On April 11, the Centers for Medicare & Medicaid Services (CMS) released its proposed rules for FY2026—regulatory updates with significant operational, financial, and compliance implications across healthcare settings. From hospice and skilled nursing to inpatient psychiatric facilities and acute care hospitals, these proposals are not just about policy—they’re strategic imperatives. Here’s what you need to know—and how working with the healthcare experts at Advis, Inc. can give your organization a competitive edge
Key Themes at a Glance:
- Financial Impact: Proposed reimbursement increases are insufficient to maintain pace with rising costs, while the proposal contains billions in projected payment shifts across multiple care settings with a focus on value-based care.
- Quality Programs: Major transitions including HOPE, iQIES, PSSM, and reporting timelines.
- Compliance Risks: New documentation standards and sunset provisions for key programs.
- Strategic Opportunity: Align operations now to avoid future penalties and maximize reimbursements.
- Extraordinary Circumstances Exception (ECE): The proposed rule would codify language that includes time extensions as a form of relief in situations that are extraordinary.
Hospice Financial Updates
- Estimates $695 million increase in payments, given a base payment rate increase at 2.4%, driven by a 3.2% market basket adjustment, minus 0.8% productivity.
- Proposes a new cap at $34,465.34.
|
Level of Care |
Proposed Base Payment Rate (without Wage Index Adjustments) |
Proposed Base Payment Rate (without Wage Index Adjustments) for Hospices that DO NOT Submit Required Quality Data (Reduction of –1.6%)
|
|
Routine Home Care, Days 1 – 60 |
$230.33 |
$221.34 |
|
Routine Home Care, Days 60 + |
$181.51 |
$174.42 |
|
Continuous Home Care |
$69.38 per hour |
$66.67 per hour |
|
Inpatient Respite Care |
$531.60 |
$510.84 |
|
General Inpatient Care |
$1,197.40 |
$1,150.63 |
Compliance Updates
Face-to-Face Attestation Requirements
- Realigns attestation requirements to meet the intent of CY2011 Home Health Prospective Payment system (HH PPS), in that the attestation from the physician or nurse practitioner must include both the signature and the date of the signature. The attestation, signature, and date of signature must be included in a “separate and distinct section” that is also clearly titled as such.
Quality Reporting Program (QRP) & Hospice Outcomes and Patient Evaluation (HOPE); Transition to internet Quality Improvement and Evaluation System (iQIES).
- Expects implementation of HOPE (developed to replace the HIS and finalized in FY2025) in FY2026. Note that although required to be collected in CY2026, public reporting of the quality measures won’t occur until 2028, unless otherwise determined by CMS.
- Sunset QIES on February 15, 2026, as all data should be reported via HOPE.
- Table 8 from the proposed rule provides a timeframe of other various compliance elements related to both HIS/HOPE and CAHPS:
- Proposes to update and expand allowable admission sources to include the physician member of the hospice IDG as previously, only the medical director or a physician designee could admit a patient to hospice.
Inpatient Psychiatric Facilities
Financial Updates
- Estimates $70 million increase in payments to Inpatient Psychiatric Facilities (IPFs) if proposed rule is adopted. This is due to a proposed payment increase of 2.4%. The increase is determined by a 3.2% market basket increase less a 0.8% productivity adjustment.
- The Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) proposes a new base rate of $891.99 per diem. And for those facilities that failed to comply with quality reporting, the proposed base rate per diem would be $874.57.
- Electroconvulsive therapy (ECT) treatment reimbursement would be $673.19. For those that failed to submit quality data, the reimbursement would be $660.04.
- Outlier payments would be increased to $39,360.
- Increases to rural adjustments would be at18%. As a reminder, the 3-year phase-out for those facilities that transitioned from rural to urban will conclude by FY2027.
- Proposed teaching adjustments to be increased to 0.7981 from 0.5150.
- Recognizes increases in psychiatry resident FTE for purposes of graduate medical education (GME).
Compliance Updates
Inpatient Psychiatric Facility Quality Reporting Program (IPFQRP)
- The 30-Day Risk Standardized measure is proposed to be in effect in FY2029, rather than FY2027.
- The reporting period for the IPF ED Visit measure will be 2 years to align with the IPF Unplanned Readmission measure.
- Removed the following QRP measures: COVID-19 Vaccination Coverage Amount Healthcare Personnel (HCP); Facility Commitment to Health Equity; and Screening for Social Drivers of Health.
Inpatient – Acute Care Hospitals (including Long–Term Care Hospitals)
Financial Updates
- Proposes payment updates by 2.4%, based on a market basket percentage increase to 3.2%, which reflects a proposed productivity adjustment of -0.8%.
- For Long-Term Acute Care (LTCH/LTACH), the payment update would be 2.6% based on a market basket percentage of 3.6%, less 0.8% productivity adjustment.
- Discontinue low wage index hospital policy and no longer apply low wage index budget neutrality factor to standardized amounts. A transitional exception is proposed to mitigate.
- Labor related share at 66%, which is 1.6% lower than current market data.
- Regarding Disproportionate Share Hospitals (DSH), DSH status was based upon SSI ratios from 2021 as they were the most current. The National Health Expenditure Accounts (NHEA) will continue to be used to determine the percent change in the percent of those uninsured. For FY2025, that percent was 7.7% and for FY2026, proposed at 8.7%.
- Table VI.B-01 summarizes IPPS percentage changes:
- As for Rural Referral Centers (RRCs), initial qualification for a rural hospital to become a RRC must not only have fewer than 275 beds but also must meet certain Case Mix Index (CMI) restrictions. Additionally, there are discharge thresholds proposed.
- Regarding low-volume hospital payments, the qualifying criteria are also changing and reverting to those rules that were in place prior to FY2011, in that certain mileage and discharge volumes must be met to receive the payment adjustment.
- Medicare Dependent, Small Rural Hospital (MDH) Program will no longer be in effect.
New Technology Add On Payment Criteria
- Criteria continue to include newness of technology, cost, and substantial clinical improvement.
- CMS is seeking public comment on at least 20 new technology items to add to the existing list.
Compliance Updates
Patient Safety Structural Measures (PSSM)
- Attestation based measures required via the Hospital Inpatient Quality Reporting (IQR) program on five separate domains of safety: leadership commitment to eliminating preventable harm; strategic planning and organizational policies; culture of safety; accountability; and engagement.
Diagnosis Related Group (DRG)
- Modify GROUPER logic for MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissues) and MDC 15 (Newborn and other Neonate Conditions Originating in Perinatal Period).
- Modify several DRGs and ICD-10 categorizations related to: chemotherapy; neurostimulators; cerebrovascular disorders; abdominal aortic aneurism; percutaneous endoscopic surgical ablations; cardiac assist devices; coronary atherectomy; aortic arch procedures; deep vein thrombophlebitis; arthroscopy; and spinal fusions.
- Also updated codes related to operating room procedures including: open drainage of mandible; percutaneous cardiovascular procedures; and endoscopic drainage of ureter with drainage devices.
- Addition of shock as an ICD-10 to Appendix C – Codes that are Major CC Only if Patient Discharged Alive.
- Changes to surgical hierarchy codes by both MDC and MS-DRG.
Hospital Readmissions Reduction Program
- Refine six readmission measures to add Medicare Advantage (MA) patients and reduce a measure cohort from 3 to 2 years. The measures affected would include: Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Acute Myocardial Infarction (AMI); Heart Failure (HF); Pneumonia (PN); Chronic Obstructive Pulmonary Disease (COPD); Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA); and Coronary Artery Bypass Graft (CABG) Surgery Hospitalization Measures.
- Additionally, remove COVID-19 diagnosed patients’ exclusion.
Hospital Acquired Condition (HAC) Reduction Program
- Technical updates to National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) measures baseline, but no measures being reviewed or added.
Hospital Valued Based Purchasing (VBP) Program
- Hospital Value Based Purchasing (VBP) Program; Modifications to Total Hip Arthroplasty/Total Knee Arthroplasty (THA/TKA) will include MA patients and reduce the measure cohort from 3 to 2 years.
- Remove COVID-19 exclusion from six measures in Clinical Outcomes.
- Remove Health Equity Adjustment.
Hospital Inpatient Quality Reporting (IQR) Program
- Refinements to: Hospital-Level, Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) ; Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity; the Hybrid Hospital-Wide Readmission (HWR) measure ; and the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (HWM) measure.
PPS Exempt Cancer Hospital Quality Reporting (PCHQR) Program
- Proposes to publicly report data on both Provider Data Catalog and Care Compare.
- Also proposing to remove the Hospital Commitment to Health Equity; the Screening for Social Drivers of Health measure; and the Screen Positive Rate for Social Drivers of Health measure.
Long Term Care Hospital Quality Reporting Program (LTCH QRP)
- Remove an item in Continuity Assessment Record and Evaluation (CARE) data Set (LCDS) regarding expirations. Also, remove several Social Determinants of Health (SDOH): living situations; food; and utilities.
Medicare Promoting Interoperability Program
- Define electronic health record (EHR) reporting period as any continuous 180-day period.
- Also proposes to modify Security Risk Analysis, Safety Assurance Factors for EHR Resilience (SAFER). Bonus measure under Public Health and Clinical Data Exchange for reporting data to a public health agency (PHA) using Trusted Exchange Framework and Common Agreement (TEFCA).
Transforming Episode Accountability Model (TEAM).
- TEAM is a mandatory alternative payment model, aim to improve beneficiary care through Financial accountability for episodes categories related to: coronary artery bypass graft (CABG), lower extremity joint replacement (LEJR), major bowl procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion.
- Proposing over ten changes to multiple areas of the model. Largely these changes evaluate impact on TEAM results as they relate to and interact with other CMS models and exploratory data methodologies.
Financial Updates
- Proposes CMS payments updated by 2.6%, based on a proposed market basket percentage increase to 3.4%, which reflects a proposed productivity adjustment of -0.8%. Note that other bodies recommended a reduction in IRF PPS payments by 7%.
- Labor-related shares are proposed at 74.5%.
- Continued phase-out of rural adjustments.
- The outlier threshold is to be updated to $11,971 for FY2026.
Compliance Updates
Inpatient Rehabilitation Facility (IRF) Quality Reporting Program (QRP)
- Proposes removal of COVID-19 vaccine measure reporting as well as several social determinants of health including: living situations; food; and utilities.
Skilled Nursing Facilities
Financial Updates
- A proposed net market basket update of 2.8%, based on a general increase of 3.0%, less 0.8% productivity adjustments.
- Tables 3 and 4 provide unadjusted federal rates per diem:
- Several updates to mapping of ICD-10 codes, including: diabetes, hypoglycemia, obesity, anorexia, bulimia, binge eating, pica, serotonin syndrome,
Compliance Updates
- Proposes removal of several social determinants of health including: living situations; food; and utilities.
Why This Matters—and Why You Need a Strategic Partner
This year’s proposed rules signal a pivot toward value-based care, streamlined data reporting, and evolving definitions of care quality. For healthcare organizations, the difference between compliance and penalties—or even financial opportunity—will be determined by how proactively you respond.
As seasoned consultants with deep expertise in CMS regulations, payment models, and quality reporting programs, Advis offers actionable guidance to ensure your organization is compliant, financially optimized, and strategically positioned for the future.
Published April 18, 202
