Medicare Revamps Psych Hospital Payments with New Tools
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
6 provisions identified: 4 benefits, 2 costs, 0 mixed.
Medicare IPF per-diem rate increase
Starting October 1, 2026, Medicare proposes to raise the IPF Federal per diem base rate from $892.87 to $912.58 for discharges through September 30, 2027. For IPFs that fail to report required quality data, the proposed per-diem rate for that period would be $894.74.
20% cap on IPF outlier payments
CMS proposes to cap an IPF's outlier payments at no more than 20 percent of its total IPF PPS payments in a year for discharges between October 1, 2026 and September 30, 2027. This would limit how much individual facilities can receive from outlier payments in FY 2027.
Standardized IPF assessment; two measures removed
CMS proposes to implement a standardized IPF patient assessment instrument (IPF-PAI) and to remove two quality 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 proposed policies.
Estimated $50M net increase to IPFs
CMS estimates the FY 2027 IPF PPS payment update will increase payments to inpatient psychiatric facilities by about $50 million during FY 2027 (October 1, 2026 through September 30, 2027).
ECT per-treatment payment rise
Beginning October 1, 2026, the Medicare ECT payment per treatment would increase from $673.85 to $688.73 for discharges through September 30, 2027. For IPFs that fail to report required quality data, the proposed ECT payment per treatment would be $675.26.
Outlier threshold lowered to $37,820
CMS proposes to lower the fixed dollar loss threshold from $39,360 to $37,820 for FY 2027 to maintain estimated outlier payments at 2 percent of aggregate IPF PPS payments for discharges Oct. 1, 2026–Sept. 30, 2027. This changes which high-cost cases qualify for outlier payments.
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Key Dates
Department and Agencies
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