Fact Sheets

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

OVERVIEW:

The Centers for Medicare & Medicaid Services (CMS) issued a final rule on July 31, 2008 to update payment rates for services furnished to people with Medicare in inpatient rehabilitation facilities (IRFs).  The IRF Prospective Payment System (PPS) final rule will be effective for discharges on or after October 1, 2008 through September 30, 2009.  The final 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 an IRF 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 inpatient 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 the 60 percent compliance rate that became effective for cost reporting periods beginning on or after July 1, 2006.  Further, the statutory provisions also required CMS to continue the use of comorbidities (that is, patient specific conditions that are secondary to the patient’s principal diagnosis) in addition to the patient’s primary reason for being in the IRF in determining the IRF’s compliance percentage 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, 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.

CHANGES TO THE IRF PPS FOR FY 2009:

The final rule updates the payment rates for IRFs under the IRF PPS for FY 2009, and implements policy changes consistent with the inpatient prospective payment system (IPPS).

• CMG Relative Weights:   CMS is updating the CMG relative weights and average length of stay values using FY 2007 IRF claims data and FY 2006 IRF cost report 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 60 percent rule criteria. 
• High-Cost Outlier Threshold:   CMS is setting the outlier threshold for FY 2009 at $10,250, 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 continuing to use the pre-reclassified and pre-floor hospital wage indexes to determine the FY 2009 rates.  For the purposes of this final rule, CMS is using the final FY 2008 pre-reclassified and pre-floor hospital 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 under specified conditions 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 statute which 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 changes will result in an estimated decrease in aggregate IRF payments of $40 million, or 0.7 percent of total IRF payments, for FY 2009.  This decrease is due to the update to the outlier threshold amount to maintain estimated outlier payments at 3.0 percent for FY 2009.

The final rule will appear in the August 8 Federal Register, and will be effective for discharges in FY 2009, beginning October 1, 2008.

For more information, see:

www.cms.hhs.gov/InpatientRehabFacPPS/LIRFF/list.asp#TopOfPage

TABLE: QUALIFYING CONDITIONS UNDER THE IRF PPS

Patients who have one or more of the following conditions either as the principal reason for receiving treatment in the IRF or as a qualifying comorbidity, and that met certain other conditions, 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, or both, during an acute hospitalization immediately preceding the IRF stay and one or more of the following criteria are met: (1) it was bilateral, (2) the patient’s BMI was least 50 at the time of admission to the IRF, or (3) the patient was 85 or older at the time of admission to the IRF.

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