Press release




The Centers for Medicare & Medicaid Services (CMS) today announced a final rule revising the criteria for classifying hospitals as inpatient rehabilitation facilities (IRFs) for purposes of Medicare payment. This final rule will make it possible for Medicare to pay appropriately for intensive rehabilitation services in the correct setting, while improving access to inpatient rehabilitation services for beneficiaries who require intensive clinical services.

"In developing this final rule, we have tried to make sure our payment system is accurate and promotes access to high quality inpatient rehabilitation services for beneficiaries who need them," said CMS Administrator Mark B. McClellan, M.D., Ph. D. "Based on extensive public comments, we have modified a number of provisions in the proposed rule, and will continue to work with the beneficiary and provider communities to ensure access to high quality rehabilitation services."

IRFs provide specialized care for patients recovering from ten specified conditions requiring intensive inpatient rehabilitation therapy. These conditions currently include stroke, spinal cord injuries, congenital deformity, amputations, major multiple traumas, fracture of femur, brain injuries, neurological disorders, burns, and polyarthritis. Because of the level of intensive rehabilitation services required for individuals treated at these facilities, Medicare pays for treatment in an IRF at a higher rate than it pays for rehabilitation in other settings, such as an inpatient hospital, skilled nursing facility, home health or the outpatient setting.

Although these ten conditions have been used to assist CMS in classifying facilities that specialize in providing intensive inpatient rehabilitation services to beneficiaries, many have recommended that the list be updated to account for changes in medical practice, including other conditions that may now be appropriate for intensive inpatient rehabilitation. Based on extensive comments and analysis, CMS is issuing a final rule that takes important steps to address these concerns, so that Medicare funds can be better targeted to patients who need intensive inpatient therapy.

The final rule will make it possible for facilities treating a broader range of patients who require intensive rehabilitation to qualify for payment as IRFs. It does so by replacing "polyarthritis" with four

arthritis-related medical conditions, thus increasing from 10 to 13 the number of "qualifying" medical conditions used to classify a facility as an IRF. For example, Medicare will now count a patient towards the compliance threshold if the patient has severe or advanced osteoarthritis involving two or more major joints (elbows, shoulders, hips, or knees, but not counting a joint that has been replaced), and have met other medical criteria outlined in the regulation. The proposed rule had required three or more joints to be affected by severe or advanced osteoarthritis. Also, the final rule will count toward the compliance threshold certain patients who undergo knee or hip joint replacement, or both, during an acute hospitalization immediately preceding the IRF stay, and who also meet one or more of three conditions specified in the regulation.

The final rule also provides for a transition to targeting payments to facilities that treat a large share of patients with diagnoses likely to require intensive rehabilitation. In the first year, the final rule requires only a limited percentage of patients of an IRF's total patient population to have one of the qualifying medical conditions in order for a facility to be classified as an IRF. For cost reporting periods beginning on or after July 1, 2004, and before July 1, 2005, the compliance threshold is set at 50 percent of the IRF's total patient population. For cost reporting periods beginning on or after July 1, 2005, and before July 1, 2006, the compliance threshold is set at 60 percent of the IRF's total patient population. For cost reporting periods beginning on or after July 1, 2006, and before July 1, 2007, the compliance threshold is set at 65 percent of the IRF's total patient population.

During this 3-year transition period specified above, CMS will monitor what impact the revised criteria for classifying facilities as IRFs has on utilization and patient access to appropriate rehabilitation services. In addition, CMS plans to promote a research program to make it possible to assess the efficacy of rehabilitation services in various settings. This research would be intended to provide objective, outcomes-oriented answers with respect to the best way to identify those patients who most need the intensive medical rehabilitation resources provided by an IRF. The research would also help identify the most frequent conditions that typically require the intensive rehabilitation treatment available only in IRFs. Based on the findings of this research, CMS may revise the qualifying medical conditions or other coverage criteria as appropriate.

If at the end of this 3-year period CMS does not take further regulatory action, then 75 percent will be the compliance percentage used for cost reporting periods beginning on or after July 1, 2007.

The final rule takes other steps to make it easier for facilities to meet the IRF requirement. In particular, the rule:

  • Establishes an administrative presumption that if the facility's Medicare patient population complies with the rule, the facility's total population complies.
  • Counts toward the new percentage threshold, both patients whose principal diagnoses matches one of the 13 qualifying medical conditions, as well as those who have a secondary medical condition that meets one of the conditions. The secondary condition must cause a significant decline in the patient's functioning such that, even in the absence of the admitting condition, the individual would require intensive rehabilitation treatment that is unique to IRFs and that cannot be performed appropriately in another care setting.
  • Changes the period of time to review patient data to determine compliance with the new percentage threshold from the most recent 12-month cost reporting period to the most recent, appropriate and consecutive 12-month time period.

The CMS is committed to ensuring that beneficiaries in need of intensive rehabilitation services have access to appropriate care. In addition, we are committed to ensuring that the Medicare program is only paying the higher payment rates to facilities that are properly classified as IRFs. Based on extensive public comments, this final rule takes important steps to achieve both goals. CMS will conduct further applied research and analysis to provide for potential enhancements in the next several years.

The final rule will be published in the May 7 Federal Register, and will become effective for cost reporting periods beginning on or after July 1, 2004.


The rule can be found at: