Medicare Updates Psych Hospital Payments with New Tools for 2027
Published Date: 4/7/2026
Proposed Rule
Summary
Starting October 1, 2026, Medicare is updating how it pays inpatient psychiatric hospitals, including changing payment rates, wage adjustments, and rules for extra-cost cases. They’re also introducing a new patient assessment tool and dropping two quality measures to keep things fresh and fair. These updates affect hospitals and patients and aim to improve care while managing costs through September 30, 2027.
Analyzed Economic Effects
3 provisions identified: 0 benefits, 2 costs, 1 mixed.
IPF Per Diem and ECT Rate Update
Starting October 1, 2026, Medicare proposes to raise the Inpatient Psychiatric Facility (IPF) Federal per diem base rate from $892.87 to $912.58 and the electroconvulsive therapy (ECT) payment per treatment from $673.85 to $688.73. For IPFs that fail to report required quality data, CMS proposes lower updated rates of $894.74 (per diem) and $675.26 (ECT). The proposal also sets the labor-related share at 79.1%, a wage index budget neutrality factor of 0.9991, and a fixed dollar loss (outlier) threshold of $37,820.
20% Cap on IPF Outlier Payments
CMS proposes to limit an individual inpatient psychiatric facility's outlier payments to no more than 20 percent of its total IPF PPS payments in a year, effective for FY 2027 discharges beginning October 1, 2026. The proposal is intended to cap the share of a facility's payments coming from outlier adjustments.
Standardized IPF Assessment and Measure Changes
CMS proposes to implement a standardized IPF patient assessment instrument (IPF-PAI) as required by the Consolidated Appropriations Act, 2023, and to remove two IPF Quality Reporting Program measures: Alcohol Use Brief Intervention Provided or Offered (SUB-2/2a) and Tobacco Use Treatment Provided or Offered at Discharge (TOB-3/3a). CMS estimates a net increase of $7,223,725 in costs to facilities for the IPF Quality Reporting Program due to the policies in this rule.
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Key Dates
Department and Agencies
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