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The Centers for Medicare & Medicaid Services July 31 issued a that would increase Medicare inpatient prospective payment system rates by a net 2.6% in fiscal year 2026, compared with FY 2025, for hospitals that are meaningful users of electronic health records and submit quality measure data.    

This 2.6% reflects a hospital market basket increase of 3.3% as well as a productivity cut of 0.7%. This update also reflects CMS’ proposal to rebase and revise the market basket to a 2023 base year. In addition, the rule includes a $2 billion increase in disproportionate share hospital payments and a $192 million increase in new medical technology payments. Overall, it would increase hospital payments by $5 billion in FY 2026 as compared to FY 2025.  

Among other provisions, the rule continues the mandatory Transforming Episode Accountability Model payment model that would provide bundled payment for certain surgical procedures beginning on Jan. 1, 2026, with limited deferment for certain hospitals. In addition, it would make modifications to the target price construction and quality measure aspects of the model, among other changes. Furthermore, CMS finalizes its proposal to discontinue the low-wage index hospital policy for FY 2026 and establishes a transitional exception policy for hospitals significantly impacted by the discontinuation.    

Published as part of the IPPS final rule, the Health Data, Technology, and Interoperability: Electronic Prescribing, Real-time Prescription Benefit and Electronic Prior Authorization final rule adopts three new certification criteria to support more efficient electronic prior authorization processing and reduce administrative burden for providers.    

Finally, CMS makes a number of changes to its quality reporting and value programs. Among other updates, the agency finalizes its proposal to remove the Health Equity Adjustment from the Hospital Value-based Purchasing program and removes four measures from the inpatient quality reporting program. The agency also will include Medicare Advantage patients in calculating hospital performance in the Hospital Readmission Reduction Program but has not finalized its proposal to include payment data for these beneficiaries in the calculation of excess readmissions.    

In a shared with the media, Ashley Thompson, AHA senior vice president of public policy analysis and development, said, “The AHA appreciates CMS’ recognition of the importance of an appropriate balance of burden and value in quality measurement programs, especially the sunsetting of the COVID-19 vaccination coverage among healthcare personnel measure. 

“The AHA is also pleased that CMS’ payment updates and support for hospitals that treat a disproportionately high number of low-income patients are improved in this final rule. However, we are still concerned that these updates are not adequate enough for the many hospitals that are struggling in today’s challenging operating environment, especially those in rural and underserved communities.

“The AHA has long supported widespread adoption of meaningful, value-based and alternative payment models to deliver high-quality care at lower costs. We remain worried that the Transforming Episode Accountability Model (TEAM) will not advance these objectives and puts at particular risk hospitals that are not of a large enough size or in a position to support the investments needed. This is why we continue to urge the agency to make TEAM voluntary.” 

AHA members will receive a Regulatory Advisory with further details on the rule.