Fiscal Year (FY) 2026 Inpatient Rehabilitation Facilities Prospective Payment System Final Rule - CMS-1829-F
On August 1, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates for inpatient rehabilitation facilities under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2026. CMS is publishing this final rule in accordance with the existing statutory and regulatory requirements. This fact sheet outlines the major provisions of the final rule.
Final Updates to the FY 2026 IRF PPS Payment Rates
For FY 2026, CMS is finalizing a 2.6% increase to IRF PPS payment rates. This reflects a 3.3% market basket update, offset by a 0.7 percentage point productivity adjustment. Additional technical updates finalized in this rule include:
- An updated outlier threshold to maintain outlier payments at 3.0% of total payments.
- Annual updates to the prospective payment rates, wage index, case-mix group relative weights, and average length of stay values.
CMS estimates these updates will result in an overall increase of $340 million in aggregate IRF payments for FY 2026.
Final Updates to the FY 2026 IRF QRP
The IRF QRP is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a 2-percentage point reduction in their Annual Increase Factor. Additionally, measures adopted into the IRF QRP are publicly reported on the Care Compare tool at Medicare.gov. For the IRF QRP, CMS is finalizing the removal of two quality measures as well as future public reporting associated with these measures, the removal of four Social Determinant of Health (SDOH) standardized patient assessment data elements, and the amendment of the reconsideration policy and process. CMS summarizes feedback it received in response to four Requests for Information (RFIs) on future measures, data collection burden reduction, data submission timelines, and adoption of health IT standards.
Measure Removal. Based on measure removal Factor 8 (the costs associated with a measure outweigh the benefit of its continued use in the program) set forth in 42 C.F.R. ยง 412.634(b)(2)(viii), CMS is finalizing its proposal to remove two measures from the IRF QRP: (1) beginning with the FY 2026 (CY 2024) IRF QRP, the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, and (2) beginning with the FY 2028 (CY 2026) IRF QRP, the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure. While the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure will not be removed from the IRF patient assessment instrument (IRF-PAI)until October 1, 2026 because it is not technically feasible to do so any earlier, submission of data on this measure will be optional beginning October 1, 2025 and no IRF will be penalized if they do not submit data on this measure after that time.
Item Removal. CMS is finalizing its proposal to remove four SDOH standardized patient assessment data elements from the IRF-PAI to reduce burden. Data submission on one item for Living Situation (R0310), two items for Food (R0320A and R0320B), and one item for Utilities (R0330) will be removed from the IRF-PAI with the FY 2028 IRF QRP, beginning with patients admitted on or after October 1, 2026.
Reconsideration Policy. CMS is finalizing its proposal to amend the reconsideration policy and process for an IRF to appeal a determination of non-compliance with IRF QRP requirements. First, under this finalized policy and process, CMS will permit IRFs to request, and CMS to grant, an extension to file a request for reconsideration of a non-compliance determination if, during the 30-day period to request a reconsideration, the IRF was affected by an extraordinary circumstance beyond the control of the IRF (for example, a natural or man-made disaster). Second, CMS is finalizing its proposed updates to the bases on which CMS can grant a reconsideration request, providing that CMS will grant a timely request for reconsideration, and reverse an initial finding of non-compliance, only if CMS determines that the IRF was in full compliance with the IRF QRP requirements for the applicable program year. CMS is codifying these finalized policies and processes at 42 CFR 412.634(d)(5) through (d)(7).
FY 2026 IRF QRP RFIs
CMS received feedback on four RFIs: 1) Future measure on the topics of interoperability, nutrition, delirium, and well-being; 2) Potential revisions to the IRF-Patient Assessment Instrument (IRF-PAI), which will allow CMS to reduce burden; 3) potential revisions to the data submission deadlines for assessment data, which will allow CMS to provide IRFs with more timely quality data; and 4) advancing digital quality measurement in order to seek feedback on current adoption of health information technology (IT) and standards, including Fast Healthcare Interoperability Resources (FHIR). CMS provides a high-level summary of the comments in this final rule.
Request for Information on Streamlining Regulations and Reducing Administrative Burdens in Medicare
CMS continues to seek public input on approaches and opportunities to streamline regulations and reduce burdens on those participating in the Medicare program through a standalone RFI available at https://www.cms.gov/medicare-regulatory-relief-rfi. The public should submit all comments in response to this RFI through the provided weblink prior to September 15, 2025.
The final rule can be viewed at the Federal Register at: https://www.federalregister.gov/public-inspection/current
For more information about IRF QRP, please visit: https://www.cms.gov/medicare/quality/inpatient-rehabilitation-facility
For more information about IRF PPS, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-rehabilitation
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