What’s happening: On April 11, the Centers for Medicare & Medicaid Services (CMS) released the federal fiscal year (FFY) 2026 inpatient prospective payment system (IPPS) proposed rule — which falls short of what hospitals need to keep up with rising costs and health care needs.
What else to know: As a result of all proposed changes, CMS estimates that hospital inpatient payments will increase by $4 billion in FFY 2026. Comments on the proposed rule are due June 10.
Key proposals include:
- A net 2.4% payment rate increase, reflective of a market basket increase of 3.2% and productivity cut of 0.8%; this includes a $1.5 billion increase in uncompensated care payments to disproportionate share hospitals and an estimated $234 million increase in new technology add-on payments
- Changes to the mandatory Transforming Episode Accountability Model, a five-year episode-based payment model that begins Jan. 1, 2026; more than 100 California hospitals will be required to participate in the model
- Discontinuation of the low-wage index policy for FFY 2026 and subsequent years
- The addition of seven new Medicare Severity Diagnosis Related Groups and removal of six
- The removal of three measures on health equity and the COVID-19 vaccination for health care personnel measure from Inpatient Quality Reporting Program
- The inclusion of Medicare Advantage patients in the calculation of claims-based measures for several quality programs
- The removal of the health equity adjustment from the Hospital Value-Based Purchasing Program
- Modifications to several Promoting Interoperability Program measures, as well as a new optional measure on exchanging public health data using the Trusted Exchange Framework and Common Agreement
The proposed rule also includes several requests for information, including on streamlining and reducing regulatory burden in the Medicare program, digital quality measurement, and the development of quality measurements focused on nutrition and physical activity to promote patient well-being.
Additional details are available in a CMS fact sheet. CHA will issue a detailed summary in the coming weeks.
Visit CHA’s Federal Regulatory Tracker to follow new and anticipated federal rules.
Michelle Millerick
Megan Howard
