Fact Sheets

PROPOSED CHANGES TO PAYMENT POLICIES AND RATES FOR INPATIENT REHABILITATION FACILITIES IN FISCAL YEAR 2009

OVERVIEW:

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on April 21, 2008 that would update payment rates for services furnished to people with Medicare in inpatient rehabilitation facilities (IRFs), effective for discharges on or after October 1, 2008 through September 30, 2009.  The proposed rule would apply to more than 200 freestanding IRFs, and to more than 1,000 IRF units in acute care hospitals.

BACKGROUND:

As required by the Balanced Budget Act of 1997, CMS implemented a prospective payment system (PPS) for freestanding IRFs as well as IRF units of a hospital, effective for cost reporting periods beginning on or after January 1, 2002.   The new PPS, which replaced the previous system that reimbursed IRFs based on reasonable costs subject to certain cost limits, was intended to encourage the efficient provision of intensive rehabilitation services in IRFs and to constrain costs while ensuring quality care. 

In order to be excluded from the acute care hospital PPS and instead be paid the higher rates for providing rehabilitation services under the IRF PPS, an IRF must demonstrate that its annual patient population consists of at least 60 percent of patients with one or more of the qualifying conditions listed in the table below.   This compliance rate was scheduled to increase to 75 percent for cost reporting periods beginning on or after July 1, 2008.  However, provisions in the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) required CMS to set the compliance rate no higher than 60 percent for cost reporting periods beginning on or after July 1, 2006.  Further, the statutory provisions also required CMS to continue the use of comorbidities (i.e., secondary diagnoses) in addition to the patient’s primary reason for being in the IRF in determining IRFs’ compliance percentages under this rule. 

CURRENT PAYMENT CALCULATION UNDER THE IRF PPS:

Under the IRF PPS, each patient is assigned to a case mix group (CMG) based on the primary condition for which the patient was admitted to the IRF; and on the patient’s functional and cognitive abilities.  Based on certain patient comorbidities (conditions that are secondary to the principal diagnosis or reason of the inpatient stay), the patient is also assigned to a tier within each CMG.  CMS makes a single prospective payment to the facility for the inpatient stay based on the relative resource intensity that would typically be associated with each patient’s clinical condition, as reflected in the relative weight assigned to each CMG and tier.  The payment rate is then adjusted at the facility level for teaching status, the applicable geographic wage index, and the percentage of low-income patients served by the facility.  IRFs in rural areas receive an additional payment adjustment.  Cases with extraordinarily high costs compared to the prospectively set payment may qualify for an outlier payment.

PROPOSED CHANGES TO THE IRF PPS FOR FY 2009:

The proposed rule would update the payment rates for IRFs under the IRF PPS for FY 2009, and would implement policy changes consistent with the inpatient prospective payment system (IPPS).

• CMG Relative Weights:   CMS is proposing to update the CMG relative weights and average length of stay values using FY 2006 data.  The current CMG relative weights, which have been used to set payment rates since FY 2006, are based on FY 2003 data and do not reflect the impact on case mix of the revised criteria for payment as an IRF. 
• High-Cost Outlier Threshold:   CMS is proposing to set the outlier threshold for FY 2009 at $9,191, the amount estimated to maintain estimated outlier payments equal to 3.0 percent of total estimated payments for FY 2009.
• Wage Index Adjustment:   CMS is proposing to continue to use the pre-reclassified and pre-floor hospital wage indexes to determine the proposed FY 2009 rates.  For the purposes of this proposed rule, CMS used the final FY 2008 pre-reclassified and pre-floor wage indexes.
• Clarifications of Existing Policies:   CMS is also clarifying policies regarding “New England deemed counties” and multi-campus hospitals to be consistent with the IPPS and the other post-acute care settings.  CMS will update the IRF wage index tables based on the OMB bulletins used to update the hospital wage data.
• Implementation of IRF PPS Provisions in the MMSEA:  CMS is implementing the statutory provisions by setting the compliance percentage at 60 percent for cost reporting periods beginning on or after July 1, 2006, and by continuing to count comorbidities when determining an IRF’s compliance with the threshold.  CMS is also updating the IRF PPS payment rates by zero percent for FY 2009, in compliance with the statutory provision that sets the increase factor for IRFs at zero percent for FYs 2008 and 2009, effective for discharges beginning on or after April 1, 2008.
• Payment Rate Impact Analysis:   The proposed changes will result in an estimated decrease in aggregate IRF payments of $20 million for FY 2009.  This decrease is due to the update to the outlier threshold amount to decrease estimated outlier payments from 3.3 percent for FY 2008 to 3.0 percent for FY 2009.

Comments will be accepted on the proposed rule until June 20, 2008.   CMS will respond to comments in a final rule to be issued on or before August 1. 

For more information, see:

www.cms.hhs.gov/InpatientRehabFacPPS/LIRFF/itemdetail.asp?itemID=CMS1209922

QUALIFYING CONDITIONS UNDER THE IRF PPS

Patients who have one or more of the following conditions either as the primary reason for receiving treatment in the IRF or as a qualifying comorbidity may be counted toward an IRF’s compliance percentage.

• Stroke
• Spinal cord injury
• Congenital deformity
• Amputation
• Major multiple trauma
• Fracture of femur (hip fracture)
• Brain injury
• Neurological disorders
• Burns
• Arthritis-related medical conditions (three types specified in the rule)
• Knee or hip joint replacement if (1) it was bilateral, (2) the patient’s BMI was greater than 50, or (3) the patient was 85 or older

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