The Centers for Medicare & Medicaid Services (CMS) on April 11 released the Fiscal Year (FY) 2026 Inpatient Prospective Payment System (IPPS) proposed rule with comments due June 10. The agency also included a request for information seeking input on how to streamline Medicare regulations, reduce provider burden, and reduce the cost of private health care expenditures required to comply with federal regulations.
The CMS is proposing to increase the payment rates by 2.4% for items and services paid under IPPS for FY 2026, reflecting a projected FY 2026 hospital market basket increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment. The agency proposed total uncompensated care-based payments equaling $7.14 billion (an increase of $1.5 billion from FY 2025), and empirically justified disproportionate share hospital payments equaling $3.92 billion in FY 2026. The CMS also proposes to discontinue its low-wage index policy in FY 2026 and beyond with a narrow transitional policy in FY 2026 for hospitals significantly impacted by the elimination of the policy, similar to what was implemented in the FY 2025 IPPS interim final rule [refer to Washington Highlights, Oct. 4, 2024].
For graduate medical education updates, the CMS provided clarification for its policy of calculating full-time equivalent counts for cost reporting periods other than 12 months and provided public notice that slots from the closure of Wahiawa General Hospital located in Wahiawa, Hawaii, and Carney Hospital located in Boston are available for redistribution through Section 5506. In a separate proposed rule, the Inpatient Psychiatric Facility PPS (IPF PPS), the agency proposed an increase to the teaching status adjustment factor and a proposal to allow IPF cap increases associated with the portion of resident training for awarded positions under Section 4122 of the Consolidated Appropriations Act, 2023 (P.L. 117-328).
The rule proposed a number of changes to the inpatient quality reporting and value programs, including the removal of quality measures on health equity and social determinants of health and COVID-19 vaccination, support for future quality measures focused on well-being and nutrition, and proposed the inclusion of Medicare Advantage patients to measure hospital performance for the Hospital Readmission Reduction Program. The proposed rule would retain the mandatory Transforming Episode Accountability Model payment model finalized last year that will bundle payment for certain surgical procedures for a subset of selected hospitals beginning Jan. 1, 2026. However, the CMS proposed to make modifications to quality measurement in the model, changes to the payment methodology and risk adjustment, expansion of the skilled nursing facility three-day waiver, and removal of the decarbonization and resilience initiative.