The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service (FFS) inpatient prospective payment system (IPPS) for fiscal year (FY) 2027. Highlights of the proposed rule include:
- Mandating participation in the expanded Comprehensive Joint Replacement Model by all acute care hospitals paid under the inpatient prospective payment system beginning Oct. 1, 2027, for beneficiaries undergoing lower extremity joint replacements in the inpatient or outpatient setting.
- Increasing the standardized operating rate by a net 3.2%, after a 0.8% productivity cut and budget neutrality adjustments, from $6,752.61 to $6,967.87 for hospitals that successfully comply with the CMS quality reporting program and electronic health record requirements. Hospitals that do not meet these requirements are subject to a reduced annual update.
- Increasing the federal capital rate by 4%, from $524.15 to $545.22.
- Increasing the cost outlier threshold by 28%, from $40,397 to $51,704, to maintain the target of paying 5.1% of aggregate inpatient prospective payment system 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.
- Decreasing disproportionate share hospital and uncompensated care payments by $564 million nationally. Uncompensated care 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 relative weights using FY 2025 MedPAR claims data and updated cost report and cost-to-charge ratios.
- Adding 14 new Medicare Severity Diagnosis-Related Groups while deleting 18, with most changes within Major Diagnostic Category 05, Diseases and Disorders of the Circulatory System; Major Diagnostic Category 08, Diseases and Disorders of the Musculoskeletal System and Connective Tissue; and Major Diagnostic Category 13, Diseases and Disorders of the Female Reproductive System.
- Modifying off-campus provider-based location rules by changing the “same patient population” criteria. Specifically, CMS proposes limiting the referral-based 75% test to outpatient departments only. Inpatient facilities seeking provider-based status could continue using the alternative ZIP code overlap test, but would no longer be allowed to use the referral-based test to meet the location requirement.
- Adopting eight measures for the Hospital Inpatient Quality Reporting Program, including 3 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
- Adopting one measure on sepsis readmissions for the Hospital Readmissions Reduction Program for the FY 2029 program year.
The MHA will provide a hospital-specific impact analysis and additional details on the proposed rule in the near future. Members are encouraged to submit comments to CMS by June 9 and to notify Vickie Kunz of any issues identified by June 1. The CMS is expected to release a final rule around Aug. 1.