Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—FINAL RULES: CMS issues Final Rule updating payment policies for hospitals in FY 2026, (Aug 4, 2025)
Organizations Mentioned:Centers for Medicare & Medicaid Services
By WK Editorial Staff
CMS issues final rule updating payment policies for hospitals in FY 2026, implementing changes to IPPS and LTCH PPS payment rates, quality reporting programs, and promoting interoperability while seeking input on reducing administrative burdens.
The Centers for Medicare & Medicaid Services (CMS) recently released a final rule outlining updates to payment policies for inpatient and long-term care hospitals under the Medicare hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) for fiscal year (FY) 2026. The final rule aligns with statutory and regulatory requirements and aims to enhance payment rates for hospitals treating Medicare beneficiaries (Final Rule, 90 Fed. Reg. 36536 (Aug. 4, 2025)).
Key Changes to IPPS Payment Rates. CMS is implementing a 2.6% increase in IPPS operating payment rates for general acute care hospitals participating in quality reporting and electronic health record programs. This increase is based on a projected 3.3% market basket percentage increase, adjusted for productivity. The changes are expected to boost hospital payments by $5.0 billion in FY 2026, including additional payments for new medical technologies and uncompensated care.
LTCH PPS Payment Rates Update. For FY 2026, CMS is raising the LTCH standard payment rate by 2.7%, reflecting a 3.4% market basket increase adjusted for productivity. LTCH PPS payments are projected to rise by approximately 3.0%, amounting to $72 million, mainly due to high-cost outlier payments. CMS is also adjusting the LTCH outlier threshold to meet statutory requirements.
Transition for Low Wage Index Hospital Policy. Following a court decision, CMS is discontinuing the low wage index hospital policy for FY 2026 and introducing a transitional exception to support impacted hospitals. The agency is adopting a budget-neutral approach to address disparities affecting low wage index hospitals, with a focus on rural facilities.
Quality Reporting Programs Updates. CMS is modifying quality measures under the Hospital Inpatient Quality Reporting Program, including adjustments to complication rates and mortality rates. The agency is also removing certain measures and updating the Extraordinary Circumstances Exception policy to provide flexibility in meeting reporting requirements.
Promoting Interoperability Program Enhancements. In the Medicare Promoting Interoperability Program, CMS is refining reporting requirements for eligible hospitals and critical access hospitals, emphasizing security risk management and annual self-assessments. The program aims to encourage the meaningful use of certified electronic health record technology and data exchange with public health agencies.
Reducing Administrative Burdens. In response to Executive Order 14192, CMS is seeking public input on streamlining regulations and reducing administrative burdens for Medicare program participants. The agency is committed to enhancing care delivery efficiency and minimizing regulatory complexities to support providers and improve patient outcomes.
Overall, the FY 2026 final rule reflects CMS's ongoing efforts to optimize payment policies, promote quality care, and advance interoperability in healthcare settings. Stakeholders are encouraged to review the full details of the final rule to understand the implications for hospital reimbursement and quality reporting in the upcoming fiscal year.
FederalRegisterIssuances: FinalRules IPPSNews CMSNews HITNews LTCHNews PaymentNews QualityNews FedTracker HealthCare