Press Releases


For Immediate Release: Tuesday, July 31, 2007
Contact: CMS Media Relations


Inpatient rehabilitation facilities (IRFs) will receive approximately $6.4 billion in payments from Medicare in fiscal year (FY) 2008, under a rule announced today by the Centers for Medicare & Medicaid Services (CMS). The rule will update payment rates and modify payment policies for services furnished to Medicare beneficiaries for discharges occurring on or after October 1, 2007, through September 30, 2008. The rule's provisions are estimated to increase Medicare payments to approximately 1,220 IRFs in FY 2008 by approximately $150 million.

"Today's rule is designed to ensure accurate payments for intensive rehabilitation care provided to Medicare beneficiaries in IRFs," CMS Acting Deputy Administrator Herb Kuhn said. "This continues Medicare's commitment to support beneficiary access to inpatient rehabilitation facility services while at the same time improving the appropriateness and consistency of payment for care across all post acute settings."

"Moreover, combined with payment system rules released today on skilled nursing facilities, we are demonstrating our commitment to ensure that Medicare is affordable for current beneficiaries and is sustained for future generations by paying accurately and efficiently," added Kuhn.

The final rule increases the IRF payments by 3.2 percent, based on the rehabilitation, psychiatric and long-term care hospital (RPL) market basket. 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. The rule also increases the high-cost outlier threshold to $7,362 from $5,534 in FY 2007, based on an analysis of 2006 data, which indicates that this threshold would maintain estimated outlier payments at 3 percent of estimated total payments under the IRF PPS.

Although the higher threshold would mean that fewer cases would qualify for outlier payments, a lower outlier threshold would require an across-the-board reduction in the base payment for an IRF stay in order to maintain budget neutrality. The existing short-stay transfer policy was also clarified to indicate that short-stay transfer cases that meet the criteria to qualify for outlier payments are eligible to receive the additional payments.

The final rule also updates the IRF PPS wage index. When in FY 2006 the IRF PPS adopted the Core Based Statistical Area labor market designations developed by the Office of Management and Budget, we identified some geographic areas where there were no hospitals and, thus, no wage index data on which to base the calculation of the IRF PPS wage index. This situation does not currently affect any IRFs.

The final rule establishes a policy by which the average wage index from all contiguous counties can be used in the future as a reasonable proxy for the rural area within that State. (This policy does not apply in Puerto Rico.).

Finally, a policy commonly referred to as the "75 percent rule" is used by CMS to classify a provider as an IRF. Currently, in addition to a patient's principal diagnosis the comorbidities of a patient may be used to determine whether a provider met the requirements of the 75 percent rule. However, for cost reporting periods beginning on of after July1, 2008, comorbidities no longer can be used to determine whether a provider meets the requirements of the 75 percent rule.

Although CMS carefully examined comments regarding the 75 percent rule, at this time data analysis and clinical research do not support revising the current policy. However, CMS will examine its policies using future data to consider improvements to the classification policy as appropriate. The IRF Prospective Payment System (PPS) was first implemented for cost reporting periods beginning on or after January 1, 2002. The objective of implementing a PPS for IRFs was to increase the accuracy of the payments made to these specialized providers for the resources they use to furnish efficient quality care to Medicare beneficiaries. IRFs have received an increase in payment rates each Federal fiscal year since the IRF PPS was implemented. The payment update is designed to ensure accurate payments are made for intensive rehabilitation care provided to Medicare beneficiaries in IRFs. Promoting accuracy of payments for services to Medicare beneficiaries in IRFs supports Medicare's goal of being a prudent purchaser of health services.

For more information please refer to the CMS IRF PPS web site which is It is expected to be published in the Federal Register on Tuesday, August 7, 2007.

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