FY 2027 Inpatient Rehabilitation Facilities (IRF) Prospective Payment System (PPS) Final Rule (CMS-1845-F)
On July 30, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare payment policies and rates for inpatient rehabilitation facilities under the Inpatient Rehabilitation Facilities (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2027. CMS is publishing this final rule consistent with the legal requirements to update Medicare payment policies for IRFs annually.
For FY 2027, CMS finalized an update to the IRF PPS payment rates of 2.3% based on an IRF market basket update of 3.2%, less a 0.9 percentage point productivity adjustment. The final rule includes annual updates to the prospective payment rates, the outlier threshold, the case-mix-group relative weights and average length of stay values, the wage index, and associated impact analysis. In addition, this final rule includes policy revisions for the 36-hour rule (§ 412.622(a)(3)(ii)), updates to the interdisciplinary team meeting (IDT) 412.622(a)(5)(ii)), and provides a summary of feedback on one Request for Information (RFI) on payment reform.
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. In the FY 2027 IRF PPS rule, CMS is finalizing a revised data submission deadline for the IRF QRP and providing a summary of feedback on one RFI.
Updates to the FY 2027 IRF PPS Payment Rates
For FY 2027, CMS finalized an update to the IRF PPS payment rates by 2.3% based on the IRF market basket percentage increase of 3.2%, less a 0.9 percentage point productivity adjustment based on more recent data that became available after the publication of the proposed rule. This final rule also applies to the third and final year of the phase-out of the rural adjustment for IRFs transitioning from rural to urban (which began in FY 2025) that were reclassified due to updated Core-Based Statistical Area delineations. Additionally, CMS finalized the outlier threshold to maintain outlier payments at 3% of total payments. CMS estimates the final technical rate setting changes would result in an estimated increase in IRF payments of $340 million for FY 2027.
Final Updates to FY 2027 IRF PPS Payment
CMS finalized a revision to § 412.622(a)(3)(ii) to specify that all (not just some) therapies must be initiated within 36 hours of admission to the IRF. CMS believes this revision will significantly reduce inquiries and support the IRF industry.
CMS also finalized a revision to the current IDT policy (§ 412.622(a)(5)(ii)) to mandate that the initial meeting is completed on or before the fourth day of admission to align with the plan of care, and clarify that subsequent IDT meetings are conducted weekly (with CMS defining “weekly” as seven days from the date of the initial IDT meeting, that must occur by day four), which enhances the ongoing development and execution of the patient’s plan of care.
Proposed Updates to the FY 2027 IRF QRP
Data Submission Deadline: CMS is finalizing the revision to shorten the timeframe for data submission from 4.5 months to approximately 45 days beginning with the FY 2029 IRF QRP. This new timeframe would reduce the lag between data submission and public reporting by up to three months, resulting in timelier data for consumers and their families. IRFs will also have earlier access to data to support their quality initiatives.
IRF PPS and QRP Requests for Information
CMS sought feedback on potential enhancements to the IRF PPS, including updates to how primary diagnoses and comorbidities are used to classify patients by case mix. These potential updates would build on selected elements of the case-mix classification methodology used in the Skilled Nursing Facility Patient Driven Payment Model, as implemented in the FY 2019 final rule, and would move IRF payment toward a more robust, modernized system better aligned with other post-acute payment systems settings.
CMS received comments on one potential measure topic that CMS is considering adopting in future years for the IRF QRP: advanced care planning (ACP). ACP is a continuous process of conversation and documentation to align a patient’s care and interventions with their beliefs, values, and preferences, if they become unable to make those decisions. CMS provides a summary of comments received in the FY 2027 IRF PPS final rule.
Finalized Change to the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP)
As part of the FY 2027 IRF PPS final rule, CMS finalized the update to the DMEPOS Competitive Bidding Program’s bid surety bond requirements. The final change increases the bid surety bond amount from $50,000 to $100,000 for bids submitted under a Remote Item Delivery (RID) Competitive Bidding Program (CBP) and requires only one $100,000 bid surety bond per bidding entity, regardless of how many competitions under the RID CBP it bids on. For all other competitions, the bid surety bond amount remains $50,000, and bidding entities must obtain a separate bid surety bond for each competitive bidding area. This change aims to deter bidders from submitting disingenuous bids.
CMS has launched the first phase of its Round 2028 DMEPOS CBP bidder education initiative. This early education phase provides prospective DMEPOS suppliers with important information about the upcoming bidding process, eligibility requirements, and key program changes before the registration and bidding periods open, giving them ample time to prepare. For more information, review the Round 2028 bidder education materials and Frequently Asked Questions, and sign up for the Competitive Bidding Implementation Contractor’s listserv at: www.dmecompetitivebid.com.
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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