Proposed Updates to Medicare Payment Systems for 2027

The Centers for Medicare & Medicaid Services (CMS) has proposed updates to the Medicare payment systems for Fiscal Year 2027, affecting various healthcare facilities and services. These changes impact skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs), and hospice care under their respective Prospective Payment Systems (PPS).

For SNFs, CMS suggests a 2.4% increase in payment rates, based on a 3.2% market basket increase reduced by a 0.8% productivity adjustment. Notably, adjustments from the SNF Value-Based Purchasing Program are excluded from this rate change, amounting to $208.4 million in FY 2026. Meanwhile, IRF payment rates are also proposed to increase by 2.4%, with similar market basket and productivity adjustments.

IPFs are slated for a 2.3% increase in payment rates, derived from a 3.1% market basket increase minus a 0.8% productivity adjustment. CMS plans to update the outlier threshold to maintain outlier payments at 2.0% of total IPF PPS payments, potentially increasing payments by $50 million compared to FY 2026. Meanwhile, Medicare hospice payment rates could see a 2.4% increase, contributing an additional $785 million from FY 2026.

In related updates, CMS revised Hospital Price Transparency FAQs and introduced new guidelines on encoding algorithms. Additionally, CMS released the latest Program for Evaluating Payment Patterns Electronic Reports (PEPPERs) to aid hospitals in ensuring billing accuracy. The Office of Inspector General emphasized compliance issues with inaccurate reporting by some SNFs. CMS continues to support transparency and accuracy in billing, urging healthcare professionals to stay informed of these regulatory compliance requirements.