The proposed 3.1% overall payment increase for hospitals in fiscal year 2027 includes a 2.4% update to operating payment rates for general acute-care hospitals paid under the Inpatient Prospective Payment System, officials said. This net update is based on a projected 3.2% hospital market basket increase, reduced by a 0.8 percentage point productivity adjustment, according to the Centers for Medicare & Medicaid Services.

CMS estimates the proposed changes would increase total IPPS payments by about $1.9 billion compared with fiscal year 2026.

Hospitals that meet quality reporting requirements under the Hospital Inpatient Quality Reporting Program and demonstrate meaningful use of electronic health records would be eligible for the full update, CMS officials said. Those that do not successfully report quality data or fail to meet meaningful EHR use criteria would receive a reduced update consistent with existing IPPS policy, although the penalty structure follows prior rules rather than a new methodology specific to FY 2027.

However, the effective increase for some hospitals could be lower than the 2.4% headline rate after CMS factors in reductions in uncompensated care and outlier payments. The agency projects that Medicare Disproportionate Share Hospital and uncompensated care payments will decrease by approximately $564 million in FY 2027 compared with FY 2026, totaling $7.563 billion—a 3.3% decline from the previous year. This decrease is projected despite an expected rise in the national uninsured rate from 8.7% in FY 2026 to 9.1% in FY 2027, according to CMS estimates.

For hospitals meeting quality and EHR reporting requirements, CMS proposes a standardized amount of $6,967.87 for FY 2027, reflecting a 3.19% increase over FY 2026. The payment updates apply to general acute-care hospitals under IPPS that satisfy the Inpatient Quality Reporting and Promoting Interoperability program requirements, officials said.

The proposed rule, published in the Federal Register under docket number 2026-07203, also includes updates for long-term care hospitals, but the central acute-care payment increase remains the 2.4% operating rate update. CMS will accept public comments on the proposed rule and associated quality reporting policies through June 9, 2026, at 5 p.m. Eastern time. After reviewing comments, CMS plans to issue a final FY 2027 IPPS rule later in the year, with policies effective for discharges occurring between Oct. 1, 2026, and Sept. 30, 2027.

CMS is also proposing expansions to the Hospital Inpatient Quality Reporting Program, including the addition of three new measures. The agency plans to adopt the Excess Days in Acute Care After Hospitalization for Diabetes measure, which is claims-based, beginning with the FY 2029 IQR program year. Two new electronic clinical quality measures—the Hospital Harm Postoperative Venous Thromboembolism eCQM and the Advance Care Planning eCQM—would begin reporting for FY 2030. Additionally, CMS proposes to adopt five modified mortality measures incorporating both fee-for-service and Medicare Advantage patients into IQR starting in FY 2028, with plans to add these measures to the Hospital Value-Based Purchasing Program in FY 2032.

In the Hospital Readmissions Reduction Program, CMS proposes adding a new measure for the 30-day all-cause risk-standardized readmission rate following sepsis hospitalization, effective FY 2029. There are no proposed changes to the Hospital-Acquired Condition Reduction Program for FY 2027 beyond previously adopted policies. CMS also plans to update the definition of certified electronic health record technology for the Promoting Interoperability Program, aligning it with updates from the Office of the National Coordinator for Health Information Technology. Several updates to electronic clinical quality measures used in the Promoting Interoperability Program are proposed, including modifications to measure specifications and reporting requirements.

CMS is moving toward broader value-based accountability by proposing the establishment of CJR-X, a new mandatory nationwide episode-based payment model for lower extremity joint replacement beginning Oct. 1, 2027. Under CJR-X, acute-care hospitals would be financially accountable for spending and quality for hip, knee, and ankle joint replacement procedures during the inpatient stay and for 90 days post-discharge. Participation would be mandatory for all acute-care hospitals nationwide, except those in Maryland and those participating in the Transforming Episode Accountability Model, according to CMS. The agency also proposes updates to the TEAM model, including expanding eligible spinal fusion episodes, aligning attribution and quality measures with other CMS programs, and refining pricing methodologies.

Additional proposals include eliminating the alternate pathway for new technology add-on payments under IPPS and the transitional pass-through under the Outpatient Prospective Payment System, requiring breakthrough device designation technologies to meet the same criteria as non-breakthrough devices. For FY 2027, CMS proposes a maximum new technology add-on payment of $10,205 per case for the CARA System. The agency is also introducing new anti-discrimination requirements for graduate medical education payments, conditioning funding on residency and training programs not discriminating based on race, color, national origin, sex, age, disability, or religion. Similar standards would apply to nursing and allied health education programs and their accreditors.

CMS continues to develop the Birthing-Friendly Hospital designation introduced in the 2023 IPPS final rule and seeks public comment on expanding the designation using a more robust set of maternal quality care measures from the IQR program, including specific electronic clinical quality measures. The agency also proposes revisions to requirements for off-campus provider-based departments, clarifying criteria for demonstrating that such facilities serve the same patient population as the main provider and modifying rules for off-campus inpatient hospital services that do not serve patients in the same ZIP code as the main provider.

The FY 2027 IPPS proposed rule and supporting materials are available on the CMS website, and public comments are being accepted through June 9, 2026. CMS will finalize the rule later this year, with payment and quality reporting policies effective for discharges during the 2027 federal fiscal year.

Industry data from Kaufman Hall indicates that 2024 has been characterized by a period of stabilization for hospitals and health systems in the United States. The consulting firm reported improved operating margins and stable or neutral rating-agency outlooks for not-for-profit hospitals, signaling a halt in the financial deterioration that had affected many providers in previous years. Kaufman Hall’s analysis also highlighted a significant shift in merger and acquisition activity, with divestitures accounting for 62.5% of announced hospital and health system transactions in 2024, up from 31.1% in 2023 and exceeding the prior recent high of 56.2% in 2020. This trend points to ongoing restructuring within the sector, although no single major merger or acquisition dominated headlines during the early months of the year.

Divestitures accounted for 62.5% of announced hospital and health system transactions in 2024, up from 31.1% in 2023 and exceeding the prior recent high of 56.2% in 2020.

While bankruptcy remains a notable factor in healthcare finance, recent studies and reports emphasize that most hospital-related bankruptcy filings involve smaller organizations rather than large health systems. According to a Journal of Healthcare Management article, over half of healthcare organizations filing for bankruptcy during the study period chose Chapter 11 reorganization rather than Chapter 7 liquidation. The article noted that more than half of hospitals and health systems seeking bankruptcy protection ultimately fail to reorganize successfully and cease operations. However, larger hospitals affiliated with systems tend to have a higher likelihood of successful reorganization, underscoring the variability in bankruptcy outcomes across the sector.

A peer-reviewed exploratory study available through PubMed Central examined financial indicators associated with hospital bankruptcy. The study found that hospitals that permanently closed following bankruptcy were more likely to be for-profit entities and had lower cash flow to total debt ratios. Additional financial metrics correlated with bankruptcy classification included net patient revenue, accounts receivable, current ratio, total assets, debt-to-equity ratio, net operating profit margin, and the proportion of uncompensated care relative to net patient revenue. These findings provide insight into risk factors for hospital financial distress but do not correspond to any newly reported bankruptcy events in early 2024.

Legal and policy analysis published in the Yale Journal on Regulation discussed bankruptcy as a potential mechanism for public hospitals to avoid closure. The article outlined three primary options for financially distressed public hospitals: closure, privatization, or filing for bankruptcy. It argued that bankruptcy can sometimes preserve hospital operations that would otherwise end, a consideration for policymakers addressing public hospital financial challenges. This perspective reflects ongoing debates about the role of bankruptcy in the public hospital sector rather than reporting on a specific case.

The U.S. Department of Health and Human Services (HHS) has highlighted recurring concerns related to private equity (PE) ownership and debt-financed hospital acquisitions. A recent HHS report criticized some PE firms for using borrowed funds to purchase hospitals and subsequently selling off assets to generate short-term profits, potentially undermining long-term financial sustainability. The report referenced a health system that filed for bankruptcy on May 6, 2024, which was mandated to sell all remaining hospitals. While this case illustrates financial distress within the industry, it has not been identified as a singular major closure headline.

Kaufman Hall’s 2024 data also showed a decline in the credit quality of smaller parties involved in hospital transactions. The share of deals where the smaller party had a credit rating of A- or above fell to 2.8% in 2024 from 12.3% in 2023. This decline suggests increasing financial strain among smaller hospitals and health systems, contributing to the rise in divestitures and restructuring activity. Despite these pressures, no confirmed major hospital merger, closure, or bankruptcy event emerged as a dominant news story in the early part of 2024.

Overall, the available data and analyses from Kaufman Hall, HHS, peer-reviewed research, and legal scholarship collectively portray an industry experiencing mixed signals: signs of financial stabilization among larger not-for-profit hospitals alongside persistent distress and restructuring among smaller providers and certain segments. The absence of a single major headline merger, closure, or bankruptcy in the early months of 2024 reflects this complex and evolving landscape.