What MedPAC’s 2027 Update Recommendation Signals for RCM Leaders

MedPAC released its draft recommendations for 2027, and while the headlines may look routine, the underlying signals matter for anyone planning toward 2030.

The Commission is proposing two main steps. First, hold the 2027 base update exactly as written into current law. Second, implement the Medicare Safety-Net Index and add $1 billion to the MSNI pool. The MSNI measures how much of a hospital’s Medicare volume is low-income, along with its uncompensated care burden. MedPAC believes it is a better predictor of which hospitals are financially vulnerable, and the data supports that view.

This is the second year in a row where the Commission has pushed the field toward a more targeted safety-net funding model. In plain terms, it means this. Congress is moving away from broad add-ons and toward more precise payments based on who a hospital actually serves.

At the same time, there are several data points in the report that matter for revenue cycle leaders.

Margin pressure is still real.
The aggregate FFS Medicare margin remains deeply negative at −12.1 percent. Even when excluding COVID relief funds and 340B remedy payments, most hospitals are still losing money on Medicare fee-for-service. Relatively efficient hospitals are doing better, with a median margin of −1 percent, but that is still a signal of how thin the operating environment remains.

Hospitals are not collapsing, but they are not easing up either.
All-payer operating margins improved in 2024, and early 2025 data suggests continued improvement. Some of this is due to slowing labor cost growth. Some is due to temporary policy factors, like 340B remedy payments. But none of it changes the reality that Medicare remains an underpaying line of business, and the pressure on cost containment is not going away.

Volume is growing again.
Inpatient and outpatient FFS volume increased in 2024. That tells us patients are back, care demand is steady, and revenue opportunity is real. But with the margins where they are, hospitals cannot grow their way out of inefficiency. Growth only helps when workflows are strong, denials are low, and estimates and eligibility are accurate.

So what does all of this mean for hospitals working toward a 2030 operating model?

First, cost discipline will not go out of style.
MedPAC does not believe across-the-board increases solve structural issues. They want hospitals to become more efficient, not more subsidized. That should tell leaders to keep pushing automation, real-time eligibility, denial prevention, clean claims, and modern financial engagement. The hospitals that win in 2030 will be the ones that run disciplined, predictable, data-driven operations.

Second, safety-net exposure needs more attention.
The MSNI is a clear sign that policymakers want to direct dollars toward hospitals caring for vulnerable Medicare beneficiaries. If your hospital has high dual-eligible volume or high uncompensated care costs, you should understand your MSNI score now. This will shape how much targeted support you may receive in the future.

Third, the spread between efficient hospitals and everyone else will widen.
The relatively efficient group is nearly at break-even with Medicare. They are operating cleaner revenue cycles, tighter cost structures, and more disciplined workflows. If you are still relying on manual processes or chasing denials, your cost per claim will go up while your margin goes down.

Fourth, 2030 readiness should not wait.
Automation, real-time adjudication, transparent estimates, and tighter payer relationships are no longer “forward thinking.” They are the minimum standard to stay above water in a world where Medicare shortfalls are baked in.

MedPAC’s recommendations do not have the flash of a brand-new model or a sweeping overhaul, but they tell a clear story. The next few years will reward hospitals that simplify, modernize, and focus deeply on accuracy, efficiency, and patient mix. They will challenge hospitals that rely on old workflows and assume broad increases will fix structural gaps.

The environment may be shifting slowly, but the direction is unmistakable.

Information here: https://www.medpac.gov/wp-content/uploads/2025/01/Tab-D-Hospital-Dec-2025.pdf