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3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp 3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp 3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp 3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp 3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp 3-MO 3.83% +1bp 6-MO 3.98% unch 1-YR 4.08% +4bp 2-YR 4.28% +5bp 3-YR 4.34% +4bp 5-YR 4.45% +7bp 7-YR 4.59% +7bp 10-YR 4.75% +7bp 20-YR 5.28% +6bp 30-YR 5.27% +6bp
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CMS

Medicare's largest hospital rule finalised an update of 2.3 percent, a tenth below what it proposed, and hospitals had already told it the proposal was too low

Money & World
The Editorial Team ·
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The number is 2.3 percent, and the proposal it replaces was 2.4.

CMS filed the FY 2027 inpatient prospective payment final rule for public inspection at 4:15 p.m. Eastern on Friday. It updates the national standardized amount for inpatient hospital operating costs by 2.3 percent, being a market basket increase of 3.2 percent less a productivity adjustment of 0.9 of a percentage point. The rule takes effect on 1 October.

Why the final rate is below the proposed one

The market basket did not move. The productivity adjustment did.

CMS proposed 0.8 of a percentage point in the spring, on IHS Global's fourth quarter 2025 forecast, and told commenters it would use newer data if newer data arrived. It did. The final figure rests on IGI's second quarter 2026 forecast with history through the first quarter of 2026, which put the adjustment at 0.9 and the market basket at 3.2, and 3.2 less 0.9 is 2.3. The same revision, in the same direction, cut the hospice update CMS finalised the same afternoon.

Commenters had argued the other way. The rule records several of them stating that the proposed 2.4 percent was already too low, citing contract labour, prior authorisation and claim denials, supply costs, tariffs and MedPAC's March 2026 finding of Medicare fee-for-service operating margins around negative 12 percent for 2022 to 2024.

What the $2.9bn is made of

CMS estimates acute care hospitals gain $2.9bn in FY 2027, and the composition matters more than the total. Operating payments, outlier payments, uncompensated care, capital and new technology add-ons push it up. Two expirations pull the other way, and both land on 1 January 2027, three months into the payment year: the temporary changes to the low-volume hospital adjustment, and the Medicare-Dependent Small Rural Hospital program.

Uncompensated care and supplemental payments come to about $8.0bn. That change on its own is worth 0.2 percent on total operating and uncompensated care payments, which is the narrow figure and not the aggregate.

Long-term care hospitals are a much smaller story. Across the 319 in the analysis, payments to standard federal rate cases go from about $2.436bn to about $2.490bn, a rise of roughly $54m.

The document: Centers for Medicare & Medicaid Services and Office of the National Coordinator for Health Information Technology, Department of Health and Human Services, final rule, Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals (IPPS) and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year (FY) 2027 Rates; Requirements for Quality Programs; Other Policy Changes; and Adoption of Updated Versions of Certain Health Information Technology Standards, CMS-1849-F and CMS-0062-F, RINs 0938-AV79 and 0938-AV44, 42 CFR parts 405, 412, 413, 415, 419, 495 and 512 and 45 CFR part 170, FR document 2026-15833, filed for public inspection on 31 July 2026 at 4:15 p.m. Eastern. The complete raw public inspection text, approximately 5.96 megabytes, was downloaded and searched here, and every figure below was read in the sentence that states it rather than taken from any summary. The rule states that the regulations are effective on 1 October 2026. On the rate, the rule states that in accordance with section 1886(b)(3)(B) of the Act it is updating the national standardized amount for inpatient hospital operating costs by an applicable percentage increase of 2.3 percent, that is a 3.2 percent market basket percentage increase with a reduction of 0.9 percentage point for the productivity adjustment, and that the 3.2 percent figure and the 0.9 percentage point figure come from IHS Global Inc's second quarter 2026 forecast of the 2023-based IPPS market basket with historical data through the first quarter of 2026. The rule separately states that in the proposed rule, based on IGI's fourth quarter 2025 forecast, CMS proposed a productivity adjustment of 0.8 percentage point for FY 2027, and that CMS proposed to use more recent data if it became available. In its summary of comments the rule records that several commenters stated the proposed 2.4 percent increase is too low, citing contract labour and workforce shortages, administrative costs including prior authorisation and claim denials, pharmaceutical and supply costs, tariffs, changes to federal student loan limits, MedPAC's March 2026 report showing Medicare fee-for-service operating margins of about negative 12 percent for 2022 to 2024, and the One Big Beautiful Bill Act. The Summary of Costs and Benefits states that acute care hospitals are estimated to experience a $2.9 billion increase in payments in FY 2027, driven by operating payments including outlier payments, uncompensated care payments, capital payments, new technology add-on payments, and the expiration of the temporary changes in the low-volume hospital program and the expiration of the MDH program on 1 January 2027. It states that for the 319 long-term care hospitals in the analysis, aggregate FY 2027 LTCH PPS payments to standard Federal payment rate cases are estimated at approximately $2.490 billion against approximately $2.436 billion for FY 2026, an increase of approximately $54 million. The impact appendix states that total uncompensated care payments and supplemental payments equal approximately $8.0 billion and that hospitals will experience a 0.2 percent increase in total operating IPPS payments and uncompensated care payments relative to FY 2026 total payments due to the change in uncompensated care payments specifically. The rule states that the total amount available for value-based incentive payments for FY 2027 is approximately $1.9 billion, based on the December 2025 update of the FY 2025 MedPAR file, and that the applicable percent for the FY 2027 program year is 2.00 percent. The Summary of Costs and Benefits lists among the rule's major provisions Requirements to Prohibit Unlawful Discrimination by Graduate Medical Education Programs and Nursing and Allied Health Education Programs..

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