2025-06336Proposed RuleSignificantWallet

Medicare Tweaks Rehab Payments for 2026

Published Date: 4/30/2025

Proposed Rule

Summary

Starting in fiscal year 2026, Medicare is updating how it pays inpatient rehab facilities, including changes to payment rates and how patient cases are grouped. The rule also continues to phase out extra payments for rural facilities and updates quality reporting rules. These changes affect rehab centers and could impact their funding starting October 1, 2025.

Analyzed Economic Effects

4 provisions identified: 2 benefits, 1 costs, 1 mixed.

Medicare IRF payments updated for FY2026

If you operate an inpatient rehabilitation facility (IRF), Medicare proposes updated payment rates for discharges on or after October 1, 2025 and through September 30, 2026. CMS projects a 3.4 percent market basket increase for FY2026 (based on IGI's Q4 2024 forecast), will apply a required productivity adjustment, and estimates an overall $295 million increase in Federal payments to IRFs during FY2026.

Case-mix weight changes shift payment distribution

CMS proposes updated case-mix group (CMG) relative weights and average length-of-stay (ALOS) values for FY2026 using FY2024 IRF claims and FY2023 cost report data. The CMG updates will be implemented in a budget-neutral manner using a budget neutrality factor of 0.9985, and CMS estimates 99.2 percent of IRF cases would experience less than a 5 percent change in their CMG relative weight.

Rural payment adjustment phaseout continues

CMS will continue the second year of a 3-year phaseout of the rural adjustment for IRFs transitioning from rural to urban status; this phaseout began in FY2025 and continues for FY2026 (affecting discharges on or after October 1, 2025).

IRF quality-reporting removals lower reporting costs

CMS proposes removing the COVID-19 Vaccination Coverage among Healthcare Personnel measure from the IRF Quality Reporting Program beginning with the FY2026 QRP, and removing the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure plus four Social Determinants of Health (SDOH) IRF-PAI items beginning with the FY2028 QRP. CMS estimates these QRP changes will decrease IRF costs by about $504,929.84 beginning with the FY2026 QRP and by about $1,090,580.75 beginning with the FY2028 QRP.

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Key Dates

Published Date
Effective Date
4/30/2025
10/1/2025

Department and Agencies

Department
Independent Agency
Agency
Health and Human Services Department
Centers for Medicare & Medicaid Services
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