FY 2027 IPPS Updates

The Center for Medicare and Medicaid Services has released the FY 2027 updates to the Inpatient Prospective Payment System (IPPS). Keeping pace with annual changes is a must for complete and accurate reimbursement once the updates become valid on October 1, 2026. Organizations have a responsibility to familiarize themselves with the changes to ensure they are equipped with the information that leads to optimal reporting and regulatory compliance.

Use this link to find the FY 2027 IPPS Final Rule Home Page | CMS and its associated files.

Below is a sample of updates to the Inpatient Prospective Payment System for FY 2027.

Payment Policies

Each year’s release of the Inpatient Prospective Payment System’s Final Rule brings updates and changes to policies that impact an organization’s requirements for reporting and reimbursement related to meeting or not meeting those requirements. The discussion and conclusions documented in the final rule, although extensive and complex, contain the details necessary for ensuring entities realize optimal reimbursement while remaining compliant. Below is an example of significant changes for FY 2027.

Payment Rate Changes
Acute care hospitals that report quality data and are meaningful users of EHRs will receive approximately a 2.3% increase in Medicare operating rates. This reflects the projected hospital market basket update of 3.2%, reduced by a 0.9% productivity adjustment.

Hospitals that do not submit quality data would lose 25% of the market basket update of 3.2% or 0.8 %. After the productivity adjustment of 0.9% This would be 1.5% increase only.

Hospitals that are not meaningful users of EHRs will be subject to a 75% reduction of the market basket update or 2.4%. Combined with the productivity adjustment of 0.9%, their total update for FY 2027 will -0.1%.

Hospitals that do not submit quality data and are not meaningful users of EHR will lose 100% of the market basket update. After the productivity adjustment their update will be -0.9%.

Comprehensive Care for Joint Replacement–Expanded (CJR-X) Model
New for 2027 is the Comprehensive Care for Joint Replacement–Expanded (CJR-X) Model.

The CJR-X Model focuses on improving care and reducing spending for Medicare beneficiaries undergoing lower-extremity joint replacement (LEJR) procedures. The existing CJR Model will be expanded nationally on January 1, 2028.

Key elements of the model include:

• Hospitals will be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and for 90 days following hospital discharge.
• Five quality measures and a Composite Quality Score (CQS) will be used to assess quality performance.
• Regional risk-adjusted target prices will include capped normalization and trend factors.
• Pricing-specific policies will apply to certain hospitals, including low-volume and safety-net hospitals.
• Provider and beneficiary overlap will be permitted with most models, allowing participating hospitals to enter financial arrangements that waive certain Medicare program requirements.
• Beneficiary-identifiable and regionally aggregated data sharing will be permitted.
• Options will be available for Alternative Payment Model (APM) participation.

For complete information about the CJR-X Model, refer to Section X.C of the FY 2027 IPPS Final Rule.

MS-DRGs

For FY 2027 CMS has deleted 18 MS-DRGs, created 14 new MS-DRGs, revised the title of 23 MS-DRGs and made other adjustments as deemed necessary to ensure ICD-10-CM and ICD-10-PCS codes group to the MS-DRG that most accurately reflects their usage of resources. The majority of changes are in MDC 05 Diseases and Disorders of the Circulatory System and MDC 08 Diseases and Disorders of the Musculoskeletal System and Connective Tissue.

Examples

1. CMS is changing the MS-DRGs the following codes group to when performed as a standalone procedure. To improve clinical coherence, code X2HN37B Insertion of endocardiac pacing electrode into left ventricle, percutaneous approach, new technology group 11 is moving

From

• MS-DRG 264 Other Circulatory System O.R. Procedures

To

• MS-DRGs 228 Other Cardiothoracic Procedures with MCC and 229 Other Cardiothoracic Procedures without MCC.

Code XHH80HB Insertion of ultrasound transmitter and battery for endocardiac pacing electrode into chest subcutaneous tissue and fascia, open approach, new technology group 11 is moving

From

• MS-DRGs 258 Cardiac Pacemaker Device Replacement with MCC and 259 Cardiac Pacemaker Device Replacement without MCC

To

• MS-DRG 210 Cardiac Pacemaker Revision or Device Replacement with MCC or MS-DRG 211 Cardiac Pacemaker Revision or Device Replacement without MCC. MS-DRGs 210 and 211 are new for 2027.

2. CMS has increased the severity level of the MS-DRGs that ICD-10-PCS code XW0V0P7 Introduction of gentamicin-eluting bone void filler into bones, open approach, new technology group 7 groups from “with CC” or “without CC/MCC” to be equal in severity to “with MCC” and has revised MS-DRG titles to add the specification of “or Insertion of Antibiotic-eluting Bone Void Filler” as outlined below:

• 463 Wound Debridement or Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC or Insertion of Antibiotic-eluting Bone Void Filler
• 474 Amputation for Musculoskeletal System and Connective Tissue Disorders with MCC or Insertion of Antibiotic-eluting Bone Void Filler
• 477 Biopsies of Musculoskeletal System and Connective Tissue with MCC or Insertion of Antibiotic-eluting Bone Void Filler
• 480 Hip and Femur Procedures Except Major Joint with MCC or Insertion of Antibiotic-eluting Bone Void Filler
• 492 Lower Extremity and Humerus Procedures Except Hip, Foot and Femur with MCC or Insertion of Antibiotic-eluting Bone Void Filler
• 616 Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC or Insertion of Antibiotic-eluting Bone Void Filler”
• 628 Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC or Insertion of Antibiotic-eluting Bone Void Filler”

Other areas of change include:

• Introduction of MS-DRG logic lists for “Islet Cell Transplant Procedures”
• Revision of MS-DRGs for cardiac pacemaker revision and device replacement
• New MS-DRGs for extensive or complex spinal fusion procedures using the Aprevo® Custom-made Anatomically Designed Interbody Fusion Device and/or the iFuse Bedrock™ Granite Implant System.
• Revision of MS-DRGs for hip and/or knee joint procedures
• Consolidation or MS-DRGs for procedures for uterine and adnexa malignancy

NTAP

For 2027 there are 41 services/technologies from 2026 that have continued NTAP approval, 6 services/technologies were granted NTAP approval under the Traditional Pathway, and 16 services/technologies were granted approval under the Alternative Pathway. This makes a total of 63 procedures with approval for new technology add-on payment in 2027.

Here is a partial list of technologies whose NTAP is continuing from FY 2026

Here is a partial list of technologies whose NTAP is newly approved for FY 2027

*Several of these new technologies carry a significant NTAP reimbursement amount. Efforts should be made to ensure any administration of these substances is identified and reported to avoid missing out on substantial reimbursement.

This is just a small taste of the extensive changes being implemented in the Inpatient Prospective Payment System for FY 2027. We encourage everyone who works with the revenue cycle to review more comprehensive coverage of the updates to ensure you can hit the ground running when they become valid on October 1, 2026.

Prepare Now

There are many more ICD-10-CM changes for FY 2027 beyond those covered here, along with updates to ICD-10-PCS and the Inpatient Prospective Payment System (IPPS). Make sure you and your team are ready to apply the updates beginning October 1, 2026.

Enroll now in HIAlearn’s FY 2027 Code Update Series:

• FY 2027 ICD-10-CM Code Updates
• FY 2027 ICD-10-PCS Code Updates
• FY 2027 Inpatient Prospective Payment System (IPPS) Updates
• CPT - Coming Soon!

Bundled pricing is available.

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