Details on the IPPS and LTCH rule

The proposed rule includes identical payment updates for acute hospitals providing inpatient care and LTCHs. The agency proposed a 3.2% increase in the market basket used to calculate rates, minus a 0.8% productivity adjustment, meaning hospitals would receive a 2.4% pay increase under the proposed rule. Last year, hospitals received a 2.6% payment increase.

CMS said it expects that hospital payments will increase by around $1.4 billion for FY2027. It's also possible Congress could extend higher payments that are slated to expire on Dec. 31 for Medicare-dependent hospitals and low-volume hospitals, which CMS estimated would raise total payments by an additional $400 million.

In addition, CMS proposed expanding the Comprehensive Care for Joint Replacement (CJR) model into a mandatory, nationwide program that will be called CJR-X and begin on Oct. 1, 2027.

The proposed IPPS and LTCH rule also features several additional changes, including:

• Changes to the Hospital IQR Program, including the adoption of three new measures — one focusing on excess days in acute care for diabetes-related hospitalizations and two focusing on advanced care planning and certain hospital harm-related incidents — the modification of five mortality measures (heart attack, heart failure, pneumonia, COPD, and coronary artery bypass graft surgery) starting with the 2028 payment determination, adding Medicare Advantage patients to the program, and shortening the performance period from three years to two. Additionally, three measures would be removed beginning with the 2030 payment determination.
• The addition of a hospital 30-day, all-cause, risk-standardized readmission rate following sepsis hospitalization measure to the hospital readmissions reduction program starting in 2029.
• Several changes to the Promoting Interoperability Program, including updating the definition of certified EHR technology, removing two electronic referral loop measures, modifying the electronic prior authorization measure, adding a unique device identifiers for implantable medical devices measure to the public health and clinical data exchange objective, and adding two new electronic clinical quality measures with the 2030 payment determination.
• Updates to the Transforming Episode Accountability Model (TEAM), a mandatory alternative payment model finalized last year, that "would modify policies affecting episode category triggers, quality measure assessment, and the construction of target prices," according to an executive summary of the proposed rule.

"Differences in patient selection, perioperative pathways, implant use, and post-acute utilization across hip, knee, and ankle procedures can drive meaningful variation in quality, safety, and total episode cost under a 90-day model," Schmidt said. "As participation becomes mandatory, organizations will need to focus on identifying and addressing unwarranted variation across the full episode of care, while preserving appropriate clinical judgment for patients with higher complexity."

MacDonald said the proposed payment increase is "a step in the right direction, but it does not negate the compounding effects of rising inflation, record levels of uncompensated care, and a growing uninsured population."

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