DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

 200 Independence Avenue SW 

 Washington, DC 20201 

June 8, 2007 

In late 2005, CMS issued a memorandum regarding the Medicare Inpatient Rehabilitation Facility 
(IRF) Prospective Payment System (PPS) and recent changes to the so-called 75 percent rule. 

Attached is an update to the 2005 memo, prepared by CMS staff. It contains the most recent data 
available on the topic. It highlights the IRF payment system, Medicares rationale for treating inpatient 
rehabilitation facilities differently from standard acute care inpatient hospitals, the assumptions CMS 
uses to estimate the economic impact of regulatory changes, and the implication of these estimates. It 
also presents data on Medicare spending for IRFs over time, and illustrates how IRF admission and 
discharge practices have changed with the introduction of the prospective payment system in 2002, and 
during the two-year suspension on enforcement of the 75 percent rule. 

This memo is intended to help improve understanding of Medicares policies for IRFs and CMSs 
responsibilities in evaluating and managing these policies. There are two key points in this regard. 
First, Medicare pays IRFs at a higher rate than other hospitals because IRFs are designed to offer 
specialized rehabilitation care to patients with the most intensive needs. CMS maintains criteria, such 
as the 75 percent rule, in order to distinguish between IRFs and acute inpatient hospitals that are paid 
under the inpatient hospital PPS (IPPS). Second, CMSs primary concerns in managing the IRF 
payment system are ensuring that Medicares payments are accurate and that beneficiaries have access 
to high quality care in the most appropriate setting. 

The new data in this update illustrate that the ongoing implementation of the 75 percent rule continues 
to have the desired effect of ensuring that the most appropriate Medicare beneficiaries have access to 
care in IRFs, while those with lower acuity cases are increasingly being served in settings that are both 
less intensive and less costly. 


INPATIENT REHABILITATION FACILITY PPS AND THE 75 PERCENT RULE 

EXECUTIVE SUMMARY 

This memorandum updates a report entitled The Inpatient Rehabilitation Facility PPS and the 75 
percent Rule that CMS issued to the public on November 30, 2005.1 It provides an overview of our 
updated analysis of Medicare Inpatient Rehabilitation Facility (IRF) spending over time and how IRF 
admission and discharge behavior changed with the introduction of the IRF prospective payment 
system (PPS) in 2002 and the suspension of the 75 percent rule. 

Background 

 
Medicare pays IRFs at a higher rate than other hospitals because IRFs are designed to offer 
specialized rehabilitation care to patients with the most intensive needs. 
 
The 75 percent rule has been part of the criteria for defining IRFs since the implementation of 
the hospital inpatient prospective payment system (IPPS) in 1983. The purpose of the criteria is to 
ensure that IRFs, which are exempt from the hospital inpatient PPS, are primarily involved in 
providing intensive rehabilitation services to patients that cannot be served in other, less intensive 
rehabilitation settings. 
 
In order for an IRF to be paid under the IRF PPS instead of the acute care hospital inpatient PPS, 
the 75 percent rule previously required that a certain percentage of the facilitys patients require 
intensive multidisciplinary inpatient rehabilitation and have one or more of 10 medical conditions. 
In 2004, CMS updated the 75 percent rule by further defining one of the qualifying conditions, 
polyarthritis, which resulted in a final list of 13 qualifying medical conditions. 
 
For more detail on the history and development of the IRF PPS and the 75 percent rule, please see 
the November 30, 2005 memorandum posted at: 
www.cms.hhs.gov/InpatientRehabFacPPS/Downloads/IRFPPS_75pcRuleOLmemo.pdf 
IRF Margins, Expenditures, and Access 

 
Estimates by the Medicare Payment Advisory Commission (MedPAC) show that industry margins 
comparing payments to costs for all IRFs have been in the low-to-mid teens since the 
implementation of the IRF PPS (11.0 percent for 2002, 17.8 percent for 2003, 16.2 percent for 
2004, and 13.0 percent for 2005).2 
 
MedPAC estimated relatively modest cost increases for 2003 and 2004, at only 2.4 percent and 3.6 
percent, respectively. 
 
IRF payments grew at an annual average rate of over 18 percent in the first 2 years of the new IRF 
PPS (2002 and 2003). 
 
There are significant state and regional differences in the distribution of IRFs. More than one-third 
of IRFs are located in just a handful of states, including Texas, Pennsylvania, California, New 
York, and Ohio. Further, IRFs are distributed unevenly across the Medicare population with 
1 Posted at: www.cms.hhs.gov/InpatientRehabFacPPS/Downloads/IRFPPS_75pcRuleOLmemo.pdf 
2 Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, March 2007, p. 211-212 
It is important to note that MedPAC projects the aggregate Medicare margin to drop from 13.0 percent in 2005 to 2.7 
percent in 2007. This analysis assumes that the decline in the volume of IRF patients caused by the phase in of the 75 
percent rule will continue at a steady rate. CMS data suggests that these volume declines might be leveling off. 

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densities that vary from less than one IRF per 100,000 Medicare beneficiaries (in Hawaii and 
Maryland) to over nine per 100,000 Medicare beneficiaries (in Louisiana). 

 
Despite this variation in IRF distribution, patients requiring post-acute rehabilitation who reside in 
areas where there are no IRFs are receiving care in other post-acute care settings, including skilled 
nursing facilities, long-term care hospitals, outpatient rehabilitation facilities, and in the home via 
home health care. 
 
Industry data analysis shows that the five categories of IRF diagnoses experiencing the greatest 
decrease in claims volume between 2003 and 2005 are: lower extremity joint replacement, cardiac, 
osteoarthritis, pain syndrome, and miscellaneous. These five categories are associated with 
conditions that are not generally considered to require the intensive rehabilitation provided by IRFs 
and can often be more appropriately cared for in other less intensive settings. 
 
Medicare admissions for musculoskeletal conditions (e.g., single joint replacements) and medical 
conditions (e.g., pain, pulmonary, miscellaneous, etc.) increased rapidly prior to and during the 
period of IRF PPS implementation and suspension of the 75 percent rule. Once monitoring 
procedures were reinstituted using the updated 75 percent rule, Medicare admissions for these 
conditions have decreased. 
 
Admissions for nervous system and brain conditions, which are generally assumed to require 
intensive rehabilitation, decreased prior to and during the period of IRF PPS implementation and 
suspension of the 75 percent rule. Admissions for these complex conditions are now increasing. 
 
Some of the recent changes in the utilization of IRF services may be due not only to the 75 percent 
rule but to the influence that local coverage determinations and other increased monitoring have 
had on provider awareness of the Medicare admissions criteria for IRF services. 
Impact Analysis of the 75 Percent Rule 

 
IRF industry stakeholders have used differences between the regulatory impact analysis included in 
the IRF classification criteria final rule (published on May 7, 2004) and actual provider experience 
since July 2004 to question the validity of the updated IRF classification criteria. It appears that 
some of the assumptions made by industry stakeholders are based on a misunderstanding of the 
purpose and scope of a regulatory impact analysis. 
 
CMS does not use impact analyses as expenditure targets and does not manage Medicare programs 
to meet the estimates set forth in regulatory impact analyses. Instead, CMS regularly conducts 
reviews and analyses of program data after 
the policy implementation in order to evaluate the 
actual impact and effectiveness of the policy change. 
 
The reality of the situation is that very few IRFs (17 out of over 1,200 facilities) have been 
reclassified since enforcement of the criteria was reintroduced in 2004. 
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IRF EXPENDITURES 

IRFs were designed to meet the needs of the segment of the inpatient hospital population who required 
intensive rehabilitation therapy as the result of a major illness or injury. The intent of the policy was to 
guarantee care for this atypical subset of patients while, at the same time, minimizing incentives to 
game the IPPS by transferring other types of hospital patients to this cost-based unit. Similarly, 
treatment in an IRF was not expected to replace the traditional post-acute services used by the majority 
of beneficiaries such as outpatient rehabilitation, skilled nursing facilities, and home health care. 

Since the mix of services is different, the payment rates for IRFs are substantially higher for providing 
rehabilitation services than the IPPS rates for similar services. The base IRF PPS payment amount 
(prior to adjustments) was $12,981 per discharge in FY 2007 compared with $5,302 for IPPS. Thus, 
the purpose of the 75 percent rule is to ensure that the appropriate payment is made to each type of 
provider. 

IRFs experienced strong financial performance under the new PPS as evidenced by a compounded 
annual average growth rate in expenditures of 18.3 percent in each of the first two years (2002 and 
2003) and positive Medicare margins for hospital-based IRF units of between 6 and 15 percent (an 
expanded discussion of these results follows). Of note, Medicare accounts for an average of 70 percent 
of IRFs patient population.3 In addition, subsequent studies aimed at determining the impact of the 
IRF PPS on patient utilization and access found no problems with access to care as a result of the 
introduction of the IRF PPS.4 

As shown in Figure 1, while CMS predicted a moderate increase in IRF expenditures based on 
historical growth rates, actual spending was significantly higher. Actual payments in the first five years 
of the IRF PPS, 2002-2006, were much higher than projected, beginning with an increase of $1.2 
billion (26.1 percent), between 2001 and 2002. Estimates of spending (which are based on partial 
claims data for 2006) show some leveling off of IRF expenditures for 2006, at about $6 billion. This is 
primarily due to the following factors: 

 
CMS implemented a number of refinements to the IRF PPS for FYs 2006 and 2007. Two of 
these refinements, an across the board reduction in payments of 1.9 percent for FY 2006 and an 
across the board reduction in payments of 2.6 percent for FY 2007 (for a total reduction of 4.5 
percent), were implemented to fulfill the statutory mandate to adjust payments to account for 
changes in coding that do not reflect real changes in case mix. Our contractor, the RAND 
Corporation, showed that such changes accounted for between 1.9 percent and 5.9 percent of 
the growth in payments during the initial implementation of the IRF PPS. 
 
Both of these refinements offset at least half of the market basket increases for FYs 2006 and 
2007, which contributed to the leveling off of aggregate payments. CMS has proposed a full 
market basket increase to IRF payment rates of 3.3 percent for FY 2008 (the market basket 
estimate may change somewhat when it is updated for the final rule). 
3 Carter, G.M., O.Hayden, S.M. Paddock, B.O. Wynn (2003). Case Mix Certification Rule for Inpatient Rehabilitation 
Facilities. Santa Monica, CA: RAND, DRU-2981-CMS. 
4 Beeuwkes Buntin, M., G.M. Carter, O. Hayden, C. Hoverman, S. Paddock, B.O. Wynn. (2005). IRF Care Use Before and 
After Implementation of the IRF PPS. Santa Monica, CA: RAND, DRR-3325-CMS. 
Beeuwkes Buntin, M., J. Escarce, C. Hoverman, S. Paddock, M. Totten, B.O. Wynn. (2005). Effects of Payment Changes 
on Trends in Access to Post-Acute Care. Santa Monica, CA: RAND, DRR-3324-CMS. 
www.rand.org/publications/TR/TR259/ 


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As illustrated later in Figure 4, IRFs experienced a rapid growth in utilization prior to 2004. 
From 2000 until 2004, when CMS reinstated enforcement of the 75 percent rule, IRF utilization 
increased by 24 percent. After CMS began the phase-in of the 75 percent rule in 2004, Figure 4 
shows that utilization declined by about 19 percent by 2006, returning utilization to 
approximately the same level that it was in 2000. This decline in utilization also contributes to 
a leveling off of aggregate payments since 2004. 
 
Part of the decline in IRF utilization since 2004 may be due to the development of local 
coverage determinations and other increased monitoring activities on the part of fiscal 
intermediaries and other CMS contractors. This increased focus on the claims review process is 
likely increasing IRFs awareness of the Medicare admissions criteria for IRF services and 
leading them to be more selective in admitting patients with lower-extremity joint replacement 
and other orthopedic conditions. 
 
While Figure 1 shows a leveling off of aggregate payments, average payments per case for 
IRFs will continue to increase (as shown later in Figure 9), particularly if the proposed 3.3 
percent market basket increase for FY 2008 is implemented. 
Figure 1: IRF Spending 1985-2007 and PPS Estimate 2002-2012 

[figure removed]

Note: 2007 spending estimate is extrapolated based on data for only part of 2007. 
Source: MedPAC: 1985-1996, CMS/OACT 1997-2007 and projections 2002-2012 


It should be noted that CMS impact analyses cannot reflect unanticipated changes that occur after the 
analyses are completed. CMSs impact analysis for the May 7, 2004 final rule that re-established 
enforcement of the 75 percent rule underestimated the extent to which IRFs increased the numbers of 
patients that did not meet the 75 percent rule criteria and, therefore, the degree to which IRFs would 
later need to adjust their operating procedures to meet the provider classification criteria. However, the 
difference between projections and actual experience does not invalidate the policy. 

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Due to the methodology used to develop a Medicare economic impact analysis, CMS does not use 
impact analyses as expenditure targets and does not manage Medicare programs to meet the estimates 
set forth in impact analyses. Instead, CMS regularly conducts reviews and analyses of program data 
after 
the policy implementation in order to evaluate the actual impact and effectiveness of the policy 
change. The remainder of this memorandum presents the results of recent CMS analyses and examines 
actual changes in IRF utilization and provider activity over time. 

IRF UTILIZATION 

Recent analyses have shown changes in the mix of IRF patients since the implementation of the IRF 
PPS in 2002 and the renewed enforcement of the 75 percent rule in 2004. As shown in Figure 2, from 
the mid-1990s to the introduction of the IRF PPS, the volume of cases admitted to IRFs for nervous 
system and brain disorders was decreasing as providers admitted a greater number of patients with 
other types of medical conditions. This pattern became even more evident from 2002 to 2004 when the 
moratorium on the enforcement of the 75 percent rule was in effect. In 2004, however, the pattern 
started reversing with IRFs increasing the number of stroke, brain injury, and nervous system patients 
while decreasing the number of lower extremity joint replacements. 

As the industry has noted, the decreased claims volume identified since 2004 is almost totally 
attributable to cases in one of five condition categories: lower extremity joint replacement, 
miscellaneous, cardiac, osteoarthritis, and pain syndrome. These are precisely the conditions that the 
75 percent rule was designed to impact because they are not generally thought to require the intensive 
rehabilitation services provided by IRFs. The clinical experts that CMS consulted in revising the 75 
percent rule criteria indicated that patients with these conditions could typically be appropriately cared 
for in other less intensive settings. 

Since 2004, CMS has actively encouraged research that could help refine the clinical criteria 
established in the 75 percent rule. As part of this effort to identify the types of patients whose treatment 
needs require an IRF setting, CMS has collaborated with several crucial stakeholders to create a 
framework for future research. Some of these efforts are described below. 

 
At CMSs request, the National Center for Medical Rehabilitation Research at the National 
Institute of Child Health and Human Development (NICHD/NIH) convened a panel in 
February 2005 to develop a research agenda on appropriate settings for rehabilitation.5 
 
Recently, NICHD/NIH also issued a notice on the National Institutes of Health (NIH) website 
recognizing the need to enhance the evidence base for clinical practice, and pledging to work 
with providers and research groups to encourage the design of clinical studies that meet NIH 
standards.6 CMS has also pledged to work with researchers conducting NIH-approved studies 
so that they can meet their study objectives within the overall framework of the Medicare 
program benefit. 
 
Over the past year, CMS has been actively participating in various NIH panel discussions to 
foster research in the area of medical rehabilitation. In the course of attending these meetings, 
CMS has established connections with many of the researchers conducting the research in this 
area and have been helping them to identify the appropriate resources within CMS. 
5 The Summary Report for the February 14-15, 2005 panel meeting is available at 
www.nichd.nih.gov/publications/pubs/upload/rehab_settings_2005.pdf. 
6 The notice is available at http://grants.nih.gov/grants/guide/notice-files/NOT-HD-07-005.html. 


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CMS staff strongly support industry research efforts by serving on project advisory boards and 
by participating in industry-sponsored meetings and research conferences. 
Figure 2: Changes in IRF Patient Mix by Type of Service 

[figure removed]

Note: underlying data shown in Appendix chart C. 1996-1999 from RAND Sample, 2002-2006 from CMS Medicare 
claims, 2000 and 2001 claims not available. 

CMS ANALYSIS OF IRF UTILIZATION AND PROVIDER PRACTICES 

CMS started monitoring IRF expenditure levels in 1985. At that time, total Medicare payment for IRF 
services was only $0.48 billion, indicating that the services were being furnished to a small beneficiary 
population, presumably the targeted population with atypical rehabilitation needs. From 1985 through 
2001, IRF payments increased at an annual average rate of 15.0 percent, as shown below in Figure 3. 

Figure 3: IRF Pre-PPS Spending 1985 - 2001 

[figure removed]

Source: MedPAC: 1985-1996, CMS OACT 1997-2001 

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As one might expect, the increases in Medicare expenditures correlate with significant increases in 
both the number of IRFs and the volume of IRF claims. As Figure 4 shows, the number of IRFs has 
stayed relatively constant since the implementation of the IRF PPS, and the volume of IRF discharges 
continued to grow steadily until 2004, when CMS re-established enforcement of the 75 percent rule. 
As expected, one can see a decrease in the volume of IRF discharges since 2004. However, 
preliminary analyses of the 2007 data suggest that this decrease may be starting to level off in 2007. 

Figure 4: Growth in number of IRFs and IRF Discharges, 1984  2006* 

[figure removed]

Source: CMS/CMM and the Iowa Foundation for Medical Care (IFMC). 

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In addition, as shown in Figures 5 and 6, CMS data indicate that there are significant state and regional 
differences in the distribution of IRFs. Figure 5 shows distribution of IRFs by state and Figure 6 
illustrates the density of IRFs in each state per 100,000 Medicare beneficiaries. More research will be 
needed to determine whether there are state and/or regional competitive pressures that are having an 
impact on admission decisions and the mix of services. 
Figure 5: National IRF Distribution, 2006 

[figure removed]

Source: CMS/CMM, see Appendix chart D for underlying data. 
Figure 6: IRF Density: Number of IRFs per 100,000 Medicare Beneficiaries, 2006 

[figure removed]

Source: CMS/CMM, see Appendix chart D for underlying data. 
 

MEDICARE BENEFICIARY ACCESS TO REHABILITATION CARE 

CMS is committed to maintaining access to rehabilitation care for all Medicare beneficiaries. As 
indicated in Figure 7 below, patients requiring post acute rehabilitation care for four common 
conditions (total knee replacement, total hip replacement, hip fracture, and stroke) have access to and 
are receiving services in different settings. It is also important, however, to make sure that beneficiaries 
are receiving the appropriate level of care at an appropriate cost. The IRF classification criteria are a 
tool used to identify those patients who have a need for a more intensive level of therapy than is 
generally required. 

Recent industry reports emphasize a subset of the CMS data, starting with the highest level of 
utilization (2003 and 2004) and subsequent decreases. It is important to note that the highest level of 
utilization is not necessarily the appropriate level of utilization, and that patients who need 
rehabilitation services have continued access to these services in other settings, as shown in Figure 7 
below. For example: 

 
Although the proportion of total knee replacement and total hip replacement patients receiving 
care in IRFs has dropped significantly since 2004, Figure 7 shows the proportions of these 
patients receiving care in the other post-acute care settings increasing. 
 
Skilled Nursing Facilities (SNFs), particularly, are in a better position than ever before to 
manage patients with musculoskeletal conditions with the introduction of 9 new resource 
utilization group (RUG) payment categories beginning in FY 2006. These new payment 
categories compensate providers more fully for patients with both rehabilitation and medical 
needsprecisely the patients who may need some level of medical monitoring but do not 
require the intense level of services provided in an IRF setting. 
 
In fact, CMS is hearing reports from the SNF industry that some SNFs are reconfiguring 
themselves to care for these types of patients more effectively. 
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Figure 7: Access to Rehabilitation Care 2000-2006 

[figure removed]

Note: Data for 2006 includes claims in the system for only the first half of calendar year 2006. Other includes home self-care, home health in more 
than seven days of acute care hospital discharge, outpatient therapy, expiration, LTCH, and other facilities. Also, a small percentage of cases may be 
counted in multiple settings if they received multiple sources of care within the narrow time window examined. For this reason, totals may not 
always add to 100 percent. Source, CMS claims data. 

It is also worth noting that, while the enforcement of the 75 percent rule is helping to ensure that 
Medicare beneficiaries are getting rehabilitation care in more appropriate settings, average spending 
per case continues to rise for IRFs and most other post acute care settings. (See Figure 9, below.) 

 
Aggregate payments to IRFs for total knee and hip replacement patients declined in 2005 
because of substantial declines in the volume of these patients being treated in IRFs, not from 
any decline in the average payment per case for these cases, which showed a slight increase in 
2005. (See Figures 8 and 9 below.) 
 
In addition, although aggregate payments to IRFs for total knee replacement patients declined 
for the first time in 2005, they have almost doubled since 2000. 
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Figure 8: 
Total Medicare Payments to Rehabilitation Providers by Provider Type, Annual 
Growth Rate of Condition Incidence and Medicare Payments, 2000-2005 

Total Knee Replacement (Hospital Discharges Total Hip Replacement (Hospital Discharges +2.75%) 

[figure removed]

Note: Growth rates in Figures 8 and 9 shown are compounded annual growth rates (CAGRs). This is the average compound rate at which 2000 levels 
grow to reach 2005 levels. The growth rate listed by each medical condition in Figure 8 is the 2000-2005 CAGR for all Medicare inpatient hospital 
discharges for that condition. The CAGRs listed by site of service in Figure 8 are growth rates for spending in each site. The CAGRs listed by site of 
service in Figure 9 are growth rates for average payment per case for each site. Source, CMS claims data. 

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FUTURE REFINEMENTS UNDER DEVELOPMENT 

To ensure continued access to care for all patients needing rehabilitation services, CMS has developed 
a budget proposal to reimburse IRFs for treating three (3) selected conditions (unilateral knee 
replacement, unilateral hip replacement, and unilateral hip fracture) at reduced rates that are based on 
the average skilled nursing facility payments for these conditions plus an allowance for certain higher 
overhead and patient care costs unique to IRFs. The creation of a base rate that more accurately reflects 
the needs of the typical patient with these conditions provides some flexibility in administering 
CMSs medical review programs, and in determining compliance under the 75 percent rule. This 
proposal is intended to focus payment more on patient needs, rather than on the setting of services. 

INDUSTRY PERFORMANCE 

Two analyses of margin data performed using Medicare cost report data provide some helpful 
information. 

CMS Analysis: 
An internal analysis by the CMS Office of the Actuary of Medicare hospital cost report data from the 
first quarter of FY 2007 shows the aggregate margins for hospital-based inpatient rehabilitation units 
(about 80% of all inpatient rehabilitation facilities) to be 6.3% in FY 2002, 15.0% in FY 2003, 12.0% 
in FY 2004, and 8.8% in FY 2005. The same analysis shows the aggregate inpatient Medicare margins 
for freestanding rehabilitation hospitals to be 21.7% in FY 2002, 25.4% in FY 2003, 24.4% in FY 
2004, and 21.5% in FY 2005. These are preliminary estimates.7 

MedPAC Analysis: 
MedPACs analysis of aggregate margins shows similar trends. For hospital-based inpatient 
rehabilitation units, MedPACs analysis finds Medicare margins to be 6.1% in 2002, 14.9% in 2003, 
12.0% in 2004, and 8.5% in 2005. For freestanding rehabilitation hospitals, MedPAC estimates 18.5% 
for 2002, 23% for 2003, 24.3% for 2004, and 20.9% for 2005. Blended, industry margins comparing 
payments to costs for all IRFs have been in the low-to-mid teens since the implementation of the IRF 
PPS (11.0 percent for 2002, 17.8 percent for 2003, 16.2 percent for 2004, and 13.0 percent for 2005).8 

7 Note that CMS calculates margins using the following formula: (total payments  total costs)/total payments. 
8 Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, March 2007, p. 211-212 
It is important to note that MedPAC projects the aggregate Medicare margin to drop from 13.0 percent in 2005 to 2.7 
percent in 2007. This analysis assumes that the decline in the volume of IRF patients caused by the phase in of the 75 
percent rule will continue at a steady rate. CMS data suggests that these volume declines might be leveling off. 

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Appendix chart A 

CMS-13 

MEDICAL CONDITIONS TO DETERMINE THE CLASSIFICATION PERCENTAGE: 

1. 
Stroke 
2. 
Spinal cord injury 
3. 
Congenital deformity 
4. 
Amputation 
5. 
Major multiple trauma 
6. 
Fracture of femur (hip fracture) 
7. 
Brain injury 
8. 
Neurological disorders, including multiple sclerosis, motor neuron diseases, polyneuropathy, muscular 
dystrophy, and Parkinsons disease 
9. 
Burns 
10. Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and seronegative arthropathies resulting in 
significant functional impairment of ambulation and other activities of daily living that have not 
improved after an appropriate, aggressive, and sustained course of outpatient therapy services or 
services in other less intensive rehabilitation settings immediately preceding the inpatient rehabilitation 
admission or that result from a systemic disease activation immediately before admission, but have the 
potential to improve with more intensive rehabilitation. 
11. Systemic vasculidities with joint inflammation, resulting in significant functional impairment of 
ambulation and other activities of daily living that have not improved after an appropriate, aggressive, 
and sustained course of outpatient therapy services or services in other less intensive rehabilitation 
settings immediately preceding the inpatient rehabilitation admission or that result from a systemic 
disease activation immediately before admission, but have the potential to improve with more intensive 
rehabilitation. 
12. Severe or advanced osteoarthritis (osteoarthrosis or degenerative joint disease) involving two or more 
major weight bearing joints (elbow, shoulders, hips, or knees, but not counting a joint with a prosthesis) 
with joint deformity and substantial loss of range of motion, atrophy of muscles surrounding the joint, 
significant functional impairment of ambulation and other activities of daily living that have not 
improved after the patient has participated in an appropriate, aggressive, and sustained course of 
outpatient therapy services or services in other less intensive rehabilitation settings immediately 
preceding the inpatient rehabilitation admission or that result from a systemic disease activation 
immediately before admission, but have the potential to improve with more intensive rehabilitation. (A 
joint replaced by a prosthesis no longer is considered to have osteoarthritis, or other arthritis, even 
though this condition was the reason for the joint replacement.) 
13. Knee or hip joint replacement, or both, during an acute hospitalization immediately preceding the 
inpatient rehabilitation stay and also meets one or more of the following specific criteria: 
I. 
The patient underwent bilateral knee or bilateral hip joint replacement surgery during the acute 
hospital admission immediately preceding the IRF admission. 
II. 
The patient is extremely obese with a Body Mass Index of at least 50 at the time of admission to 
the IRF. 
III. The patient is age 85 or older at the time of admission to the IRF. 
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Appendix chart B 

REHABILITATION IMPAIRMENT CATEGORIES (RICS) AND ASSOCIATED IMPAIRMENT GROUPS 

[Appendix chart removed]

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Appendix chart B (cont.) 

REHABILITATION IMPAIRMENT CATEGORIES (RICS) AND ASSOCIATED IMPAIRMENT GROUPS 

[Appendix chart removed]

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Appendix chart C 

[Appendix chart removed]

Appendix chart D 

IRF DENSITY: IRFS PER 100,000 MEDICARE BENEFICIARIES 

[Appendix chart removed]

Source: IFMC report IRFs that submitted IRF-PAIs between January 1, 2006 and December 31, 2006. 

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