Medicare Program; FY 2026 Inpatient Psychiatric Facilities Prospective Payment System-Rate Update

<RULE> DEPARTMENT OF HEALTH AND HUMAN SERVICES <SUBAGY>Centers for Medicare & Medicaid Services</SUBAGY> <CFR>42 CFR Part 412</CFR> <DEPDOC>[CMS-1831-F]</DEPDOC> <RIN>RIN 0938-AV46</RIN> <SUBJECT>Medicare Program; FY 2026 Inpatient Psychiatric Facilities Prospective Payment System—Rate Update</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This final rule updates the prospective payment rates, the outlier threshold, and the wage index for Medicare inpatient hospital services provided by Inpatient Psychiatric Facilities (IPFs), which include psychiatric hospitals and excluded psychiatric units of an acute care hospital or critical access hospital. This final rule also revises the payment adjustment factors for teaching status and for IPFs located in rural areas. These changes will be effective for IPF discharges occurring during the fiscal year beginning October 1, 2025, through September 30, 2026. We are finalizing changes to measures used in the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program, updating and codifying the Extraordinary Circumstances Exception policy, and summarizing comments received through requests for information regarding future changes to the IPFQR Program. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> These regulations are effective October 1, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> The IPF Payment Policy mailbox at <E T="03">IPFPaymentPolicy@cms.hhs.gov</E> for general information. Nick Brock, (410) 786-5148, for information regarding the inpatient psychiatric facilities prospective payment system (IPF PPS) and regulatory impact analysis. Kaleigh Emerson, <E T="03">kaleigh.emerson1@cms.hhs.gov,</E> for information regarding the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Availability of Certain Tables Exclusively Through the Internet on the CMS Website</HD> Addendum A to this final rule summarizes the fiscal year (FY) 2026 IPF PPS payment rates, outlier threshold, cost of living adjustment factors (COLA) for Alaska and Hawaii, national and upper limit cost-to-charge ratios, and adjustment factors. In addition, Addendum B to this final rule shows the complete listing of ICD-10 Clinical Modification (CM) and Procedure Coding System (PCS) codes, the FY 2026 IPF PPS comorbidity adjustment, and electroconvulsive therapy (ECT) procedure codes. Addenda A and B to this final rule are available on the CMS website at <E T="03">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/tools-and-worksheets.</E> Tables setting forth the FY 2026 Wage Index for Urban Areas Based on Core Based Statistical Area (CBSA) Labor Market Areas, the FY 2026 Wage Index Based on CBSA Labor Market Areas for Rural Areas, and the FY 2026 CBSA Labor Market Areas are available exclusively through the internet, on the CMS website at <E T="03">https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility/wage-index.</E> <HD SOURCE="HD1">I. Executive Summary</HD> <HD SOURCE="HD2">A. Purpose</HD> This final rule updates the prospective payment rates, the outlier threshold, and the wage index for Medicare inpatient hospital services provided by Inpatient Psychiatric Facilities (IPFs) for discharges occurring during fiscal year (FY) 2026, (beginning October 1, 2025, through September 30, 2026). This rule also revises the payment adjustment factors for teaching status and for IPFs located in rural areas. Lastly, this final rule modifies a quality measure, removes four quality measures, and updates and codifies the Extraordinary Circumstances Exception (ECE) policy under the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program. <HD SOURCE="HD2">B. Summary of the Major Provisions</HD> <HD SOURCE="HD3">1. Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS)</HD> For the IPF PPS, we are finalizing our proposals to: • Revise the facility-level IPF PPS adjustment factors for teaching status and for IPFs located in rural areas. • Make technical rate setting updates: The IPF PPS payment rates will be adjusted annually for input price inflation, as well as statutory and other policy factors. This rule updates: ++ The IPF PPS Federal per diem base rate from $876.53 to $892.87. ++ The IPF PPS Federal per diem base rate for providers who failed to report quality data to $875.44. ++ The electroconvulsive therapy (ECT) payment per treatment from $661.52 to $673.85. ++ The ECT payment per treatment for providers who failed to report quality data to $660.70. ++ The labor-related share from 78.8 percent to 79.0 percent. ++ The wage index budget neutrality factor to 1.0011. This final rule applies a refinement standardization factor of 0.9927. ++ The fixed dollar loss threshold amount from $38,110 to $39,360, to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF PPS payments. <HD SOURCE="HD3">2. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program</HD> For the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program, we are finalizing our proposals to modify the reporting period of the 30-Day Risk-Standardized All Cause Emergency Department (ED) Visit Following an IPF Discharge measure, remove the Facility Commitment to Health Equity measure, remove the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) measure, remove the Screening for Social Drivers of Health and Screen Positive Rate for Social Drivers of Health measures, and update and codify changes to the Extraordinary Circumstances Exception (ECE) policy. In addition, we are summarizing comments received on three topics through requests for information on a potential future star rating system for IPFs, future measure concepts for the IPFQR Program, and on using the Fast Healthcare Interoperability Resources® (FHIR®) standard for electronic exchange of healthcare information for patient assessment reporting. <HD SOURCE="HD2">C. Summary of Impacts</HD> <GPOTABLE COLS="2" OPTS="L2,tp0,i1" CDEF="s75,r100"> <TTITLE> </TTITLE> <CHED H="1">Provision description</CHED> <CHED H="1">Total transfers & cost reductions</CHED> <ROW> <ENT I="01">FY 2026 IPF PPS payment update</ENT> <ENT>The overall economic impact of this final rule is an estimated $70 million in increased payments to IPFs during FY 2026.</ENT> </ROW> <ROW> <ENT I="01">IPFQR Program update, including measure removals</ENT> <ENT>We estimate a cost reduction of $1,746,474 ($1,731,712 in CY 2026 and a further $14,761 in CY 2027) for facilities and patients due to the policies we are finalizing for the IPFQR Program.</ENT> </ROW> </GPOTABLE> <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. Overview of the Legislative Requirements of the IPF PPS</HD> Section 124 of the Medicare, Medicaid, and State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) required the establishment and implementation of an IPF PPS in a budget neutral manner. Specifically, section 124 of the BBRA mandated that the Secretary of Health and Human Services (the Secretary) develop a per diem prospective payment system (PPS) for inpatient hospital services furnished in psychiatric hospitals and excluded psychiatric units including an adequate patient classification system that reflects the differences in patient resource use and costs among psychiatric hospitals and excluded psychiatric units. “Excluded psychiatric unit” means a psychiatric unit of an acute care hospital or of a Critical Access Hospital (CAH), which is excluded from payment under the Inpatient Prospective Payment System (IPPS) or CAH payment system, respectively. These excluded psychiatric units will be paid under the IPF PPS. Section 405(g)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF PPS to psychiatric distinct part units of CAHs. Sections 3401(f) and 10322 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) as amended by section 10319(e) of that Act and by section 1105(d) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (hereafter referred to jointly as “the Affordable Care Act”) added subsection (s) to section 1886 of the Social Security Act (the Act). Section 1886(s)(1) of the Act titled “Reference to Establishment and Implementation of System,” refers to section 124 of the BBRA, which relates to the establishment of the IPF PPS. Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the rate year (RY) beginning in 2012 (that is, a RY that coincides with a FY) and each subsequent RY. Section 1886(s)(2)(A)(ii) of the Act required the application of an “other adjustment” that reduced any update to an IPF PPS base rate by a percentage point amount specified in section 1886(s)(3) of the Act for the RY beginning in 2010 through the RY beginning in 2019. As noted in the FY 2020 IPF PPS final rule (84 FR 38424), for the RY beginning in 2019, section 1886(s)(3)(E) of the Act required that the other adjustment reduction be equal to 0.75 percentage point; that was the final year the statute required the application of this adjustment. Because FY 2021 was a RY beginning in 2020, FY 2021 was the first year that section 1886(s)(2)(A)(ii) of the Act did not apply since its enactment. Sections 1886(s)(4)(A) through (D) of the Act require that for RY 2014 and each subsequent RY, IPFs that fail to repo ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 356k characters. 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