Premier Submits Comments on FY 2027 Medicare Inpatient Payment Proposed Rule

Today, Premier submitted comments to the Centers for Medicare & Medicaid Services (CMS) on the fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) proposed rule. In its comments, Premier expressed continued concern that Medicare annual updates continue to fail to account for rising labor costs, inflation and tariffs, contributing to a growing gap between hospitals’ payment and cost. To address chronic underpayment that hurts the stability and resilience of the health system on which patients depend, Premier urged CMS:

• Raise the market basket update to reflect the impact of labor expenses, inflation and exogenous factors;
• Adopt new or supplemental data sources to ensure labor costs, inclusive of contract labor, are adequately reflected in the Medicare hospital payment; and
• Implement the transitional policy in place of the low-wage index policy in a non-budget neutral manner.

Among other detailed comments, Premier also urged CMS to:

• Improve the cadence and accuracy of data sharing in the Transforming Episode Accountability Model (TEAM);
• Apply the following recommendations for the Comprehensive Care for Joint Replacement Expansion (CJR-X):
  • Develop additional policies and guardrails to prevent under-resourced hospitals that are “regionally inefficient” from entering a downward spiral if unable to compete with peers on cost containment;
  • Consider a simple methodology for determining when a region has achieved an “efficient” price target – such as setting the efficient price target at the 20th percentile of a regional benchmark – rather than adopting a complicated and unreliable administrative update factor such as the Accountable Care Prospective Trend;
  • Create a glidepath to risk and limit downside risk in the first year of implementation to allow hospitals additional time to prepare for bearing risk;
  • Implement a 5 percent stop-loss policy in the first performance year;
  • Continuously monitor the performance of rural hospitals, Medicare-dependent, small rural hospitals, sole community hospitals, and safety net hospitals and modify the risk adjustment methodology if evidence shows they are under-performing at significantly higher rates than non-safety net hospitals;
  • Align the definition of a safety net hospital in CJR-X with TEAM to maintain consistency and because the volume may be too low to adequately identify all safety net hospitals; and
  • Monitor the impact of post-acute care (PAC) availability for CJR-X participants and make appropriate design changes – such as application of additional safeguards, risk adjustment, or pricing methodology – to mitigate the impact of PAC shortages and prevent harming patient access in rural communities.
• Modify existing policy to ensure patients receiving benefits under Section 1115 demonstrations are counted as Medicaid-eligible for disproportionate share hospital (DSH) calculations, including uncompensated or undercompensated care pool populations regardless of benefit design; and
• In response to several requests for information (RFI) on electronic clinical quality measures (eCQMs) included in the proposed rule:
  • Birthing-Friendly Hospital Designation: Consider alternative specifications, risk adjustment, weighting and overall scoring methodologies for the Cesarian Birth eCQM and Severe Obstetric Complications eCQM.
  • Emergency Care Access & Timeliness eCQM: Re-specify for adoption in an inpatient setting and do not adopt in the Value-Based Purchasing Program as delays in emergency department are often due to factors beyond a hospital’s control.