The Centers for Medicare & Medicaid Services (CMS) recently released a final rule updating the Medicare fee-for-service inpatient prospective payment system (IPPS) for fiscal year (FY) 2027.
Highlights of the final rule include:
- Requiring all acute care hospitals paid under the IPPS to participate in the expanded Comprehensive Joint Replacement (CJR-X) model beginning Jan. 1, 2028, three months later than proposed. The CJR-X model will apply to inpatient and outpatient lower extremity joint replacement patients enrolled in Medicare Parts A and B, with Medicare as the primary payer.
- Increasing the standard operating rate by a net 1.4%, after the 0.9 percentage point productivity cut and budget neutrality adjustments, from $6,752.61 to $6,848.98 for hospitals that successfully comply with the CMS quality reporting program and electronic health record requirements. Hospitals that do not meet requirements for these programs are subject to a reduced annual update.
- Increasing the federal capital rate by 3%, from $524.15 to $540.03.
- Increasing the cost outlier threshold by 22%, from $40,397 to $49,346, to maintain the target of paying 5.1% of aggregate IPPS payments as outliers.
- Maintaining the current labor-related share of the standardized operating rate at 66% for hospitals with a wage index greater than 1.0 and 62% for those with a wage index equal to or less than 1.0.
- Increasing disproportionate-share hospital and uncompensated-care payments by $228 million nationally. UCC payments will be allocated using the average of the three most recent years of audited Worksheet S-10 data.
- Updating Medicare-Severity Diagnosis-Related Group (MS-DRG) relative weights using FY 2025 MedPAR claims data and updated cost report and cost-to-charge ratios.
- Adding 14 new MS-DRGs and deleting 18 MS-DRGs, with most changes within Major Diagnostic Category (MDC) 05 (Diseases and Disorders of the Circulatory System), MDC 08 (Musculoskeletal System and Connective Tissue) and MDC 13 (Female Reproductive System).
- Finalizing changes to off-campus provider-based location rules by modifying the “same patient population” criterion. Specifically, the CMS will limit the referral-based 75% test to outpatient departments only. Inpatient facilities seeking provider-based status may continue to use the alternative ZIP code overlap test.
- Adopting eight measures for the Hospital Inpatient Quality Reporting Program, including three measures not previously used in CMS quality programs:
- Excess days in Acute Care After Hospitalization for Diabetes
- Advance Care Planning
- Hospital Harm – Postoperative Venous Thromboembolism
- Modifying several measures to include Medicare Advantage beneficiaries in the value-based purchasing program.
- Adopting one measure on sepsis readmissions for the Hospital Readmissions Reduction Program for the FY 2030 program year, which is one year later than proposed.
The MHA will provide an updated hospital-specific impact analysis and additional details on the final rule in the coming weeks. Members with questions should contact the MHA Health Finance team.
The Centers for Medicare & Medicaid Services (CMS) recently released a final rule updating the Medicare fee-for-service inpatient prospective payment system (IPPS) for fiscal year (FY) 2027.
