The Centers for Medicare & Medicaid Services (CMS) recommended a host of payment and quality program changes for fiscal year (FY) 2026 in the proposed inpatient psychiatric facility prospective payment system (IPF PPS) rule the agency released on Friday, April 11.
 
As NABH reported to members in an alert late Friday, the proposed rule recommends increasing FY 2026 rates for inpatient psychiatric hospitals and units by 2.4% ($70 million), relative to FY 2025 levels, which accounts for a 3.2% market basket update that would be offset by 0.8 percentage point productivity adjustment.

Proposed Payment Changes
This annual IPF PPS update also proposes changes to other PPS components, including:

• Outliers: To maintain the outlier pool at the current level of 2.0% of total payments, CMS proposes increasing the high-cost threshold from $38,110 to $39,360. This change will slightly reduce the number of IPF claims that qualify for an outlier payment.
• Labor Costs: The labor-related share would slightly increase from 78.8% t to 78.9%, which indicates a slight rise in labor costs, relative to all other costs.

Facility-based adjustments: Medicare payments for IPF patients factor in multiple facility-level characteristics including local wages, rural status, teaching hospital status, the presence of a qualifying emergency department. This rule proposes two budget-neutral changes to current facility level adjustments:
 
Rural: Based on its analyses of more recent Medicare claims and cost reports from 2020 through FY 2022, the agency promises to increase the rural adjustment to 18%. This increase from the current 17% adjustment, which has been in effect since this PPS was established, recognizes an 18% differential in per diem costs, relative to non-rural IPFs. This budget neutral change would be implemented by using funds that are otherwise used for IPF PPS payments.
 
Teaching: For FY 2026, CMS proposes to increase the teaching adjustment from 0.5150 to 0.7981, to account for the estimated higher indirect operating costs. This proposal also is based on analyses of the new cost data from FY 2020 through FY 2022. Similarly, this change would be implemented in a budget-neutral manner.
 
Finally, we note that for other hospital proposed rules for FY 2026 CMS issued on April 11, the proposed annual updates were generally in line with the proposed IPF PPS update, with a 2.4% update proposed for general acute-care hospitals and 2.6% proposed for long-term care hospitals. This range of proposed updates stands in stark contrast to the 5 percentage-point increase for 2026 that CMS recently finalized for Medicare Advantage plans— a disparity that we will stress in our comments to CMS.

Proposed Quality Reporting Changes
While the NABH Quality Committee will help develop our comments on the quality-measurement proposals in the rule, NABH urges all its members to contact CMS and explain  how these changes would affect patient care and your organization’s overall operations.
 
Proposed Quality Measure Removal
The agency proposes removing these four quality measures, which are currently set to affect FY 2026 payments:

• Facility Commitment to Health Equity,
• Covid–19 Vaccination Coverage among Health Care Personnel,
• Screening for Social Drivers of Health, and
• Screen Positive Rate for Social Drivers of Health.

As part of its rationale for these proposed removals, CMS noted the costs associated with achieving a high score outweigh their benefit especially because these “structural measures” do not directly measure clinical outcomes. Further, the rule cites as a benefit the associated reduction in annual costs per IPF for implementing these measures.
 
Proposed New Measures
CMS seeks guidance from stakeholders on how to design these new measures:

• Nutrition: CMS asks how to consider assessing individual nutritional status using various strategies, guidelines, and practices designed to promote healthy eating habits and ensure individuals receive the necessary nutrients for maintaining health, growth, and overall well-being. This also includes aspects of health that support or mediate nutritional status, such as physical activity and sleep. In this context, preventable care plays a vital role by proactively addressing factors that may lead to poor nutritional status or related health issues.
• Wellbeing: CMS requests comments about designing a well-being measure that reflects a comprehensive approach to disease prevention and health promotion, as it integrates mental, social, and physical health while emphasizing preventive care to proactively address potential health issues. The agency specifically requests tools and measures that assess overall health, happiness, and satisfaction in life that could include aspects of emotional well-being, social connections, purpose, fulfillment, and self-care work.

Proposed Measure Modification
To facilitate using their data in a complementary manner, CMS proposes to align the timeframes for two IPF quality measures: the Emergency Department (ED) Visit measure and the Unplanned Readmission measure. To do so, the IPF ED Visit timeframe will be expanded from a 1-year to 2-year reporting period, which matches the timeframe for this readmission measure. This change would take effect for the third quarter of 2025 through the second quarter of 2027, with the data to begin affecting payment in FY 2029.
 
Possible Future Use of Star Ratings
Currently, CMS publishes quality data online at www.medicare.gov/care-compare with provider-specific data for some IPFs available within the “hospitals” category.  Also, beginning earlier this year, CMS provided to each IPF and the public an organization-specific report of the quality data CMS has submitted to the Hospital Quality Reporting system.
 
The Consolidated Appropriate Act of 2023 requires HHS to make additional IPF quality program data available to the public. To satisfy this new mandate, this rule raises for future consideration the possibility of using “star ratings” for IPFs, as it currently does for other hospitals and providers.
 
Star ratings are composite measures on provider performance that are intended to help patients and caregivers understand a provider’s quality of care and to compare quality differences across providers. Historically, providers have engaged in extensive policy work with CMS to improve star ratings’ relevance to patients and caregivers, with some concerns still unaddressed by the agency.
 
This rule seeks feedback on the future of developing a five-star methodology for IPFs that  would encourage continuous quality improvement. CMS intends to design this methodology based on information from IPFs, patient groups, and other stakeholders, while currently seeking input on these points:

• Criteria for measure selection,
• Possible use of measures in the current IPF quality reporting program, and
• Future use of additional data for an IPF Star Rating System.

Details questions in these three categories are listed in Appendix A listed below.

Electronic Data Collection of Patient Assessment Information
Congress requires CMS to collect certain standardized patient assessment data using a standardized patient assessment instrument (PAI) in FY 2028 and each subsequent rate year[1]. More specifically, the PAI must collect at patient admission and discharge these categories of data: functional status; cognitive function and mental status; special services, treatments, and interventions; medical conditions and comorbidities; impairments; and other categories as determined appropriate by the HHS secretary. In addition, Congress requires that these data be used to compare IPFs.
 
To help develop a plan to implement this mandate, CMS has been collecting information from the field, including cautions from NABH and the Medicare Payment Advisory Commission last year that urged CMS to use PAI measures that are tested and validated specifically in IPFs, directly pertain to patient care, and are confirmed as statistically reliable.[2]  To continue developing its IPF PAI design and implementation plan, this rule presents a lengthy list of questions, provided below as Appendix B, which are intended to assess the ability of the IPF field to implement a PAI using interoperable health information technology. In our comments, NABH will emphasize current real-world limitations of the overall field’s HIT capacity. Our comments will require substantial, specific information from our members related to CMS’ extensive list of questions to influence regulators.
 
Additional Request for Information
 
Reducing Administrative Burden
Aligning with a January 2025 White House Executive Order that calls for eliminating at least 10 existing regulations to offset any new regulation that increases net costs, CMS is seeking public comment on approaches and opportunities to streamline regulations and reduce administrative burdens. CMS directs feedback on this issue to its separately posted request for information.  Specifically, questions posted in the detailed RFI fall into these categories:

• Streamline Regulatory Requirements
• Opportunities to Reduce Administrative Burden of Reporting and Documentation
• Identification of Duplicative Requirements

Please see the agency’s fact sheet for more information.
NABH will submit comments on this rule by the June 10 deadline.

[1] Required by Section 4125 of the Consolidated Appropriations Act of 2023, which was enacted in Dec. 2022.
[2] See CEO Update, 5-31-24, and pages 6-8 of the May 2024 letter from the Medicare Payment Advisory Commission to CMS.

APPENDIX A
CMS Request for Information On the
Possible Future Use of Star Ratings for IPFs

CMS invites public comment on the following star rating topics.
 
Criteria for measure selection

1. Are there specific criteria CMS should use to select measures for an IPF star rating system, such as a measure’s generalizability (degree to which a measure is applicable to a broad segment of patients)?
2. Should an IPF star rating system be limited to or more heavily weight certain types of measures (for example, outcome measures, process measures, structural measures; measures that address certain topics, such as safety, psychiatric treatment, substance use treatment, whole person care, or patient experience)?

Suitability of measures currently in the IPFQR Program

3. From the perspective of patients and families or other caregivers, which measures currently adopted for the IPFQR Program are most important when attempting to summarize quality of care in IPFs? Which are least important? Are there any measures in the program that should be specifically excluded or included in IPF Star Ratings? For the list of IPFQR Program measures, we refer the reader to Table 5 in section IV.F. in this proposed rule.
4. From the perspective of referring providers, payers, or other interested parties, which measures currently adopted for the IPFQR Program are most important when attempting to summarize quality of care in IPFs? Which are least important? Are there any measures in the program that should be specifically excluded or included in an IPF star ratings system?
5. Two measures currently in the IPFQR Program—Hours of Physical Restraint Use
   (HBIPS-2) and Hours of Seclusion (HBIPS-3)—are calculated and publicly reported as a rate per 1000 hours of patient care. Does the way these measures are currently specified and displayed create challenges for including these measures in a star rating calculation? If these measures were selected to be included in a star rating calculation, are there recommendations about how these measures should be included in a larger star rating methodology? For example, should the rate be made into a categorical variable (for example, quartiles)?

Future use of additional data for an IPF Star Rating System

6. In the FY 2024 IPF PPS final rule (88 FR 51128), we finalized the Psychiatric Inpatient Experience (PIX) survey as a measure of patient experience in IPFs. The PIX survey will become mandatory for the FY 2028 payment determination—that is, data collection occurring in CY 2026. Although PIX data may not be available for an initial version of an IPF star rating system, what considerations should CMS give these data, when they become available? For example, should they be included as part of an overall star rating, or used to derive a standalone patient experience star rating? See for example the Hospital patient experience star rating, which is derived from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS©) survey and displayed as “Patient survey rating” on the Compare tool.
7. Are there other measurement topics that are currently not addressed by an IPFQR Program measure, but would be valuable in an IPF star rating? We intend to use this input to inform our future star rating development efforts. We intend to consider how a rating system would determine an IPF’s star rating, the methods used for such calculations, and an anticipated timeline for implementation. We will consider comments in response to this RFI for future rulemaking.

APPENDIX B
CMS Request for Information On
IPF Patient Assessment Instruments (PAI) Design and Implementaiton

CMS invites public comment on the following PAI topics.

• Please note whether your IPF is a unit or a freestanding hospital. In addition, for all of your responses below, please specify whether and how your organization’s status as a unit or freestanding hospital affects your response.
• To what extent does your facility use health IT systems to maintain and exchange patient records?
• If your facility has transitioned to using electronic records in whole or in part, what types of health IT does your IPF use to maintain patient records?
  • Are these health IT systems certified under the Office of the National Coordinator for Health Information Technology (ONC) health IT certification program?
  • Does your facility use EHRs or other health IT products or systems that are not certified under the ONC Health IT Certification Program? If so, do these systems exchange data using standards and implementation specifications adopted by HHS?
  • Please specify.
• Does your IPF submit patient data to CMS directly from your health IT system, without the assistance of a third-party intermediary? If a third-party intermediary is used to report data, what type of intermediary service is used? How does your facility currently exchange health information with other healthcare providers or systems, specifically between IPFs and other provider types, or with public health agencies? What challenges do you face with the electronic exchange of health information?
  • Are there any challenges with your current electronic devices (for example, tablets, smartphones, computers) that hinder your ability to easily exchange information across health IT systems?
  • Please describe any specific issues you encounter.
• Does limited internet or lack of internet connectivity impact your ability to exchange data with other healthcare providers, including community-based care services, or your ability to submit patient data to CMS?
• What steps does your IPF take to ensure compliance in using health IT with security and patient privacy requirements such as the requirements of the regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA) and related regulations?
• Does your IPF refer to the SAFER Guides (see newly revised versions published in January 2025 at https://www.healthit.gov/topic/safety/safer-guides) to self-assess EHR safety practices?
• Quality Data Submission. What challenges or barriers does your IPF encounter when submitting quality measure data to CMS as part of the IPFQR Program? Please identify any factors that hinder successful data submission. What opportunities or factors could improve your facility’s successful data submission to CMS?
• What types of technical assistance, guidance, workforce training resources, and other resources would help IPFs to successfully implement the Fast Healthcare Interoperability Resources®[1] (FHIR®) standard for electronic exchange of patient assessment data.
• What strategies can CMS, HHS or other Federal partners take to ensure that technical assistance is both comprehensive and user-friendly?
• Is your facility using technology that utilizes application programming interfaces (API) based on the FHIR standard to enable electronic data sharing? If so, with whom are you sharing data using the FHIR standard and for what purpose(s)? For example, have you used FHIR APIs to share data with public health agencies? Does your facility use any Substitutable Medical Applications and Reusable Technologies (SMART) on FHIR applications? If so, are the SMART on FHIR applications integrated with your EHR or other health IT?
• What benefits or challenges have you experienced with implementing technology that uses FHIR-based APIs? How does adopting technology that uses FHIR-based APIs to facilitate the reporting of patient assessment data impact provider workflows? What impact, if any, does adopting this technology have on quality of care?
• Does your facility have any experience using technology that shares electronic health information using one or more versions of the United States Core Data for Interoperability (USCDI) standard? Note the Department of Health and Human Services currently underway policy development project to develop USCDI standards for behavioral healthcare.
• Call for Volunteers. Would your IPF and/or vendors be interested in participating in testing to explore options for transmission of assessments, for example, testing methods to transmit assessments that incorporate FHIR-enabled data to CMS?
• What other information should we consider, to facilitate successful adoption and integration of FHIR-based technologies and standardized data for a patient ssessment instruments like the IPF-PAI?
  • We invite any feedback, suggestions, best practices, or success stories related to the implementation of these technologies.

[1]FHIR is a widely adopted standard for exchanging healthcare data electronically, facilitating interoperability between different systems. Developed by HL7, FHIR uses a RESTful API based on web standards like JSON, XML, and RDF.