CMS issues hospital inpatient payment final rule for FY 2027

The Centers for Medicare & Medicaid Services today issued a final rule that would increase Medicare rates by a net 2.3% in fiscal year 2027, compared with FY 2026, for hospitals that are meaningful users of electronic health records and submit quality measure data. 

This payment update reflects a 3.2% hospital market basket increase, as well as a 0.9% productivity cut. Overall, it will increase hospital payments by $2.9 billion in FY 2027 compared to FY 2026. This includes an increase in disproportionate share and uncompensated care payments of $228 million. The update also includes an increase of $779 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 $300 million.  

Additionally, the agency expands the Comprehensive Care for Joint Replacement bundled payment model to be nationwide starting Jan. 1, 2028, three months later than proposed. The initial model was tested from April 2016 through December 2024, and the expanded model, called CJR-X, will continue to focus on lower extremity joint replacement procedures. Participating hospitals will be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and 90 days post-discharge. CJR-X will be mandatory for all acute care hospitals, except for those participating in the Transforming Episode Accountability Model and those located in Maryland. 

In a statement shared with the media today, Joanna Hiatt Kim, AHA’s vice president of payment policy, said, “AHA appreciates efforts to partner with CMS to expand the effectiveness of value-based models. We believe that flexibility is critical, as some hospitals lack the scale or financial capacity to make the investments in care redesign that are necessary for success. As such, we are disappointed CMS failed to make meaningful improvements to its expanded joint replacement bundled payment program. Mandatory models present significant challenges, and CMS’ low-volume threshold fails to ensure that hospitals have enough cases to integrate changes in care delivery and actually determine if they had an impact. In addition, certain pricing policies in the model will make continued savings unachievable for hospitals. 

“Additionally, it cannot be overlooked that many hospitals face intense financial pressures, in part because the costs they incur for providing care far outpace government reimbursements. Despite this, CMS has made another inadequate update to inpatient payment rates, with an extremely high productivity cut even larger than proposed. This is in the face of rising need for care and higher uninsured rates.”  

Further, CMS finalized several modifications to the criteria for new residency programs and certain organ acquisition and reasonable cost payment policies. It also finalized updates to TEAM that modify policies affecting episode triggers, quality measure assessment and target price construction. Additionally, in response to comments received on a request for information regarding voluntary participation of physician-owned hospitals in TEAM, the agency states that it intends to propose a policy for additional POH participation in future rulemaking. 

For the Inpatient Quality Reporting Program, the agency removed three, adopted eight measures and modified three measures currently in use; all condition-specific measures in the program will include Medicare Advantage beneficiaries, and CMS will make the same changes to these measures as used in the Hospital Value-based Purchasing Program. The agency also updated data reporting and submission requirements for certain measures, including the Maternal Morbidity Structural Measure. CMS adopted a new measure on readmission following sepsis hospitalization into the Hospital Readmissions Reduction Program but provided an additional year before the measure will impact payment determination. The agency also finalized several changes to its quality programs, including the adoption of two new electronic clinical quality measures and removal of three to the Medicare Promoting Interoperability Program in alignment with the IQR Program, and finalized promoting interoperability program proposals to make the electronic prior authorization measure an optional bonus measure for the EHR reporting period in calendar year 2027 and mandatory beginning with the EHR reporting period in CY 2028. CMS also finalized policies extending electronic prior authorization requirements to drugs covered under the medical benefit. 

AHA members will receive a Regulatory Advisory with further details on the rule.