The Centers for Medicare and Medicaid Services finalized updated Medicare payment policies and rates for inpatient hospitals and long-term care hospitals on July 31, under the Fiscal Year 2027 Inpatient Prospective Payment System final rule.
The regulation directly determines revenue for thousands of hospitals nationwide and shapes access to inpatient care for the more than 65 million Americans enrolled in Medicare, according to CMS.
The Inpatient Prospective Payment System is the mechanism through which Medicare reimburses hospitals for inpatient stays, setting standardized payment amounts for each diagnosis-related group. Annual updates to the IPPS are closely watched by the hospital industry because even small percentage changes in reimbursement rates translate to billions of dollars in aggregate revenue.
The rule takes effect at the start of fiscal year 2027 on Oct. 1. It also includes updated policies for long-term care hospitals, which serve patients requiring extended hospitalization.
CMS said the final rule reflects the agency’s latest data on hospital costs and is designed to ensure that Medicare payments appropriately reflect the cost of providing care. The regulation also incorporates quality measurement updates and other policy changes affecting hospital operations.
The rule affects virtually every acute-care hospital in the United States that accepts Medicare patients, making it one of the most consequential annual regulatory actions in the health care sector.