News: CMS issues FY 2027 IPPS proposed rule

CMS issued the fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) proposed rule. The proposal would increase Medicare IPPS rates by a net 2.4% in FY 2027 for hospitals that use electronic health records and submit quality measure data. This payment update reflects a hospital market basket increase of 3.2% as well as a productivity cut of 0.8%.

Overall, the proposal would increase hospital payments by $41.9 billion in FY 2027 compared to FY 2026. This includes a decrease in disproportionate share and uncompensated care payments of $564 million—even though the estimated uninsured rate is estimated to increase from 8.7% to 9.1%. It also includes a proposed increase of $464 million in new medical technology payments.

Additionally, CMS proposed an expansion of the Comprehensive Care for Joint Replacement Model—called CJR-X—nationwide starting October 1, 2027. The model, which was initially tested from April 2016 through December 2024, would continue to focus on improving care while reducing spending for Medicare beneficiaries undergoing lower extremity joint replacement procedures. Participating hospitals would be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and 90 days post-discharge.

If finalized, the final expanded model of the CJR-X would be mandatory for all acute care hospitals except for participants of the Transforming Episode Accountability Model (TEAM) and those located in Maryland. CMS claims that CJR-X would include certain modifications to qualify measures and payment methodology policies in response to the CJR model evaluation results and stakeholder feedback.

CMS’s proposed updates to TEAM would modify prices affecting episode category triggers, quality measure assessment, and the construction of target prices. Additionally, the proposal includes two requests for information regarding ambulatory surgical center episodes and voluntary participation of hospitals with physician ownership.

The proposal also includes several changes to CMS’ quality programs. They include:

• For the Inpatient Quality Reporting Program, adopting three new measures and remove three others, while updating data reporting and submission requirements for certain measures including the Maternal Morbidity Structural Measure.
• Modifying three condition-specific measures to include Medicare Advantage beneficiaries in the patient populations.
• Making the same modification to five condition-specific mortality measures in the Hospital Value-based Purchasing Program.
• Adopting a new measure on readmission following sepsis hospitalization into the Hospital Readmissions Reduction Program.
• Seeking comments on measures related to emergency care throughput as well as sepsis mortality, and on the Birthing Friendly Hospital designation.

The proposal also includes several modifications to the criteria for new residency programs, in an effort to prohibit unlawful discrimination by graduate medical education programs. It also seeks to clarify certain organ acquisition and reasonable cost payment policies.

CMS will accept comments on the proposed rule through June 9, 2026.

Editor’s note: To read the full proposed rule, click here. To read additional coverage from the American Hospital Association, click here.