Press release





The Centers for Medicare & Medicaid Services (CMS) today issued a final rule that updates Inpatient Rehabilitation Facility (IRF) payment rates for fiscal 2010 and adopts a new regulatory framework that clarifies the coverage criteria (including provisions regarding patient selection and care) for IRFs that will be effective on Jan. 1, 2010.  The final rule applies to more than 200 freestanding IRFs and just under 1,000 IRF units in acute care hospitals and, except as otherwise specified, is effective for discharges occurring on or after Oct. 1, 2009.

The coverage criteria provisions are intended to ensure that Medicare beneficiaries who need the intensive rehabilitation services provided in IRFs continue to have access to high quality care.  The Jan. 1, 2010 effective date for these provisions will allow facilities time to change their operations as needed to comply with the final regulation.  The new regulatory scheme will replace the prior policies, including those contained in HCFAR 85-2-1 (a 1985 ruling that was issued by CMS, then called Health Care Financing Administration).  CMS plans to issue a notice in the Federal Register that will rescind HCFAR 85-2-1, effective Jan. 1, 2010.  CMS also plans to draft new guidance regarding the new coverage criteria that it will place in the Medicare Benefit Policy Manual (MBPM).  As amended, the MBPM will provide detailed policy guidance regarding CMS’s interpretations of the coverage criteria regulations adopted under this rule.

“The final rule we are issuing today incorporates industry best practices into CMS coverage requirements, while promoting more consistent review of the medical necessity of IRF stays for individual patients in light of their clinical needs,” said Jonathan Blum, director of the CMS Center for Medicare Management.  “The policies were developed by CMS working closely with medical directors from several fiscal intermediaries, and have been refined in the final rule to respond to public comments on the proposals.”

The coverage criteria provisions in the final rule establish requirements for preadmission screening of potential IRF patients through which a facility can document that a patient is eligible for intensive rehabilitation services in an IRF setting, post-admission treatment planning requirements, and ongoing coordination of care requirements.  To eliminate confusion about the effect of the coverage criteria on IRF facility requirements (criteria facilities must meet to be paid under the IRF Prospective Payment System (IRF PPS), rather than the Inpatient Prospective Payment System (IPPS)), the final rule moves the coverage criteria to a newly created section of the regulations.  The coverage criteria apply to all Medicare patients in the facility without regard to whether they have one of the IRF qualifying conditions as an admitting or secondary diagnosis. 

The specific coverage requirements that are adopted in the final rule include:

  • Require as admission criteria that the patient is able and willing to actively participate in an intensive rehabilitation program and is expected to make measurable improvement in his or her functional capacity or adaptation to impairments.
    • Require that IRF services be ordered by a rehabilitation physician with specialized training and experience in rehabilitation services and be coordinated by an interdisciplinary team, including at least a registered nurse with specialized training or experience in rehabilitation; a social worker or case manager (or both); and a licensed or certified therapist from each therapy discipline involved in treating the patient.  The rehabilitation physician would be responsible for making the final decisions regarding the patient’s treatment in the IRF.
      • Require a post-admission evaluation to document the status of the patient after admission to the IRF, and require comparison of this post-admission screen and the preadmission screening documentation.  Using this information, facilities can begin developing an overall plan of care that is designed to meet the individual patient’s specific needs.  The rule requires the maintenance of the overall plan of care in the patient’s medical record.  However, in response to comments, the final rule extends the deadline for completing the overall plan of care to the end of the fourth day following the patient’s admission, rather than the proposed rule’s deadline of 72 hours.  Also in response to comments, the final rule does not require the rehabilitation physician to consult with the interdisciplinary team members when developing the post-admission evaluation, although the rule encourages the rehabilitation physician to consider any available input from the interdisciplinary team members.
        • Require that IRFs use qualified personnel to provide required rehabilitation nursing, physical therapy, occupational therapy, speech-language pathology, social services, psychological services, and prosthetic and orthotic services.
          • Require the interdisciplinary team to meet weekly to review the patient’s progress and make any needed modifications to the individualized overall plan of care.

            Since 2002, Medicare has paid rehabilitation hospitals and rehabilitation units in acute care hospitals for inpatient stays under the IRF PPS.  Under this payment system, the patient is classified into a case-mix group (CMG) taking into account his or her overall physical and cognitive status.  Medicare makes a single payment to the IRF based on the CMG assignment.  In rare cases, Medicare will make an additional payment, called an outlier payment, to the facility when the costs of treating an individual patient are much higher than the payment for the CMG.

            The payment rates set by the IRF PPS for rehabilitation therapy services are higher than would be paid for services in other settings, such as skilled nursing facilities, or in the home health setting.  This is because these patients have more severe and more complex medical conditions that need more intensive and coordinated rehabilitation services.  A major reason for updating the coverage policies is to help IRFs select appropriate patients who need the comprehensive and more costly rehabilitation services furnished in the IRF setting.

            To be eligible to be paid under the IRF PPS, each facility must demonstrate on an annual basis that at least 60 percent of its total patient population had either a principal or secondary diagnosis that falls within one or more of the qualifying conditions designated in the regulations governing IRFs.  (This is commonly referred to as “the 60 Percent Rule.” The list of qualifying conditions is attached.) In calculating an IRF's compliance rate to determine the IRF’s compliance with the 60 percent rule, CMS has historically tried to use a method that extrapolated the compliance rate from Medicare fee-for-service data.  It is now clear that the extrapolation method of determining compliance will be more widely available if Medicare Advantage patients are included in these compliance review calculations.  Therefore, CMS is requiring submission of IRF patient assessment data on Medicare Part C (Medicare Advantage) patients in IRFs.

            In other provisions, CMS is setting the payment rate update for IRFs at 2.5 percent in fiscal 2010, based on the Rehabilitation, Psychiatric, and Long-term Care (RPL) market basket, which is projected to increase total payments to IRFs in fiscal 2010 by $145 million.  The RPL market basket was developed to measure the rate of inflation for the resources used in treating the specific types of patients served by these facilities.  Also, CMS is setting the outlier threshold for fiscal 2010 at $10,652, the amount estimated to maintain estimated outlier payments equal to 3.0 percent of total estimated payments under the IRF PPS for fiscal 2010.

            For facility and patient-level adjustments, which are made in a budget-neutral manner so as not to affect total IRF payments, the final rule:

            • Updates the CMG relative weights and average length of stay values using fiscal 2008 claims data and the most recent available IRF cost report data, which reflect recent changes in IRF patient populations resulting from the 60 percent rule and medical review activities.

            • Uses the IPPS fiscal 2009 pre-reclassified and pre-floor hospital wage data to determine the fiscal 2010 IRF PPS rates.

            • Updates the rural, low-income patient (LIP), and teaching status adjustment factors using the most recent three years of data (fiscal years 2006 through 2008).

              The final rule went on display on July 31, 2009 at the Office of the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at:

              It will appear in the Aug. 7, 2009 Federal Register.

              Fact sheets discussing the payment provisions in the final rule and the patient selection, treatment planning, and patient care provisions can be found at:

              For more information, please see:






              Patients who have one or more of the following conditions either as a primary reason for receiving treatment in the IRF or as a qualifying co-morbidity 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 if (1) it was bilateral, (2) the patient’s Body Mass Index was greater than 50, or (3) the patient was 85 or older