CMS issues hospital IPPS proposed rule for FY 2026 

The Centers for Medicare & Medicaid Services April 11 issued a proposed rule that would increase Medicare inpatient prospective payment system rates by a net 2.4% in fiscal year 2026, compared with FY 2025, for hospitals that are meaningful users of electronic health records and submit quality measure data. 

This 2.4% payment update reflects a hospital market basket increase of 3.2% as well as a productivity cut of 0.8%. This update also reflects CMS’ proposal to rebase and revise the market basket to a 2023 base year. In addition, the rule includes a proposed $1.5 billion increase in disproportionate share hospital payments and a proposed $234 million increase in new medical technology payments. Overall, it would increase hospital payments by $4 billion in FY 2026 as compared to FY 2025.  

In addition, CMS has included in the rule its previously published request for information seeking input on opportunities to streamline regulations and reduce burdens on providers. 

In a statement shared with the media today, Ashley Thompson, AHA’s senior vice president for public policy analysis and development, said, “America’s hospitals and health systems spend too many resources each year on regulatory requirements, forcing many of our clinicians to focus more time completing paperwork than treating patients. The AHA appreciates the Administration’s request for information on approaches and opportunities to streamline regulations and reduce burdens in the Medicare program. We particularly welcome the agency’s focus on ways to streamline and focus quality measurement efforts, including by proposing to eliminate the outdated reporting related to staff vaccination rates. We look forward to sharing our ideas and working closely with CMS to further cut down on excessive administrative red tape. 

“However, we are disappointed to see that the agency proposed an inadequate inpatient hospital payment update of 2.4%, including of particular concern an extremely high proposed productivity cut of 0.8%. We are very concerned that this update will hurt our ability to care for our communities. Indeed, many hospitals across the country, especially those in rural and underserved communities, already operate under unsustainable financial situations, including negative margins. We urge CMS to reconsider its policy in the final rule to enable all hospitals to provide high-quality, around-the-clock, essential care for their patients and communities. 

“Additionally, we appreciate that CMS continues to gather stakeholder feedback and make modifications to the Transforming Episode Accountability Model (TEAM). The AHA has long supported the adoption of value-based and alternative payment models to deliver high-quality care at lower costs; however, we are concerned that TEAM, even with the proposed changes, may force some hospitals to assume more risk than they can manage, threatening their ability to maintain access to quality care. Thus, we continue to urge the agency to make TEAM voluntary.”  

Among other provisions, the proposed rule would continue the mandatory TEAM payment model that would provide bundled payment for certain surgical procedures, with limited deferment for certain hospitals. In addition, it would make modifications to the quality measure aspect of the model and remove health equity plans from the model, among other changes. CMS is seeking comments but did not provide proposals on certain issues like low-volume thresholds. Furthermore, CMS would discontinue the low-wage index hospital policy for FY 2026 and establish a transitional exception policy for hospitals significantly impacted by the discontinuation. 

Finally, CMS proposes a number of changes to its quality reporting and value programs. Among other updates, CMS would remove four measures from the inpatient quality reporting program and modify several others. The agency also proposes to include Medicare Advantage patients in calculating hospital performance in the Hospital Readmission Reduction Program. Lastly, CMS proposes to update its extraordinary circumstances exception policy to allow for reporting extensions in addition to outright exemptions. 

CMS will accept comments on the proposed rule through June 10. AHA members will receive a Regulatory Advisory with further details on the rule.