The Centers for Medicare and Medicaid Services (CMS) has proposed a 2.6% payment rate increase for inpatient rehabilitation facilities (IRFs) in 2026. This adjustment is part of the Inpatient Rehabilitation Facility Prospective Payment System proposed rule. The increase stems from a market basket update of 3.4%, reduced by a 0.8 percentage point productivity adjustment. CMS stated that they would finalize the 2026 market basket percentage increase and productivity adjustments using more recent data if available.
For fiscal year 2025, IRFs received a payment rate increase of 2.8%. The new rule seeks to update the outlier threshold to keep outlier payments at 3% of total payments. This change is expected to lead to an estimated $295 million increase in IRF payments for 2026.
The inpatient rehab quality reporting program requires IRFs to meet reporting requirements to avoid a 2 percentage point reduction in their Annual Increase Factor. The report measures are publicly accessible through Medicare.gov’s Care Compare tool.
The CMS proposal also includes annual updates to factors such as case-mix group relative weights, average length of stay values, and the wage index. CMS plans to eliminate two quality measures and four Social Determinant of Health (SDOH) standardized patient assessment data elements for better efficiency.
Additionally, CMS is asking for input on future measures, data collection burden reduction, data submission timelines, and the adoption of health IT standards, including Fast Healthcare Interoperability Resources (FHIR). They are seeking feedback on new measures related to interoperability, nutrition, delirium, and well-being. The proposed rule includes removing measures related to COVID-19 vaccination among healthcare personnel and patients.
Overall, the CMS proposal aims to enhance measure development, reduce reporting burdens, improve data provision timing, and better integrate digital quality measurement through health IT standards for inpatient rehabilitation facilities.
