Medicare Sets a Higher Daily Rate for Psychiatric Hospital Stays in FY 2027

CMS issued the fiscal year 2027 inpatient psychiatric facility prospective payment system final rule on July 29, updating Medicare payment rates for stand-alone psychiatric hospitals and psychiatric units within general hospitals.

The per diem base rate for qualifying facilities rises from 892.87 dollars to 912.40 dollars. CMS calculated the update as a 3.2 percent market basket increase minus a 0.9 percentage point productivity adjustment, for a net 2.3 percent payment increase. Facilities that fail to meet quality reporting requirements receive a lower rate. Total estimated inpatient psychiatric facility payments are projected to rise by approximately 60 million dollars in FY 2027 compared to FY 2026, with the update effective October 1, 2026.

The rule also finalizes a new outlier payment cap starting FY 2028. Beginning October 1, 2027, facilities with at least 50 inpatient stays per year may not receive outlier payments exceeding 20 percent of their total inpatient psychiatric facility payments in a given year. Outlier payments are supplemental amounts triggered when a case's cost far exceeds the standard per-diem rate. CMS said the cap addresses a pattern of outlier billing concentrated at a relatively small number of facilities.

For quality reporting, the rule removes two measures from the inpatient psychiatric facility quality reporting program and introduces a new standardized patient assessment instrument that facilities must begin collecting data for in October 2027, ahead of the FY 2029 payment determination.