CMS issues 2026 IPPS proposed rule
On April 11, CMS published a draft copy of the fiscal year (FY) 2026 Inpatient Prospective Payment System (IPPS) final rule to detail potential changes to Medicare inpatient coding and billing.
CMS is proposing a 2.4% increase in operating payments for acute care hospitals, which reflects a projected FY 2026 hospital market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment. The agency expects the proposed changes to operating and capital IPPS payment rates to boost hospital payments by $4 billion.
CMS also detailed its proposed transition plan for the discontinuation of the low-wage index policy for FY 2026 and subsequent years. This proposal stems from a recent court order to vacate certain policies and budget neutrality adjustments. The agency is proposing to adopt a budget-neutral narrow transitional exception to the calculation of 2026 IPPS payments for low-wage index hospitals that would be significantly impacted throughout the transition.
The proposed rule includes several modifications to various quality and reporting programs, including adjustments to certain Hospital Inpatient Quality Reporting (IQ) Program measures. CMS is proposing to change the risk adjustment methodology, shorten the performance period, and add Medicare Advantage patients to the current cohort for the following IQR measures:
- Hospital-Level, Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty
- Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity
Along with other IQR measure modifications, CMS is proposing to remove the following measures:
- Hospital Commitment to Health Equity beginning with the CY 2024 reporting period/FY 2026 payment determination
- COVID-19 Vaccination Coverage among Health Care Personnel measure, beginning with the CY 2024 reporting period/FY 2026 payment determination
- Screening for Social Drivers of Health and Screen Positive Rate for Social Drivers of Health measures, beginning with the CY 2024 reporting period/FY 2026 payment determination
CMS is also proposing changes to the Medicare Promoting Interoperability Program, Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, and more. In addition, the agency is proposing to update current Extraordinary Circumstances Exception (ECE) policy to clarify that it has the discretion to grant an extension rather than only a full exception in response to ECE requests.
The rule includes nearly 500 new ICD-10-CM codes that would take effect on October 1, if finalized. The proposals include a new code for type 2 diabetes mellitus in remission, as well as more than 100 new codes to capture non-pressure chronic ulcers in various stages. Revenue cycle professionals can view Part B News’ analysis of the code proposals for more information.
Finalized in the 2025 IPPS final rule, the Transforming Episode Accountability Model (TEAM) is a bundled payment model scheduled to run from January 2026 to December 2030. CMS is proposing several changes to TEAM, including a limited deferment period for certain hospitals and removing health equity plans.
The proposed rule is expected to be published in the Federal Register on April 30. The agency is seeking feedback on several proposals in the rule, and comments are due on June 10. Revenue cycle professionals can read CMS’ fact sheet and press release for more information on the proposed changes.