CMS Finalizes 2.3% IPPS Rate Increase, Mandatory Joint Replacement Bundled Payment Model for FY 2027
CMS finalized its fiscal year 2027 Inpatient Prospective Payment System (IPPS) rule on July 31, establishing a 2.3% payment rate increase for acute care and long-term care hospitals. The rule introduces the first mandatory, nationwide episode-based payment model for joint replacement procedures covering knee, hip, and ankle replacements. The rule takes effect October 1, 2026 (FY 2027 start). This matters for Medicaid because many state programs base their hospital payment rates on Medicare methodologies, and the bundled payment model could influence state approaches to managing orthopedic services under managed care and fee-for-service arrangements.
State Medicaid programs that benchmark hospital rates to Medicare or contract with hospitals serving dual-eligible beneficiaries will see immediate reimbursement impacts, and the mandatory bundled payment model may accelerate state adoption of similar episode-based payment approaches for orthopedic services.
Managed Care · Finance
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