FFY 2026 IPPS Proposed Rule: Wage Index

I. FY26 IPPS Proposed Rule Summary

II. ”Unleashing Prosperity through Deregulation of the Medicare Program”

III. National Medicare IPPS Estimates

IV. Provider Rates

V. Uncompensated Care DSH

VI. Wage Index

VII. Graduate Medical Education

VIII. Reminder: Outlier Reconciliation Changes

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The FFY26 national AHW is $57.80¹⁰ representing a 5.2% increase from FFY25 (a CBSA’s AHW needed to increase by 5.2% or more to maintain or experience a wage index increase from FFY25 to FFY26. As displayed in Table 4 below, the 5.2% increase to the national AHW continues to reflect labor cost increases of the COVID-19 pandemic.

In FFY26, CMS continues to apply the following adjustments to wage indices of certain providers:

• “5% Cap” – No provider’s wage index can decrease 5% or more as compared to FY24

• “Rural Floor” Wage Index – Calculation considers all urban-to-rural reclassified hospitals (42 CFR 412.103) when determining a state’s rural floor wage index

Additionally, CMS proposes a temporary budget neutrality adjustment of -0.0003 (or 0.9997) to the standard FFY26 operating rate as a transitional adjustment for hospitals with a wage index below the 25^th percentile.

Important Dates for FFY26 and FFY27

May 27, 2025 – Deadline to terminate/withdrawal from wage index reclassifications with the Medicare Geographic Classification Review Board (MGCRB).

June 10, 2025 –  Deadline for providers to terminate or withdraw wage index reclassifications with the Medicare Geographic Classification Review Board (MGCRB).

September 2, 2025 - Deadline for FFY27 AHW and MOMA revisions and for requests/renewals of MGCRB reclassifications for FFY27 thought FFY29.

For more information, please contact Ryan Sader at ryan.sader@toyonassociates.com.

¹⁰Toyon estimates the final FY25 national AHW at $57.80 from the CMS April 2025 Wage Index Public Use File. This is an increase of $0.17 as compared to the FFY26 Proposed Rule national AWH of $57.63 which used preliminary data.