Medicare Finalizes a 2.3 Percent Rate Increase and a Stricter Therapy-Start Standard for Inpatient Rehabilitation Facilities in 2027

The Centers for Medicare and Medicaid Services on July 30, 2026, issued a final rule updating payment rates and coverage standards for inpatient rehabilitation facilities for fiscal year 2027.

The rule sets the payment rate update at 2.3 percent, based on a market basket increase of 3.2 percent reduced by a 0.9 percentage point productivity adjustment required by federal law. CMS estimates the changes will increase total Medicare payments to these facilities by approximately 340 million dollars in fiscal year 2027.

The rule also resolves a longstanding policy ambiguity. Inpatient rehabilitation facilities have operated under a requirement that therapy begin within 36 hours of admission, but prior regulatory text required only that at least one therapy discipline begin in that window, which produced inconsistent enforcement across facilities. The revised standard requires all ordered therapies to begin within 36 hours of admission. A therapy evaluation counts as initiation of therapy under the rule.

A parallel new requirement mandates an initial interdisciplinary team meeting within four days of admission. These changes most directly affect patients admitted for stroke, hip fracture, brain injury, or other serious conditions requiring intensive daily therapy, as these patients typically need physical therapy, occupational therapy, and speech-language pathology concurrently.

Both coverage changes take effect October 1, 2026. The rule also accelerates quality data reporting: starting with fiscal year 2029, facilities must submit performance data within 45 days of each quarter's close rather than the current 4.5-month window.