FY 2027 IPPS final rule: What hospitals need to know

CMS released the fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) final rule last week, outlining upcoming changes to Medicare payment rates and policies for inpatient services. Overall, the agency estimates that the updates will generally increase hospital payments by $2.1 billion.

CMS finalized a 2.3% increase to IPPS payments for FY 2027 (beginning October 1, 2026), reflecting a 3.2% hospital market basket increase and -0.9% productivity adjustment. The finalized payment rate is slightly lower than the agency’s initial proposal of 2.4%. 

The rule also details CMS’ plans for a nationwide expansion of its Comprehensive Care for Joint Replacement (CJR) model. The CJR Expanded (CJR-X) model will hold hospitals responsible for spending and care during a patient’s lower extremity joint replacement procedure through 90 days post-discharge. While CMS originally intended to launch the CJR-X model on October 1, 2027, it postponed implementation until January 1, 2028, in response to stakeholder feedback. Most IPPS hospitals will be required to participate in the new model, although CMS noted several exceptions, including Transforming Episode Accountability Model (TEAM) participants and Maryland facilities.

Revenue cycle professionals should take note of updates related to TEAM, a five-year, mandatory, episode-based payment model that launched on January 1, 2026. TEAM is designed to improve care coordination for original Medicare beneficiaries undergoing certain procedures by holding hospitals accountable for costs associated with the surgery through 30 days post-discharge. The FY 2027 IPPS final rule includes updates to several policies affecting episode category triggers, quality measure assessments, and target price construction.

The rule also includes graduate medical education payment updates, clarification of organ acquisition reimbursement policies, and numerous changes to quality reporting measures.

The FY 2027 IPPS final rule updates take effect on October 1, 2026, unless otherwise noted. Revenue cycle professionals can view CMS’ fact sheet for more information. The agency also published a press release on the CJR-X model.