CMS Proposes 2.4% Increase in Hospital Payments for Fiscal 2027
In a recent proposed regulation, the Centers for Medicare & Medicaid Services (CMS) unveiled a 2.4% increase in inpatient payments for hospitals under the Inpatient Prospective Payment System (IPPS) for fiscal year 2027. This adjustment is driven by a projected 3.2% rise in the hospital market basket, offset by a 0.8 percentage point productivity reduction. To qualify for the full increase, hospitals must participate in the Hospital Inpatient Quality Reporting (IQR) program and effectively utilize electronic health records.
The proposed change would boost overall hospital payments by an estimated $1.4 billion, including new technology add-on payments, potentially enhancing inpatient case payments by approximately $464 million in fiscal 2027. Current provisions for Medicare-Dependent Hospitals and payment adjustments for low-volume hospitals are set to expire by the end of 2026. If extended through 2027, CMS anticipates approximately $0.4 billion in additional payments to these facilities.
Moreover, the proposed regulation features a 2.4% payment rate increase for long-term care hospitals under the Long-Term Care Hospital (LTCH) Prospective Payment System for 2027. This aligns with a similar market basket increase, minus productivity adjustments, and is expected to boost payments by around $55 million. CMS aims to maintain the LTCH outlier threshold at its 2026 level, resulting in outlier payments constituting about 8% of total disbursements.
On October 1, 2027, CMS plans to make the Comprehensive Care for Joint Replacement (CJR) Model mandatory. The CJR Model aims to manage care and reduce costs for Medicare patients undergoing certain joint replacements while maintaining care quality. Additionally, proposed changes include updating Organ Acquisition and Reasonable Cost Payment Policies and enhancing Reimbursement Appeals processes for organ procurement and testing organizations.
For quality reporting, CMS proposes integrating three new measures into the Hospital Inpatient Quality Reporting Program, updating five mortality measures for future payment years, and modifying Excess Days in Acute Care after Hospitalization measures. The COVID-19 Vaccination Coverage measure for healthcare personnel is proposed for removal starting with the 2028 program year.
The Hospital Readmissions Reduction Program will introduce a new 30-day readmission measure following sepsis hospitalizations, starting with the 2029 program year. No changes are proposed for the Hospital-Acquired Condition Reduction Program for fiscal 2027.