Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals (IPPS) and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year (FY) 2026 Rates; Changes to the FY 2025 IPPS Rates Due to Court Decision; Requirements for Quality Programs; and Other Policy Changes; Health Data, Technology, and Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization

This FY 2026 IPPS/LTCH PPS final rule will make payment and policy changes under the Medicare inpatient

prospective payment system (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long- term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This final rule also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. We are also making changes relating to Medicare graduate medical education (GME) for teaching hospitals.

In the Hospital Value-Based Purchasing (VBP) Program, we are finalizing modifications to the Hospital-Level Total Hip Arthroplasty/ Total Knee Arthroplasty (THA/TKA) Complications measure beginning with the FY 2033 program year. We also provide notice of the technical update to the five National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) measures beginning with the FY 2029 program year, and the technical update to the six measures in the Clinical Outcomes domain beginning with the FY 2027 program year. We are finalizing removal of the Health Equity Adjustment (HEA) from the program's scoring calculations in the FY 2026 program year. We provide previously and newly established performance standards for FY 2027 through FY 2031 program years for the Hospital VBP Program.

In the Hospital-Acquired Condition (HAC) Reduction Program, we are also providing notice of the technical update to the five Centers for Disease Control and Prevention's (CDC) NHSN healthcare-associated infection (HAI) measures.

In the Hospital Readmissions Reduction Program, we are finalizing our proposal to add Medicare Advantage (MA) beneficiaries to the six Hospital Readmissions Reduction Program (HRRP) measures beginning with the FY 2027 program year; however, we are not finalizing our proposal to include payment data for MA beneficiaries in the calculation of aggregate payments for excess readmissions. We also are finalizing our proposal to reduce the applicable period from 3-years to 2-years beginning with the FY 2027 program year. We also provide notice of the technical update to remove the COVID-19 exclusion from all six readmission measures.

In the PPS-Exempt Cancer Hospital Quality Reporting Program (PCHQR), we are finalizing our proposals to modify the public reporting requirements and remove three existing measures.

In the Hospital Inpatient Quality Reporting (IQR) Program, we are finalizing our proposals to modify four existing quality measures and to remove four existing measures. We also are finalizing our proposal, with modification, to update and codify the Extraordinary Circumstances Exception (ECE) policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital in the Hospital IQR, Hospital Readmissions Reduction, PCHQR, HAC Reduction, and Hospital VBP Programs with a modification.

In the Medicare Promoting Interoperability Program, we are finalizing our proposal to define the electronic health record (EHR) reporting period in CY 2026 and subsequent years as a minimum of any continuous 180-day period within that calendar year for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program and to make corresponding revisions at 42 CFR 495.4. We are finalizing our proposal, with modifications, to revise the Security Risk Analysis measure beginning with the EHR reporting period in CY 2026. We are finalizing our proposal to modify the Safety Assurance Factors for EHR Resilience (SAFER) Guides measure beginning with the EHR reporting period in CY 2026. We are finalizing our proposal to add an optional bonus measure under the Public Health and Clinical Data Exchange objective for reporting data to a public health agency (PHA) using the Trusted Exchange Framework and Common Agreement (TEFCA) beginning with the EHR reporting period in CY 2026.

For the LTCH Quality Reporting Program (QRP), we are finalizing our proposal to remove one item from the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) with respect to patients who have expired in the LTCH. We also are finalizing our proposal to remove four Social Determinant of Health (SDOH) standardized patient assessment data elements from the LCDS. Next, we are finalizing our proposal to amend the reconsideration request process in the LTCH QRP. Finally, we include summaries of comments received in response to Requests for Information (RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions to the data submission deadlines for assessment data collected for the LTCH QRP; and (3) advancing digital quality measurement (dQM) in the LTCH QRP.

The Transforming Episode Accountability Model (TEAM), a mandatory alternative payment model that was finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), aims to improve beneficiary care through financial accountability for episodes categories that begin with one of the following procedures: coronary artery bypass graft (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. In this final rule, we finalizing updates to TEAM that would modify policies affecting participation of new hospitals, quality measure and assessment, the construction of target prices, the removal of certain health reporting elements, the broadening of the Skilled Nursing Facility (SNF) 3-Day Rule, and the removal of the Decarbonization and Resilience Initiative (DRI). Additionally, the policies in this final rule reflect our commitment to ensuring TEAM's incentives help to drive beneficiary quality of care improvements and reductions in Medicare spending.

The Secretary of Health and Human Services has delegated responsibilities to the Assistant Secretary for Technology Policy (ASTP)/Office of the National Coordinator for Health Information Technology (ONC) (collectively, ASTP/ONC \1\) for the implementation of certain provisions in Title IV of the 21st Century Cures Act (Public Law (Pub. L.)) 114-255, December 13, 2016) (Cures Act) that are designed to: advance interoperability; support the access, exchange, and use of electronic health information (EHI); and identify reasonable and necessary activities that do not constitute information blocking.\2\ ASTP/ONC is also responsible for implementation of certain provisions of the Health Information Technology for Economic and Clinical Health Act (Pub. L. 111-5, Feb. 17. 2009) (HITECH Act) including: requirements that the National Coordinator perform duties consistent with the development of a nationwide

health information technology infrastructure that allows for the electronic use and exchange of information and that promotes a more effective marketplace, greater competition, and increased consumer choice, among other goals; and requirements to keep or recognize a program or programs for the voluntary certification of health information technology.

\1\ On July 29, 2024, notice was posted in the Federal Register that ONC would be dually titled to the Assistant Secretary for Technology Policy and Office of the National Coordinator for Health Information Technology (89 FR 60903).

\2\ Reasonable and necessary activities that do not constitute information blocking, also known as information blocking exceptions, are identified in 45 CFR part 171 subparts B, C and D. ONC's official website, HealthIT.gov, offers a variety of resources on the topic of Information Blocking, including fact sheets, recorded webinars, and frequently asked questions. To learn more, please visit: https://www.healthit.gov/topic/information-blocking/.

Under various statutory authorities, we either discuss continued program implementation or make changes to the Medicare IPPS, the LTCH PPS, other related payment methodologies and programs for FY 2026 and subsequent fiscal years, and other policies and provisions included in this final rule. These statutory authorities include, but are not limited to, the following:

Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS).

Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals; and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.

Sections 123(a) and (c) of the Balanced Budget Refinement Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of LTCHs described in section 1886(d)(1)(B)(iv) of the Act.

Section 1814(l)(4) of the Act requires, beginning with FY 2017, that CAHs that do not successfully demonstrate meaningful use of certified electronic health record technology (CEHRT) for an EHR reporting period for a cost reporting period shall be paid 100 percent of reasonable costs rather than 101 percent of reasonable costs.

Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. Hospitals paid under the IPPS with approved GME programs are paid for the indirect costs of training residents in accordance with section 1886(d)(5)(B) of the Act.

Section 1886(d)(5)(F) of the Act provides for additional Medicare IPPS payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. These payments are known as the Medicare disproportionate share hospital (DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the methods under which a hospital may qualify for the DSH payment adjustment.

Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase that would otherwise apply to the standardized amount applicable to a subsection (d) hospital for discharges occurring in a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary.

Section 1886(b)(3)(B)(ix) of the Act, which requires downward adjustments to the applicable percentage increase, beginning with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico hospitals), for eligible hospitals that do not successfully demonstrate meaningful use of CEHRT for an EHR reporting period for a payment adjustment year.

Section 1866(k) of the Act, which provides for the establishment of a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as “PPS-exempt cancer hospitals.”

Section 1886(n) of the Act, which establishes the requirements for an eligible hospital to be treated as a meaningful EHR user for an EHR reporting period for a payment year or, for purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal year.

Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program, under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year.

Section 1886(p) of the Act, which establishes a Hospital- Acquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions.

Section 1886(q) of the Act, as amended by section 15002 of the 21st Century Cures Act, which establishes the Hospital Readmissions Reduction Program. Under the program, payments for discharges from an applicable hospital as defined under section 1886(d) of the Act will be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act directs the Secretary to assess a hospital's performance relative to other hospitals with a similar proportion of beneficiaries who are dually eligible for both Medicare and full Medicaid benefits.

Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital (DSH) payments under section 1886(d)(5)(F) of the Act and for an additional uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, subsection (d) hospitals that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act will receive two separate payments: (1) 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act if subsection (r) did not apply (“the empirically justified amount”), and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act, in the absence of section 1886(r) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured; and (3) the hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.

Section 1886(m)(5) of the Act, which requires the Secretary to reduce by 2 percentage points the annual update to the standard Federal rate for discharges for a long-term care hospital (LTCH) during the rate year for LTCHs that do not submit data on quality measures in the form, manner, and at a time, specified by the Secretary.

Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for Sustainable Growth Rate

(SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS, with implementation beginning in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2026.

Section 1899B of the Act, which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.

Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program (CHIP) beneficiaries while reducing program expenditures. 2. Summary of the Major Provisions

The following is a summary of the major provisions in this final rule. In general, these major provisions are being finalized as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the changes in this final rule is presented in section I.D. of the preamble of this final rule. a. Transition for the Discontinuation of the Low Wage Index Hospital Policy

To help mitigate growing wage index disparities between high wage and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 through 42332), we adopted a policy to increase the wage index values for certain hospitals with low wage index values (the low wage index hospital policy). This policy was adopted in a budget neutral manner through an adjustment applied to the standardized amounts for all hospitals. We indicated our intention that this policy would be effective for at least 4 years, beginning in FY 2020, in order to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. We also stated we intended to revisit the issue of the duration of this policy in future rulemaking as we gained experience under the policy. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we adopted an extension of the low wage index hospital policy and the related budget neutrality adjustment effective for at least three more years, beginning in FY 2025, in order for sufficient wage data from after the end of the COVID-19 Public Health Emergency to become available.

As discussed in section III.F.5. of the preamble of this final rule, on July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the “adjustments” language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C. Cir. 2024). After considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, in the FY 2025 IFC (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. In addition, we established an interim transition policy for hospitals significantly impacted by the removal of the FY 2025 low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. We note, as discussed elsewhere, in this final rule we are finalizing the provisions of the interim final action with comment period (IFC) (89 FR 80405) (hereinafter referred to as the FY 2025 IFC), that implemented revised Medicare wage index values for FY 2025, established a transitional payment exception for low wage hospitals significantly impacted by those revisions, and made conforming changes to the hospital IPPS and LTCH PPS payment rates for FY 2025 to reflect the removal of the low wage index hospital policy following the appellate court decision in Bridgeport Hosp. v. Becerra.

For FY 2026 and subsequent fiscal years, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we are discontinuing the low wage index hospital policy and will no longer apply a low wage index budget neutrality factor to the standardized amounts. As discussed in section III.F.7. of the preamble of this final rule, we are using our authority under section 1886(d)(5)(I)(i) of the Act to adopt a narrow transitional exception to the calculation of FY 2026 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy, that will be implemented in a budget neutral manner. This transitional exception policy will apply to hospitals that benefitted from the FY 2024 low wage index hospital policy and compares the hospital's FY 2026 wage index to the hospital's FY 2024 wage index. If the hospital's FY 2026 wage index is decreasing by more than 9.75 percent from the hospital's FY 2024 wage index, then the transitional payment exception for FY 2026 for that hospital is equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index. We are making this policy budget neutral through an adjustment applied to the standardized amounts for all hospitals. b. Update to the IPPS Labor-Related Share

As discussed in section IV. of the preamble of this final rule, we are finalizing our proposal to rebase and revise the 2018-based IPPS market basket to reflect a 2023 base year. In addition, using the cost category weights from the 2023-based IPPS market basket, we calculated a labor-related share of 66.0 percent, which we will use for discharges occurring on or after October 1, 2025. The labor-related share of 66.0 percent is 1.6 percentage points lower than the current labor-related share of 67.6 percent. As discussed in section IV.B.3. of the preamble of this final rule, this downward revision to the labor-related share is primarily the result of incorporating the more recent 2023 Medicare cost report data for Wages and Salaries, Employee Benefits, and Contract Labor costs. This is partially offset by an increase in the Professional Fees: Labor-Related cost weight. c. Hospital Readmissions Reduction Program

The Hospital Readmissions Reduction Program was established under section 1886(q) of the Act, as amended by section 15002 of the Cures Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions or procedures. In this final rule, we are finalizing the following proposals, beginning with the FY 2027 program year: (1) Refine all six readmission measures to add Medicare Advantage patient cohort data; (2) reduce the applicable period from 3-years to 2-years and update codified regulation language; and (4) update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital with a modification. We also

provide notice of the technical update to remove the COVID-19 exclusion from all six readmission measures. We are not finalizing the proposal to include payment data for MA beneficiaries in the calculation of aggregate payments for excess readmissions.. d. Hospital Acquired Condition (HAC) Reduction Program

Section 1886(p) of the Act establishes the HAC Reduction Program under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions. In this final rule, we are making a technical update to the NHSN Healthcare Associated Infection (HAI) measures baseline. We are also finalizing our proposal to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital with a modification. e. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. In this final rule, we are finalizing modifications to the THA/TKA Complications measure beginning with the FY 2033 program year. We also provide notice of the technical update to remove the COVID-19 exclusion from the six measures in the Clinical Outcomes domain beginning with the FY 2027 program year and the technical update to the five NHSN Healthcare Associated Infection (HAI) measures beginning with the FY 2029 program year. We also are finalizing our proposal to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital with a modification. We are also finalizing our proposal to remove the Program's HEA adjustment in the FY 2026 program year. Lastly, we provide previously and newly established performance standards for FY 2027 through FY 2031 program years for the Hospital VBP Program. f. Hospital Inpatient Quality Reporting (IQR) Program

Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) hospitals are required to report data on measures selected by the Secretary for a fiscal year in order to receive the full annual percentage increase. In this FY 2026 IPPS/LTCH PPS final rule, we are finalizing several changes to the Hospital IQR Program. We are finalizing modifications to four measures currently in the Hospital IQR Program measure set: (1) Hospital-Level, Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) beginning with the April 1, 2023- March 30, 2025 reporting period/2027 payment determination; (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity beginning with the July 1, 2023-June 30, 2025 reporting period/2027 payment determination; (3) the Hybrid Hospital-Wide Readmission (HWR) measure beginning with the July 1, 2025, through June 30, 2026 Reporting Period/FY 2028 payment determination; and (4) the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (HWM) measure beginning with the July 1, 2025, through June 30, 2026 reporting period/FY 2028 payment determination. We are also finalizing the removal of four measures: (1) the Hospital Commitment to Health Equity measure beginning with the CY 2024 reporting period/FY 2026 payment determination; (2) the COVID-19 Vaccination Coverage among HCP measure beginning with the CY 2024 reporting period/FY 2026 payment determination; (3) the Screening for Social Drivers of Health measure beginning with the CY 2024 reporting period/FY 2026 payment determination; and (4) the Screen Positive Rate for Social Drivers of Health measure beginning with the CY 2024 reporting period/FY 2026 payment determination. We are finalizing our proposal to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital with a modification. Additionally, we sought comments regarding measure concepts related to well-being and nutrition for future consideration. We also sought comments on the path forward for digital quality measurement and use of Fast Healthcare Interoperability Resources (FHIR). g. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. In this final rule, we are finalizing our proposal to publicly report PCH data on both the Provider Data Catalog and on Care Compare and to make corresponding changes to regulatory text to replace references to “Provider Data Catalog” with “CMS website”. We are also finalizing our proposals to remove the (1) Hospital Commitment to Health Equity, (2) the Screening for Social Drivers of Health measure; and (3) the Screen Positive Rate for Social Drivers of Health measure beginning with the CY 2024 reporting period/ FY 2026 program year. Lastly, we are finalizing our proposal to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital with a modification. h. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

For the LTCH QRP, we are finalizing our proposal to remove one item from the LCDS with respect to patients who have expired in the LTCH. We also are finalizing our proposal to removal of four SDOH standardized patient assessment data elements from the LCDS. We are finalizing our proposal to amend the reconsideration request process in the LTCH QRP. Finally, we include a summary of comments received in response to Requests for Information (RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions to the data submission deadlines for assessment data collected for the LTCH QRP; and (3) advancing digital quality measurement (dQM) in the LTCH QRP. i. Medicare Promoting Interoperability Program

Under sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act, respectively, eligible hospitals and CAHs are required to submit data in accordance with section 1886(n) to successfully demonstrate meaningful use of CEHRT for an EHR reporting period to avoid a downward payment adjustment under Medicare for the associated fiscal year. In this final rule, we are finalizing several changes to the Medicare Promoting Interoperability Program. Specifically, we are finalizing our proposals: (1) to amend the definition of “EHR reporting period for a payment adjustment year” at 42 CFR 495.4 for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program to define the EHR reporting period in CY 2026 and subsequent years as a minimum of any continuous 180-day period within that calendar year; (2) to modify the Security Risk Analysis measure to require eligible hospitals and CAHs to attest

“yes” to having conducted security risk management in addition to the existing measure requirement to attest “yes” to having conducted security risk analysis, beginning with the EHR reporting period in CY 2026; (3) to modify the SAFER Guides measure by requiring eligible hospitals and CAHs to attest “yes” to completing an annual self- assessment using the eight SAFER Guides published in January 2025, beginning with the EHR reporting period in CY 2026; and (4) to add an optional bonus measure to the Public Health and Clinical Data Exchange objective for eligible hospitals and CAHs that submit health information to a public health agency (PHA) using the Trusted Exchange Framework and Common Agreement \TM\ (TEFCA), and consistent with other measure requirements, beginning with the EHR reporting period in CY 2026. j. Transforming Episode Accountability Model (TEAM)

In section XI.A. of the preamble of this final rule, we discuss the changes we finalized and considered for the Transforming Episode Accountability Model (TEAM). TEAM is a 5-year mandatory model that will be tested under the authority of section 1115A of the Act, beginning on January 1, 2026, and ending on December 31, 2030. We finalized changes to multiple areas of the model, including: (1) a limited deferment period for certain hospitals; (2) addressing the expiration of the Medicare Dependent Hospital program; (3) excluding Indian Health Service (IHS) hospitals from TEAM participation; (4) adding the Information Transfer Patient Reported Outcome-based Performance Measure (Information Transfer PRO-PM); (5) applying a neutral quality measure score for TEAM participants with insufficient quality data; (6) a methodology to construct target prices when there are coding changes; (7) reconstructing the normalization factor and prospective trend factor; (8) replacing the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI); (9) using a 180-day lookback period and Hierarchical Condition Categories (HCC) version 28 for beneficiary risk adjustment; (10) eliminating downside financial risk for low volume hospitals; (11) aligning the date range used for episode attribution; (12) removing health equity plans and health related social needs data reporting; (13) broadening the Skilled Nursing Facility (SNF) 3-day rule waiver; (14) modifying the referral to primary care services requirement; and (15) removing the Decarbonization and Resilience Initiative (DRI). k. ONC Health IT Certification Program Updates

In the Health Data, Technology, and Interoperability: Patient Engagement, Information Sharing, and Public Health Interoperability proposed rule (HTI-2 Proposed Rule) (89 FR 63498), which appeared in the Federal Register on August 5, 2024, ASTP/ONC proposed a wide- ranging set of updates to the ONC Health IT Certification Program. In the Health Data, Technology, and Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization (HTI-4 final rule), which is being published as part of the FY 2026 IPPS/LTCH final rule, ASTP/ONC is finalizing a limited subset of the proposals in the HTI-2 proposed rule. In this section, ASTP/ONC describes the HTI-2 proposals it is finalizing in this rule. (1) New and Revised Standards and Certification Criteria (a) Minimum Standards Code Sets Updates

In section III.B.5 of the preamble of the HTI-2 Proposed Rule, ASTP/ONC proposed to adopt an updated baseline version of RxNorm, identified as a minimum standard code set, in 45 CFR 170.207(d) (Medications), and to reorganize the text of the regulation in 45 CFR 170.207(d). RxNorm is referenced in the “electronic prescribing” and “real-time prescription benefit” health IT certification criteria ASTP/ONC is also finalizing in this final rule. ASTP/ONC is finalizing these proposals in section XI.B.4.b.(2) of the preamble of this final rule, with modifications. Consistent with 45 CFR 170.555, health IT developers may use newer versions of the adopted baseline version of a standard identified as a minimum standard on a voluntary basis. (b) Revised Electronic Prescribing Certification Criterion

As discussed in section XI.B.4.b.(3) of the preamble of this final rule, ASTP/ONC is finalizing proposed updates in the HTI-2 Proposed Rule to the “electronic prescribing” criterion in 45 CFR 170.315(b)(3), with modifications. ASTP/ONC is finalizing that, for technology certified to the criterion in 45 CFR 170.315(b)(3) subsequent to June 30, 2020, health IT developers must update the Health IT Module to use the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard version 2023011 and provide that update to their customers in order to maintain certification of the Health IT Module, by January 1, 2028. For the time period up to and including December 31, 2027, ASTP/ONC is finalizing that developers certifying a Health IT Module to 45 CFR 170.315(b)(3) may use either the updated NCPDP SCRIPT standard version 2023011 or the NCPDP SCRIPT standard version 2017071. ASTP/ONC is also finalizing that any Health IT Modules for which a health IT developer seeks certification to the updated criterion using NCPDP SCRIPT standard version 2023011 would need to support electronic prior authorization transactions in accordance with the standard. Finally, ASTP/ONC is finalizing a series of additional updates to 45 CFR[thinsp]170.315(b)(3)(ii), including removing transactions currently identified as optional for the certification criterion. (c) New Real-Time Prescription Benefit Criterion

As discussed in section XI.B.4.b.(4) of the preamble of this final rule, ASTP/ONC is finalizing the proposal in the HTI-2 Proposed Rule to adopt a “real-time prescription benefit” certification criterion in 45 CFR[thinsp]170.315(b)(4), with modifications. Real-time prescription benefit tools empower providers and their patients to compare the patient-specific cost of a drug to the cost of a suitable alternative, compare prescription costs at different pharmacies, view information about out-of-pocket costs, and learn whether prior authorization for a specific drug is required. The certification criterion ASTP/ONC is finalizing is based on the NCPDP Real-Time Prescription Benefit (RTPB) standard version 13. ASTP/ONC is also finalizing a proposal to include this certification criterion in the Base EHR definition in 45 CFR[thinsp]170.102 after January 1, 2028. ASTP/ONC is finalizing these policies in order to implement section 119(b)(3) of Title I of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260). (d) New Certification Criteria for Modular API Capabilities

As discussed in section XI.B.4.b.(5) of the preamble of this final rule, ASTP/ONC is finalizing two health IT certification criteria for “modular API capabilities” proposed in the HTI-2 Proposed Rule. Specifically, ASTP/ONC is finalizing certification criteria in 45 CFR 170.315(j)(20), “Workflow triggers for decision support interventions,” and 45 CFR 170.315(j)(21), “Subscriptions--client,” both of which are cross-referenced by other certification criteria ASTP/ONC is finalizing to support electronic prior authorization.

(e) New Certification Criteria for Electronic Prior Authorization

In section III.B.20 of the preamble of the HTI-2 Proposed Rule, ASTP/ONC proposed to adopt a “prior authorization API--provider” criterion in 45 CFR 170.315(g)(34). ASTP/ONC also proposed to adopt a set of HL7[supreg] FHIR[supreg] implementation guides (IGs) in 45 CFR 170.215 for HHS use, including IGs referenced as part of the proposed criterion for electronic prior authorization and other IGs that support interoperable exchange of information between payers, providers, and patients.

In section XI.B.4.b.(5) of the preamble of this final rule, ASTP/ ONC is finalizing three certification criteria in 45 CFR 170.315(g)(31), (32), and (33) for electronic prior authorization that are based on the requirements originally proposed in 45 CFR 170.315(g)(34), with modifications. ASTP/ONC is also finalizing adoption of the IGs proposed in section III.B.20 and incorporating these specifications by reference in 45 CFR 170.299.

ASTP/ONC is finalizing these criteria to make available Health IT Modules that can enable health care providers to conduct prior authorization transactions using payer APIs established by CMS in the Interoperability and Prior Authorization rule (89 FR 8758). Use of these Health IT Modules will also support providers and clinicians participating in the Promoting Interoperability programs and MIPS Promoting Interoperability performance category required to report on Electronic Prior Authorization measures. 3. Summary of Costs and Benefits

The following table provides a summary of the costs, savings, and benefits associated with the major provisions described in section I.A.2. of the preamble of this final rule. BILLING CODE 4120-01-P

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Section 1886(d) of the Act sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these “subsection (d) hospitals.” Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis- related groups (DRGs).

The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of- living adjustment (COLA) factor. This base payment rate is multiplied by the DRG relative weight.

If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG- adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for an additional Medicare payment beginning on October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals.

If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.

Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. In general, to qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add- on payment, they would be inadequately paid under the regular DRG payment.

The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and hospitals located in Puerto Rico, the new supplemental payment.

Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.

With the recent enactment of section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025, under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through September 30, 2025. For discharges occurring on or after October 1, 2007, but before October 1, 2025, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). As section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended the MDH program through FY 2025 only, beginning on October 1, 2025, the MDH program will no longer be in effect absent a change in law. Because the MDH program is not authorized by statute beyond September 30, 2025, beginning October 1, 2025, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the IPPS Federal rate.

Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs.

The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS

Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); Inpatient psychiatric hospitals (IPF) and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States,

the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are included along with the IPPS annual update in this document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs continue to be paid solely under a reasonable cost-based system, subject to a rate-of-increase ceiling on inpatient operating costs. Similarly, extended neoplastic disease care hospitals are paid on a reasonable cost basis, subject to a rate-of-increase ceiling on inpatient operating costs.

The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, effective for LTCH's cost reporting periods beginning in FY 2016 cost reporting period, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS. 4. Critical Access Hospitals (CAHs)

Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v) of the Act and existing regulations under 42 CFR part 413. 5. Payments for Graduate Medical Education (GME)

Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR part 413. Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved GME program receive an additional payment for each Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals. The additional payment is based on the indirect medical education (IME) adjustment factor, which is calculated using a hospital's ratio of residents to beds and a multiplier, which is set by Congress. Section 1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. The regulations regarding the indirect medical education (IME) adjustment are located at 42 CFR 412.105.

The FY 2026 IPPS/LTCH PPS proposed rule appeared in the April 30, 2025, Federal Register (90 FR 18002). In the proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2026 operating costs and capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we set forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2026.

The following is a general summary of the changes that we proposed to make. 1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights

In section II. of the preamble of the proposed rule, we included the following:

Proposed changes to MS-DRG classifications based on our yearly review for FY 2026.

Proposed recalibration of the MS-DRG relative weights.

A discussion of the proposed FY 2026 status of new technologies approved for add-on payments for FY

2025, a presentation of our evaluation and analysis of the FY 2026 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) Public Law 108-173, obtained in a town hall meeting for applications not submitted under an alternative pathway), and a discussion of the proposed status of FY 2026 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products. 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals

In section III. of the preamble of the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following:

The proposed FY 2026 wage index update using wage data from cost reporting periods beginning in FY 2022.

Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2026 based on the 2022 Occupational Mix Survey.

Proposed application of the rural, imputed and frontier State floors, and proposed transition for the discontinuation of the low wage index hospital policy.

Proposed revisions to the wage index for acute care hospitals, based on hospital redesignations and reclassifications under sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.

Proposed adjustment to the wage index for acute care hospitals for FY 2026 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

Proposed labor-related share for applying the FY 2026 wage index. 3. Proposed Rebasing and Revising of the IPPS Market Baskets

In section IV. of the preamble of the proposed rule, we proposed to rebase and revise the IPPS market baskets to reflect a 2023 base year. In section IV.B.3. of the preamble of the proposed rule, using the cost category weights from the proposed 2023-based IPPS market basket, we proposed to use a labor-related share of 66.0 percent for the national standardized amounts for all IPPS hospitals (including hospitals in Puerto Rico) that have a wage index value that is greater than 1.0000. 4. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2026

In section V. of the preamble of the proposed rule, we discussed the following:

Proposed calculation of Factor 1 and Factor 2 of the uncompensated care payment methodology.

Proposed methodological approach for determining Factor 3 of the uncompensated care payment for FY 2026, which is the same methodology that was used for FY 2025.

Proposed methodological approach for determining the amount of interim uncompensated care payments, using the average of the most recent 3 years of discharge data. 5. Other Decisions and Proposed Changes to the IPPS for Operating Costs

In section VI. of the preamble of the proposed rule, we discussed proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR parts 412 and 413, including the following:

Proposed inpatient hospital market basket update for FY 2026.

Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status.

Proposed conforming amendments to reflect the statutory extension of the temporary changes to the low-volume hospital payment adjustment through September 30, 2025.

Proposed conforming amendments to reflect the statutory extension of the MDH program through September 30, 2025.

A direct graduate medical education (GME) and indirect medical education (IME) policy proposal for calculating full-time equivalent counts and caps for cost reporting periods other than 12 months; and a notice of closure of two teaching hospitals and opportunities to apply for available slots.

Proposed nursing and allied health education (NAHE) program Medicare Advantage (MA) add-on rates and direct GME MA percent reductions for CY 2024; and proposed regulatory changes regarding the calculation of net cost of NAHE.

Proposed update to and revision to the payment adjustment for certain immunotherapy cases.

Proposed changes to the requirements of the Hospital Readmissions Reduction Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital Readmissions Reduction Program.

Proposed changes to the requirements of the Hospital Value-Based Purchasing Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital Value-Based Purchasing Program.

Proposed changes to the requirements of the Hospital- Acquired Conditions Reduction Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital-Acquired Conditions Reduction Program.

Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2025. 6. Proposed FY 2026 Policy Governing the IPPS for Capital-Related Costs

In section VII. of the preamble of the proposed rule, we discussed the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2026. 7. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages

In section VIII. of the preamble of the proposed rule, we discussed the following:

Proposed changes to payments to certain excluded hospitals for FY 2026.

Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration. 8. Proposed Changes to the LTCH PPS

In section IX. of the preamble of the proposed rule, we set forth proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2026. 9. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers

In section X. of the preamble of the proposed rule, we addressed the following:

Solicitation of comment on adopting measures across the hospital quality reporting and value-based purchasing programs which capture more forms of unplanned post-acute care and encourage hospitals to improve discharge processes.

Proposed changes to the requirements for the Hospital IQR Program.

Proposed changes to the requirements for the PCHQR Program.

Proposed changes to the requirements for the LTCH QRP, and requests for information on future measure concepts, revisions to the data

submission deadlines for assessment data collection, and advancing digital quality measurement (dQM) in the LTCH QRP.

Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program. 10. Other Proposals and Comment Solicitations Included in the Proposed Rule

Section XI. of the preamble of the proposed rule included proposed changes to TEAM that would affect participation, quality measure and assessment, pricing methodology, health data reporting, waivers of Medicare Program requirements, and the Decarbonization and Resilience Initiative. 11. Other Provisions of the Proposed Rule

Section XII.A. of the preamble of the proposed rule includes our discussion of the MedPAC Recommendations.

Section XII.B. of the preamble of the proposed rule includes a descriptive listing of the public use files associated with the proposed rule.

Section XIII. of the preamble of the proposed rule includes the collection of information requirements for entities based on our proposals.

Section XIV. of the preamble of the proposed rule includes information regarding our responses to public comments. 12. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals

In sections II. and III. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2026 prospective payment rates for operating costs and capital-related costs for acute care hospitals, including cost-of- living adjustment (COLA) factors for IPPS hospitals located in Alaska and Hawaii. We proposed to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum of the proposed rule, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2026 for certain hospitals excluded from the IPPS. 13. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2026 LTCH PPS standard Federal payment rate and other factors used to determine LTCH PPS payments under both the LTCH PPS standard Federal payment rate and the site neutral payment rate in FY 2026. We proposed to establish the adjustments for the wage index, labor-related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates. 14. Impact Analysis

In Appendix A of the proposed rule, we set forth an analysis of the impact the proposed changes would have on affected acute care hospitals, LTCHs, and other entities. 15. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services

In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2026 for the following:

A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs).

Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.

The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges. 16. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2025 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2025 report or to obtain a copy of the report, contact MedPAC at (202) 220- 3700 or visit MedPAC's website at https://www.medpac.gov.

For information on the adoption of the MS-DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189).

For general information about the MS-DRG system, including yearly reviews and changes to the MS-DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766) and the FYs 2011 through 2025 IPPS/LTCH PPS final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 56872; 82 FR 38010 through 38085; 83 FR 41158 through 41258; 84 FR 42058 through 42165; 85 FR 58445 through 58596; 86 FR 44795 through 44961; 87 FR 48800 through 48891; 88 FR 58654 through 58787; and 89 FR 69000 through 69109, respectively). For discussion regarding our previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48799 through 48800).

Comment: A commenter summarized the statutory and regulatory history regarding the documentation and coding recoupment adjustments required under section (7)(b) of the TMA, Abstinence Education, and QI Programs Extension Act of 2007 (Pub. L. 110-90), as amended. The commenter reiterated its position that the total level of adjustments made by CMS under this section took back more than was authorized by Congress and stated that section 7(b)(2) of Public Law 110-90 requires CMS to increase the standardized amount by 0.9412% to avoid carrying over into FY 2026 the -3.9% reduction to the standardized amount that law required between FY 2013 and FY 2017.

Response: As of FY 2023, CMS completed the statutory requirements of section 7(b)(1)(B) of Public Law 110-90 as amended by section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240), section 404 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10), and section 15005 of the 21st Century Cures Act (Pub. L. 114-255). As we discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44794 through 44795), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58444 through 58445) and in prior rules, we believe section 414 of the MACRA and section 15005 of the 21st Century Cures Act set forth the levels of positive adjustments for FYs 2018 through 2023. Those adjustments added up to +2.9488 percentage points, not +3.9 percentage points, and we see no evidence that Congress enacted that smaller adjustment schedule with the silent intent that CMS would later make a permanent 0.9412% payment adjustment to reach a total +3.9 percentage point adjustment. To the contrary, section 414 of MACRA instructs the agency to “not make the adjustment (estimated to be an increase of 3.2 percent) that would otherwise apply for discharges occurring during fiscal year 2018 by reason of the completion of the adjustments required under clause (ii).” Because the adjustment “that would otherwise apply” in fiscal year 2018 but for clause (1)(B)(iii) was +3.9%, the commenter's suggestion to complete making that adjustment now is inconsistent with the statute's text.

Subparagraph (b)(2) of Public Law 110-90 does not compel a contrary result. As the U.S. Court of Appeals for the D.C. Circuit has explained, that provision simply requires CMS “to ignore recoupment adjustments” when “calculat[ing] and apply[ing] the annual `percentage increase' ” to base rates provided for in the Medicare statute to account for inflation. Fresno Community Hospital & Medical Center v. Cochran, 987 F.3d 158, 163 (D.C. Cir. 2021). The Secretary has complied with that instruction. Similarly, the commenter's citations to statements the agency made in the Federal Register about its intent to unwind the reductions to the standardized amount the agency made between FY 2013 and FY 2017 were made before Congress passed clause (1)(B)(iii) and have been countermanded by that provision. We therefore decline the commenter's suggestion to read into section 7(b) of Public Law 110-90 implied authority to increase the standardized payment amount by 0.9412%.