On April 11, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that proposes updates to Medicare payment policies and rates for inpatient rehabilitation facilities under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2026. CMS is publishing this proposed rule consistent with the legal requirements to update Medicare payment policies for IRFs annually. This fact sheet discusses the major provisions of the proposed rule.
For FY 2026, CMS proposes to update the IRF PPS payment rates by 2.6% based on the proposed IRF market basket update of 3.4%, less a proposed 0.8 percentage point productivity adjustment. The proposed rule includes annual updates to the prospective payment rates, the outlier threshold, the case-mix-group relative weights and average length of stay values, the wage index, and associated impact analysis.
The IRF QRP is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a 2 percentage point reduction in their Annual Increase Factor. Additionally, measures adopted into the IRF QRP are publicly reported on the Care Compare tool at Medicare.gov. For the IRF QRP, CMS is proposing to remove two quality measures, remove four Social Determinant of Health (SDOH) standardized patient assessment data elements, and to amend the reconsideration policy and process. In addition, CMS is seeking feedback with four Requests for Information (RFIs) on future measures, data collection burden reduction, data submission timelines, and adoption of health IT standards.
Request for Information on Streamlining Regulations and Reducing Administrative Burdens in Medicare
On January 31, 2025, President Trump issued Executive Order (EO) 14192 "Unleashing Prosperity Through Deregulation," which states the Administration’s policy to significantly reduce the private expenditures required to comply with Federal regulations to secure America’s economic prosperity and national security and the highest possible quality of life for each citizen. To comply with the Executive Order, CMS, is including in the proposed rule a Request for Information seeking public input on approaches and opportunities to streamline regulations and reduce burdens on those participating in the Medicare program. The RFI is available at https://www.cms.gov/medicare-regulatory-relief-rfi and the public should submit all comments in response to this RFI through the provided weblink.
Proposed Updates to the FY 2026 IRF PPS Payment Rates
For FY 2026, CMS proposes to update the IRF PPS payment rates by 2.6% based on the proposed IRF market basket percentage increase of 3.4%, less a proposed 0.8 percentage point productivity adjustment. CMS is proposing that if more recent data becomes available (for example, a more recent estimate of the market basket update or productivity adjustment), CMS would use this data, if appropriate, to determine the FY 2026 market basket percentage increase and the productivity adjustment in the final rule. Additionally, CMS proposes to update the outlier threshold to maintain outlier payments at 3.0% of total payments. We estimate the proposed technical rate setting changes would result in a preliminary estimated increase in IRF payments of $295 million for FY 2026.
Proposed Updates to the FY 2026 IRF QRP
Measure Removal. Invoking measure removal Factor 8: The costs associated with a measure outweigh the benefit of its continued use in the program. CMS proposes to remove two measures from the IRF QRP, beginning with the FY 2026 (CY 2024) IRF QRP: the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, and beginning with the FY 2028 (CY 2026) IRF QRP, the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure.
Item Removal. CMS proposes to remove four SDOH standardized patient assessment data elements to reduce burden. Data submission on one item for Living Situation (R0310), two items for Food (R0320A and R0320B), and one item for Utilities (R0330) will be optional beginning October 1, 2025, and be removed from the IRF PAI with the FY2028 IRF QRP.
Reconsideration Policy. CMS proposes to amend the reconsideration policy and process to remove the word “extenuating” used in previous iterations of the reconsideration policy and replacing it with “extraordinary.” CMS will also permit IRFs to request, and CMS to grant, an extension to file a request for reconsideration of a noncompliance determination if the IRF was affected by an extraordinary circumstance beyond the control of the IRF.
FY 2026 IRF QRP Requests for Information (RFIs)
CMS is seeking feedback on four RFIs: 1) Future measure on the topics of interoperability, nutrition, delirium, and well-being; 2) Potential revisions to the IRF-Patient Assessment Instrument (IRF-PAI), which would allow CMS to reduce burden; 3) potential revisions to the data submission deadlines for assessment data, which would allow CMS to provide IRFs with more timely quality data; and 4) advancing digital quality measurement in order to seek feedback on current adoption of health information technology (IT) and standards, including Fast Healthcare Interoperability Resources (FHIR).
The proposed rule can be viewed at the Federal Register at: https://www.federalregister.gov/public-inspection/current
For more information about IRF QRP, please visit: https://www.cms.gov/medicare/quality/inpatient-rehabilitation-facility
For more information about IRF PPS, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/inpatient-rehabilitation
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