CMS releases final 2027 hospital inpatient payment rule: Questions and answers

Hospitals now know what to expect from the federal government for inpatient hospital payments next year.

On Friday afternoon, the Centers for Medicare & Medicaid Services released its final 2027 Inpatient Prospective Payment System rule. It includes a bump in payments for inpatient care, but less than health systems had hoped.

The rule also includes other changes in federal health policy.

Here’s a quick rundown.

Q: How much will payments rise?

A: The final increase for 2027 hospital inpatient payment rates is 2.3%. The rule calls for a 3.2% increase to reflect higher costs for goods and supplies, but it’s reduced by a 0.9 percentage point “productivity adjustment,” CMS says. So the net increase next year is 2.3%.

CMS says the rule will boost hospital payments by about $2.1 billion.

The administration initially proposed a 2.4% increase when it released its initial proposed rule in the spring.

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Q: What about long-term care hospitals?

A: Long-term care hospitals will also receive a 2.3% increase in inpatient payment rates, CMS says.

Q: How are hospitals reacting?

A: Joanna Hiatt Kim, vice president of payment policy for the American Hospital Association, said in a statement Friday night that the planned payments were disappointing, especially as many hospitals are facing financial pressures.

“CMS has made another inadequate update to inpatient payment rates, with an extremely high productivity cut even larger than proposed,” she said. “This is in the face of rising need for care and higher uninsured rates.”

Charlene MacDonald, president and CEO of the Federation of American Hospitals, expressed disappointment, saying Medicare policies shouldn’t strain access to care.

"Today's Medicare payment update reflects what hospitals experience firsthand: fewer affordable coverage options are contributing to more uninsured patients seeking care. As uncompensated care grows, adequate Medicare payments become even more critical to preserving access to care,” MacDonald said in a statement.

Q: What other provisions are included?

A: CMS also says it’s going to expand the Comprehensive Care for Joint Replacement (CJR) Model, citing “strong evidence of cost savings while maintaining quality of care.” Under the rule, nearly all of the nation’s hospitals would be moving into a value-based model for hip, knee and ankle joint replacements. CMS says the expanded model, called CJR-X, will be mandatory nationwide beginning Jan. 1, 2028.

Hospitals have objected to the model being mandatory. MacDonald said, “the increasing adoption of mandatory payment models reduces flexibility for hospitals and physicians. Lasting improvements in care delivery come through collaboration and innovation, not one-size-fits-all mandates.”

The American Hospital Association also objected to the government’s plans.

“Some hospitals lack the scale or financial capacity to make the investments in care redesign that are necessary for success,” Hiatt Kim said.

“Mandatory models present significant challenges, and CMS' low-volume threshold fails to ensure that hospitals have enough cases to integrate changes in care delivery and actually determine if they had an impact,” she said.

America’s Essential Hospitals also said in a letter to CMS in June that participation shouldn’t be mandatory, saying it “was not appropriately designed to address safety net hospitals’ needs.”

Q: What about Medicare-Dependent Hospitals and low volume hospitals?

A: Under current law, the additional payments for Medicare-Dependent Hospitals (MDHs) are slated to expire December 31, 2026. The program offers extra support for small hospitals with a large percentage of Medicare patients, and is particularly important to rural hospitals. Congress has repeatedly extended the program, and CMS acknowledged it could happen again.

Another Medicare program that offers support for small hospitals with low volume of Medicare patients is also set to phase out at the end of the year. Congress has typically extended that program as well, and that’s also an important program for rural hospitals.

Q: What about outpatient payment rates?

A: CMS just introduced its proposed 2027 outpatient payments in early July. The agency proposed a 2.4% increase in outpatient payment rates.

CMS will take comments on its outpatient proposals until Aug. 31.