FFY 2026 IPPS Proposed Rule
I. FY26 IPPS Proposed Rule Summary
II. ”Unleashing Prosperity through Deregulation of the Medicare Program”
III. National Medicare IPPS Estimates
IV. Provider Rates
On April 11, the Centers for Medicare & Medicaid Services (CMS) published/issued the Inpatient PPS Proposed Rule for Federal Fiscal Year 2026 (FFY26 IPPS Proposed Rule for discharges on or after October 1, 2025).
Comments to the Proposed Rule are due to CMS no later than 5 pm EDT on Tuesday June 10, 2025. The comment form for the Proposed Rule ("CMS-1833-P") may be accessed here (follow the instructions under the “submit a comment” tab). Comments can also be submitted via mail and CMS’s lists a regular and overnight mailing address in the FFY26 IPPS Proposed Rule.
Toyon is pleased to provide our take on the FFY26 IPPS Proposed Rule, focused on areas directly impacting Medicare cost reporting and provider reimbursement. A summary of the key highlights is below. Please use the table of contents for detailed analyses and observations of the Proposed Rule.
Summary
The FFY26 IPPS Proposed Rule increases payments to providers by approximately $4 billion. Excluding the market basket update, estimated changes impacting FFY26 Medicare inpatient payments are primarily attributed to:
$1.5 billion proposed increase to the Uncompensated Care Disproportionate Share fund (UC DSH).
$234 million from the continuation of the New-Technology Add-On Payments (NTAP)
-$500 million from the expiration of current Low Volume Adjustment (LVA) criteria and Medicare Dependent Hospital (MDH) status
Toyon’s Take
UC DSH
The proposed increase to UC DSH funding is primarily due to the forecast of the uninsured for FFY26. Looking back at FFY24 and FFY25, from proposed to final, UC DSH funding decreased by $700M and $800M, respectively. Any changes to the proposed FFY26 UC DSH payments are dependent on updated projections on the uninsured population from National Health Expenditure Accounts (NHEA). With looming cuts to Medicaid from “The One Big Beautiful Bill”, uncompensated care would increase. Given these dynamics, the amount of UC DSH funding in FFY26 should stick and possibly grow in future years with hospitals providing care to more uninsured patients.
Market Basket
Toyon recommends providers comment to CMS requesting at least a 1% increase to the proposed FFY26 market basket. This mirrors Medicare's Payment Advisory Commission (MedPAC) recommendation update hospital Medicare payment rates by 1%. Furthermore, the FFY26 market basket does not restore Medicare’s 0.9412% underpayment related to ATRA | MACRA1. Toyon estimates IPPS providers are underpaid by over $1 billion and recommends providers appeal for remediation of these payments with CMS. Please feel free to contact Lisa Ellis at lisa.ellis@toyonassociates.com with questions or for assistance.
Listed in the following articles are detailed discussions of Toyon’s analysis and observations of the FY2X IPPS Proposed Rule. Toyon appreciates providing regulatory and reimbursement updates to the provider community. If you have any questions, please feel free to contact Fred Fisher at fred.fisher@toyonassociates.com.
1Taxpayer Relief Act of 2012 (ATRA) reduced Medicare Fee for Service (FFS) IPPS payments from FY14 through FY17 to collect $11 billion related to documentation and coding corrections, resulting from errors after CMS implemented MS DRGs in FY08. Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Cures Act (MACRA) was established to restore rates to market basket levels, spread over FY18 through FY23. In FY24 another 0.9412% adjustment to the standardized amount was needed, but not applied, to fully restore Medicare payments.