Medicare Finalizes 2027 Hospital Payment Rates and Rules
Published Date: 8/4/2026
Rule
Summary
This final rule will revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals; make changes relating to Medicare graduate medical education (GME) for teaching hospitals; update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs); update and make changes to requirements for certain quality programs; and make other policy- related changes. ONC also adopts certain health information technology (health IT) standards and specifications on behalf of HHS.
Analyzed Economic Effects
8 provisions identified: 6 benefits, 2 costs, 0 mixed.
Medicare-Dependent Hospital (MDH) Status Ends
The Medicare-dependent, small rural hospital (MDH) program is extended only through December 31, 2026; beginning January 1, 2027, hospitals that previously had MDH status will no longer have MDH status and will be paid based on the IPPS Federal rate.
Medicare TEAM Model Updates
The mandatory Transforming Episode Accountability Model (TEAM) runs January 1, 2026 through December 31, 2030 and applies to certain procedure-based episode categories (CABG, LEJR, major bowel, SHFFT, and spinal fusion). CMS finalized updates that change episode triggers, quality measure timing, and target price construction for TEAM.
CJR‑X: Mandatory Joint Replacement Model
CMS is expanding the Comprehensive Care for Joint Replacement Expanded (CJR‑X) Model nationally starting January 1, 2028. It will be mandatory for acute care hospitals (except those in TEAM and hospitals in Maryland) and holds hospitals accountable for lower extremity joint replacement (LEJR) episodes from the inpatient/outpatient admission through 90 days after discharge.
Low-Volume Hospital Payment Extension & Thresholds
Section 6201 of the Consolidated Appropriations Act, 2026 extends the modified low-volume hospital definition through the portion of FY 2027 occurring October 1, 2026 through December 31, 2026: a hospital qualifies if it is more than 15 road miles from another subsection (d) hospital and has fewer than 3,800 total discharges. The sliding payment adjustment ranges from +25% for hospitals with 500 or fewer discharges to 0% for hospitals with more than 3,800 discharges.
No‑Discrimination Rule for GME Programs
CMS finalized a requirement that approved graduate medical education (GME) residency programs must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion in selections, participation, resource allocation, or similar activities.
90% Rule for New Residency Program Status
For a residency program to be considered new for cap‑building purposes, CMS finalized a criterion that at least 90 percent of individual residents must not have prior experience training in another program in the same specialty, with exceptions for small programs, displaced residents, and binding third‑party matches.
Advance Care Planning eCQM Adopted
CMS finalized adoption of the Advance Care Planning electronic clinical quality measure (eCQM) in the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability Programs and adopted it (with modification) in the PPS‑Exempt Cancer Hospital Quality Reporting Program, with mandatory reporting tied to future payment determinations (e.g., adoption in Hospital Inpatient QRP beginning with the FY 2030 payment determination).
Sepsis Readmission Measure for HRRP
CMS finalized adoption of the Hospital 30‑Day, All‑Cause, Risk‑Standardized Readmission Rate Following Sepsis Hospitalization measure for the Hospital Readmissions Reduction Program with two years of early look reports for the FY 2028 and FY 2029 program years and full use beginning with the FY 2030 program year.
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