Press release




The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on April 28, 2009 that would update payment rates and clarify the framework for Medicare patient selection and care in inpatient rehabilitation facilities (IRFs) during fiscal year (FY) 2010.  The proposed rule would apply to more than 200 freestanding IRFs and over 1,000 IRF units in acute care hospitals, and would be effective for discharges occurring on or after October 1, 2009.

The proposed rule's patient selection and care 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.  In addition to the proposed rule, CMS is posting draft revisions to the Medicare Benefit Policy Manual (MBPM) for public comment.  This draft makes conforming changes to the manual based on the proposed rule; it provides detailed policy guidance regarding the selection of patients for admission to IRFs, and the development and implementation of individual treatment plans.  The proposals would create a framework that incorporates current best practices in rehabilitative medicine, while promoting more efficient and focused medical review by Medicare’s fiscal intermediaries and administrative contractors. 

Comments on the draft MBPM revisions should be submitted through a link that will be supplied on the CMS Website, rather than through the site used for the submission of comments on proposed regulatory language.  CMS intends to issue final updated MBPM policies concurrently with the issuance of the final IRF PPS rule.

“CMS is proposing updates to the current IRF coverage criteria that would better reflect industry-wide best practices, and improve understanding and consistency of medical necessity guidelines,” said CMS Acting Administrator Charlene Frizzera.  “The proposed policies were developed by CMS working closely with the National Institutes of Health and medical directors from several fiscal intermediaries, and taking into account input from the rehabilitation community.”

The proposed revisions would clarify requirements for preadmission screening to determine whether a patient should receive rehabilitation services in an IRF or in another, less-intensive setting, post-admission treatment planning, and ongoing care coordination throughout the inpatient stay.   Specifically, CMS is proposing to:

  • Update and clarify the IRF admission criteria to specify that the patient should be able and willing to actively participate in an intensive rehabilitation program and should be 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.
  • Specify 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.
  • Emphasize the importance of the post-admission evaluation to document the status of the patient after admission to the IRF, compare it to that noted in the preadmission screening documentation, and begin developing an overall plan of care to meet the individual patient’s specific needs.  The proposed rule would require the overall plan of care to be completed with input from all of the interdisciplinary team members and to be maintained in the patient’s medical record.
  • 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 prospective payment system (PPS).   Under the IRF PPS, 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 hospital outpatient departments, 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 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 used 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 accurate if Medicare Advantage patients are included in these compliance review calculations.  Therefore, CMS is proposing to require submission of IRF patient assessment data on Medicare Part C (Medicare Advantage) patients in IRFs.

In other provisions, CMS projects that the payment rate update for IRFs will be 2.4 percent in FY 2010, based on the Rehabilitation, Psychiatric, and Long-term Care (RPL) market basket, and that, if finalized as proposed, the market basket update would increase total payments to IRFs in FY 2010 by $140 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 proposing to set the outlier threshold for FY 2010 at $9,976, the amount estimated to maintain estimated outlier payments equal to 3.0 percent of total estimated payments under the IRF PPS for FY 2010.   The change to the outlier threshold would increase overall IRF payments by $10 million.   The total increase in IRF payments under this proposed rule is $150 million.

For facility and patient-level adjustments, which would not increase total IRF payments, the proposed rule would:

  • Update the CMG relative weights and average length of stay values using FY 2007 data, which reflect recent changes in IRF patient populations resulting from the 60 percent rule and medical review activities.
  • Use the pre-reclassified and pre-floor hospital wage data to determine the proposed FY 2010 rates.  The FY 2010 IRF PPS wage index values in the proposed rule are based on the final FY 2009 pre-reclassified and pre-floor hospital wage data.
  • Update the rural, low-income patient (LIP), and teaching status adjustment factors using the most recent three years of data (FYs 2005 through 2007).


CMS will accept comments on the proposed rule until June 29, 2009, and will address all comments in a final rule to be issued by August 1, 2009.

The proposed rule went on display on April 28, 2009 at the Office of the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at:

For more information, including information about how to submit comments on the draft MBPM provisions, please see: