Inpatient Rehabilitation Facility PPS

What’s the IRF PPS?

Section 4421 of the Balanced Budget Act of 1997 (Public Law 105-33), as amended by section 125 of the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999 (Public Law 106-113), and by section 305 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554), authorizes the implementation of a per discharge prospective payment system (PPS), through section 1886(j) of the Social Security Act, for inpatient rehabilitation hospitals and rehabilitation units - referred to as inpatient rehabilitation facilities (IRFs). The IRF PPS will utilize information from a patient assessment instrument (IRF PAI) to classify patients into distinct groups based on clinical characteristics and expected resource needs. Separate payments are calculated for each group, including the application of case and facility level adjustments.

Hospital Center

For a one-stop resource web page focused on the informational needs and interests of Medicare Fee-for-Service (FFS) hospitals, go to the Hospital Center (see under "Related Links Inside CMS" below).

Section 3004 of the Affordable Care Act 

CMS has created a website to support Section 3004 of the Affordable Care Act, Quality Reporting for Long Term Care Hospitals, Inpatient Rehabilitation Hospitals and Hospice Programs. This site has been created so that  the public can view information, and communications, related to Section 3004. This site is expected to expand as more information is provided. There is also provided a link for emailing comments, questions or ideas to CMS pertaining to Quality Reporting and Section 3004.

IRF Legislative History

 Historically, each rule or update notice issued under the annual Inpatient Rehabilitation Facility (IRF) prospective payment system (PPS) rulemaking cycle included a detailed reiteration of the various legislative provisions that have affected the IRF PPS over the years.  The IRF legislative history document (PDF) now serves to provide that discussion and will be updated when we find it necessary.

IRF Classification Criteria (PDF)

An inpatient rehabilitation hospital or an inpatient rehabilitation unit of a hospital (otherwise referred to as an IRF) is excluded from the IPPS and is eligible for payment under the IRF PPS if it meets all of the criteria specified in 42 Code of Federal Regulations (CFR) 412.25 (for units) and 412.29. Specifically, to be classified for payment under Medicare’s IRF prospective payment system, at least 60 percent of a facility’s total inpatient population must require IRF treatment for one or more of 13 conditions listed in 42 CFR 412.29(b)(2).      

Determining IRF "60 Percent Rule" Compliance

The Medicare Administrative Contractors (MACs) are responsible for determining whether facilities meet the 60 percent rule requirements for payment under Medicare’s IRF prospective payment system.   This determination is made on an annual basis at the beginning of each facility's cost reporting period and remains in effect for the duration of that cost reporting period.