Proposed Updates to Medicare Payment Policies for Inpatient Psychiatric Facilities

On April 2, 2026, the Centers for Medicare & Medicaid Services (CMS) unveiled proposed updates to the Medicare payment policies for Inpatient Psychiatric Facilities (IPF) under the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) for fiscal year (FY) 2027. These changes reflect CMS’s annual commitment to revising Medicare payment policies, ensuring they align with contemporary healthcare necessities.

The proposed modifications include updates to payment rates, adjustments to the outlier threshold, and a revised wage index. One key proposal is to cap outlier payments at no more than 20% of a facility's total IPF PPS payments. In addition, CMS plans to remove specific measures from the IPF Quality Reporting Program and introduce a standardized patient assessment instrument.

For FY 2027, CMS recommends a 2.3% increase in the IPF PPS payment rates, based on a projected 3.1% market basket increase, offset by a 0.8 percentage point productivity adjustment. CMS notes that the final adjustment may vary depending on the latest data. The proposal would uphold outlier payments at 2.0% of total IPF PPS payments, forecasting a 2.1% rise, equivalent to $50 million, in payments to IPFs compared to FY 2026.

Enhancements to Outlier Payment Policy

The planned amendments to the outlier payment policy aim to aid facilities managing high-cost patient care, ensuring the consistency of outlier payments at 2% of total payments. Recent analyses indicated elevated outlier thresholds, complicating the access to extra payments for expensive cases. The proposal sets out to limit outlier payments at the provider level, addressing high routine costs. CMS invites feedback on this proposal and on the overall IPF PPS facility adjustments structure.

IPF Quality Reporting Program Proposals

For the IPF Quality Reporting Program, facilities must provide specified quality data to circumvent a 2.0 percentage point reduction in annual payment updates. CMS proposes eliminating two quality measures from the CY 2026 reporting period for FY 2028 payment calculations. Additionally, a standardized IPF patient assessment instrument, resulting from the Consolidated Appropriations Act of 2023, is suggested for implementation. This IPF-PAI instrument will use the Health Level Seven (HL7) Fast Healthcare Interoperability Resources (FHIR)® specification for data submission.

Further details on the proposal can be found in the Federal Register, with additional information on the IPF PPS and the IPF Quality Reporting Program available through the CMS website.