The Centers for Medicare & Medicaid Services (CMS) issued a notice for proposed rule changes that would update Medicare payment policies and rates for inpatient and long-term care hospitals under the Medicare hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) proposed rule for fiscal year (FY) 2026. 

CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS. LTCHs are paid under the LTCH PPS. Under these two payment systems, CMS sets base payment rates prospectively for inpatient stays, generally based on the patient’s diagnosis, the services or treatment provided, and the severity of illness. Subject to certain adjustments, a hospital receives a single payment for each case depending on the payment classification assigned at discharge. The proposed increase in IPPS operating payment rates for general acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users under the Medicare Promoting Interoperability Program is projected to be 2.4%. For FY 2026, CMS is proposing an annual update of 2.6% to the LTCH standard payment rate. For more detailed information about the proposed rate changes, view CMS’s Fact Sheet here.

The proposed rule also seeks public input on ways to enhance patient care, focusing on nutrition, physical activity, and overall wellness, as part of CMS’s "Making America Healthy Again" initiative. CMS aims to modernize healthcare regulations, streamline processes, and reduce burdens on Medicare participants through technology and quality measurement updates.

Generally, some of the proposed changes in this rule would:

• Make changes to the IPPS Payment Rates for general acute care hospitals.
• Make changes to LTCH PPS Payment Rates for long-term care hospitals.
• Discontinue the low wage index hospital policy for FY 2026 and subsequent years, which were originally intended address wage index disparities affecting low-wage index hospitals, including many rural hospitals.
• Modify and remove some current Hospital Inpatient Quality Reporting (IQR) measures and explore some IQR measure concepts for future years, specifically focusing on well-being and nutrition.
  • 4 measures proposed to be removed include: 1) “Hospital Commitment to Health Equity”; 2) “COVID-19 Vaccination Coverage among Health Care Personnel”; 3) the Screening for Social Drivers of Health; and 4) the Screen Positive Rate for Social Drivers of Health.
  • Make adjustments to the Medicare Promoting Interoperability Program, including new security risk and safety measures.
  • Make changes to the Hospital Readmission Reduction Program, which reduces payments to hospitals with excess readmissions, by – among other things, adding Medicare Advantage (MA) data and shortening the applicable period from 3 years to only 2 years.
  • Make changes to LTCH Quality Reporting Program (LTCH QRP), that would modify requirements for COVID-19 Vaccine, remove social determinants of health assessment data elements, amend the reconsideration policy & process; and seek public comment on several Requests for Information (RFIs) seeking public input on approaches and opportunities to streamline regulations and reduce burdens on those participating in the Medicare program.
    • Of note – LTCHs that do not meet reporting requirements may be subjected to a 2 percentage-point reduction in their Annual Payment Update (APU).
    • Make changes to the Transforming Episode Accountability Model (TEAM), which is an episode-based payment model that would run from January 1, 2026 to December 31, 2030.

The FY 2026 IPPS and LTCH PPS proposed rule has a 60-day comment period, with comments due June 10. The proposed rule can be downloaded from the Federal Register at https://www.federalregister.gov/public-inspection/current. 

The Press Release for this rule is available at https://www.cms.gov/newsroom/press-releases/cms-seeks-public-input-inpatient-hospital-whole-person-care-proposes-updates-medicare-payments. For a fact sheet on the IPPS/LTCH PPS proposed payment rule, visit https://www.cms.gov/newsroom/fact-sheets/fy-2026-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective.