Psych Hospitals Get Medicare Rate Bump for 2026
Published Date: 4/30/2025
Proposed Rule
Summary
Starting October 1, 2025, Medicare is updating how it pays inpatient psychiatric hospitals, including changes to rates, wage adjustments, and special payments for teaching and rural facilities. These updates aim to better support mental health care providers and improve quality reporting. If you want to share your thoughts, make sure to comment by June 10, 2025!
Analyzed Economic Effects
5 provisions identified: 2 benefits, 2 costs, 1 mixed.
Higher FY2026 IPF Per‑Diem and ECT Rates
If you operate an Inpatient Psychiatric Facility (IPF), CMS proposes to raise the Federal per diem base rate from $876.53 to $891.99 and the electroconvulsive therapy (ECT) payment per treatment from $661.52 to $673.19 for discharges on or after October 1, 2025 through September 30, 2026. CMS estimates the overall economic impact of the proposed IPF PPS updates is $70 million in increased payments to IPFs during FY 2026.
Reduced Updates for Non‑Reporting IPFs
If your IPF fails to report required quality data, CMS proposes reducing the FY2026 update so the Federal per diem base rate would be $874.57 (instead of $891.99) and the ECT payment per treatment would be $660.04. This reduction reflects the statutory 2.0 percentage point penalty applied to IPFs that fail to report required quality data for the rate year.
Standardized Patient Assessment Data Requirement (RY 2028+)
Under the Consolidated Appropriations Act, 2023 changes cited by CMS, IPFs must collect and submit standardized patient assessment data using a standardized instrument for rate years beginning in FY 2028 and each subsequent rate year (at least admission and discharge). CMS also must implement payment methodology revisions effective for FY 2031 that take that assessment data into account.
Wage Index, Labor Share, Outlier Threshold Changes
CMS proposes technical payment-setting changes for FY2026: the labor‑related share would change from 78.8% to 78.9%, the wage index budget neutrality factor would be 1.0011, a refinement standardization factor of 0.9927 would be applied, and the fixed dollar loss (outlier) threshold would increase from $38,110 to $39,360 to keep estimated outlier payments at 2% of aggregate IPF PPS payments. These adjustments would apply for discharges October 1, 2025 through September 30, 2026.
IPFQR Measure Removals and ECE Policy Update
CMS proposes changes to the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program: modify the reporting period for the 30‑Day Risk‑Standardized All‑Cause ED Visit measure; remove these measures—COVID-19 Vaccination Coverage Among Healthcare Personnel, Facility Commitment to Health Equity, Screening for Social Drivers of Health, and Screen Positive Rate for Social Drivers of Health—and update and codify the Extraordinary Circumstances Exception (ECE) policy. CMS estimates the IPFQR changes would reduce costs by $1,746,474 ($1,731,712 in CY2026 and $14,761 in CY2027) for facilities and patients.
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Key Dates
Department and Agencies
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