CMS Publishes Federal Fiscal Year 2026 Hospital Payment Proposed Rule

On April 11, 2025, the Centers for Medicare & Medicaid Services (“CMS”) published its annual proposed rule for the federal fiscal year (“FFY”) 2026 inpatient prospective payment system (“IPPS”) and long-term care hospital (“LTCH”) payment system. The proposed rule features typical content stemming from statutory changes and litigation developments related to hospital reimbursement. Unlike previous proposed rules in recent years, there are few proposals related to the COVID-19 Public Health Emergency (“PHE”) and its impact on hospitals. CMS also included a Request for Information seeking input on how to streamline Medicare regulations, reduce provider burden, and reduce the cost of private health care expenditures required to comply with federal regulations.

This Alert details key changes to and updates on the following topics:

1. Medicare disproportionate share hospital payments
2. IPPS payment rates and LTCH payment rates
3. Low volume hospital definition and payment adjustment
4. Medicare-Dependent, Small Rural Hospital Program
5. Graduate and indirect medical education
6. Nursing and allied health education
7. Hospital Readmissions Reduction Program
8. Hospital Value-Based Purchasing Program
9. Hospital-Acquired Condition Reduction Program
10. Digital quality measurement
11. Hospital Inpatient Quality Reporting Program
12. LTCH Quality Reporting Program
13. Transition from the low wage index policy
14. Medicare Promoting Interoperability Program
15. Transforming Episode Accountability Model.

Comments on these proposals are due to CMS by June 10, 2025. We recommend you consider submitting comments on any provision potentially affecting your organization. Please feel free to reach out to your Ropes & Gray advisor with any questions about these proposals.

1. Medicare DSH. The agency did not propose to make any changes to traditional disproportionate share hospital (“DSH”) payments but made proposals relating to updates in the factors used for determining DSH uncompensated care payments. The statute at 42 U.S.C. § 1395ww(r) requires CMS to use three factors to determine the amount of Medicare payments to DSH hospitals. These factors represent CMS’s estimate of 75% of the amount of traditional Medicare DSH payments that would have been paid under the pre-2014 system, an adjustment to that amount to account for changes in the national uninsured rate, and each eligible hospital’s estimated uncompensated care amounts relative to total uncompensated care for all eligible hospitals. For FFY 2026, CMS proposes to increase DSH uncompensated care payments to hospitals by approximately $1.5 billion. Consistent with policy applied since FFY 2014, CMS would calculate Factor 1 as the difference between the most recently available estimates of the aggregate amount of Medicare DSH payments that would be made for FFY 2026 in the absence of Section 1886(r) of the Social Security Act (the “Act”) and the amount of empirically justified Medicare DSH payments made for the fiscal year. Under the proposed rule, Factor 1 for FFY 2026 would be $11.761 billion. CMS would continue to calculate Factor 2 by applying the weighted average approach to estimate the rate of uninsurance that hospitals will experience during the fiscal year. Under the proposed rule, Factor 2 for FFY 2026 would be 60.71%, and the proposed FFY 2026 uncompensated care amount would be $7,140,406,650. The same as the last few years, Factor 2 uses data from CMS’s Office of the Actuary to estimate that the percentage of the nationwide uninsured fell from 14% in Calendar Year (“CY”) 2013 to an average of 8.7% in CY 2026 (up from 7.7% in CY 2025). To calculate Factor 3, CMS proposes to continue using the three most recent years (FFY 2020, FFY 2021, and FFY 2022) of audited data on uncompensated care costs from Worksheet S–10 of the cost reports. CMS invites public comments on its Factor 1 and Factor 2 proposals. CMS proposes the same methodological approach for determining Factor 3, the hospital’s uncompensated care amount relative to the uncompensated care amount for all hospitals that receive DHS payments, that CMS used for FFY 2025. Specifically, Factor 3 is the quotient of the amount of uncompensated care for a hospital for a period selected by the HHS Secretary and the aggregate amount of uncompensated care for all subsection (d) hospitals that receive payment under Section 1886(r) of the Act for such period. CMS proposes to use the most recent three fiscal years of audited Worksheet S-10 Part 1 data, from the cost reports that span FFY 2020-2022, to calculate Factor 3 for eligible hospitals. If a cost report covers a period that is more or less than 12 months, CMS will annualize the UCC from Worksheet S-10 Part I and “if applicable, use the statewide CCR [cost-to-charge ratio] (urban or rural) to calculate uncompensated care costs.”
2. Changes in IPPS Payment Rates and Proposed Changes to the LTCH PPS Payment Rates and Other Proposed Changes to the LTCH PPS for FY 2026. Overall, CMS proposes an increase of 2.4% to the IPPS payment rates for FFY 2026, 0.2% lower than the 2.6% increase that was enacted for FFY 2025. The FFY 2026 increase is the result of a 3.2% increase to the market basket percentage estimate, offset by a 0.8% decrease due to the productivity adjustment. CMS also proposes a 2.6% increase in the national standardized amount for long-term care hospitals for the next federal fiscal year. For the LTCH payment system, CMS proposes an increase of 2.6% as compared to 2.8 % in FFY 2025. This increase is the result of a 3.4 % increase to the market basket percentage estimate, offset by a 0.8% decrease due to the productivity adjustment. CMS states the proposed changes for inpatient hospital operating costs or “applicable percentage increase” are made under the authority of Section 1886(b)(3)(B) of the Act, as amended by Sections 3401(a) and 10319(a) of the Affordable Care Act. Additionally, Section 1886(g) of the Act requires the Secretary to use a prospective payment system to pay for the capital-related costs of inpatient hospital services. The proposed changes to the LTCH PPS Payment Rate are made under Section 1886(m)(5) of the Act. The update requirements are codified under 42 CFR 412.523(c)(4). CMS estimates the proposed changes will result in an increase of approximately $4.0 billion in FFY 2026 payments to acute care hospitals. According to CMS, this increase is primarily driven by changes in operating payments, uncompensated care payments, and capital payments. CMS further indicated that the increase in operating payments is due to the market basket update and productivity adjustment. The proposed changes are estimated to result in an increase of approximately $61 million in FFY 2026 payments to LTCHs. This increase is primarily due to the market basket update and adjustments for area wage levels and high-cost outlier payments.
3. Changes to Low-Volume Hospital Definition and Payment Adjustment. Beginning with discharges occurring on or after October 1, 2025, CMS proposes to revert the definitions of “low-volume hospital” and the corresponding payment adjustment methodology back to those adopted under the statutory requirements in effect between FFY 2005 and FFY 2010. The Consolidated Appropriations Act of 2025 (“CAA 2025”) extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment for the remainder of FFY 2025. In particular, the CAA 2025 extended the modified definition of “low-volume hospital” (15 road miles from another subsection (d) hospital [acute care hospitals paid under IPPS] and with fewer than 3,800 discharges during the fiscal year) and the methodology for calculating the payment adjustment under the IPPS for low-volume hospitals (determined using a continuous linear sliding scale ranging from 25% for low-volume hospitals with 500 or fewer discharges to 0% for low-volume hospitals with greater than 3,800 discharges) for discharges prior to October 1, 2025. Because CAA 2025’s temporary extensions of the changed low-volume hospital qualifying criteria and payment adjustment will expire at the end of FFY 2025 absent Congressional action, for FFY 2026 and subsequent fiscal years, CMS proposes to revert back to the original text of § 1886(d)(12) of the Act, requiring the Secretary to develop an empirically justifiable adjustment, that is, an applicable percentage increase for low-volume hospitals based on an empirical relationship between the standardized cost-per-case for such hospital and the total number of discharges of such hospitals and the amount of the additional incremental costs (if any) associated with the number of such charges. CMS proposes an empirically justifiable payment adjustment of 25%. Additionally, beginning in FFY 2026, a “low-volume hospital” must be more than 25 road miles from another subsection (d) hospital and have fewer than 200 discharges during the fiscal year. Consistent with previous years, CMS proposes that hospitals must submit written requests for low-volume hospital status to their Medicare contractor by September 1, 2025, and include sufficient documentation to establish that they meet the applicable mileage and discharge criteria. CMS further proposes that if the temporary changes to the low-volume payment adjustment are extended through legislation beyond September 30, 2025, the agency would make conforming changes to the regulations at § 412.101(b)(2)(i) and (iii) and (c)(1) and (3) to reflect any further extension.
4. Proposed Changes in the Medicare-Dependent, Small Rural Hospital (“MDH”) Program. An MDH receives special payments under Section 1886(d)(5)(G) of the Act. These payments were expected to end on April 1, 2025, but Section 2202 of the 2025 Full-Year Continuing Appropriations and Extensions Act, Public Law 119-4, extended them to October 1, 2025. After that date, the MDH program will stop, unless Congress passes legislation to extend the program. Absent Congressional action, all hospitals will receive the same Federal rate, not the higher of the federal rate or a blended rate based partly on the MDH’s specific rate. CMS seeks to update the rules for the MDH program at § 412.108(a)(1) and (c)(2)(iii) and the general payment rules at § 412.90(j) to match the new end date of September 30, 2025.
5. GME/IME - Calculating Full-time Equivalent Counts and Caps for Cost Reporting Periods Other than 12 Months. CMS does not propose any changes to its proration methodology for cost reporting periods other than 12 months but rather states that it is clarifying the current, pre-existing methodology for determining the total Direct Graduate Medical Education (“GME”) and Indirect Graduate Medical Education (“IME”) counts for a non-12-month cost reporting period. A hospital’s GME count represents the number of FTE residents working in the hospital over the course of an entire cost reporting period, while IME count reflects the average intensity of teaching activity in a hospital during a cost reporting period. The current proration methodology for a non-12-month cost reporting period requires proration of the GME FTE cap, but does not require proration of the IME FTE caps. To determine the unweighted FTE count for GME, regardless of whether the cost reporting period is 12 months, CMS states that the following steps should be used: (Step 1) For each resident and each of that resident’s individual rotations, determine the ratio of total days allowable to the hospital in that rotation to total days in that entire rotation; (Step 2) Multiply the ratio from Step 1 by the ratio of total days in the entire rotation divided by 365 (or 366, in the case of a leap year). This represents the portion of total FTE time for this rotation that may be claimed by the hospital for purposes of GME payment, prorated for the length of the cost reporting period; and (Step 3) Calculate the sum of the products from Step 2 for all residents and rotations in the hospital’s programs to arrive at the hospital’s total unweighted GME FTE count for the cost reporting period. To determine the FTE count for IME, regardless of whether the cost reporting period is 12 months, CMS states that the following steps should be used: (Step 1) For each resident and each of that resident’s individual rotations, determine the ratio of total days allowable to the hospital in that rotation to total days in that entire rotation; (Step 2) Multiply the ratio from Step 1 by the ratio of total days in the entire rotation divided by the actual number of days in the cost reporting period. This represents the portion of total FTE time for this rotation that may be claimed by the hospital for purposes of IME payment; and (Step 3) Calculate the sum of the products from Step 2 for all residents and rotations in the hospital’s programs to arrive at the hospital’s total IME FTE count for the cost reporting period.
   Just as the GME FTE counts are prorated based on a standard 365-day (or 366-day) cost reporting period, a hospital’s GME FTE cap must similarly be prorated for cost reporting periods other than 12 months. To calculate the prorated cap, the hospital’s regular 12-month GME FTE cap is divided by 365 days (or 366 days) and then multiplied by the actual number of days in the cost reporting period. Furthermore, it is not necessary to prorate the IME FTE caps for a non-12-month cost reporting period; the same IME FTE cap and any associated adjustments apply to a cost reporting period that is other than 12 months.
6. Proposed Regulatory Changes Regarding the Calculation of Net Cost of Nursing and Allied Health Education. CMS proposes amendments to its regulations concerning calculation of the net cost of nursing and allied health education (“NAHE”) in response to the February 2024 D.C. District Court holding in Mercy Health–St. Vincent Medical Center LLC d/b/a Mercy St. Vincent Medical Center, et al., v. Xavier Becerra, Case No. 22-cv-3578 (TNM). In Mercy Health, the Court held that the plain reading of the regulatory text at 42 C.F.R. 413.85(d)(2)(i) requires CMS to allow direct and indirect costs to be summed, and tuition and fees to be subtracted from that sum, to arrive at the net cost of NAHE. The litigation concerned Transmittal 12, which CMS issued in November 2017, taking the position that revenues received from tuition, student fees and other sources should be allocated to direct costs prior to the allocation of overhead costs, rather than be treated as post-stepdown adjustments. The Court ultimately held that this interpretation was not consistent with the regulations, and although CMS disagrees with that holding, it proposes amendments to its regulations to bolster its position in Transmittal 12. Specifically, CMS proposes amending 42 CFR § 413.85(d)(2)(i) to state that the net cost of approved educational activities is determined as follows: (1) determine allowable direct costs incurred by the provider for trainee stipends and compensation of teachers employed by the provider; (2) subtract from allowable direct costs the revenues the provider receives from students or on behalf of students enrolled in the program, such as, but not limited to, tuition, student fees, or textbooks purchased for resale; and (3) add indirect costs of the activities as determined under the Medicare cost-finding principles in 42 CFR § 413.24, but limited to indirect costs that the provider itself incurs as a consequence of operating the approved educational activities.
7. Hospital Readmissions Reduction Program Updates and Changes. CMS proposes significant updates to the Hospital Readmissions Reduction Program (“HRRP”) that the agency says are intended to enhance the quality of hospital care and align with broader health care goals. These updates include incorporating Medicare Advantage (“MA”) data into the six readmission measures, alongside existing Medicare fee-for-service (“FFS”) data. Additionally, the “applicable period” for measuring performance would be shortened from three years to two years, with this change codified into the program's regulations. The calculation of aggregate payments for excess readmissions would also be modified to include MA data, specifically by using the Medicare Provider Analysis and Review (“MedPAR”) file or the most up-to-date payment sources for both Medicare FFS and MA beneficiaries who meet the criteria for each condition or procedure. Furthermore, CMS plans to update and codify the Extraordinary Circumstance Exception (“ECE”) policy, granting CMS the discretion to provide extensions or exemptions in response to ECE requests from hospitals affected by events like natural disasters, further clarifying the process and notification requirements. The proposal also includes the removal of COVID-19 exclusions and risk-adjustment covariates from the six readmission measures, while integrating MA beneficiaries into each measure’s cohort and updating the risk adjustment model to use individual ICD-10 codes. These changes are set to begin with the FFY 2027 program year.
   The updates are made under section 1886(q) of the Act, as amended by Section 15002 of the 21st Century Cures Act, 2016 (Public Law 114-255). This section mandates the reduction of payments to hospitals with excess readmissions and provides CMS with the authority to update the program’s measures and methodologies. According to CMS, the changes for the Hospital Readmissions Reduction Program will result in no financial impact for the FFY 2027 payment determination or subsequent years. In the proposed rule, CMS also stated that the estimated average change in Medicare savings per hospital from the proposed updates would be $15,579, with 1,424 hospitals having a greater penalty amount and 1,547 hospitals having the same or lower penalty amount. CMS invites public comment on the proposed changes, including the inclusion of MA beneficiaries, the updated ECE policy, the removal of COVID-19 exclusions, and the estimated financial impact.
8. Hospital Value-Based Purchasing (“VBP”) Program. CMS proposes updates to the Hospital-Level Risk-Standardized Complication Rate (“RSCR”) following electing primary total hip arthroplasty (“THA”) and/or total knee arthroplasty (“TKA”). In addition, CMS proposes technical updates with respect to (1) the five condition- and procedure-specific mortality measures (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN) and the COMP-HIP-KNEE measure beginning with the FFY 2207 program year; and (2) the five National Healthcare Safety Network (“NHSN”) Healthcare-Associated Infection (HAI) measures. CMS is also proposing newly established performance standards for certain measures for the program years in FFY 2027 through FFY 2031. CMS additionally proposes to update the ECE regulations to specify that an ECE could take the form of an extension of time for a hospital to comply with a data reporting requirement, if appropriate under the circumstances. Specifically, CMS proposes to amend its regulations so that it may grant an ECE with respect to reporting requirements in the event of an extraordinary circumstance—defined as an event beyond the control of a hospital (i.e., a natural or man-made disaster, terrorist attack, etc.)—that affected the ability of the hospital to comply with one or more applicable reporting requirements with respect to a fiscal year. Finally, CMS proposes to remove the health equity adjustment (“HEA”) from the Hospital Value-Based Purchasing (“VBP”) Program. CMS is requesting comments with respect to each of these proposals.
9. Hospital-Acquired Condition Reduction Program Updates and Changes (HACRP). CMS proposes technical updates to the NHSN Healthcare-Associated Infection measures and updates to the ECE policy for the Hospital-Acquired Condition Reduction Program, to go into effect on October 1, 2025. CMS proposes to update and codify the ECE policy to clarify that it has the discretion to grant either an exemption from, or an extension of time to meet, reporting requirements in response to ECE requests when hospitals are affected by events beyond their control, such as natural disasters. Additionally, CMS is providing notice of updating the CDC National Healthcare Safety Network (“NHSN”) health care-associated infections (“HAI”) chart-abstracted measures, transitioning to a new 2022 baseline for the standard population data used in SIR calculations, which will be phased in starting with infections reported in 2025 and fully implemented for the HAC Reduction Program in FFY 2028. These updates are made under section 1886(p) of the Act, which mandates the reduction of payments to hospitals with high rates of hospital-acquired conditions. According to CMS, the proposed changes are designed to be budget neutral, ensuring that the overall financial impact on hospitals remains unchanged.
10. Toward Digital Quality Measurement in CMS Quality Programs – Request for Information. CMS seeks public input on the transition to digital quality measurement (“DQM”) for CMS programs. Specifically, CMS is soliciting comments on its anticipated use of Health Level Seven® Fast Healthcare Interoperability Resources® (FHIR) in electronic clinical quality measure (“eCQM”) reporting in CMS programs, including the Hospital Inpatient Quality Reporting (“IQR”) Program, the Hospital Outpatient Quality Reporting (“OQR”) Program, and the Medicare Promoting Interoperability Program. CMS, along with CDC, is working to transition to fully automated digital quality measures by developing new measures to address patient safety gaps and updating current measures to an FHIR-based format. CMS also seeks public comments on its approach to FHIR-based patient assessment reporting in the Inpatient Psychiatric Facility Quality Reporting (“IPFQR”) Program.
11. Requirements for and Changes to the Hospital Inpatient Quality Reporting (“IQR”) Program. CMS proposes to modify four existing quality measures and to remove four measures to improve quality reporting and safety practices across hospitals. Specifically, CMS proposes to modify the following two measures to add Medicare Advantage patients to the current cohort of patients, shorten the performance period from three to two years, and change the risk adjustment methodology: (1) the Hospital-Level, Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty and (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity. Additionally, CMS proposes to modify (3) the Hybrid Hospital-Wide Readmission and (4) Hybrid Hospital-Wide Mortality measures to lower the submission thresholds. The four measures to be removed beginning with the CY 2024 reporting period/FFY 2026 payment determination include the (1) Hospital Commitment to Health Equity, (2) COVID-19 Vaccination Coverage among Health Care personnel Measure, and measures of (3) the Screening for Social Drivers of Health and (4) the Screen Positive Rate for Social Drivers of Health. CMS requests comments from the public on these proposed changes. In addition, CMS is requesting comment with respect to measure concepts focusing on well-being and nutrition for consideration in future years. Finally, CMS proposes to update and codify the ECE policy to clarify that it has the discretion to grant an extension rather than only a full exception in response to ECE requests.
12. Proposed Changes to the Long-Term Care Hospital Quality Reporting Program (“LTCH QRP”). Pursuant to Section 1886(m)(5) of the Act, which mandates the establishment of quality reporting requirements for long-term care hospitals, CMS is proposing several changes to the LTCH Quality Reporting Program (“LTCH QRP”). According to CMS, these changes are intended to enhance the quality reporting program, reduce administrative burdens, and improve overall outcomes for Medicare beneficiaries receiving post-acute care in LTCHs. The proposed changes would, starting with patients admitted on or after October 1, 2026, exclude expired LTCH patients from the COVID-19 Vaccine reporting requirements by removing the need to submit item O0350 for these patients on the LCDS, in response to provider concerns about the difficulty and burden of collecting vaccination data after a patient has expired, according to CMS. Furthermore, CMS states that it aims to amend the reconsideration policy and process to provide clearer guidelines and greater flexibility for LTCHs seeking to challenge noncompliance determinations that could result in a 2% reduction to their annual payment update under the LTCH QRP. Additionally, CMS proposes to remove four Social Determinants of Health (“SDOH”) standardized patient assessment data elements beginning with the FFY 2028 LTCH QRP, specifically the items for Living Situation (R0310), Food (R0320A and R0320B), and Utilities (R0330). CMS states that these changes would streamline the data collection process and alleviate the administrative burden on LTCHs. CMS also seeks public comment on several Requests for Information (“RFIs”) related to future measure concepts for the LTCH QRP, revisions to the data submission deadlines for assessment data collected for the LTCH QRP, and advancing DQM in the LTCH QRP.
    According to CMS, the proposed changes are designed to be budget neutral, ensuring that the overall financial impact on LTCHs remains unchanged. The 2026 LTCH QRP would result in a total information collection burden increase of four hours and $187.60 associated with updates to the reconsideration policy. CMS estimates that the proposed changes for the FFY 2028 LTCH QRP would result in a decrease of 2,633.51 hours associated with its policies and updated burden estimates and a total cost decrease of approximately $180,016.80. CMS estimates that removing the four standardized patient assessment data elements beginning with FFY 2028 LTCH QRP would keep the 330 LTCHs from incurring 2,601 hours of administrative burden at a cost of $182,330.10 (or $552.52 per LTCH).
13. Low wage index policy. CMS proposes to discontinue the low wage index hospital policy, for FFY 2026 (beginning October 1, 2025) and subsequent fiscal years, in alignment with the D.C. Circuit’s decision in Bridgeport Hosp. v. Becerra, Case No. 22-5249. In 2019, CMS adopted a wage index redistribution policy, under which HHS would increase the wage index value for low-wage hospitals and apply a budget neutrality factor for all other hospitals. Under the low wage index hospital policy, CMS would increase the wage index for hospitals with a wage index below the 25th percentile wage index value by half the difference between the otherwise applicable final wage index value and the 25th percentile wage index value for that year. On July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under the Medicare statute “to adopt the low wage index hospital policy for [F]FY 2020,” and that the policy and related budget neutrality adjustment must be vacated. In response, on October 3, 2024, CMS released an interim final action with comment period, in which it recalculated the FFY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FFY 2025. CMS now proposes to discontinue the policy for FFY 2026 and all subsequent federal fiscal years. In addition, CMS proposes a transitional exception policy applicable to hospitals that will be “significantly impacted” by the discontinuation of the low wage index hospital policy (i.e., the hospital’s proposed FFY 2026 wage index is decreasing by more than 9.75% from the hospital’s FFY 2024 wage index). For such a hospital, the transitional payment exception for FFY 2026 would be equal to the additional FFY 2026 amount the hospital would be paid under the IPPS if its FFY 2026 wage index were equal to 90.25% of its FFY 2024 wage index. Unlike the prior interim transitional policy, which CMS instituted for FFY 2025, the transitional payment exception that CMS proposes beginning FFY 2026, which CMS expects to impact 52 hospitals with a total impact payment of $27 million, would be made budget neutral through an adjustment applied to the standardized amount for all hospitals. This represents a change from the FFY 2025 policy, which was not budget neutral.
14. Proposed Changes to the Medicare Promoting Interoperability Program. CMS proposes that eligible health care professionals, such as hospitals and Critical Access Hospitals (“CAHs”), use Certified EHR Technology (“CEHRT”) under the Medicare Promoting Interoperability Program and the Merit-Based Incentive Payment System. For FFY 2026, CMS suggests several changes. First, eligible hospitals and CAHs would report on their Electronic Health Record (“EHR”) use for at least 180 days in a row in any calendar year. CMS extended this period from 90 days to 180 days in CY 2024 to give hospitals more time and flexibility to update and test their EHR systems, according to CMS. CMS also plans to make corresponding changes at 42 C.F.R. § 495.4. Second, eligible hospitals and CAHs must attest “Yes” to both security risk analysis and security risk management for their EHRs. The HIPAA Security Rule requires covered entities and business associates to protect the privacy and security of electronic health information (“ePHI”). Third, eligible hospitals and CAHs must attest “Yes” to using all eight 2025 SAFER Guides to assess their EHRs every year. The ASTP updated the SAFER Guides in January 2025 with new recommendations focusing on common risks to ePHI. CMS proposes the use of new SAFER Guides every year starting in CY 2026. Finally, CMS proposes a bonus measure for the Public Health and Clinical Data Exchange objective for data exchange with a Public Health Agency (“PHA”) using the Trusted Exchange Framework and Common Agreement (“TEFCA”). Eligible hospitals and CAHs could get up to five bonus points for sharing data with a PHA.
15. Proposed Changes to the Transforming Episode Accountability Model (“TEAM”). The Transforming Episode Accountability Model (“TEAM”) is a mandatory, episode-based alternative payment model for acute care hospitals. Under TEAM, select acute care hospitals will take responsibility for the cost and quality of care from hospital-based surgeries through the first 30 days after the patient’s surgery. TEAM will run from January 1, 2026 to December 31, 2030. TEAM will test five specific surgical episode categories: Coronary Artery Bypass Graft Surgery; Lower Extremity Joint Replacement; Major Bowel Procedure; Surgical Hip/Femur Fracture Treatment; and Spinal Fusion. Under the authority of Section 115A of the Act, CMS proposes various changes to TEAM in advance of its implementation, including (but not limited to) a limited deferment period for certain hospitals (such as for new hospitals that open shortly before or during the model performance period), expanding the Skilled Nursing Facility 3-Day Rule Waiver, reconstructing the normalization factor, and utilizing a neutral quality measure score for TEAM participants with insufficient quality data. These changes would go into effect on October 1, 2025.
    Further, CMS is soliciting comments for four policy areas: Indian Health Service hospital outpatient episodes; low-volume hospitals; standardized prices; and primary care referral requirements. The agency is also seeking feedback on its proposal for new hospitals in mandatory Core-Based Statistical Areas (“CBSAs”) to participate in TEAM after one performance year. CMS requests comments on support for TEAM participants previously designated as MDHs and determining MDH eligibility for Track 2 based on status at track selection. Adjusting claims post-discharge and updating target prices are also open for comments, as are potentially converting standardized prices to real dollars and removing certain health equity definitions and elements. They also seek comments on allowing the Skilled Nursing Facility 3-day rule waiver for certain discharges and removing the Decarbonization and Resilience Initiative (“DRI”) from the TEAM model.

Ropes & Gray will continue to monitor developments in these areas. If you have any questions about this Alert, please contact any of the Alert’s authors or your usual Ropes & Gray advisor.