The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service inpatient prospective payment system (IPPS) for fiscal year (FY) 2026.
The rule proposes to:
- Increase the standard operating rate by a net 3.2%, after the 0.8% productivity cut and budget neutrality adjustments, from $6,624.39 to $6,835.47, for hospitals that successfully comply with the CMS quality reporting program and electronic health record requirements. Hospitals that do not meet the requirements for these programs are subject to a reduced annual update.
- Increase the federal capital rate by 3.3%, from $512.14 to $528.95.
- Decrease the cost outlier threshold by 4.1%, from $46,217 to $44,305, to maintain the target of paying 5.1% of aggregate IPPS payments as outlier.
- Rebase and revise the labor-related share of the standardized operating rate from 67.6% to 66% for hospitals with a wage index greater than 1.0.
- Increase disproportionate share hospital and uncompensated care (UCC) payments by $1.5 billion nationally. UCC payments will be allocated using the average of three most recent years of audited Worksheet S-10 data.
- Add seven new Medicare-Severity (MS) Diagnosis Related Groups, while deleting six MS-DRGs, with most changes within Major Diagnostic Category 05, Diseases and Disorders of the Circulatory System.
- Remove four measures from the Hospital Inpatient Quality Reporting Program, effective with the 2024 reporting and FY 2026 payment period:
- COVID-19 vaccination coverage among health care personnel.
- Hospital commitment to health equity structural measure.
- Screening for social drivers of health.
- Screen positive rate for social drivers of health.
- Modify the Hybrid hospital-wide readmission and mortality measures and the stroke mortality and elective total hip and knee arthroplasty measures.
- Update and codify the Extraordinary Circumstances Exception (ECE) policy to clarify that the CMS has discretion to grant an extension in response to an ECE request from a hospital.
- Remove the health equity adjustment from the hospital value-based purchasing program scoring methodology beginning with the FY 2026 program.
- Include Medicare Advantage patients in the calculation of multiple claims-based measures across several programs, including the Hospital Readmissions Reduction program, beginning with the FY 2027 program.
- Shorten the Hospital RRP’s performance period from three years to two years. For example, FY 2027 HRRP penalties would be based on July 1, 2023 through June 30, 2025 performance.
- Seek stakeholder comments in response to the Request for Information on opportunities to streamline regulations and reduce administrative burden on providers, suppliers, beneficiaries and other interest parties in the Medicare program.
The MHA continues to review the proposed rule and will provide hospitals with an estimated impact analysis in the next few weeks. The MHA encourages hospitals to review the proposed rule and submit comments to the CMS by June 10 and to notify Vickie Kunz at the MHA regarding questions or issues identified by May 27.