2026 Final Medicare Payment, Policy Changes: An Overview Across Care Settings

Medicare payment rules are foundational to the structure and delivery of health care to almost 70 million individuals. Each year, the Centers for Medicare & Medicaid Services (CMS) releases rules shaping reimbursement rates, regulatory requirements, and quality benchmarks for a spectrum of care settings. The rules apply either to the federal fiscal year (FY) or the calendar year (CY).

Here are what hospitals, skilled nursing facilities (SNFs), ambulatory surgical centers (ASCs), physicians, home health agencies (HHAs) and hospices will see in 2026.

Final 2026 federal fiscal year (FFY) rules: IPPS, SNF, Hospice

Certain Medicare payment rules took effect October 1, 2025, the start of the 2026 FFY. Rules following the 2026 FFY include the hospital inpatient prospective payment system (IPPS), skilled nursing facility prospective payment system (SNF PPS), and hospice rules.

FFY 2026 IPPS

The IPPS governs inpatient stays at acute care hospitals. The 2026 final IPPS rule includes the following key updates:

• Hospitals will see a net payment increase of 2.6%, an estimated $5 billion more in 2026.
• The Transforming Episodic Accountability Model — or TEAM — will launch as planned on January 1, 2026. There are some modest modifications, but the bulk of the model remains unchanged. Roughly 750 hospitals are mandated to participate in TEAM.
• Disproportionate Share Hospital (DSH) payments will increase an estimated $2 billion compared to 2025.
• The low wage index hospital policy is discontinued for FY 2026 and subsequent years. CMS adopts a budget-neutral transitional exception for hospitals significantly impacted.

FFY 2026 SNF PPS

The SNF PPS systems covers short-term skilled care — nursing and rehabilitation — for Medicare beneficiaries. 2026 SNF PPS final rule includes the following key updates:

• SNF payment rates increase by a net 3.2%, a $1.16 billion increase in 2026 over 2025.
• Thirty-four changes to the payment driven payment model’s ICD 10 code mappings; some are significant.
• CMS removes four items from the social determinants of health category of the standardized patient assessment data elements beginning with residents admitted October 1, 2025. Data elements removed are living situation (1), food (2), and utilities (1).

FFY 2026 Hospice

Hospice care plays a vital role in supporting patients at the end of life. Key changes in the 2026 final hospice payment rule updates:

• CMS updates the hospice payment rate by 2.6%, an estimated increase of $750 million compared to 2025.
• With the 2.6% hospice payment update, the aggregate annual hospice cap is also increased by that amount in 2026 to $35,361.44.
• CMS finalizes that a physician member of the interdisciplinary group may recommend admission to hospice care, aligning with the current certification regulations and Conditions of Participation.
• CMS restores signature and date requirements for face-to-face attestation and eliminates the requirement that the attestation be a separate and distinct document. The final rule also clarifies the attestation requirement may be fulfilled also as part of a signed and dated clinical note within the medical record.

Final 2026 CY rules: Physicians, home health, outpatient hospital

Calendar year rules take effect January 1, 2026, and include the physician fee schedule (PFS), hospital outpatient prospective payment system (OPPS), and home health prospective payment system (HH PPS).

CY 2026 PFS

The PFS governs thousands of services delivered by physicians and other practitioners across various settings. The 2026 final PFS rule features several notable changes:

• For 2026, there are two conversion factor updates—an update of 2.5% (mandated under the One Big Beautiful Bill Act) and a second update based on whether there is participating in a qualifying alternative payment model (APM). If in a qualifying APM, an update of 0.75% and if not, 0.25%. CMS also adds an additional 0.49% adjustment to account for other changes in work relative value units (RVUs) for some services.

Combined, the two conversion factors are either:

• Qualifying APM — Total conversion factor of $33.57 or 3.77% (projected increase of $1.22), or
• Nonqualifying APM — Total conversion factor of $33.40 or 3.26% (projected increase of $1.05)

• CMS finalizes a new “efficiency adjustment” factor for work RVUs and corresponding intraservice portion of physician time of non-time-based services. The adjustment would be a negative 2.5% for CY 2026 which is based on the sum of the past five years of the Medicare Economic Index productivity adjustment percentage.
• CMS moves forward with a practice expense change to indirect costs based on whether those are office-based or facility-based — reducing payments for facility-based services and increasing them for office-based services. There are some services where it wouldn’t apply.
• CMS finalizes a new ambulatory specialty model (ASM) specifically related to lower back pain and heart failure. It’s a five-year model beginning January 2027 and focuses on improving cost and outcomes for these chronic conditions.

CY 2026 HH PPS

Medicare’s HH PPS supports skilled care for beneficiaries in their residences. CMS originally proposed significant payment cuts of roughly 6.4%, or $1.135 billion in 2026; however, the agency scaled that back in the 2026 HH PPS final rule to a 1.3% cut in aggregate, or a $220 million reduction in 2026 compared to 2025.

This is the result of a positive update of 2.4% combined with multiple behavioral payment adjustments reductions (a permanent and temporary cut) to reflect the transition to the patient-driven groupings model (PDGM), plus a slight decrease related to the 2026 fixed dollar loss ratio.

All total, HHAs in CY 2026 face a decrease in payments of 1.3%, or $220 million. This is a significant improvement from the proposed rule’s policy, which would have been a 6.4% or $1.135 billion cut.

CY 2026 OPPS

The OPPS governs services provided in the hospital outpatient department setting. The 2026 final OPPS rule includes:

• CMS finalizes a net 2.6% update for 2026 for both the OPPS and the ASC setting. Both updates are based on a market basket increase of 3.3% reduced by the productivity adjustment of 0.7%.
• Drugs administered in off-campus, excepted provider-based departments face a site neutral payment cut. These previously grandfathered services will now be paid at roughly 40% of the OPPS rate, essentially at the PFS rate, instead of the full OPPS rate.
• CMS didn’t finalize its proposed change on expediting the claw-back of $7.8 billion related to a prior 340B lawsuit. CMS had proposed an annual offset of 2% per year from 2026 to 2031. While it didn’t finalize this for 2026, CMS intends to increase the offset in 2027 to something more than the current 0.5%.
• CMS finalizes the elimination of the inpatient-only list over three years, including removing 285 musculoskeletal procedures in 2026 and adding hundreds to the covered procedures list for ASCs.
• Hospitals face additional price transparency changes in 2026. For example, the rule requires hospitals to disclose in their machine-readable files the 10th, median, and 90th percentile allowed amounts when their payer-specific negotiated charges are based on percentages or algorithms.

How CLA can help with regulatory changes

Hospitals, SNFs, physicians, home health agencies, and hospices are continually adapting to changes. That is why reviewing and preparing for these new payment rates and regulatory requirements is so important.

If you’re not sure where to start or have questions about how to adjust to these changes, reach out to CLA. Whether you’re a SNF, hospital, physician practice, home health agency or hospice, our dedicated health care teams can help.

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