(Aug. 8, 2025) – On July 31, the Centers for Medicare & Medicaid Services released the fiscal year 2026 Inpatient Prospective Payment System Final Rule.
Key Highlights Include:
- IPPS payment increase of 2.6 percent nationally
- Disproportionate Share Hospitals' uncompensated care payments will increase by approximately $2 billion
- Increases new medical technology payments by $192 million
- Continues the mandatory Transforming Episode Accountability Model that launches Jan. 1, 2026. Makes certain modifications to the model, including a 31-episode, low-volume threshold that eliminates downside risk in the given episode category for hospitals that do not meet that threshold
- Discontinues the low-wage index hospital policy and adopts a budget-neutral narrow transitional exception for hospitals significantly impacted by the discontinuation
- Modifies four current measures in the Hospital Inpatient Quality Reporting Program:
- Hospital-Level, Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty to add Medicare Advantage patients to the current cohort of patients, shorten the performance period from three to two years and change the risk adjustment methodology
- Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity to add Medicare Advantage patients to the current cohort of patients, shorten the performance period from three to two years, and make changes to the risk adjustment methodology
- Hybrid Hospital-Wide Readmission and Hybrid Hospital-Wide Mortality measures to lower the submission thresholds to allow for up to two missing laboratory results and up to two missing vital signs, reduce the core clinical data elements submission requirement to 70 percent or more of discharges, and reduce the submission requirement of linking variables to 70 percent or more of discharges
- Removes four current measures in the IQR program:
- Hospital Commitment to Health Equity
- COVID-19 Vaccination Coverage among Health Care Personnel
- Screening for Social Drivers of Health
- Screen Positive Rate for Social Drivers of Health
- Modifies its value programs in several ways, including removing the Health Equity Adjustment from the Hospital Value-Based Purchasing Program and including MA patients in calculating hospital performance in the Hospital Readmission Reduction Program; however, CMS did not finalize its proposal to include payment data for these beneficiaries in the calculation of excess readmissions
- Adopts three new certification criteria to support more efficient electronic prior authorization processing and reduce administrative burden for providers
Program changes are effective on or after Oct. 1, 2025, unless otherwise noted.
KHA strongly encourages PPS hospitals to log in to Advantage Analytics to view their hospital-specific impact report once the final rule analysis is available in the coming weeks. If you need a reminder of your login information, please contact KHA.
--Jaron Caffrey