Fiscal Year 2026 Medicare Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) and Quality Reporting (IPFQR) Updates Final Rule (CMS-1831-F)
On July 31, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates for Inpatient Psychiatric Facilities (IPFs), under the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) and Quality Reporting (IPFQR) Updates Final Rule (CMS-1831-F), for fiscal year (FY) 2026 in accordance with existing statutory and regulatory requirements.
This fact sheet outlines the major provisions of the final rule, including final annual updates to the prospective payment rates, the outlier threshold, the wage index, and associated impact analysis. The rule also updates the facility-level adjustment factors, with increases to payments for teaching status and rural location. CMS believes these policies will improve or maintain individual access to high-quality care by ensuring that payment rates reflect the best available data on the resources involved in inpatient psychiatric care and the costs of these resources.
For the IPF Quality Reporting (IPFQR) Program, CMS is finalizing the removal of four measures from the program, as well as modifying the reporting period of one measure. In addition, CMS is finalizing the update to the Extraordinary Circumstances Exception (ECE) policy and codifying the process for requesting or granting an ECE. CMS also summarizes comments received in response to Requests for Information (RFI) regarding future changes to the IPFQR Program, including future star ratings for IPFs, measure concepts on well-being and nutrition, and digital quality measurement.
Changes to Payments Under the IPF PPS
Updates to IPF Payment Rates
For FY 2026, CMS updates the IPF PPS payment rates by 2.5%, based on the final 2021-based IPF market basket increase of 3.2% reduced by a 0.7 percentage point productivity adjustment. Additionally, CMS updates the outlier threshold so that outlier payments remain at 2.0% of total payments. Total estimated payments to IPFs are expected to increase by 2.4%, or $70 million, in FY 2026, relative to IPF payments in FY 2025.
Updates to IPF PPS Facility-Level Adjustment Factors
The Consolidated Appropriations Act of 2023 (CAA, 2023) (Pub. L. 117–328) required CMS to revise the IPF PPS methodology for determining payment rates for FY 2025 and authorized further revisions in subsequent years. The current IPF PPS facility-level adjustment factors for teaching status and rural location were derived from a regression model implemented in 2005 and have not been updated since that time. In accordance with section 1886(s)(5)(D)(i) of the Social Security Act, as added by the CAA, CMS updates the IPF PPS facility-level adjustment factors for teaching status and rural location based on our analysis of more recent claims and cost data from FY 2020, 2021, and 2022. Based on our analysis of these more recent claims and costs data, along with the public comments received in response to the FY 2025 IPF PPS final rule RFI on facility-level adjustment factors, we are increasing the adjustment factors for facility teaching status and rural location beginning in FY 2026. In addition, CMS recognizes the increases to IPF teaching caps for resident full-time equivalents awarded under Section 4122 of the CAA, 2023.
As required under section 1886(s)(5)(D)(iii) of the Social Security Act and section 124(a)(1) of the Medicare, Medicaid, and State Children’s Health Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113), we are finalizing these updates to the IPF PPS in a budget-neutral manner (that is, total estimated payments to IPFs for FY 2026 are estimated to be the same with or without the final revisions).
Final Updates to the IPFQR Program
The IPFQR Program requires that all IPFs paid under the IPF PPS submit certain specified quality data to CMS, in a form and manner and within the timeframes that CMS prescribes. IPFs that do not submit the specified data on quality measures as required by the IPFQR Program receive a 2.0 percentage point reduction to their annual payment update. The IPFQR Program aims to assess and foster improvement in the quality of care provided to patients in IPFs. By requiring IPFs to submit quality data to CMS and by CMS publicly reporting these data under the IPFQR Program, CMS ensures that patients can make more informed decisions about their health care options.
In this final rule, CMS is finalizing changes to quality measures in the IPFQR Program. CMS modifies the reporting period of one measure — the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure (also referred to as the IPF ED Visit measure) — from a one year, calendar year reporting period to a two year, fiscal year reporting period, to bring this measure’s reporting period into alignment with another program measure with which it is intended to be comparable. CMS is also removing four measures, all beginning with the CY 2024 reporting period/FY 2026 payment determination: Facility Commitment to Health Equity; COVID–19 Vaccination Coverage among Health Care Personnel; Screening for Social Drivers of Health; and Screen Positive Rate for Social Drivers of Health.
CMS is also finalizing and codifying updates, changing the IPFQR Program’s ECE policy to explicitly include extensions as a type of relief that CMS may grant in the event of an extraordinary circumstance that affects the ability of an IPF to comply with reporting requirements. CMS also codifies the process for requesting or granting an ECE. As part of this policy update, CMS is finalizing a change to the timeframe that facilities must submit an ECE request to CMS to 60 days, from the current 90 days. In the proposed rule, CMS proposed shortening this timeframe to 30 days, from the current 90 days, but is finalizing a change to 60 days based on public comment.
Additionally, CMS summarizes comments received in response to Requests for Information related to the IPFQR Program. CMS sought input on potential future star rating systems for the IPFQR Program for display on the Compare tool on Medicare.gov. The Compare tool currently displays star ratings for many providers and facility types but does not include IPFs. This RFI solicited feedback on the development of a five-star methodology for IPFs that can meaningfully describe an IPF’s quality of care.
CMS also sought input on future measure concepts on the topics of well-being and nutrition and requested information on potentially using the Fast Healthcare Interoperability Resources® (FHIR®) standard for IPFs reporting patient assessment data to CMS. Responses to these Requests for Information are summarized in the final rule.
The final rule can be viewed at the Federal Register at: https://www.federalregister.gov/public-inspection/current.
Information on the Inpatient Psychiatric Facility PPS is available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-psychiatric-facility.
Information on the Inpatient Psychiatric Facility QRP is available at: https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/inpatient-psychiatric-facility-quality-reporting-ipfqr-program.
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