Medicare Tweaks Rehab Facility Payments and Therapy Timelines for 2027
Published Date: 4/6/2026
Proposed Rule
Summary
Starting in fiscal year 2027, Medicare is updating how it pays inpatient rehab facilities, including new rules to start therapy within 36 hours of admission and better tracking of patient progress. Rural payment boosts will continue to phase out, and quality reporting gets a refresh. These changes affect rehab centers and could impact their payments, so comments are open until June 1, 2026.
Analyzed Economic Effects
7 provisions identified: 3 benefits, 2 costs, 2 mixed.
IRF Payments Updated by 2.4%
Medicare would update inpatient rehabilitation facility (IRF) payment rates for FY 2027 by a market basket update of 3.2 percent minus a productivity adjustment of 0.8 percentage point, resulting in a proposed net update of 2.4 percent for discharges Oct 1, 2026 through Sept 30, 2027. CMS says it will use the most current data available when finalizing the FY 2027 update.
Therapy Must Start Within 36 Hours
The rule would require that all therapy treatments or therapy evaluations in an IRF begin within 36 hours from midnight on the day of admission. This requirement applies to IRF admissions during FY 2027 (discharges on or after October 1, 2026).
Rural Adjustment Phase-Out Continues
CMS would continue the third year of a 3-year phaseout of the IRF rural adjustment that began in FY 2025. This ongoing phaseout affects IRFs transitioning from rural to urban status for FY 2027 payments.
Higher Bid Surety for Remote DME Bidders
The proposed rule would increase the required bid surety bond amount for entities submitting bids under Remote Item Delivery (RID) contracts in the DMEPOS Competitive Bidding Program. This change applies to entities bidding in RID competitive bidding areas.
Preadmission Functional Status Documentation
The proposal would require that an IRF document a patient's current functional status on the preadmission screening form. This change is proposed for FY 2027 and ties documentation to the admission process for IRF care.
Initial Interdisciplinary Team by Day 4
CMS proposes the initial Interdisciplinary Team (IDT) meeting must occur by the 4th day of admission in IRFs to align with the Plan of Care timeframe. This requirement is proposed for FY 2027 admissions (discharges on or after October 1, 2026).
CMG Weight Updates, Budget-Neutral Redistribution
CMS proposes to update Case-Mix Group (CMG) relative weights and average length-of-stay (ALOS) values for FY 2027 using FY 2025 claims and FY 2024 cost reports, applying a budget-neutral factor of 0.9990 so aggregate payments stay the same. CMS estimates 99.4 percent of IRF cases would see less than a 5 percent change in a CMG relative weight.
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Key Dates
Department and Agencies
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