The Centers for Medicare & Medicaid Services (CMS) has finalized its fiscal year (FY) 2027 payment rule, increasing Medicare inpatient payments to acute care hospitals by 2.3%, or roughly $2.1 billion. While any increase is welcome, many health systems argue it fails to account for rising labor, supply, and administrative costs.
As Joanna Hiatt Kim, AHA’s vice president of payment policy, wrote in a public statement, “…CMS has made another inadequate update to inpatient payment rates, with an extremely high productivity cut even larger than proposed. This is in the face of rising need for care and higher uninsured rates.”
At the same time, outpatient and ambulatory surgery center (ASC) volumes continue to grow as CMS phases out the Inpatient only (IPO) list, allowing more procedures to move beyond the traditional inpatient setting. As a result, health systems must do more with every dollar while ensuring documentation, coding, and reimbursement remain accurate across care settings.
What is changing under the CMS FY 2027 payment rule?
The final rule includes several updates that will affect hospitals beginning October 1, 2026, for FY 2027:
- A 2.3% increase in Medicare inpatient payments for acute care hospitals, totaling approximately $2.1 billion.
- Different impacts by hospital type. CMS projects for nonprofit hospitals will see an average 3.2% payment increase, while for-profit hospitals are expected to see a 1.4% net increase after other payment adjustments.
- A new mandatory Transforming Episode Accountability Model (TEAM) for certain joint replacement procedures beginning in 2028. The model holds participating providers accountable for spending and quality throughout an episode of care, from surgery through recovery.
- New quality reporting measures, including metrics related to diabetes care, post-surgical complications (such as hospital-acquired venous thromboembolism), Medicare Advantage data, and mortality reporting.
The American Hospital Association (AHA) and other industry organizations have expressed concerns that the finalized payment increase does not fully offset the continued financial pressures hospitals face, particularly as workforce and supply costs remain elevated.
Why does this matter for outpatient surgery and ASCs?
Although the FY 2027 rule mostly impacts inpatient reimbursement, it represents a larger shift in healthcare delivery.
CMS continues to encourage care in lower-cost settings when clinically appropriate, with more surgical procedures moving to hospital outpatient departments and ASCs that were previously included on the inpatient-only list.
As reimbursement models evolve and episode-based payment becomes more common, organizations need accurate clinical documentation and coding from the very beginning of the patient’s journey.
Errors in surgical terminology, CPT® or HCPCS code assignments, or lack of standardization of procedure dictionaries can create downstream challenges, including scheduling issues, prior authorization delays, claim denials, and unnecessary administrative work.
With reimbursement under mounting pressure, avoiding preventable revenue leakage becomes even more important.
How can health systems prepare for the CMS FY 2027 payment update?
Organizations cannot control CMS payment updates, but they can strengthen the operational processes that influence reimbursement.
Key priorities include:
- Keeping surgical terminology aligned with changing CPT, HCPCS, and CMS policies
- Regularly updating and maintaining preference cards, procedure dictionaries, and clinical content
- Supporting accurate documentation before surgery is scheduled
- Monitoring regulatory changes that affect site-of-care decisions and reimbursement
These improvements help reduce rework while supporting cleaner claims and more consistent reimbursement across inpatient, outpatient, and ASC settings.
Supporting reimbursement as regulations change
As payment models become more complex and surgeries continue shifting across care settings, maintaining clinical terminology is essential for revenue integrity.
IMO Health helps health systems keep clinical terminology current with code sets, payment policies, and regulatory changes.
By supporting accurate procedure documentation and maintaining trusted terminology across clinical workflows, organizations can reduce administrative burden, improve coding accuracy, and better prepare for ongoing CMS reimbursement changes.
With the FY 2027 payment update looming, the most successful organizations will be those that pair operational efficiency with high-quality clinical data to support accurate reimbursement from the start.
Learn more about IMO Health’s surgical scheduling and OR efficiency solution.
Want a closer look? Schedule a demo.
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