CMS' 2.6% IPPS Rate Hike: A Game Changer for Hospitals!

Ladies and gentlemen, buckle up! The Centers for Medicare & Medicaid Services (CMS) just dropped a bombshell that's going to shake up the healthcare industry. They've issued a final rule that's going to increase Medicare inpatient prospective payment system rates by a net 2.6% in fiscal year 2026. This is a HUGE deal, folks! Let's break it down and see what it means for hospitals, especially those in rural and underserved communities.

First things first, this 2.6% payment update reflects a hospital market basket increase of 3.3% as well as a productivity cut of 0.7%. This update also reflects CMS’ proposal to rebase and revise the market basket to a 2023 base year. In addition, the rule includes a $2 billion increase in disproportionate share hospital payments and a $192 million increase in new medical technology payments. Overall, it would increase hospital payments by $5 billion in FY 2026 as compared to FY 2025. That's right, folks! We're talking about a $5 BILLION boost for hospitals!

Now, let's talk about the Transforming Episode Accountability Model (TEAM). This mandatory payment model is going to provide bundled payment for certain surgical procedures beginning on Jan. 1, 2026. CMS is making modifications to the target price construction and quality measure aspects of the model. But here's the kicker: they're finalizing their proposal to discontinue the low-wage index hospital policy for FY 2026 and establishing a transitional exception policy for hospitals significantly impacted by the discontinuation. This is a double-edged sword, folks. On one hand, it's going to help hospitals that are struggling to keep up with the rising costs of labor. On the other hand, it's going to put a strain on hospitals in low-wage areas.

But wait, there's more! CMS is also making a number of changes to its quality reporting and value programs. They're finalizing their proposal to remove the Health Equity Adjustment from the Hospital Value-based Purchasing program and removing four measures from the inpatient quality reporting program. They're also including Medicare Advantage patients in calculating hospital performance in the Hospital Readmission Reduction Program. But here's the thing: they haven't finalized their proposal to include payment data for these beneficiaries in the calculation of excess readmissions. This is a big deal, folks! It's going to change the way hospitals are evaluated and reimbursed.

Now, let's talk about the elephant in the room. The American Hospital Association (AHA) has some concerns about this final rule. They're worried that the updates are not adequate enough for the many hospitals that are struggling in today’s challenging operating environment, especially those in rural and underserved communities. They're also concerned that the TEAM model will not advance the objectives of delivering high-quality care at lower costs. They're urging the agency to make TEAM voluntary.

But here's the thing, folks. This is a no-brainer! The 2.6% increase in IPPS rates is going to provide hospitals with much-needed financial resources to maintain and improve their operations. For rural and underserved communities, this increase is particularly crucial as it helps address the unique challenges these hospitals face, including higher uncompensated care costs and limited access to advanced medical technologies.

So, what's the bottom line? This final rule is a game changer for hospitals. It's going to provide them with the financial resources they need to maintain and improve their operations. It's going to help them deliver high-quality care to patients. And it's going to change the way hospitals are evaluated and reimbursed. So, buckle up, folks! This is going to be a wild ride!