On July 31, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2025. CMS is publishing this final rule in accordance with the legal requirements to update Medicare payment policies for IRFs on an annual basis.
For FY 2025, CMS finalized the update to the IRF PPS payment rates by 3.0% based on the final IRF market basket update of 3.5%, less a 0.5 percentage point productivity adjustment. The final rule includes annual updates to the prospective payment rates, the outlier threshold, the case-mix-group relative weights and average length of stay values, the wage index, and associated impact analysis. In addition, the rule includes an update to the IRF PPS wage index using the latest Core-Based Statistical Areas (CBSAs) from the Office of Management and Budget and provides a transition for those IRFs who lose the rural adjustment due to their labor market area transitioning from rural to urban.
The IRF QRP is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a 2-percentage point reduction in their Annual Increase Factor. Additionally, CMS publicly reports each IRF’s performance on measures adopted into the IRF QRP on the Care Compare website. For the IRF QRP, CMS finalized adding four assessment items, modifying one assessment item, and removing one from the IRF-Patient Assessment Instrument (PAI). CMS received feedback from two Requests for Information (RFIs), one on quality measure concepts under consideration for future IRF QRP years and one on a star rating system for publicly reporting IRF QRP measures on Care Compare.
This fact sheet discusses the provisions of the final rule. The FY 2025 Inpatient Rehabilitation Facility Prospective Payment System final rule (CMS-1804-F) can be downloaded from the Federal Register at https://www.federalregister.gov/public-inspection/2024-16911/medicare-program-inpatient-rehabilitation-facility-prospective-payment-system-for-federal-fiscal
Final Updates to the FY 2025 IRF PPS Payment Policies
For FY 2025, CMS finalized updates to the IRF PPS payment rates by 3.0% based on the final IRF market basket percentage increase of 3.5%, less a final 0.5 percentage point productivity adjustment. Additionally, CMS finalized updates to the outlier threshold to maintain outlier payments at 3% of total payments. We estimate the final technical rate setting changes will result in an estimated increase in IRF payments of $280 million for FY 2025. This reflects a $300 million increase from the update to the payment rates and a $20 million decrease due to the update to the outlier threshold.
Final Wage Index Update for Revised Census Data
CMS also finalized the IRF PPS wage index using the most recent Office of Management and Budget (OMB) statistical area delineations based on the 2020 Decennial Census, which revises the existing core-based statistical areas in the OMB Bulletin 23-01. Any wage index decreases will be mitigated by the permanent 5% cap on negative wage index changes (regardless of the underlying reason for the decrease). In addition, we are finalizing the phase out of the rural adjustment for IRFs that transition from rural to urban status under the new CBSAs. For FY 2025, CMS estimates that eight IRFs will change their status from rural to urban. These IRFs will receive two-thirds of the rural adjustment in FY 2025, one-third of the rural adjustment in FY 2026, and no rural adjustment in FY 2027. This approach is consistent with how we implemented this policy in FY 2016 and provides IRFs a transition period to adjust to the updated wage index.
Final Updates to the IRF QRP
Beginning with the FY 2028 IRF QRP (beginning with patients admitted on October 1, 2026), CMS is finalizing the adoption of four new items in the IRF-PAI as standardized patient assessment data elements under the Social Determinants of Health (SDOH) category: (1) Living Situation (one item), (2) Food (two items), and (3) Utilities (one item). Identifying and collecting patients’ health-related social needs (HRSNs) these items may assist IRFs in better addressing those identified needs with the patient, their caregivers, and community partners during the discharge planning process, if indicated.
Beginning with the FY 2028 IRF QRP (beginning with patients admitted on October 1, 2026), CMS is finalizing a modification of the Transportation item in the IRF-PAI, collected under the SDOH category. As part of routine item and measure monitoring work, CMS has identified an opportunity to improve the data collection for this item. Specifically, the finalized modification of the Transportation item will improve and align data collection in three ways: (1) specify the look-back period for identifying if and when a patient experienced a lack of reliable transportation, (2) simplify the response options for the patient, and (3) require collection at admission only (rather than at admission and discharge), which will decrease provider burden since the current assessment item is collected at both admission and discharge.
CMS routinely reviews the IRF-PAI for redundancies and opportunities to simplify data submission requirements. CMS is finalizing removing the Admission Class assessment item collected at admission from the IRF-PAI item set, as CMS identified that this item is currently not used in calculating quality measures already adopted in the IRF QRP or for purposes unrelated to the IRF QRP, such as payment, survey, or care planning. This removal will be effective beginning with the FY 2028 IRF QRP (beginning with patients admitted on October 1, 2026); however, IRFs will not be required to collect this item beginning with patients admitted on October 1, 2024.
Requests for Information (RFIs)
CMS requested public input on the following RFIs, which will help develop potential policies for rulemaking in future years. The agency received comments in all areas requested.
Future Measure Concepts for the IRF QRP
CMS continues to evaluate, refine, and develop new measures for the IRF QRP to ensure that people with Medicare and their caregivers have meaningful information for making informed health care decisions. IRF QRP measures examine provider performance across various dimensions of care, and providers benefit from having sufficient information to foster performance improvement. We sought feedback on the measure concepts of vaccination composite, pain management, and depression. We received robust feedback on these concepts and have provided a summary in the FY2025 IRF PPS final rule. CMS plans to use this feedback to inform future measure development.
Creating an IRF QRP Star Rating System
CMS sought feedback on creating an IRF QRP Star Rating System. Currently, the IRF QRP does not have a star rating system to supplement existing, publicly reported, quality information for individuals to use when comparing IRF quality of care. We intend to develop a five-star methodology for IRFs that can meaningfully distinguish between quality of care offered by providers and would also be reported on both Care Compare and the Provider Data Catalog. Star ratings for IRFs will be designed to help consumers quickly identify differences in quality when selecting a provider while also helping to promote competition in health care markets. We received robust feedback on these concepts and have provided a summary in the FY 2025 IRF PPS final rule. CMS will use this feedback to inform any future rating system.
For more information about IRF QRP, please visit: https://www.cms.gov/medicare/quality/inpatient-rehabilitation-facility
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