CMS Finalizes 2.3% Medicare Payment Increase for Hospitals, Launches Mandatory Joint Replacement Model for 2027

The Centers for Medicare & Medicaid Services finalized its fiscal year 2027 payment rule, enacting a 2.3% net payment rate increase for acute care and long-term care hospitals, which is expected to boost inpatient payments by $2.1 billion. The rule also locks in CJR-X, a mandatory nationwide joint replacement payment model starting January 1, 2028, projected to save $725 million over five years. While CMS Administrator Mehmet Oz, MD, highlights improved health outcomes and taxpayer savings, hospital groups like the American Hospital Association criticize the pay raises as inadequate to cover rising care costs.

Medicare hospital payment rates

• ▪The Centers for Medicare & Medicaid Services finalized a 2.3% net payment rate increase for acute care hospitals under the Inpatient Prospective Payment System for fiscal year 2027.
• ▪The fiscal year 2027 inpatient payment rate reflects a projected hospital market basket percentage increase of 3.2%, reduced by a 0.9 percentage point productivity adjustment.
• ▪The Centers for Medicare & Medicaid Services expects the fiscal year 2027 payment updates to increase overall Inpatient Prospective Payment System hospital payments by approximately $2.1 billion.

Long-term care hospital payments

• ▪The Centers for Medicare & Medicaid Services finalized a 2.3% annual payment update for standard long-term care hospital discharges for fiscal year 2027.
• ▪The Centers for Medicare & Medicaid Services finalized its decision to freeze the long-term care hospital outlier threshold at $78,936, which is the same level as fiscal year 2026.

Electronic health record requirements

• ▪The Centers for Medicare & Medicaid Services is adding mandatory reporting for Unique Device Identifiers for implantable medical devices starting in calendar year 2027.
• ▪The Centers for Medicare & Medicaid Services is modifying the Electronic Prior Authorization measure to be an optional bonus measure for calendar year 2027 before making it mandatory in calendar year 2028.

Quality reporting program changes

• ▪The Centers for Medicare & Medicaid Services is finalizing the removal of the COVID-19 Vaccination Coverage Among Healthcare Personnel measure beginning with the fiscal year 2028 program year.
• ▪The Centers for Medicare & Medicaid Services will incorporate Medicare Advantage patient data into claims-based quality measures and shorten performance evaluation windows from three years to two years.

Joint replacement model expansion

• ▪All acute care hospitals, except those in Maryland or participating in the TEAM model, will be required to participate in the CJR-X joint replacement model.
• ▪The CJR-X joint replacement model is projected to save the federal government $725 million over five years.
• ▪The Centers for Medicare & Medicaid Services finalized a mandatory nationwide joint replacement payment model, named CJR-X, to begin on January 1, 2028.

Value-based purchasing programs

• ▪The Hospital Readmissions Reduction Program will adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure, with payment reduction calculations beginning in fiscal year 2030.
• ▪The Centers for Medicare & Medicaid Services is finalizing modifications to five condition-specific and procedure-specific mortality measures under the Hospital Value-Based Purchasing Program beginning with the fiscal year 2032 program year.

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