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The rate picture
The final inpatient prospective payment system rule, released July 31 and effective Oct. 1, raises rates 2.3% for hospitals that report quality data and are meaningful EHR users. That figure reflects a 3.2% market basket increase reduced by a 0.9 percentage point productivity adjustment. CMS projects about $2.9 billion more in FY 2027 inpatient payments than in FY 2026.
Several line items move with it. Disproportionate share and uncompensated care payments rise about $228 million, and new technology add-on payments climb about $779 million. Another $300 million would flow through the low-volume and Medicare-dependent hospital programs, but only if Congress extends them as of Jan. 1, 2027.
The American Hospital Association called the update inadequate and described the productivity cut, which came in larger than proposed, as extremely high given rising care needs and more uninsured patients.
CJR-X goes national
The bigger strategic change is CJR-X, a mandatory, nationwide expansion of the Comprehensive Care for Joint Replacement model beginning Jan. 1, 2028, three months later than CMS first proposed. It covers lower extremity joint replacement in both inpatient and outpatient settings and makes hospitals accountable for spending and quality through 90 days after discharge. Nearly every acute care hospital is in scope; the exceptions are hospitals already in the Transforming Episode Accountability Model (TEAM) and Maryland hospitals.
The AHA said CMS made no meaningful improvements to the design, arguing that the low-volume threshold leaves some hospitals with too few cases to judge results and that certain pricing rules make continued savings unachievable.
Other items worth tracking
- Quality programs: A readmission-after-sepsis measure joins the Hospital Readmissions Reduction Program, with an extra year before it affects payment. Condition-specific inpatient measures will include Medicare Advantage patients.
- Prior authorization: The electronic prior authorization measure is an optional bonus in the 2027 Promoting Interoperability reporting period and becomes mandatory in 2028.
- TEAM: CMS adjusted episode triggers, including three added spinal fusion MS-DRGs, and refined target price construction.
- Graduate medical education: Criteria for identifying new residency programs were modified.
What to do before October
Finance teams should rebuild FY 2027 Medicare inpatient forecasts at 2.3% and stress-test them against expense growth that is likely to exceed it. Orthopedic leaders have about 17 months to prepare for CJR-X: map current 90-day episode costs, identify preferred post-acute partners, and agree with surgeons on care pathways and any gainsharing terms. Hospitals already in TEAM should confirm how the new spinal fusion triggers change their exposure.
Archive entry for Aug 1, 2026, added Nov. 11, 2026.