On July 27, 2022, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2023 Inpatient Rehabilitation Facilities (IRFs) final payment rule. The final rule includes the annual payment update and proposals related to health equity in the IRF Quality Reporting Program. CMS released a fact sheet accompanying the rule.
This final rule is scheduled to be published in the Federal Register on August 8, 2022.
Inpatient rehabilitation facilities to get a $275M increase in payments
CMS will update IRF payments overall by 3.2 percent, or $275 million, for FY 2023, marking the highest IRF market basket update ever implemented in IRF prospective payment system. CMS originally proposed a 2.0 percent, or $170 million, increase in its proposed rule published in March 2022 but finalizes higher increase based on the IRF market basket update. CMS notes that the Medicare Payment Advisory Commission (MedPAC) had recommended that CMS reduce IRF payments by 5 percent.
Stakeholders commented that the proposed market base update was inadequate relative to inflation and the rise of costs due to the COVID-19 public health emergency. However, CMS is required to update IRF payments annually based on the same methodology, using the market basket update, adjusted for productivity. CMS notes that the IRF market basket update reflects the price pressures (higher energy prices, faster wage growth, etc.) but it does not reflect other factors, such as quantity of labor used, which may increase the level of costs.
Cost changes are only reflected when a market basket is rebased, and the base year weight is updated to a more recent time period. CMS believes that the current 2016-based IRF market basket continues to appropriately reflect IRF cost structures. However, using the most recent data, CMS finalized a higher market basket update then was proposed.
There are currently 1,115 IRFs, 52 percent of which are nonprofit facilities, and Medicare payment constitutes the majority of these IRFs’ revenues.
CMS updates the case-mix group (CMG) relative weight in a budget neutral manner, using the FY 2021 IRF claims and FY 2020 IRF cost report data, which CMS states are the most current and complete data available.[1] CMS indicates that 98.9 percent of all IRF cases are in CMGs that will experience a less than 5 percent change as a result of the update.
Additionally, CMS finalizes FY 2023 standard payment conversion factor of $17,878.
These updates are effective for discharges on and after October 1, 2022 to September 30, 2023.
CMS finalizes the permanent cap on wage index changes
Beginning FY 2023 and thereafter, CMS will make permanent a 5 percent cap on any wage index decrease from the prior year, regardless of the reason for the decrease. CMS simultaneously finalizes the same permanent cap on wage index changes for other post-acute care facilities, including hospices and inpatient psychiatric facilities.
CMS did not apply a cap to the reduction in the wage index for FY 2022. CMS states that this policy is an acknowledgement of stakeholder comments to the FY 2022 IRF final payment rule that CMS should protect IRFs from payment volatility and extend the 1-year transition period it had adopted in FY 2021 so that wage index values do not change by more than 5 percent from year-to-year. Beginning October 1, 2022, CMS will apply a cap on decreases to ensure the wage index applied is not less than 95 percent of the wage index applied to that IRF in the previous year.
CMS to consider public input for including home health in IRF transfer policy in future rulemaking
In its proposed rule, CMS sough public input on whether it should include home health in the IRF transfer policy based on a recent Office of the Inspector General (OIG) recommendation[2] that early discharges to home health care should be part of the IRF transfer payment policy. The 2021 OIG report found that if CMS had expanded its IRF transfer payment policy to include early discharges to home health, it would have resulted in an estimated savings of $993 million to Medicare over two years.
Originally, CMS did not include early discharges to home health as part of the IRF transfer payment policy due to lack of home health claims data. At the time, the home health payment system was newly established, but that is no longer a concern for CMS.
CMS did not propose to include early discharges to home health as part of the IRF transfer payment policy for FY 2023. CMS does not respond to comments in this final rule but states that public input may be used in future rulemaking.
CMS finalizes data collection from all IRF patients, will consider responses to RFIS
The IRF Quality Reporting Program (QRP) is a pay-for-reporting program. IRFs that do not meet required reporting thresholds incur a 2.0 percentage point reduction in their Annual Increase Factor (AIF).
CMS does not implement any new measures for the IRF QRP for FY 2023, maintaining the 18 measures currently included in the QRP. However, CMS does finalize a change to the IRF QRP beginning in FY 2026 and addresses the requests for information (RFIs) included in the proposed rule.
CMS will require quality data reporting on all IRF patients
CMS finalizes its proposed policy to expand the IRF QRP reporting requirements to apply to all IRF patients, regardless of payer, beginning FY 2026. Currently, these requirements only apply to IRF patients with Medicare Part A fee-for-service and Medicare Part C. The IRF Patient Assessment Instrument (IRF-PAI) assessment will be used to collect data from every patient receiving care in an IRF beginning on October 1, 2024. CMS believes this expansion will provide a more complete picture of the quality of care provided by IRFs and will help ensure that all IRF patients are receiving the same quality of care.
The implementation of this reporting requirement is expected to cause an increase in costs to IRFs of $31, 783,532 beginning with FY 2026.
CMS will consider comments in response to RFIs on health equity and future measures
In the proposed rule, CMS included the following RFIs:
- Health Equity and Quality Disparities – CMS sought feedback on a general framework to assess healthcare disparities across CMS quality programs, as well as in the IRF QRP and other measurement guidelines. CMS outlined two potential methods for assessing healthcare quality disparities in the IRF QRP, including a provider-specific method to estimate how differences across subgroups stem from specific factors.
- Future Quality Measure Concepts – CMS also requested information on the importance, relevance, applicability and appropriateness of quality measure concepts. This included a cross-setting function measure that would incorporate:
- Domains of self-care and mobility,
- A health equity structural measure, and
- A measure that would assess whether IRF patients are current on their COVID-19 vaccine.
- Inclusion of Digital Quality Measures – CMS requested comments on potential adoption of a futureNational Healthcare Safety Network Healthcare-Associated Clostridioides difficile[3] Infection Outcome measure in the IRF QRP that would utilize electronic health record derived data.
CMS will not finalize any changes in response to these RFIs. Included in the final rule are CMS’s summary of comments received on each RFI. CMS states that it will take all comments, concerns, and suggestions into account for future development in the IRF QRP.
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This Applied Policy® First Night Summary was prepared by Simay Okyay with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at sokyay@appliedpolicy.com or at 202-558-5272.
[1] See Table 2: Relative Weights and Average Length of Stay Values for the Case-Mix Groups on page 19 of the final rule.
[2] Office of the Inspector General. December 7, 2021 Early Discharges From Inpatient Rehabilitation Facilities to Home Health Services [Report No. A-01-20-00501] https://oig.hhs.gov
[3] Clostridioides difficile is responsible for a spectrum of infections that can in some situations lead to sepsis or death.