the proposed payment updates for long-term care hospitals (LTCHs) would lead to continued strain on these providers as they care for some of Medicare's sickest patients," Thompson said. "In recent years, the outlier threshold has skyrocketed, forcing LTCHs to absorb tens of thousands of additional dollars in losses before Medicare will help cover some costs of extremely ill beneficiaries. CMS' proposal this year to increase this threshold even more – by an additional $14,199 – coupled with its minimal proposed market basket update, would make it increasingly difficult for LTCHs to care for these patients and alleviate pressure on their acute-care hospital partners. The AHA looks forward to working with CMS to ensure continued access for these patients."
The FY 2026 Inpatient Prospective Payment System and Long-Term Care Hospital prospective payment system proposed rule has a 60-day comment period.
Email the writer: SMorse@himss.org