CMS issues hospital IPPS proposed rule for FY 2027

This payment update reflects a hospital market basket increase of 3.2% as well as a productivity cut of 0.8%. Overall, it would increase hospital payments by $1.9 billion in FY 2027 compared to FY 2026. This includes a proposed decrease in disproportionate share and uncompensated care payments of $564 million. This is despite the fact that the estimated uninsured rate is estimated to increase from 8.7% to 9.1%. The update also includes a proposed increase of $464 million in new medical technology payments. If Congress extends the low-volume and Medicare-dependent hospital programs Jan. 1, 2027, these hospitals would receive additional payments of $400 million.

Additionally, the agency proposes to expand the Comprehensive Care for Joint Replacement Model nationwide starting Oct. 1, 2027. Initially tested from April 2016 through December 2024, the model would continue to focus on improving care and reducing spending for Medicare beneficiaries undergoing lower extremity joint replacement procedures. Participating hospitals would be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and 90 days post-discharge. If finalized, the expanded model, called CJR-X, would be mandatory for all acute care hospitals, except for those participating in the Transforming Episode Accountability Model, or TEAM, and those located in Maryland. CMS states that CJR-X would include certain modifications to quality measures and payment methodology policies in response to the CJR Model evaluation results and stakeholder feedback.

In a statement shared with the media today, Ashley Thompson, AHA's senior vice president for public policy analysis and development, said, "Hospitals and health systems are eager to advance value-based payment arrangements that improve quality, enhance patient outcomes, and make health care more affordable. The AHA and its members support continued innovation in Medicare payment models that align incentives, promote coordinated care, and reward prevention and wellness.

"While we appreciate CMS's efforts to expand the reach of value-based models, we believe that mandatory participation presents significant challenges, particularly for hospitals that lack the scale or financial capacity to make the necessary investments in care redesign. A phased or voluntary approach would better support success, allowing organizations to build the infrastructure and partnerships needed to achieve shared savings and improved outcomes.

"At the same time, hospitals face mounting financial pressures. Despite this, CMS has proposed another inadequate update to inpatient payment rates, another extremely high productivity cut, and reductions to disproportionate share payments - in the face of rising need for care and higher uninsured rates. Policymakers must balance these realities to preserve access to comprehensive care while driving sustainable transformation."

Furthermore, CMS proposes to make several modifications to the criteria for new residency programs to prohibit unlawful discrimination by graduate medical education programs, and clarify certain organ acquisition and reasonable cost payment policies.

CMS also proposes updates to TEAM that would modify policies affecting episode category triggers, quality measure assessment and the construction of target prices. Additionally, the agency includes two requests for information regarding ambulatory surgical center episodes and voluntary participation of hospitals with physician ownership.

The agency also proposes several changes to the Medicare Promoting Interoperability Program including the adoption of two new electronic clinical quality measures and removal of three eCQMs in alignment with the Hospital Inpatient Quality Reporting Program. The agency also proposes to modify reporting requirements for the Public Health and Clinical Data Exchange objective by adopting a unique device identifier for the implantable medical devices measure.

CMS also proposes several changes to its quality programs. For the Inpatient Quality Reporting Program, the agency would adopt three new measures and remove three others, while updating data reporting and submission requirements for certain measures including the Maternal Morbidity Structural Measure. The agency also proposes to modify three condition-specific measures to include Medicare Advantage beneficiaries in the patient populations, and proposes to make the same modification to five condition-specific mortality measures in the Hospital Value-based Purchasing Program. CMS would adopt a new measure on readmission following sepsis hospitalization into the Hospital Readmissions Reduction Program. The agency seeks comment on measures related to emergency care throughput as well as sepsis mortality, and on the Birthing Friendly Hospital designation.

CMS will accept comments on the proposed rule through June 9, 2026. AHA members will receive a Regulatory Advisory with further details on the rule.