IPPS 2026 Summary & Coding Updates

Payment Changes, MS‑DRGs, NTAPs, and What to Do Now

The FY 2026 IPPS Final Rule is a significant and comprehensive update. It not only changes the amount hospitals are paid but also adjusts core policies that shape those payments and updates the diagnosis and procedure code sets that drive MS-DRG assignment. For finance leaders, CDI teams, and coders, this is a crucial update, and getting the details right is paramount for revenue, compliance, and data quality. These updates directly affect hospital reimbursement integrity, compliance auditing, and Medicare payment accuracy—areas where BESLER provides strategic support through its Medicare reimbursement services and revenue integrity consulting.

To assist you in navigating this complexity, BESLER has developed two companion education sessions. In the FY 2026 IPPS Final Rule Summary, Senior Reimbursement Consultant Bob McDowell guides you through the payment update, wage index changes, DSH/UCC pools, quality program tweaks, and the new TEAM model. In Coding Updates for IPPS 2026, Senior Manager of Revenue Integrity Services Kristen Eglintine explains the ICD‑10‑CM/PCS changes, new and deleted MS‑DRGs, and what CDI and coding teams must update by October 1, 2025.

This guide delves into the key takeaways from those sessions. It outlines what has changed, why it matters, and most importantly, what actions to take over the next 60–90 days. This will ensure that finance, coding, and CDI teams are fully prepared for Day 1 and positioned for accurate Medicare reimbursement and long-term revenue integrity.

Payment & Policy: What Changes and What It Means for Your Bottom Line

Base Rate and Overall Update

For FY 2026, CMS set the IPPS operating payment update at 2.6% — a 3.3% market-basket increase reduced by a 0.7% productivity adjustment. This means that hospitals will see an increase of $5.0B  in their operating payments. After CMS applies budget-neutrality and other policy adjustments, the national standardized operating amount rises 1.94% year over year (to $6,752.61). Long-term acute care hospitals receive a 2.7% update.

Finance and reimbursement teams can work with BESLER’s Medicare reimbursement experts to model how these changes impact hospital payment projections and ensure compliance with CMS requirements.

Wage Index: The “Low-Wage” Policy Is Vacated (with an Updated Transition Safeguard)

Following the July 2024 court decision, Bridgeport Hospital v. Becerra, and CMS’s subsequent rulemaking, the low-wage index policy will be vacated for FY 2026. 

To mitigate the impact on hospitals affected, CMS implemented a transitional safeguard. For hospitals that were in the lower 25th percentile in FY 2024, a hospital’s FY 2026 wage index cannot decrease by more than 9.75% compared to its higher FY 2024 wage index (i.e., it’s capped at 90.25% of the FY 2024 value). This safeguard is designed to help protect rural and low-wage hospitals that benefited from the policy from taking a large reduction in hospital payments in a single year.  

Separately, CMS reduced the labor-related share for hospitals with a wage index greater than or equal to 1.0 from 67.6% to 66.0%, founded on rebasing to the FY 2023 IPPS market basket.

Action for finance teams: For hospitals with a WI > or = 1.0 budget using the 66.0% labor share  and your finalized FY 2026 wage index. For hospitals that were in the lower 25th percentile in FY 2024, model the transitional safeguard by comparing FY 2026 WI to FY 2024 (apply the 9.75% max decrease floor where applicable). Revisit occupational mix assumptions and evaluate MGCRB/urban–rural reclassification strategies given the policy change. Hospitals can partner with BESLER’s reimbursement specialists to evaluate reclassification options and optimize wage index outcomes.

Disproportionate Share (DSH) & Uncompensated Care (UCC)

For FY 2026, CMS builds DSH & UCC payments in three steps:

• Factor 1 sets the national pool at $16.55B (25%, or $4.14B will be distributed to hospitals through  what DSH would have been under the old formula).
• Factor 2 adjusts that pool for the uninsured rate (62.14%) compared to the base year 2013, yielding a $7.71B UCC pool.
• Factor 3 is your hospital’s share of the residual portion of the national amount, $4.7B, based on audited Worksheet S-10 uncompensated care cost (average of FY 2020–2022) compared to all DSH hospitals nationwide factoring in CMS additional adjustments.

Quick actions to protect your share:

• Tighten S-10 support: Make sure charity/bad-debt amounts align with your written policy and GAAP write-offs.
• Validate CCRs: Confirm charge-to-cost conversions are reasonable.
• Check change events: If you had mergers/campus changes, verify how CMS blended prior entities into your Factors-1 & 3.

Hospitals can engage BESLER’s DSH and uncompensated care audit team to validate Worksheet S-10 accuracy and ensure compliant Medicare reimbursement calculations.

New Technology Add‑On Payments (NTAPs)

What NTAPs Do: 

NTAPs provide additional payment (on top of the MS-DRG) for qualifying new, costly technologies, so hospitals are equitably paid  while CMS recalibrates DRGs.

FY 2026 Scale:

CMS estimates $961 million in NTAP payments for FY 2026. The program includes 54 approved technologies this year — 27 carried over from previous years, 5 newly approved under the traditional pathway and 22 newly approved under the alternative pathway. 

Examples:

• Orthopedics: iFuse TORQ system for sacroiliac joint fusion and fracture fixation.
• Diagnostics/monitoring: AI-driven clinical support tools (e.g., sepsis markers) and advanced neuro-monitoring.
• Oncology/hematology: CAR-T cell therapies and novel conditioning agents for stem-cell transplant.
• Critical care: Lungpacer AeroPace system for ventilatory weaning.

Coding is the gatekeeper to payment. Many (but not all) NTAPs require ICD-10-PCS Section X procedure codes; correct PCS coding is essential to trigger the add-on. Map each NTAP technology your hospital uses to the exact PCS code(s) and ensure your chargemaster/orderables and revenue integrity rules capture them reliably.

BESLER’s revenue integrity consultants and compliance auditors can help hospitals confirm Section X code accuracy, test NTAP claim recognition, and identify potential missed payments through detailed reimbursement reviews.

Practical next steps:

1. Inventory which FY 2026 NTAP technologies you actually use (OR, ICU, oncology, cath lab).
2. Map codes: Link each item to its corresponding required PCS (Section X, when applicable) and ensure that documentation templates capture device/approach details.
3. Test claims: Run a few sample encounters through your grouper/edits to confirm the NTAP is recognized.
4. Educate teams: Brief surgeons, intensivists, and coders on the documentation phrases that drive the correct PCS code.
5. Track sunsets: Most NTAPs last 2–3 years; set reminders to remove/replace codes as technologies roll off.

Hospitals looking to safeguard Medicare and Medicaid reimbursement accuracy should integrate NTAP tracking into their revenue integrity audits—an area BESLER’s reimbursement services directly support.

Quality Programs, Interoperability, and VBP Tweaks

Hospital IQR Program:

CMS streamlines reporting by shortening some performance periods and broadening the data it considers. In particular, select measures now incorporate Medicare Advantage (MA) data, improving alignment across payer types. CMS also retires several measures to reduce burden and focus on higher-value metrics.

• Shorter performance periods on select measures (e.g., some move from 3 years → 2).
• MA data added to select measures (e.g., Hospital-Level, Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) ).
• Four measures removed: Hospital Commitment to Health Equity; COVID-19 Vaccination Coverage among HCP; Screening for Social Drivers of Health; Screen Positive Rate for Social Drivers of Health.

Readmissions (HRRP) and HAC Reduction (HACRP):

CMS tightens program windows and removes pandemic-era flexibilities to reflect current practice. It also standardizes relief for extraordinary events.

• MA data added to HRRP measures.
• Applicable period shortened for HRRP from 3 to 2 years.
• COVID-19 exclusions removed from HRRP risk adjustment.
• The Extraordinary Circumstances Exception (ECE) window has been standardized to 60 days for HRRP and HACRP.

Promoting Interoperability (Hospitals/CAHs):

Beginning with the CY 2026 EHR reporting period, hospitals must demonstrate stronger cybersecurity and safety practices and confirm annual safety self-assessments.

• Attest to security risk management (in addition to analysis).
• Attest “Yes” to completing an annual self-assessment using all eight SAFER Guides.
• Optional bonus measure under Public Health & Clinical Data Exchange for PHA data exchange.

Hospital Value-Based Purchasing (VBP):

CMS will remove the Health Equity Adjustment beginning in FY 2026, while continuing to make technical updates to measure specifications and baselines to keep the program current.

These adjustments underscore the need for robust hospital revenue integrity frameworks. BESLER’s compliance and auditing services help align internal reporting with CMS quality programs and prevent costly reimbursement errors.

TEAM: A Mandatory Bundled‑Payment Model for 5 Procedures

CMS’s Transforming Episode Accountability Model (TEAM) is a five-year, mandatory bundled-payment model running from January 1, 2026, to December 31, 2030, for hospitals selected by geography (Core Based Statistical Area or CBSA). 

Episodes begin with one of five inpatient procedures and include costs through 30 days post-discharge: 

• Coronary Artery Bypass Graft Surgery (CABG) 
• Lower-extremity joint replacement (LEJR)
• Major bowel procedure
• Surgical hip/femur fracture treatment (SHFFT)
• Spinal fusion 

Hospitals are paid a fee-for-service during the year; after the year ends, CMS reconciles spending to a target price and adjusts payments and Composite Quality Scores (CQS).

Risk tracks (pick before each performance year):

• Track 1 (PY1; optional later): Upside-only, with stop-gain up to 10%; positive reconciliation and can boost up to +10% addition to the CQS. Safety net hospitals can choose to remain in this track up to 3 years.
• Track 2 (PY2–PY5; limited to safety-net, rural, MDH, SCH, and essential access hospitals): Two-sided risk, ±10% stop-gain/stop-loss; CQS can be adjusted positive up to +10% and negative amounts up to −15%.
• Track 3 (PY1–PY5; open to all participants): Two-sided risk, ±20% stop-gain/stop-loss; and ±10% CQS adjustment.

What to do now: Identify your volume in the five episodes, model upside/downside under each track, review quality performance that feeds the CQS, and plan care-redesign and discharge pathways to manage post-acute costs within the 30-day window. 

Hospitals can leverage BESLER’s bundled payment consulting expertise to evaluate participation strategies, model financial risk, and ensure Medicare and Medicaid compliance within TEAM requirements.

Coding & Classification: What Goes Live October 1, 2025

ICD-10-CM: A Larger Update Year

For FY 2026, ICD-10-CM totals 73,349 codes (487 new, 28 deleted, 38 revised). The focus is on tighter clinical detail that affects DRG accuracy.

Accurate coding and documentation directly drive hospital reimbursement. BESLER’s physician auditing and compliance services help ensure ICD-10 updates are properly implemented for maximum reimbursement accuracy and compliance readiness.

What changed (high-level and actionable):

• Skin & ulcers (Ch. 12): Major expansion of non-pressure chronic ulcer codes — now more granular by anatomical site (abdomen, neck, chest, face, groin, upper limb, etc.) and severity (skin breakdown → fat layer exposed → necrosis of muscle/bone). Many are CCs, so specificity affects DRGs.

Action: add structured fields for site and depth in EHR/wound care templates.

• Cancer & metabolic: New codes for malignant inflammatory neoplasm of breast and type 2 diabetes in remission; additional metabolic expansions include primary/secondary hyperoxaluria, and familial hypercholesterolemia (several map to CC).

Action: ensure problem-list terms and clinician pick-lists reflect the new options.

• Neurology: Expanded options for multiple sclerosis and other degenerative neurologic conditions improve severity capture and clinical clarity.
• Injuries & external causes (Ch. 19–20): Large additions with laterality and depth — notably abdominal wall/flank injuries (e.g., S31.61–S31.63 series), several newly counting as MCC/CC; new external-cause codes for operations of war/military operations.

Action: update trauma templates to prompt side, depth, and foreign body status.

Guideline updates you’ll actually use:

• Comma usage (Alphabetic Index): Terms after commas are separate sites/modifiers; if documentation lists multiple sites (e.g., cellulitis, arm, forearm, hand), code each site documented (L03.12, L03.13, L03.14).

Action: add a short “comma examples” tip to coder huddles.

• Non-provider documentation (limited items): You may rely on documentation by other clinicians for ulcer depth, pressure-ulcer stage, BMI, NIHSS, SDOH, laterality, blood alcohol level, under-immunization, and NOW firearm injury intent.

Action: reflect this in query policies and smart forms.

• Hypertension + heart/CKD combos: It now explicitly states that, for hypertension with the heart conditions I51.5 (Myocardial degeneration) and I51.7 (Cardiomegaly), a code from category I11 (Hypertensive heart disease) is assigned, but no additional code is assigned to identify the specific heart condition.
• Action: add a one-liner rule in CDI tips to prevent proper coding.

ICD-10-PCS: Focused Additions 

FY 2026 includes 78,986 total PCS codes (156 new, 27 deleted, 14 title revisions).

What’s new and how to use it:

• Airway & skull base: New tables clarify complex cases: 09X (Nasal, Transfer) for nasoseptal pedicle flaps used in skull-base repair, and 0C1 (Larynx, Bypass) for cricothyrotomy routed to the larynx (not the trachea).

Tip: Ensure op notes clearly state the approach and anatomic target to select the right table and qualifier.

• Vascular devices: A new device value for endovascular anchors is featured in the Heart & Great Vessels and Lower Arteries sections.

Tip: Update PCS pick-lists and supply documentation so the device is captured as an anchor, not a generic stent/occluder.

• Orthopedics: Added codes for subscapularis-sparing shoulder arthroplasty and meniscus replacement (both autologous and non-autologous).

Tip: Add fields in surgeon templates for technique (e.g., subscapularis-sparing) and tissue source.

• Other notable additions include codes for wound-vac placement (Physical Rehab & Diagnostic Audiology section), a permanent code for cerebral embolic filtration during TAVR, and refined body-part definitions (larynx, occipital bone, trachea) to reduce miscoding.

Section X (New Technology) & NTAPs:

Many new-technology add-on payments (NTAPs) are tied to ICD-10-PCS Section X codes, which flag that a qualifying device or therapy was used. 

Quick tip: Keep a simple NTAP ↔ Section X cheat sheet for your approved technologies, and run a few test claims to confirm the add-on payment is recognized before go-live.

BESLER’s coding and compliance team can assist hospitals in maintaining ICD-10 alignment and NTAP coding accuracy to protect reimbursement integrity.

MS-DRGs: What’s New, What’s Gone, and What to Check

New MS-DRGs:

CMS added five DRGs aimed mainly at high-complexity cardiovascular work:

• 209: Complex aortic arch procedures.
• 213: Endovascular abdominal aorta with iliac branch procedures.
• 318, 359, 360: Percutaneous coronary atherectomy (variations for device use and MCC status).

What this means: 

Cases that previously grouped into broader vascular DRGs may now land in these more targeted buckets, changing expected LOS and payment. Retest your grouper outputs and compare them to prior-year cases to identify where shifts are expected to occur.

Deleted DRGs:

CMS removed several low-volume/overlapping groups, including Hypertensive encephalopathy (077–079), Deep vein thrombophlebitis (294–295), and one surgical arthroscopy DRG (509).

Impact: If you frequently use these, expect cases to be redistributed; update CDI focus lists and any associated edits or dashboards tied to the old numbers.

Recalibration:

As usual, CMS updated relative weights across the MS-DRG system. Even if your DRGs don’t change, model the weight shifts on your top service lines to spot quiet revenue moves (up or down).

Revenue integrity audits can help identify DRG shifts and mitigate potential Medicare payment variances. BESLER’s hospital reimbursement specialists can model these shifts and adjust revenue forecasting accordingly.

MCC/CC Updates: What to Watch

CMS expanded the list of severity-designating diagnoses for FY 2026, which can affect DRGs even when procedures remain unchanged.

More MCCs (major complications/comorbidities):

There are 20 new MCCs, including high-acuity abdominal wall/flank injuries (e.g., S31.60x–S31.65x families) and specific immune complex glomerulonephritis variants. These can move cases into higher-paying DRGs when documented and coded correctly. While important, these new MCCs are from code expansions, not new conditions receiving MCC designation. 

More CCs (complications/comorbidities):

CMS added 111 new CCs, many of which are tied to the expanded non-pressure ulcer codes (abdomen, chest, neck, face, groin, and upper limb). Additional CCs appear in metabolic/congenital areas such as hyperoxaluria, generalized arterial calcification of infancy, and Usher syndrome.

What to do now:

Update your DRG validation rules and payer testing to reflect the revised Tables 6I/6J, and refresh CDI/coder quick references so that teams can recognize the new MCC/CC diagnoses at a glance.

Hospitals should validate MCC/CC updates with support from experienced compliance partners. BESLER offers coding audit and CDI alignment services that enhance accuracy and ensure proper claim reimbursement.

Practical Prep: Finance, CDI & Coding To‑Dos (Next 60–90 Days)

1. Finance & reimbursement

• Refresh your budget model: Use the +1.94% standardized operating amount, your FY 2026 wage index, and the 66.0% labor share (for WI ≥ 1.0).
• Re-forecast DSH/UCC: Apply Factor 1–3 with the $7.713B UCC pool and your S-10 (FY 2020–2022) data; align charity/UC policies to S-10 definitions.
• NTAP readiness: List the NTAP technologies you actually use (OR/ICU/cath/oncology). Confirm that Section X coding, charging, and revenue integrity edits are captured.
• Plan for TEAM: Check volumes in CABG, LEJR, primary bowel, hip/femur fracture, and spinal fusion. Model upside/downside by track, and tie plans to your quality metrics and post-acute pathways.

Partner with BESLER’s Medicare reimbursement services team to validate DSH/UCC projections, ensure accurate wage index application, and strengthen overall revenue integrity.

2. CDI & coding

• Update builds for 10/1: Load the FY 2026 CM & PCS updates; add prompts for ulcer site and depth, as well as device specifics (e.g., endovascular anchors, tissue source).
• Targeted retraining: Review comma usage in the Alphabetic Index and what can be taken from non-provider documentation (e.g., ulcer depth, BMI, SDOH).
• Map NTAP to codes: Maintain a quick NTAP ↔ Section X crosswalk to verify that the chargemaster and orderables accurately reflect the exact devices/therapies.
• Test the grouper: Re-run sample cases to assess the effects of new/deleted MS-DRGs and MCC/CC changes; adjust clinical pathways/expected LOS as needed.

BESLER’s physician auditing and compliance experts can help update templates, test grouper effects, and train teams on FY 2026 documentation requirements.

3. Compliance & quality

• Align programs: Update workflows for IQR, HRRP, HACRP, VBP (shorter periods, MA data in select measures, retired measures).
• Promoting Interoperability (CY 2026): Complete the annual SAFER Guides self-assessment (all eight guides) and the security risk management attestation; keep the PHA data-exchange option in mind for a bonus.

BESLER supports hospitals across the contiguous United States in maintaining compliance with Promoting Interoperability, HRRP, HACRP, and VBP standards, ensuring accurate reimbursement and audit readiness.

Keep Learning & Put IPPS 2026 Into Action with BESLER

With decades of experience in hospital reimbursement and coding, BESLER helps finance leaders, CDI teams, and coders navigate complex IPPS changes, providing clear next steps. Our Medicare reimbursement consultants, Medicaid reimbursement specialists, and revenue integrity experts deliver practical solutions to ensure full compliance and optimized reimbursement. 

Explore our on-demand education to go deeper:

• FY 2026 IPPS Final Rule Summary: Payment rates, wage index transition, DSH/UCC math, NTAPs, quality programs, and the TEAM model.
• Coding Updates for IPPS 2026: Chapter-by-chapter ICD-10-CM/PCS changes, MS-DRG adds/deletes, MCC/CC updates, and what to change in your build.
• Prefer audio? Check out our Hospital Finance Podcast to stay informed. 

Preparing for October 1, 2025, doesn’t have to be overwhelming. BESLER’s team offers hospital revenue integrity consulting, reimbursement modeling, and compliance auditing services tailored to your organization’s needs.

Stay current and get tailored help for 2026 by signing up for our newsletter or scheduling a meeting with one of our reimbursement or coding specialists.