Overview

• CMS finalized a 2.6% increase in Medicare IPPS operating rates and a 2.7% hike for LTCH PPS, delivering a $5 billion boost in hospital payments for FY 2026.
• The rule rebased the IPPS operating and capital market baskets to a 2023 base year and established a 66% national labor-related share.
• CMS discontinued the low wage index policy for 2026 and introduced a narrow, budget-neutral transitional payment exception for hospitals most affected by its removal.
• Four measures were modified and four were removed from the Hospital Inpatient Quality Reporting Program, including the COVID-19 vaccination coverage and social drivers of health metrics.
• CMS updated the Transforming Episode Accountability Model to incorporate outpatient patient-reported outcomes, refine target price calculations and expand the skilled nursing facility waiver; it also mandated a continuous 180-day EHR reporting period and established an optional public health data exchange bonus measure.