CMS Proposes Fiscal Year 2016 Payment and Policy Changes for Medicare Inpatient Rehabilitation Facilities

On Apr. 23, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) and the IRF Quality Reporting Program (IRF QRP). The FY 2016 proposals are summarized below.

Proposed Changes to IRF payment policies and rates:

Changes to the payment rates under the IRF PPS. CMS is proposing to update the IRF PPS payments for FY 2016 to reflect an estimated 1.9 percent increase factor (reflecting a new IRF-specific market basket estimate of 2.7 percent, reduced by a 0.6 percentage point multi-factor productivity adjustment and a 0.2 percentage point reduction required by law). CMS is proposing that if more recent data are subsequently available (for example, a more recent estimate of the market basket or multi-factor productivity adjustment) such data would be used to determine the FY 2016 update in the final rule. An additional 0.2 percent decrease to aggregate payments because of updating the outlier threshold results in an overall update of 1.7 percent (or $130 million), relative to payments in FY 2015.

No changes to the facility-level adjustments. As stated in the FY 2015 IRF PPS final rule (79 FR 45872, 45882 through 45883), CMS froze the facility-level adjustment factors at the FY 2014 levels for FY 2015 and all subsequent years, unless and until we propose to update them again through future notice and comment rulemaking. For FY 2016, CMS will continue to hold the facility-level adjustment factors at the FY 2014 levels as we continue to monitor the most current IRF claims data available to assess the effects of the FY 2014 changes.

ICD-10-CM Conversion. In the FY 2015 IRF PPS final rule (79 FR 45872), CMS finalized conversions from the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) to the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for the IRF PPS, which will be effective when ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRF?PAI submissions. CMS reminds providers of IRF services that the implementation date for ICD-10-CM is Oct. 1, 2015.

IRF-specific Market Basket.  For FY 2016, CMS is proposing an IRF-specific market basket to replace the Rehabilitation, Psychiatric and Long-Term Care (RPL) market basket. The proposed IRF market basket would be based on 2012 data (the RPL market basket is based on 2008 data).  The proposed IRF market basket would also be derived using both freestanding and hospital-based IRFs’ FY 2012 Medicare cost report data.

Below are preliminary estimates of the proposed IRF-specific market basket and labor share:

Changes to the Wage Index.  On Feb. 28, 2013, the Office of Management and Budget (OMB) issued OMB Bulletin No. 13-01, which contained a number of significant changes related to the delineation of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and guidance on uses of the delineation of these areas. To align with these changes, CMS is proposing to adopt the newest OMB delineations for the FY 2016 IRF PPS wage index. CMS also is proposing to implement these changes using a 1-year transition with a 50/50 blended wage index for all providers. The FY 2016 wage index for each provider would consist of a blend of fifty percent of the FY 2016 wage index using the current OMB delineations and fifty percent of the FY 2016 wage index using the revised OMB delineations.

The proposed adoption of revised OMB delineations for the FY 2016 IRF PPS wage index would result in 19 IRF providers having their status changed from rural to urban. While the urban wage index is typically higher than the rural wage index, under the IRF PPS, the shift to urban status results in providers losing a 14.9 percent rural adjustment. As such, CMS is proposing that these 19 IRF providers transitioning from rural to urban status be provided with a gradual phase out of their rural adjustment over a three-year period. Specifically, CMS recommends that these providers receive two-thirds of the rural adjustment in FY 2016, one-third of the rural adjustment in FY 2017, and no rural adjustment in FY 2018.

Proposed Changes to the IRF Quality Reporting Program (QRP):

The Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT” Act) added Section 1899B to the Social Security Act to require that IRFs report data on measures that satisfy domains specified under the IMPACT Act. These same measures are to be implemented in Long-term Care Hospitals (LTCHs), IRFs, Skilled Nursing Facilities and Home Health Agencies. This rule proposes to adopt measures that satisfy three of the quality domains required by the IMPACT Act in FY 2016:  skin integrity and changes in skin integrity; functional status, cognitive function, and changes in function and cognitive function; and incidence of major falls. IRFs that fail to submit the required quality data to CMS will be subject to a two percentage point reduction to their applicable FY annual increase factor.


The domains specified by the IMPACT Act and the quality measures proposed are as follows:

In addition to the measures listed above, it is proposing to adopt four additional functional status quality measures, as well as proposing the previously finalized quality measure “All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Inpatient Rehabilitation Facilities” (NQF #2502), to establish its newly NQF-endorsed status.

Further, CMS is proposing to publicly report IRF quality reporting program quality data beginning in fall 2016. Its policy for public reporting includes a period for review and correction of quality data prior to the public display of IRF performance data.

Finally, CMS is proposing to temporarily suspend its previously finalized data validation policy. CMS proposes suspending this policy to allow time to develop a more comprehensive policy that potentially decreases the burden on IRF providers, allows it to establish an estimation of accuracy related to quality data submitted to CMS, and facilitates the alignment of the IRF validation policy with that of other CMS quality reporting program policies.

CMS will accept comments on the proposed rule until June 22, 2015.

The proposed IRF PPS rule can be downloaded from the Federal Register at: or

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