CMS on April 10 published its fiscal year 2027 Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System proposed rule, which includes a 2.4% payment increase for hospitals as well as the first mandatory nationwide episode-based payment model.
Seven things to know:
1. CMS pitches a 2.4% Medicare pay bump. Acute care and long-term care hospitals would see a 2.4% rate increase in fiscal 2027, reflecting a 3.2% market basket update minus a 0.8 percentage point productivity adjustment. CMS estimates the changes would increase hospital payments by about $1.4 billion, with LTCH payments rising about 2.3%, or $55 million. Hospitals must meet quality reporting and EHR requirements to receive the full update.
2. A mandatory episode-based payment model for joint replacements. CMS plans to expand the Comprehensive Care for Joint Replacement Model into a mandatory, nationwide program called CJR-X, set to begin Oct. 1, 2027. Under CJR-X, most hospitals would be required to take financial accountability for hip, knee and ankle replacements, including the surgery and the first 90 days of recovery. CJR-X would be the first mandatory, nationwide test of an episode-based payment model. The initial CJR model ran from April 2016 through December 2024, and CMS said it generated substantial Medicare savings while maintaining care quality. The expanded model also adds ankle replacements, which were not included in the initial program.
3. Additional payments for new medical technologies projected to rise. CMS estimates that additional payments for inpatient cases involving new technologies will increase by about $464 million in 2027, driven primarily by the continuation of new technology add-on payments for several technologies, subject to review of public comments. Separately, additional payments for Medicare-dependent hospitals and low-volume hospitals are set to expire Dec. 31, 2026, under current law. If extended through the end of 2027, CMS estimates those hospitals would receive about $400 million in additional payments.
4. Hospital Inpatient Quality Reporting Program gets new measures. CMS is proposing to adopt three new measures under the Hospital IQR Program. It also plans to modify five mortality measures — covering heart attack, heart failure, pneumonia, COPD and coronary artery bypass graft surgery — beginning with the 2028 payment determination, adding Medicare Advantage patients and shortening the performance period from three years to two years. Three measures would also be removed beginning with the 2030 payment determination.
5. Hospital Readmissions Reduction Program adds sepsis measure. CMS is proposing to add a hospital 30-day, all-cause, risk-standardized readmission rate following sepsis hospitalization measure to the hospital readmissions reduction program beginning in 2029. The program reduces payments to hospitals with excess readmissions and aims to support improvement in the quality of hospital care.
6. Promoting Interoperability Program updates. CMS is proposing several changes to the program, which encourages hospitals to adopt and demonstrate meaningful use of EHR technology. Key proposals include updating the definition of certified EHR technology, removing two electronic referral loop measures, modifying the electronic prior authorization measure and adding a unique device identifiers for implantable medical devices measure to the public health and clinical data exchange objective. Two new electronic clinical quality measures would be adopted beginning with 2030 payment determination, aligned with the Hospital IQR Program.
7. GME programs would face new nondiscrimination requirements. CMS is proposing to require that approved medical residency training programs not discriminate — or promote or encourage discrimination — on the basis of race, color, national origin, sex, age, disability or religion. Similar requirements would apply to approved nursing and allied health education programs and their accreditors. CMS said the proposal builds on nondiscrimination protections finalized in the 2026 Outpatient Prospective Payment System final rule.
Click here to access the 1,586-page proposed rule.
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