The Centers for Medicare & Medicaid Services (CMS) today issued a proposed rule that would update payment rates for services by inpatient rehabilitation facilities (IRFs) and modify payment policies for fiscal year (FY) 2007. The proposed policies, if finalized, are estimated to increase Medicare payments to approximately 1,240 IRFs in FY 2007 by $40 million. The new payments and policies would apply to discharges on or after October 1, 2006, through September 30, 2007.
“The policies we are proposing reflect the Medicare program’s ongoing commitment to ensuring that beneficiaries who need intensive rehabilitation services in an inpatient setting have access to appropriate care,” said Mark B. McClellan, M.D., Ph.D.
The proposed rule provides for an update to IRF payment rates, based on the rehabilitation, psychiatric, and long-term care (RPL) market basket of 3.4 percent. The RPL market basket is designed to capture inflation in the costs of goods and services required to provide the specialized services offered by these facilities, similar to the market basket that applies to general acute care hospitals.
This proposed rule also proposes changes that would implement certain provisions in the Deficit Reduction Act of 2005 affecting IRFs. In addition, the proposed rule describes CMS’ efforts to integrate post acute benefit structures in a way that will provide for more consistent patient classification, as well as facilitate consistent payment for services furnished to beneficiaries regardless of the setting in which the post acute care is provided.
The IRF Prospective Payment System (PPS) was first implemented on January 1, 2002 beginning with IRFs’ cost reporting periods on or after that date. The objective of the IRF PPS is to increase the accuracy of the payments made to the facilities for the resources they use to furnish care to Medicare beneficiaries, and to enhance the efficient delivery of quality care. Since first implementing this prospective payment system, CMS has increased the payment rates each federal fiscal year.
The number of IRFs has increased since the implementation of the IRF PPS but recently the total number has been holding relatively steady. However, there are significant state and regional differences in the distribution of IRFs. The ratio of IRFs to the Medicare population is significantly higher in the West South Central states of Texas, Oklahoma, Louisiana, and Arkansas â as well as in Kansas, Indiana, and Alaska â than in the rest of the country.
The proposed rule would amend existing regulations regarding the three-year phase-in of a 75 percent compliance threshold – a requirement that when fully phased-in requires at least 75 percent of an IRF’s patient population have one of the 13 designated medical conditions, as well as need intensive inpatient rehabilitation services. As provided in the Deficit Reduction Act, the proposed rule delays the imposition of the full 75 percent threshold by one year. Thus, for providers with cost reporting periods that start on or after July 1, 2006 and before July 1, 2007, the compliance threshold will be 60 percent. For providers with cost reporting periods starting on or after July 1, 2007 and before July 1, 2008, the compliance threshold will be 65 percent, while the 75 percent threshold will be imposed for providers with cost reporting periods beginning on or after July 1, 2008. In addition, comorbidities that meet the criteria as specified in the regulations may continue to be used to determine the compliance percentage for cost reporting periods that begin before July 1, 2008.
The proposed rule would increase the outlier threshold for high cost outlier cases from $5,129 to $5,609. At this level, CMS projects that estimated outlier payments would equal 3 percent of total estimated payments under the IRF PPS. In addition, the proposed rule would apply a 2.9 percent reduction in the standard payment amount for FY 2007, to offset the effect of changes in coding that do not reflect real changes in patient acuity.
The proposed IRF PPS rule will appear in the May 15, 2006 Federal Register. Comments will be accepted until July 7, 2006, and a final rule will be published later this year, to be effective for IRF discharges occurring on or after October 1, 2006 through September 30, 2007.
Note: For more information, see the CMS web site at: