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Provider Notice issued 12/02/2025
For Medicare IPPS hospitals that are in-state or are out-of-state Medicaid cost-reporting hospitals, the wage index is based on the Medicare IPPS post-reclass wage index effective at the beginning of the federal fiscal year starting three months prior to the calendar year during which the discharge occurred.
For in-state non-Medicare IPPS hospitals and out-of-state non-Medicaid cost-reporting hospitals, the wage index is based on the Medicare IPPS wage index for the hospital's Medicare core-based statistical area (CBSA) effective at the beginning of the federal fiscal year starting three months prior to the calendar year during which the discharge occurred.
For Medicare IPPS hospitals, the outlier cost-to-charge ratio is based on the sum of the Medicare IPPS hospital-specific operating and capital outlier cost-to-charge ratios effective at the beginning of the federal fiscal year starting three months prior to the calendar year during which the discharge occurred.
For non-Medicare IPPS hospitals, the outlier cost-to-charge ratio is based on the sum of the Medicare IPPS statewide average operating and capital outlier cost-to-charge ratios for urban hospitals for the state in which the hospital is located, effective at the beginning of the federal fiscal year starting three months prior to the calendar year during which the discharge occurred.
The Department is updating the outlier fixed loss threshold to $25,569.
Updates to Hospital Reimbursement Components Effective January 1, 2026
| Date: | December 2, 2025 |
| To: | Participating Hospitals: Chief Executive Officers; Chief Financial Officers; and Patient Accounts Managers |
| Re: | Updates to Hospital Reimbursement Components Effective January 1, 2026 |
This notice informs providers of updates to the hospital reimbursement methodology effective January 1, 2026.
The Department of Healthcare and Family Services (HFS or Department) will continue to utilize Grouper Version 40 of the 3M All Patient Refined Diagnosis Related Group (APR-DRG) payment system for inpatient claims and Grouper Version 3.18 of the Enhanced Ambulatory Patient Groups (EAPG) for outpatient claims in calendar year 2026.
Inpatient Reimbursement Updates
In accordance with 89 Ill. Adm. Code Section 149.100 and 89 Ill. Adm. Code Section 149.105, the Department is updating components of the inpatient reimbursement system including the Medicare inpatient prospective payment system (IPPS) wage index, labor share percentage, cost to charge ratios, and the outlier fixed loss threshold. All inpatient reimbursement changes are effective for discharges on and after January 1, 2026. These changes are as follows:
Outpatient Reimbursement Updates
Effective with dates of service on or after January 1, 2026, in accordance with 89 Ill. Adm. Code Section 148.140, the Department is updating the Medicare IPPS wage index used in calculating the outpatient EAPG base rates and updating the cost to charge ratios for the expensive drugs and devices add-on in accordance with 89 Ill Adm. Code Section 148.402.
For in-state providers and out-of-state Illinois Medicaid cost reporting providers, the wage index used for outpatient reimbursement is as described in 89 Ill. Adm. Code Section 149.100. For out-of-state noncost reporting providers, the wage index used to adjust the EAPG standardized amount shall be a factor of 1.0.
New rate sheets have been posted to the Department’s Hospital Reimbursement Notifications website. The Department will be posting updated inpatient and outpatient calculators soon.
Questions regarding this notice may be directed to the Bureau of Rate Development and Analysis at 217-785-0710.
Dan Jenkins, Deputy Administrator
Division of Medical Programs