Medicare Tweaks Hospital Pay and Quality Rules for 2027
Published Date: 4/14/2026
Proposed Rule
Summary
Starting in fiscal year 2027, Medicare is updating how it pays hospitals for inpatient care, including changes to teaching hospital funding and long-term care hospital rates. These updates also tweak quality program rules to make sure hospitals keep improving care. Hospitals, patients, and taxpayers will see these changes, which aim to balance fair payments with better health outcomes.
Free Policy Watch
New rules are filed every week. Most people never see them.
Pick a topic. PRIA watches every federal rule and tells you when one hits your household.
Pick a topic to get started
Analyzed Economic Effects
9 provisions identified: 3 benefits, 2 costs, 4 mixed.
Mandatory CJR-X Model for Joint Replacement
CMS proposes to expand the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model as a mandatory model beginning October 1, 2027. If finalized, CJR-X would be mandatory for acute care hospitals (except those participating in TEAM and hospitals located in Maryland) and would hold hospitals accountable for cost and quality for lower extremity joint replacement (LEJR) episodes from the inpatient/outpatient procedure through 90 days after discharge.
FY 2027 Hospital Payment Updates
Starting in fiscal year 2027, Medicare proposes updates to how it pays acute care hospitals (IPPS) and long-term care hospitals (LTCH PPS) for inpatient operating and capital-related costs. These changes set new payment policies and annual payment rates for FY 2027 and would apply to hospitals paid under Medicare inpatient prospective payment systems.
Medicare-Dependent Hospital (MDH) Program Ending
The Consolidated Appropriations Act, 2026 extended the Medicare-dependent, small rural hospital (MDH) program only through December 31, 2026. Beginning January 1, 2027, the MDH program will no longer be in effect absent a change in law, and hospitals that previously had MDH status would be paid based on the IPPS Federal rate.
GME Programs Must Not Discriminate
CMS proposes that approved medical residency training programs must not discriminate or promote discrimination on the basis of race, color, national origin, sex, age, disability, or religion when selecting residents or allocating resources. A similar nondiscrimination proposal is made for approved nursing and allied health education programs and accreditors.
New Residency Program Criteria Tightened
CMS proposes that to be considered a new residency program for cap-building, at least 90 percent of the individual residents must not have prior training in another program in the same specialty, with limited exceptions for small programs, displaced residents, and binding third-party match admissions. CMS would also no longer consider prior employment of program directors or faculty when determining newness for cap-building.
New Sepsis Readmission Measure (HRRP)
CMS proposes to adopt the 'Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization' measure with an early look for the FY 2028 program year and use beginning with the FY 2029 program year. This measure would be applied under the Hospital Readmissions Reduction Program.
TEAM Model Policy Changes
CMS proposes updates to the mandatory Transforming Episode Accountability Model (TEAM), which runs from January 1, 2026 through December 31, 2030. Proposed changes include adding MS-DRGs that trigger spinal fusion episodes, clarifying quality measure performance periods, using a rolling historical composite quality baseline for some measures, and modifying how target prices are constructed.
New eCQM Reporting and Quality Measure Dates
CMS proposes multiple quality measure adoptions and reporting changes with specific dates, for example: adopting the Advance Care Planning eCQM in several programs and making the Malnutrition Care Score eCQM mandatory beginning with the FY 2030 payment determination; proposing removal of certain eCQMs beginning with FY 2030; and modifying several mortality and excess days measures with start years including FY 2028, FY 2029, FY 2030, and FY 2032.
Low-Volume Hospital Definition and Payment Scale Extended
Section 6201 of the Consolidated Appropriations Act, 2026 extended the modified definition and payment methodology for low-volume hospitals through the portion of FY 2027 occurring October 1, 2026 through December 31, 2026. The statute defines a low-volume hospital as more than 15 road miles from another subsection (d) hospital and with less than 3,800 total discharges in the fiscal year, and sets a continuous sliding payment increase from 25 percent for hospitals with 500 or fewer discharges down to 0 percent for hospitals with more than 3,800 discharges.
Your PRIA Score
Personalized for You
How does this regulation affect your finances?
Sign up for a PRIA Policy Scan to see your personalized alignment score for this federal register document and every other regulation we track. We analyze your financial profile against policy provisions to show you exactly what matters to your wallet.
Key Dates
Department and Agencies
Take It Personal
Get Your Personalized Policy View
Start a Free Government Policy Watch to see how policy affects your household, then upgrade to PRIA Full Coverage for year-round monitoring.
Already have an account? Sign in