‘Not sufficient’: Hospitals lament 2026 Medicare inpatient payments

Hospitals will be getting a boost in Medicare payments for inpatient care, but it’s less than they had hoped.

Chip Kahn, president and CEO of the Federation of American Hospitals, says the CMS 2026 inpatient payment rule is insufficient.

The Centers for Medicare & Medicaid Services announced its 2026 inpatient prospective payment system (IPPS) final rule. CMS has approved a 2.6% increase in payments for inpatient care, which represents a slight increase from the 2.4% bump the agency initially proposed in the spring.

CMS is increasing total payments to hospitals by $5 billion. The agency also has finalized a $2 billion increase in Medicare payments to hospitals with a disproportionate share of patients with lower incomes in 2026.

While hospitals were glad that CMS improved its initial proposal introduced in April, they weren’t exactly cheering the final payment plan.

Ashley Thompson, senior vice president of public policy analysis and development for the American Hospital Association, said hospitals were appreciative of more support for health systems treating higher numbers of patients with lower incomes. But she said the CMS payment plan falls short of what hospitals need.

“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,” Thompson said in a statement Thursday.

Chip Kahn, president and CEO of the Federation of American Hospitals, was similarly underwhelmed by the CMS announcement of the 2026 inpatient payment rule.

“The anticipated increase is not sufficient to make up for the recent historic levels of inflation nor expected increases in the number of uninsured Americans,” Kahn said in a statement Thursday.

Hospitals are bracing for reduced aid from Medicaid due to the federal tax and policy legislation President Trump signed in July. The package is projected to reduce Medicaid spending by about $1 trillion over the next decade, and nearly 12 million are expected to lose coverage.

Hospitals expect to see more patients without coverage, and with less Medicaid support, some expect staff cuts and service reductions. Some healthcare leaders expect that some hospitals will be forced to close.

Kahn also points to more problems with the expiration of tax credits supporting the Affordable Care Act at the end of the year.

“Hospitals face an uphill battle providing 24/7 patient care. This makes it all the more important for Congress to act, protect hospital care, and extend the enhanced premium tax credits - lifelines for the health care of hardworking Americans across the country,” Kahn said in a statement.

Hospitals are also wary of the CMS planned “Transforming Episode Accountability Model” which is slated to be enacted next year. Under the TEAM model, some hospitals will “take responsibility for the cost and quality of care from a hospital-based surgery through the first 30 days after the patient’s surgery,” CMS says.

CMS will be picking the hospitals to participate, but health systems say they’d rather have a choice of joining the TEAM model.

Thompson said that hospitals support alternate payment models to deliver great care at lower costs, but she said the TEAM model “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.”CMS also approved a 2.7% increase in payments for long-term care hospitals in 2026.