As forwarded in previous notifications, the CMS Inpatient Prospective Payment System (IPPS) Final Rule for FY 2026 includes significant changes to the Low-Volume Hospital Payment Adjustment, effective October 1, 2025.
Under the new rule, the temporary provisions authorized by the Affordable Care Act and extended under the Full-Year Continuing Appropriations and Extension Act of 2025 have expired. As a result, new permanent criteria and adjustment percentages now apply.
To qualify for the Low-Volume Hospital Payment Adjustment in FY 2026, a hospital must:
- Be located more than 25 road miles from the nearest IPPS hospital, and
- Have fewer than 200 total discharges during the fiscal year.
Hospitals meeting both criteria will receive a 25% payment adjustment.
These changes represent a reversion to the statutory requirements in effect prior to the temporary ACA provisions. Any modification to the current rule would require Congressional action.
This legislative revision represents for many rural hospitals a reduction in claims payment on the traditional Medicare Inpatient volume for Prospectively Paid hospitals.
What this means:
For PPS rural hospitals, when Medicare Payments resume for FFY 2026 claims volume, you will notice a decrease in the Inpatient DRG payments that result from not receiving the Medicare low volume payment.
We can share that there are a few Bills currently in Congress that would extend the Medicare low volume payment, either for a duration of time or indefinitely, that we hope may be incorporated into a Reconciliation Bill toward the end of this year. We will keep you informed of revisions to the low volume payment and other Extender payments (i.e., Medicare Dependent Hospital status) as we progress through the end of 2025.
If you have questions about how these changes may affect your hospital’s Medicare reimbursement or eligibility status, please don’t hesitate to contact those listed below. We would be happy to review your specific circumstances and discuss next steps.
- Brent Fuller – 806-773-1599, brentf@daacg.com
- Shonna Cannaday – 806-776-0603, shonnac@daacg.com
- Tom Johansen – 469-375-6790, tomj@daacg.com
- Pete Garza – 469-718-6794, peteg@daacg.com
