Fact Sheets

Fiscal Year 2025 Inpatient Rehabilitation Facility Prospective Payment System Proposed Rule (CMS-1804-P)

On March 27, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update Medicare payment policies and rates under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2025. CMS is publishing this proposed rule in accordance with the legal requirements to update Medicare payment policies for IRFs on an annual basis.

For FY 2025, CMS proposes to update the IRF PPS payment rates by 2.8 percent based on the proposed IRF market basket update of 3.2 percent, less a proposed 0.4 percent point productivity adjustment. The proposed rule includes annual updates to the prospective payment rates, the outlier threshold, the case-mix-group relative weights and average length of stay values, the wage index, and associated impact analysis. In addition, the rule includes a proposal to update the IRF PPS wage index using the Core-Based Statistical Areas (CBSAs) defined within the  OMB Bulletin 23-01 and provide a transition for those IRFs who lose the rural adjustment due to their labor market area transitioning from rural to urban.

The IRF QRP is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a two-percentage-point reduction in their Annual Increase Factor. Additionally, CMS publicly reports each IRF’s performance on measures adopted into the IRF QRP on the Care Compare website. For the IRF QRP, CMS proposes adding four assessment items, modifying one assessment item, and removing one from the IRF-Patient Assessment Instrument (PAI). CMS is also seeking feedback with two Requests for Information (RFIs) on quality measure concepts under consideration for future IRF QRP years and a star rating system for publicly reporting IRF QRP measures on Care Compare. 

This fact sheet discusses the provisions of the proposed rule. The FY 2025 Inpatient Rehabilitation Facility Prospective Payment System proposed rule (CMS-1804-P) can be downloaded from the Federal Register at

Proposed Updates to the FY 2025 IRF PPS Payment Policies

For FY 2025, CMS proposes to update the IRF PPS payment rates by 2.8 percent based on the proposed IRF market basket percentage increase of 3.2 percent, less a proposed 0.4 percentage point productivity adjustment.CMS is proposing that if more recent data become available (for example, a more recent estimate of the market basket update or productivity adjustment), CMS would use these data, if appropriate, to determine the FY 2025 market basket percentage increase and the productivity adjustment in the final rule. Additionally, CMS proposes to update the outlier threshold to maintain outlier payments at 3.0 percent of total payments. We estimate the proposed technical rate setting changes would result in a preliminary estimated increase in IRF payments of $255 million for FY 2025. This reflects a $280 million increase from the update to the payment rates and a $25 million decrease due to the proposed update to the outlier threshold.

Proposed Wage Index Update for Revised Census Data

CMS also proposes to update the IRF PPS wage index using the most recent Office of Management and Budget (OMB) statistical area delineations based on the 2020 Decennial Census, which revises the existing core-based statistical areas. Any wage index decreases will be mitigated by the permanent five percent cap on negative wage index changes (regardless of the underlying reason for the decrease). In addition, we are proposing to phase out the rural adjustment for IRFs that transition from rural to urban status under the new CBSAs. These IRFs would receive two-thirds of the rural adjustment in FY 2025, one-third of the rural adjustment in FY 2026, and no rural adjustment in FY 2027. This approach is consistent with how we implemented this policy in FY 2016. For FY 2025, CMS estimates that eight IRFs will change their status from rural to urban. 

Proposed Updates to the IRF QRP

Beginning with the FY 2028 IRF QRP (beginning with patients admitted on October 1, 2026), CMS is proposing the adoption of four new items in the IRF-PAI as standardized patient assessment data elements under the following Social Determinants of Health (SDOH) categories (1) Living Situation, (2) Food, and (3) Utilities beginning October 1, 2026. These items support a culture of engaging with and advancing equity in IRFs. Among other reasons, identifying patient health-related social needs (HRSNs) via collecting these items may assist IRFs in better addressing those identified needs with the patient, their caregivers, and community partners during the discharge planning process, if indicated.

Beginning with the FY 2028 IRF QRP (beginning with residents admitted on October 1, 2026), CMS is proposing a modification of the Transportation item under the SDOH category. As part of our routine item and measure monitoring work, we have identified an opportunity to improve the data collection for this item. Specifically, the proposed Transportation item modification will improve and align data collection in three ways: (1) the guidance will clarify the look-back period for when a patient experienced a lack of reliable transportation, (2) the response options will be simplified for the patient, and (3) the revised assessment item will be collected at admission only, which will decrease provider burden since the current assessment item is collected at both admission and discharge.

Beginning with the FY 2028 IRF QRP (beginning with residents admitted on October 1, 2026), CMS proposes removing the “Admission Class” assessment item collected at admission from the IRF-PAI item set. We routinely review the IRF-PAI for redundancies and opportunities to simplify data submission requirements. We have identified that this item is currently not used in calculating quality measures already adopted in the IRF QRP or for purposes unrelated to the IRF QRP, such as payment, survey, or care planning.

Requests for Information (RFIs)

CMS is also requesting public input on the following RFIs, which will help develop potential policies for rulemaking in future years.

Future Measure Concepts for the IRF QRP 

This RFI aims to receive feedback on potential measurement concepts that could be developed into IRF QRP measures. CMS continues to evaluate, refine, and develop new QRP measures to ensure that people with Medicare and their caregivers have meaningful information for making informed healthcare decisions. Specifically, CMS seeks feedback on the measure concepts of vaccination composite, pain management, and depression.

Creating an IRF QRP Star Rating System 

Currently, the IRF QRP does not have a star rating system to supplement existing publicly reported quality information for people to use when comparing IRF quality of care. The agency is seeking feedback on developing a five-star methodology for IRFs that can meaningfully distinguish quality of care offered by providers and would also be reported on both Care Compare and the Provider Data Catalog. Star ratings for IRFs would be designed to help consumers quickly identify differences in quality when selecting a provider while also helping to promote competition in health care markets. This RFI seeks input on criteria that could be used to select measures for a star rating and how a star rating should be presented to consumers.

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