The Centers for Medicare & Medicaid Services today issued a notice updating the payment rates for inpatient psychiatric facilities for fiscal year 2017. CMS makes a net payment increase of 2.2%, or $100 million, compared to FY 2016. This includes a 2.8% market-basket, offset by cuts of 0.3% for productivity and a further Affordable Care Act-mandated cut of 0.2%, as well as a decrease of 0.1% for high-cost outlier cases. CMS also completes its transition to the most recent labor market areas issued by the Office of Management and Budget. Specifically, the agency adopted these new areas for the FY 2016 IPF prospective payment system wage index, but implemented a one-year transition. In addition, when implementing these new areas, several IPFs changed from rural to urban, thus losing eligibility for the rural payment add-on of 17%. In the FY 2016 IPF PPS final rule, CMS implemented a policy to gradually phase out the rural adjustment for these IPFs over three years. The affected IPFs received two-thirds of the rural adjustment in FY 2016, and will now receive one-third of the rural adjustment for FY 2017. CMS anticipates completing the phase-out in FY 2018. The updates will take effect Oct. 1.