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Hospitals get a 2.4% rate increase for inpatient payments in a proposed rule released on Friday.
The increase reflects a projected FY 2027 hospital market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment. To earn the full rate update, hospitals participating in the Inpatient Prospective Payment System (IPPS) must successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and be meaningful electronic health record users.
The proposed 2.4% increase for acute care hospitals compares to a final 2.6% payment increase for FY 2026.
Overall, the Centers for Medicare & Medicaid Services said it expects the proposed changes in IPPS payment rates for 2027 — in addition to other changes such as new technology add-on payments — will increase hospital payments by approximately $1.4 billion.
Additional payments for inpatient cases involving new medical technologies will increase by approximately $464 million in FY 2027, CMS said.
Under current law, additional payments for Medicare-Dependent Hospitals (MDHs) and the temporary change in payments for low-volume hospitals will expire Dec. 31, 2026. In the past, legislation has extended these payments, and if they were to be extended through the end of FY 2027, CMS estimates that these hospitals would receive additional payments of approximately $0.4 billion in FY 2027.
The CMS proposed rule also updates payment rates for long-term care hospitals under the Medicare Hospital Inpatient Prospective Payment System and Long-Term Care Hospital (LTCH) Prospective Payment System.
For FY 2027, CMS is proposing an annual update of 2.4% to the LTCH standard payment rate, which reflects a projected market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment.
CMS expects payments for discharges paid the LTCH standard payment rate to increase by approximately 2.3%, or $55 million, due primarily to the 2.4% annual update.
For 2026, CMS issued a final rule giving long-term care hospitals a 2.7% increase to the standard payment rate.
For FY 2027, CMS is proposing to maintain the LTCH PPS outlier threshold at its FY 2026 value. CMS estimates that this threshold will result in estimated outlier payments approximating 8% of estimated total payments, as required by statute, considering information currently available regarding possible LTCH charging practices and other information.
CMS sets base payment rates prospectively for inpatient stays, generally based on the patient's diagnosis, the services or treatment provided, and the severity of illness. Subject to certain adjustments, a hospital receives a single payment for each case depending on the payment classification assigned at discharge.
The classification systems are for: IPPS, Medicare Severity Diagnosis-Related Groups (MS-DRGs) and for LTCH PPS, Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-DRGs).
The proposed rule would also make the Comprehensive Care for Joint Replacement (CJR) Model mandatory beginning on Oct. 1, 2027. The CJR Model produced strong evidence of cost savings while maintaining quality of care, CMS said. CJR-X improves care for Original Medicare patients undergoing hip, knee and ankle replacements (also called lower extremity joint replacements) performed in the inpatient and hospital outpatient settings.
The proposed rule also includes proposed changes, clarifications and codifications for Organ Acquisition and Reasonable Cost Payment Policies, and Reimbursement Appeals for Independent Organ Procurement Organizations and Histocompatibility Laboratories.
CMS is proposing to adopt three new measures to the Hospital Inpatient Quality Reporting Program:
- Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the FY 2029 payment determination;
- Hospital Harm-Postoperative Venous Thromboembolism electronic clinical quality measure (eCQM) beginning with the FY 2030 payment determination; and
- Advance Care Planning eCQM beginning with the FY 2030 payment determination.
CMS is proposing to adopt five modified mortality measures, beginning with the FY 2028 payment determination, before moving the modified versions to the Hospital Value-Based Purchasing Program. Modifications include adding Medicare Advantage patients and shortening the performance period from three years to two years.
CMS is proposing adding Medicare Advantage patients and shortening the performance period from three years to two years for three measures in Excess Days in Acute Care after Hospitalization, beginning with the FY 2028 payment determination.
CMS is also proposing to remove the COVID–19 Vaccination Coverage Among Healthcare Personnel measure beginning with the FY 2028 program year.
The Hospital Readmissions Reduction Program is a value-based purchasing program that reduces payments to hospitals with excess readmissions. It links payment to the quality of hospital care. In FY 2027, CMS is proposing to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure beginning with the FY 2029 program year.
The Hospital-Acquired Condition Reduction Program creates an incentive for hospitals to improve patient safety and reduce the rate of hospital-acquired conditions. Hospitals in the worst performing quartile receive a payment reduction of 1% on overall Medicare fee-for-service payments. For FY 2027, CMS is not proposing any updates to this program.
Email the writer: SMorse@himss.org