Fiscal Year (FY) 2027 IRF PPS Final Rule Released

The Centers for Medicare and Medicaid Services (CMS) released the fiscal year (FY) 2027 inpatient rehabilitation facility prospective payment system (IRF PPS) final rule in the August 3, 2026, Federal Register. The key provisions contained in the FY 2027 final rule are provided below.

Payment Updates

• Payment rates and overall impact: CMS finalized a 3.2% market basket increase, reduced by a 0.9 percentage-point productivity adjustment, resulting in a 2.3% IRF PPS rate update. CMS also finalized a 74.3% labor-related share and increased the standard payment conversion factor from $19,371 in FY 2026 to $19,868 in FY 2027.
• Wage index and rural transition: CMS retained the existing IRF wage-index methodology and the permanent 5% cap on annual decreases in an individual provider’s wage index. FY 2027 is the third and final year of the transition for IRFs reclassified from rural to urban in FY 2025. Affected IRFs will receive the full FY 2027 wage index with no remaining portion of their former rural adjustment.
• Outlier payments: CMS reduced the high-cost outlier threshold from $10,141 to $8,857, rather than the proposed $8,689, based on updated data. The threshold is intended to increase estimated outlier payments from approximately 2.6% to 3% of aggregate IRF payments, producing an estimated 0.4 percentage-point increase in overall payments.

FY 2027 Coverage, Payment, and Documentation Policy Changes

• Timing of Interdisciplinary Team Meetings: CMS finalized its proposal to accelerate the timing of the initial interdisciplinary team meetings (IDT) such that the initial IDT must “occur on or before the fourth day from midnight on the date of admission,” compared to the current standard that an IDT occurs once per week.
• Initiation of Therapy Requirement: CMS finalized a requirement that all required therapy treatments and therapy evaluations ordered for an IRF patient begin no later than 36 hours from midnight on the day of admission. CMS also clarifies that all therapies must be initiated, not just one therapy. Any therapies ordered after the initial 36 hours after midnight of the day of admission are not part of the 36-hour initiation of therapy requirement and will not create compliance issues for therapies ordered later in the patient’s stay.
• Request for Information on Future IRF Payment Reform: CMS sought feedback on modernizing the IRF payment system by leveraging the Skilled Nursing Facility Patient-Driven Payment Model (PDPM) clinical category and comorbidity structure.

FY 2026 Quality Reporting Program (QRP) Updates

• Revised Data Submission Deadlines Finalized for IRF QRP: CMS finalized the proposal to revise the timelines for IRF-PAI and CDC NHSN data submissions under the IRF QRP. For the FY 2029 IRF QRP, which will be based upon Calendar Year 2027 data, CMS is finalizing a reduced timeline with a data submission deadline set for the “15th day of the second month following the end of calendar quarter.”
• Request for Information on Future IRF QRP Measure Concepts: The proposed rule included an RFI on potential future measure concepts for the IRF QRP, specifically concepts related to advanced care planning. CMS stated the agency’s prioritization of “person-centered care practices” and the need to improve shared decision-making in care transitions. There appeared to be strong support in the comments for the concept of Advance Care Planning (ACP) to improve patient-centered and goal-concordant care; however, there were also concerns that ACP may duplicate existing requirements and add documentation burden.