IPPS 2026 final rule, the RAC audit wave, and the labor cost shift.
Welcome to the first issue of The CMI. We put this together for hospital CFOs, VPs of Revenue Cycle, and Directors of Patient Financial Services. Each month we cover three industry shifts that moved hospital revenue, what they mean operationally, and one thing we're working on at ASP-RCM.
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01IPPS 2026 Final Rule: small rate bump, big documentation changes.
CMS published the IPPS 2026 final rule in April. Hospitals get a 2.9 percent net DRG rate increase. The bigger story is in the documentation requirements. Three things changed:
- Sepsis coding clarification. CMS sided with the AHA on Sep-3 documentation requirements. More hospitals can now capture A41.9 with proper documentation, which translates to about a $4,200 average upside per sepsis case.
- Severity weight rebalancing across 47 DRG pairs, mostly cardiac, ortho, and pulm.
- CC/MCC capture updates. 6 new codes added, 3 retired.
02RAC audit volume jumped 41 percent in Q1.
CMS Recovery Audit Contractors increased volume this quarter and shifted focus. Top three audit triggers in Q1 2026:
- Inpatient short stays (2-midnight rule re-enforcement)
- Sepsis vs SIRS documentation (specificity scrutiny)
- Transfer DRG capture (acute-to-acute transfers, particularly cardiac)
Average recovery per audited claim is $14,200. Average appeal success rate is 38 percent, but most hospitals don't appeal because their CDI documentation can't defend the original DRG.
- Sepsis needs both the systemic response criteria and the source documented, with timestamps.
- Inpatient admit orders need to show medical necessity tied to a greater than 24-hour expected stay before the second midnight.
- Transfer DRGs need receiving-hospital documentation that explicitly references the transfer reason.
If your appeal-win rate is below 40 percent, the issue is usually documentation, not your appeals team.
03Hospital labor cost stabilized, but contract labor is still 23 percent above 2019.
KFF and AHA data show hospital labor cost grew only 1.8 percent year over year, down from 8.3 percent in 2023. But the composition has permanently shifted. Contract labor is 23 percent above the 2019 baseline. Travel nurse rates remain at $115 to $155 an hour in tier-2 markets.
The hospitals we audit average 52 days in AR. Top quartile is sub-38. That 14-day gap is roughly $2.4M of working capital tied up per $100M in net patient revenue.
What's new at ASP-RCM
- CDI AI v2.0 shipped. Now embedded directly in Epic and Cerner via native FHIR integration. Real-time prompts during physician documentation instead of retroactive queries. Hospitals piloting v2.0 are seeing post-discharge query volume drop 58 percent and average DRG lift of 0.07 CMI.
- Free Denial Audit for hospitals. Send us 90 days of remits. We return your denial leakage by payer and DRG, AR aging benchmark vs peer hospitals at your bed size, and top 5 fixable categories with dollar estimates. BAA same-day, no demo required. Start the audit.
- HFMA Annual Conference, Denver, June 24 to 26. Our team will be there with hospital case studies. Reply if you'd like to grab time.
One thing worth 30 minutes this week
Pull your top 10 DRGs by volume. For each one, compute:
- Your average reimbursement per case
- The CMS national average per case
- The delta between the two
If the delta on any of your top 10 is over 7 percent, you have a CDI or coding gap worth $500K to $3M annually.
Bring your top 10 DRGs. We'll bring the benchmarks.
A free 30-minute call with someone senior on our team. We'll walk your top DRGs against peer benchmarks and surface the CDI gaps in real dollars. Useful whether you hire us or not.
ASP-RCM Solutions · Senior-Led RCM for Mid-Market Hospitals
asprcmsolutions.com · 469-393-0083
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