(Aug. 7, 2026) – The Centers for Medicare & Medicaid Services recently issued the final rule for the fiscal year 2027 Inpatient Prospective Payment System, which updates Medicare payment policies for acute care hospitals effective Oct. 1, 2026. Major provisions of the final rule include:
- Increases IPPS payment rates by 2.3 percent. This reflects a 3.2 percent market basket update, offset by a 0.9 percent productivity adjustment. CMS estimates the rule will increase hospital payments by approximately $2.9 billion in FY 2027, including increases in disproportionate share hospital and uncompensated care payments, as well as new medical technology add-on payments.
- Expands mandatory bundled payments nationwide. CMS finalized the Comprehensive Care for Joint Replacement model, making participation mandatory for nearly all acute care hospitals beginning Jan. 1, 2028. The model will hold hospitals accountable for spending and quality across lower-extremity joint replacement episodes extending 90 days after discharge. Hospitals participating in the Transforming Episode Accountability Model and those located in Maryland are excluded.
- Finalizes graduate medical education and TEAM updates. The rule includes modifications to graduate medical education residency program policies, organ acquisition payment policies and updates to the TEAM bundled payment model affecting episode triggers, quality measurement and target price methodology.
- CMS adopted several new quality measures and removed others across the Hospital Inpatient Quality Reporting, Hospital Readmissions Reduction, Hospital Value-Based Purchasing and Medicare Promoting Interoperability programs. The agency also finalized policies that will make the electronic prior authorization measure mandatory beginning with the 2028 reporting period and will extend electronic prior authorization requirements to drugs covered under the medical benefit.
LTCH PPS
- Includes a market basket increase of 2.3 percent (3.2 percent minus a 0.9 percent productivity adjustment).
- Estimates a net LTCH PPS payment increase of $54 million, down from the proposed $55 million.
- Updates LTCH quality reporting program.
IRF, IPF, SNF and Hospice PPS
CMS also released the final federal fiscal year 2027 Medicare payment and policy updates for the Inpatient Rehabilitation Facility, Inpatient Psychiatric Facility, Skilled Nursing Facility and Hospice Prospective Payment Systems.
--Jaron Caffrey