CMS Releases FY 2027 IPPS Proposed Rule

On April 10, the Centers for Medicare & Medicaid Services (CMS) released its proposed fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) rule. In the rule, CMS proposes to update hospital payment rates, change Medicare DSH and uncompensated care payment methodology, modify quality reporting programs, expand an episode-based payment model, and change graduate medical education requirements.

America's Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Washington Briefing in the coming days. Comments are due June 9.

Payment Updates

Payment Rates and Medicare Disproportionate Share Hospital (DSH) Payments

The rule proposes increasing operating payment rates for general acute-care hospitals by a net 2.4%. This payment update derives from a market basket increase of 3.2% reduced by a -0.8-percentage point productivity adjustment. Overall, this change is expected to increase hospital payments by $1.9 billion in FY 2026 compared with FY 2026.

For FY 2027, CMS estimates total Medicare DSH and uncompensated care (UC) payments will decrease by approximately $564 million compared with FY 2026, even though the agency projects that the national uninsured rate will increase from 8.7% in FY 2026 to 9.1% in FY 2027.

Graduate Medical Education (GME)

CMS proposes to require that approved medical residency training programs not discriminate or promote discrimination based on race, color, national origin, sex, age, disability, or religion as a condition of receiving GME payments. This proposal would apply to employment, program participation, and resource allocation, Similar requirements would apply to approved nursing and allied health education programs and their accreditors.

Comprehensive Care for Joint Replacement Expansion (CJR-X) Model

CMS proposes to establish a new mandatory, nationwide episode-based payment model, CJR-X, beginning Oct. 1, 2027. The model would hold acute-care hospitals accountable for spending and quality across inpatient and outpatient lower extremity joint replacement (hip, knee, and ankle) procedures and the 90-day post-discharge period. All acute-care hospitals would be required to participate, except those in Maryland and those participating in the Transforming Episode Accountability Model.

Provider-Based Department (PBD) Policies

CMS proposes to revise requirements for off-campus provider-based departments, including by establishing more explicit criteria for demonstrating that such facilities serve the same patient population as the main provider. Specifically, CMS proposes to modify the requirements for off-campus inpatient hospital services to qualify for provider-based status if they do not serve patients in the same ZIP code as the main provider.

Quality Reporting

CMS proposes specific updates to individual quality reporting programs:

CMS proposes to add three measures to the Hospital Inpatient Quality Reporting (IQR) program:

• Excess Days in Acute Care After Hospitalization for Diabetes, beginning FY 2029
• Hospital Harm-Postoperative Venous Thromboembolism electronic clinical quality measure (eCQM), beginning FY 2030
• Advance Care Planning eCQM, beginning FY 2030.

CMS also proposes to adopt five modified mortality measures for IQR that include both fee-for-service and Medicare Advantage patients. The IQR measures will begin in FY 2028 and will be added to the Hospital Value-Based Purchasing Program in FY 2032.

Birthing-Friendly Hospital Designation Request for Information

CMS continues to explore the Birthing-Friendly Hospital designation adopted in the 2023 IPPS final rule and solicits feedback on how to further develop and refine this designation. The agency plans to expand the designation with a more robust set of metrics, potentially based on maternal quality care IQR measures. CMS seeks to gather broad public input on the inclusion of specific eCQMs.

Hospital Readmissions Reduction Program (HRRP)

CMS proposes to add one measure to the HRRP-the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure-beginning with the FY 2029 program year.

CMS does not propose any updates to the Hospital-Acquired Condition Reduction Program.

Medicare Promoting Interoperability Program

CMS proposes to update the definition of certified electronic health record technology based on updates proposed by the Office of the National Coordinator for Health Information Technology. The agency also proposes several updates to the eCQMs for this program.

Contact Director of Policy Rob Nelb at [email protected] or 202.585.0127 with questions.