Fact sheet

Final Fiscal Year 2018 Payment and Policy Changes for Medicare Inpatient Rehabilitation Facilities (CMS-1671-F)

Final Fiscal Year 2018 Payment and Policy Changes for Medicare Inpatient Rehabilitation Facilities (CMS-1671-F)


On July 31, 2017, the Centers for Medicare & Medicaid Services (CMS) issued a final rule outlining fiscal year (FY) 2018 Medicare payment policies and rates for the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) and the IRF Quality Reporting Program (IRF QRP). The FY 2018 final policies are summarized below.

Updates to IRF payment rates

Update to the payment rates under the IRF PPS. For FY 2018, CMS is finalizing an update to the IRF PPS payments to reflect a 1.0 percent increase factor, in accordance with section 1886(j)(3)(C)(iii) of the Social Security Act, as added by section 411(b) of the Medicare Access and CHIP Reauthorization Act of 2015. An additional approximate 0.1 percent decrease to aggregate payments due to updating the outlier threshold results in an overall estimated update for FY 2018 of approximately 0.9 percent (or $75 million), relative to payments in FY 2017.

No changes to the facility-level adjustments. For FY 2018, CMS will continue to maintain the facility-level adjustment factors at current levels as we continue to monitor the most current IRF claims data available to assess the effects of the FY 2014 changes.

Rural Adjustment Transition. FY 2018 is the third and final year of the phase-out of the 14.9 percent rural adjustment for the 20 IRF providers that were designated as rural in FY 2015 and changed to urban under the new Office of Management and Budget (OMB) delineations in FY 2016. Thus, we will no longer apply a rural adjustment for these IRFs. 

Removal of 25 Percent Payment Penalty for Late Transmissions of the IRF-PAI

Under the IRF PPS, we currently apply a 25 percent payment penalty to IRF patient assessment instrument (IRF-PAI) submissions that are not timely transmitted to our data repository. We are finalizing the removal of the 25 percent payment penalty.

Refinements to the 60 Percent Rule Presumptive Methodology

On October 1, 2015, Medicare transitioned from ICD-9-CM to ICD-10-CM. In the FY 2014 IRF PPS final rule (78 FR 47860) and the FY 2015 IRF PPS final rule (80 FR 45872), we stated that after the adoption of the ICD‑10‑CM medical code set, we would review the presumptive methodology lists in ICD-10-CM (once we had enough ICD-10-CM data available) and make any necessary changes. Over the past year, we have performed a comprehensive analysis of the lists with our clinicians and input from industry stakeholders and are finalizing necessary refinements to the lists to ensure that they continue to reflect the list of 60 percent rule qualifying conditions in 42 CFR §412.29(b)(2). For FY 2018, we are finalizing the following refinements to the ICD-10-CM lists used in determining IRFs’ presumptive compliance to ensure that these lists reflect as accurately as possible the types of patients that should count presumptively toward the 60 percent rule by:

  • Counting certain ICD-10-CM diagnosis codes for patients with traumatic brain injury and hip fracture conditions; and
  • Revising the presumptive methodology list for major multiple trauma by counting IRF cases that contain two or more of the ICD-10-CM codes from three major multiple trauma lists in the specified combinations.

Based on stakeholder comments, we are not finalizing our proposed removal of certain ICD-10-CM codes from the presumptive methodology at this time, as we will continue to monitor and consider their appropriateness for inclusion on the presumptive methodology lists for future policy development and rulemaking.

Technical IRF Process Revisions

We are finalizing the following technical process revisions:

  • Removal of Voluntary Item for Swallowing Status from IRF-PAI—We are finalizing the removal of a voluntary item for swallowing status (Item #27) from the IRF-PAI as it is duplicative with a recently added item in the Quality Indicators section.
  • Sub-regulatory Process for Certain Updates to Presumptive Methodology Diagnosis Code Lists —We are finalizing a formal process to distinguish between non-substantive updates to the ICD-10-CM codes on the lists used to determine IRFs’ presumptive compliance with the 60 percent rule that would be applied through a sub-regulatory process and substantive revisions to the ICD-10-CM codes on the lists that would only be proposed and finalized through notice and comment rulemaking. The sub-regulatory process would be used to update the ICD-10-CM codes on the presumptive methodology lists to ensure that they reflect the most current ICD-10 medical code data sets, which are typically updated effective October 1 of each year.
  • Use of IRF-PAI Data to Determine Patient Body Mass Index (BMI) Greater Than 50 for Cases of Lower Extremity Single Joint Replacement—We are finalizing the use of the height/weight items (items #25A and 26A) on the IRF-PAI to calculate patients’ BMI and the use of this information to determine and presumptively count lower-extremity joint replacement patients with a BMI greater than 50 toward an IRF’s presumptive compliance percentage, in accordance with the regulations at §412.29(b)(2)(xiii)(B).

IRF Quality Reporting Program (QRP)

Under the IRF QRP, the applicable annual payment update for any IRF that does not submit the required data to CMS is reduced by 2 percentage points. In this FY 2018 IRF PPS Final Rule, CMS is finalizing the replacement of the current pressure ulcer measure with an updated version of that measure, as well as the removal of the All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502). CMS is also finalizing the public display of six additional quality measures on the IRF Compare website in calendar year 2018.

In addition to the proposals related to quality measures and public reporting, CMS is finalizing that the data IRFs submit on the measure Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) meet the definition of standardized patient assessment data for the FY 2019 IRF QRP. For the FY 2020 IRF QRP, CMS is finalizing that the data IRFs submit on the measures Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (NQF #2631) and Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury meet the definition of standardized patient assessment data. However, in response to the comments received for the FY 2020 program year, CMS is not finalizing the proposed additional standardized data elements.

Lastly, CMS is finalizing its proposals with respect to the applicability of current procedural requirements, such as the mechanism for reporting and reporting schedules, to the standardized patient assessment data.

The final IRF PPS rule can be downloaded from the Federal Register at:  

The publication date will be August 3, 2017.