Inpatient Rehabilitation Facility Prospective Payment System for FY 2012

04 August 2011 Publication
Authors: Judith A. Waltz

AHLA e-Alert

On July 29, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a Final Rule regarding payment and policy changes for Inpatient Rehabilitation Facilities (IRFs). The rule will be published in the Federal Register on August 5, 2011. The Final Rule follows the issuance of the fiscal year (FY) 2012 IRF Proposed Rule at 76 Fed. Reg. 24214 (April 29, 2011), and reflects CMS' review and consideration of approximately forty-six timely responses submitted in response to the Proposed Rule. The Final Rule revises current regulations relating to IRFs which are located in 42 C.F.R. Part 412.

As with other recent rulemaking issuances, the preamble starts with a historical overview and citations to governing statutes and relevant prior rules. The IRF Prospective Payment System (IRF-PPS) ensues from statutory changes dating back to 1997, with several statutory revisions since that time. Case-mix groups (CMGs) were developed to reflect rehabilitation impairment categories, functional status, and age, as well as other factors such as very short stays and patient deaths during the IRF stay, and have evolved to include weighting factors which account for the relative difference in resource use across all CMGs. Additional factors such as geographic variations in wages (wage index), the IRF's percentage of low income patients, location in a rural area, and outlier payments also impact total payments.

Upon admission and discharge of a Medicare Part A fee-for-service patient, IRF is required to complete appropriate sections of a Patient Assessment Instrument (IRF-PAI). This form is also now required upon the admission and discharge of Medicare Part C (Medicare Advantage) patients. The data included on this form, as processed by GROUPER software, influences the assignment of the CMG. After a patient discharge, IRF submits a Medicare claim using the GROUPER-generated CMG number, which is then processed through the Medicare contractor's software (PRICER), to make additional adjustments that impact payment.

Among other changes, the Final Rule includes the following highlights:

  • The Final Rule implements Section 3004 of the 2010 Affordable Care Act (ACA), which added a new Section 1886(j)(7) of the Social Security Act (bumping the previous Section 1886(j)(7), which became Section 1886(j)(8)). This section establishes a new quality reporting program that provides for a 2% reduction in the annual increase factor beginning in FY 2014 for failure to report quality data to the U.S. Department of Health and Human Services Secretary. Initially, data will be submitted on two quality measures: a urinary catheter-associated urinary tract infection (CAUTI) measure; and a measure for new or worsening pressure ulcers. A third measure—"30 day comprehensive All Cause Risk Standardized Readmission"—is under development. Additional quality measures are contemplated in the future. CAUTI data will be reported through the CDC/National Healthcare Safety Network, and will be collected for all patients regardless of payor. New or worsened pressure ulcers will be reported via the IRF-PAI.
  • As required by statute, quality reporting data will be made available to the public, and that IRFs will have the opportunity to review any data prior to its release to the public (both topics will be addressed in future rulemaking). CMS indicates that it has not yet proposed a specific date to begin publicly reporting IRF quality data.
  • The Final Rule updates the prospective payment rates for IRFs, including updates to the case-mix group, market basket increase factor, productivity adjustment, and wage data. Facility level adjustment factors (e.g., low income percentage, teaching status, and location in a rural area) will be frozen at the FY 2011 level while the agency explores ways to improve methodology. The outlier threshold for FY 2012 ($10,660) is set at an amount that is projected to maintain outlier payments at 3% of total payments under the IRF-PPS (a case qualifies for an outlier payment if the estimated cost of the case exceeds the adjusted outlier threshold). IRF Cost-to-Charge Ratio ceilings were also updated in the Final Rule.
  • The Final Rule consolidates, clarifies, and revises existing policies regarding IRF hospitals and IRF hospital units to eliminate "unnecessary confusion and enhance consistency." The Final Rule notes that prior to 2002, the regulations distinguished between free-standing hospitals and hospital units. Since IRF-PPS, however, both types of facilities are paid the same and are subject to the same rules and requirements. Consequently, the duplicative regulations are being combined at 42 C.F.R. § 412.29 to include the requirements for all IRFs. Section 412.25 (the requirements that continue to be specific to hospital-based units) will remain largely intact.
  • The Final Rule also notes that it has made some regulatory revisions for purposes of consistency between the IRF classification, payment, and coverage requirements (which were revised by the FY 2010 IRF-PPS Final Rule).
  • For FYs beginning on or after October 1, 2011, the Final Rule allows temporary adjustments for full-time-equivalent intern and resident caps if the IRF takes on interns and residents who are unable to complete their training program because the IRF where they had originally been training has closed or ended its residency program. The IRF must submit a timely request for a temporary cap adjustment to its Medicare contractor. There are also reporting requirements for the IRF that has closed its program. CMS notes that Section 5506 of ACA, "Preservation of Resident Cap Positions from Closed Hospitals," does not apply to IRFs that closed.
  • The Final Rule allows IRFs and in-patient psychiatric facilities to expand the number of beds during the cost reporting period, rather than limiting the expansion to the start of the cost reporting period, subject to some constraints if the IRF has had beds delicensed or decertified. CMS also relaxed the restrictions on a facility's ability to increase its bed size and square footage. In addition, CMS has revised the definition of a "new" facility. A facility can now be considered as "new" if it has not been paid under the IRF-PPS for at least five calendar years, a requirement that applies to both rehabilitation hospitals and rehabilitation units of hospitals.
  • The change of ownership or leasing rules are clarified and simplified. However, if the new owner does not accept assignment of the previous owner's provider agreement, the new owner will need to reapply to the Medicare program as an initial applicant to operate a new IRF.

CMS has issued a press release to accompany the rule's release.

Copyright 2011 American Health Lawyers Association, Washington, DC. Reprint permission granted.

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