The Centers for Medicare & Medicaid Services (CMS) Thursday released its Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule for 2026.
The 2182-page final rule, which is scheduled to be published in the Federal Register on August 4, updates Medicare payment policies and rates for inpatient and long-term care hospitals. Here are 10 changes included in the final rule.
New payment rates for inpatient hospitals
The finalized changes to IPPS payment rates are higher than the rates CMS initially planned in the proposed rule.
CMS said in a fact sheet that the increase in operating payment rates for general acute care hospitals that successfully participate in the quality reporting program and are meaningful users of electronic health records is 2.6 percent instead of the proposed 2.4 percent. This figure reflects a 3.3 percent hospital market basket percentage increase, as well as a productivity adjustment cut of 0.7 percent.
The updated rates will increase hospital payments by $5 billion. CMS said disproportionate share hospitals will also see an increase in Medicare uncompensated care payments of $2 billion. The agency also estimates that hospitals will see additional payments of $192 million for inpatient cases involving new medical technologies.
While the American Hospital Association is pleased that CMS has bumped up the payment rate since the initial proposal, the trade group issued a statement that the updates may not be enough for struggling hospitals in today’s challenging operating environment, especially those in rural and underserved communities.
New payment rates for long-term care hospitals
Long-term care hospitals will receive a 2.7 percent increase, which reflects a 3.4 percent market basket increase and a productivity adjustment cut of 0.7 percent. This will increase long-term care hospital payments for discharges by 3 percent, or $72 million.
Modified quality measures
CMS will add Medicare Advantage patients to the current cohort of patients in the measures for hospital-level, risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) and hospital 30-day, all-cause, risk-standardized mortality rate following acute ischemic stroke hospitalization with claims-based risk adjustment for stroke severity. The agency will also shorten the performance period of both measures from three years to two years and will use ICD-10 codes instead of Hierarchical Condition Categories in the risk adjustment methodology.
For the hybrid hospital-wide readmission and hybrid hospital-wide mortality measures, CMS will 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 (CCDEs) submission requirement to 70 percent or more of discharges, and reduce the submission requirement of linking variables to 70 percent or more of discharges.
Removed quality measures
CMS will remove the following four measures beginning with the calendar year 2024 reporting period/fiscal year 2026 payment determination:
- 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
CMS is also finalizing and codifying an update to the current Extraordinary Circumstances Exception (ECE) policy to clarify that CMS has the discretion to grant an extension in response to requests. After reviewing public comments, CMS said it will modify its original proposal by extending the length of time to submit a request from the proposed 30 days to 60 days.
The agency will also implement a technical update to include patients with a principal or secondary diagnosis of COVID-19 in the numerator and denominator for seven measures.
Modifications to the Hospital Readmissions Reduction Program
Beginning with the FY 2027 program year, CMS will:
- Modify six readmission measures to add Medicare Advantage data, in addition to Medicare fee-for-service data.
- Shorten the “applicable period” for measuring performance from three to two years and codify this update to the definition of “applicable period.”
- After reviewing public comments, CMS said it is modifying the original proposal to not include Medicare Advantage data in the calculations of aggregate payments for excess readmissions.
- Update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to ECE requests. After reviewing public comments, CMS is modifying the original proposal by extending the length of time to submit an ECE request from the proposed 30 days to 60 days.
- Remove COVID-19 exclusions and risk-adjustment covariates from the six readmission measures.
Changes to Hospital-Acquired Condition (HAC) Reduction Program
CMS finalized plans to update the ECE to clarify that it may grant an extension in response to requests and to codify the policy. It also will extend the amount of time to submit a request from the proposed 30 days to 60 days.
Hospital Value-Based Purchasing (VBP) Program changes
- Modification of the Hospital-Level RSCR Following Elective Primary THA and/or TKA measure for the FY 2033 program year.
- Technical updates to the Hospital-Level RSCR Following Elective Primary THA and/or TKA measure’s risk adjustment model to use International Classification of Diseases (ICD)-10 codes instead of HCCs for the FY 2033 program year.
- Technical updates to the five condition- and procedure-specific mortality measures and the THA/TKA Complications measure to include patients with a principal or secondary diagnosis of COVID-19 in the measures’ numerators and denominators for the FY 2027 program year.
- Technical updates to the CDC NHSN HAI chart-abstracted measures with the new 2022 baseline used in the FY 2029 program year and subsequent years to calculate performance standards and calculate and publicly report measure scores.
- Establishment of performance standards for the FY 2027, FY 2028, FY 2029, FY 2030, and FY 2031 program years.
- Update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to ECE requests. After reviewing public comments, CMS is modifying the original proposal by extending the length of time to submit an ECE request from the proposed 30 days to 60 days.
- Remove the Health Equity Adjustment from the Hospital VBP Program effective with the FY 2026 program year.
Long-Term Care Hospital Quality Reporting Program (LTCH QRP) changes
- Modify reporting requirements for the COVID-19 Vaccine: The Percent of Patients/Residents Who Are Up to Date measure excludes patients who have expired in the LTCH by removing an item on the LTCH Continuity Assessment Record and Evaluation Data Set (LCDS), the standardized patient assessment instrument for LTCHs, a form used for patients who have expired during their stay.
- Remove four social determinants of health-standardized patient assessment data elements from the LCDS to reduce the current burden. Beginning with the FY2028 LTCH QRP, LTCHs must no longer submit data using the LCDS on one item for Living Situation (R0310), two items for Food (R0320A and R0320B), and one item for Utilities (R0330).
- Amend the reconsideration policy and process.
Changes to the Transforming Episode Accountability Model (TEAM)
Among the changes, CMS will require selected acute care hospitals to capture quality measure performance using patient-reported outcomes in the outpatient setting without increasing participant burden, improving target price construction, and broadening the three-day Skilled Nursing Facility Rule waiver, giving patients a wider choice of and access to post-acute care.
Request for Information on Streamlining Regulations and Reducing Administrative Burdens in Medicare
To comply with President Donald Trump’s executive order on deregulation, the final rule includes a request for information asking for feedback on approaches and opportunities to streamline regulations and reduce burdens on those participating in the Medicare program.