On April 3, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2024 Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) proposed rule. CMS released a fact sheet accompanying the rule.
This rule proposes to:
- increase IRF payment rates by 3.0 percent,
- revise and rebase the IRF market basket to a 2021 base year from a 2016 base year,
- permit hospitals to establish a new IRF and be paid under the IRF PPS after the start of a cost reporting period when certain conditions are met, and
- add two new measures, remove three measures, and modify one measure in the IRF Quality Reporting Program.
This proposed rule is scheduled to be published in the Federal Register on April 7, 2023, and comments are due by 5 p.m. on June 2, 2023.
INPATIENT REHABILITATION FACILITIES TO GET A $335 INCREASE IN PAYMENTS
For FY 2024, CMS proposes to increase of IRF PPS payment rates by 3.0 percent, which is based on a proposed 2021-based market basket update of 3.2 percent reduced by a productivity adjustment of 0.2 percentage points. The Agency estimates this will result in a $335 million increase over FY 2023. However, CMS proposes to consider more recent data that become available to finalize the FY 2024 IRF payment update.
In the proposed rule, CMS acknowledges a recommendation from the Medicare Payment Advisory Commission to reduce IRF PPS payment rates by 5 percent for FY 2024; however, the Agency notes it lacks statutory authority to apply a different update factor.
CMS proposes to continue to update the case-mix group (CMG) relative weights in a budget neutral manner, using the FY 2022 IRF claims and FY 2021 IRF cost report data, which CMS states are the most current and complete data available. CMS proposes that if more recent data becomes available it will be used to determine 2024 CMG relative weights in the final rule. CMS indicates that 99.4 percent of all IRF cases are in CMGs that will experience a less than 5 percent change as a result of the update.
If finalized, these updates will be effective for discharges on and after October 1, 2023 to September 30, 2024.
CMS PROPOSES TO REVISE AND REBASE THE IRF MARKET BASKET
Beginning FY 2024, CMS proposes to revise and rebase the IRF market basket to a 2021 base year with 2021 Medicare cost report data from a 2016 base year. As CMS last rebased and revised the IRF market basket in FY 2020, this proposal is consistent with the Agency’s policy to revise and rebase the market basket approximately every four years. The following table includes a comparison of major cost category cost weights obtained from Medicare cost reports between the proposed 2021 IRF market basket and the current (2016) IRF market basket.
Table 1. Comparison of Major Cost Category from Medicare Cost Report by Base Year[1]
| Major Cost Categories | Proposed 2021 IRFM Market Basket (%) | Current 2016 IRF Market Basket (%) |
| Wages and Salaries | 46.6 | 47.1 |
| Employee Benefits | 11.6 | 11.3 |
| Contract Labor | 2.0 | 1.0 |
| Professional Liability Insurance | 0.8 | 0.7 |
| Pharmaceuticals | 4.7 | 5.1 |
| Home Office/Related Organization Contract Labor | 5.4 | 3.7 |
| Capital | 8.6 | 9.0 |
| All Other | 20.4 | 22.2 |
CMS considered an alternative approach to continue use of the IRF market basket without rebasing; but notes that this may not reflect more recent cost and price data. The Agency also indicates that its proposal is consistent with its prior practice to rebase and revise various PPS’ market baskets every 4 to 5 years.
Therefore, CMS proposes to use a 2021-based IRF market basket to reflect more current cost structure experiences of IRFs.
CMS PROPOSES TO PERMIT HOSPITALS TO ESTABLISH IRFS AFTER BEGINNING OF COST REPORTING PERIOD
Hospitals must meet certain regulatory requirements under 42 CFR § 412.25 to exclude a facility unit from payment under the Medicare Inpatient Prospective Payment System and instead receive payment as an IRF or inpatient psychiatric facility (IPF). However, currently, a hospital may only be paid under the IRF or IPF PPS at the beginning of a cost reporting period. In other words, a unit added to a hospital after the beginning of a cost reporting period cannot be excluded from IPPS until the hospital’s next cost reporting period.
Therefore, beginning in FY 2024, to ensure adequate availability of inpatient rehabilitation beds, CMS proposes to permit hospitals to establish a new IRF and be paid under the IRF PPS within the cost reporting period so long as the hospital provides 30-day advance written notification to the CMS Regional Office and Medicare Administrative Contractor.
The Agency believes that this proposal would provide greater flexibility to hospital to establish an excluded IRF unit at times other than the start of a cost reporting period. CMS does not anticipate a financial impact associated with this specific proposal.
CMS PROPOSES UPDATES TO THE IRF QUALITY REPORTING PROGRAM
The IRF Quality Reporting Program (QRP) requires that IRFs submit required quality data or be subject to a 2.0 percentage point reduction in their Annual Increase Factor (AIF). In this proposed rule, CMS proposes two new measures and one modified measure in the IRF QRP. Additionally, CMS proposes to remove three measures from the IRF QRP and proposes a new public reporting policy.
NEW IRF QRP MEASURES PROPOSED FOR ADOPTION
Percent of Patients/Residents Up to Date (Patient/Resident COVID-19) Vaccine Measure
Beginning with the FY 2026 IRF QRP, this measure would utilize collected data using a new standardized item on the IRF-PAI. The measure would report the percentage of stays in which IRF patients are up-to-date on recommended COVID-19 vaccinations as determined by current guidance from the Centers for Disease Control and Prevention (CDC).
Discharge Function Score Measure
Beginning with the FY 2025 IRF QRP, CMS proposes to adopt the Discharge Function Score measure. This measure assesses functional status by identifying the percentage of IRF patients who achieve an expected discharge function score. Because this measure is calculated using standardized patient assessment data from the IRF Patient Assessment Instrument (IRF-PAI), the agency proposes that this measure replace the Application of Functional Assessment/Care Plan measure (listed in measure removals, below).
PROPOSED MODIFICATION TO THE HEALTHCARE PERSONNEL COVID-19 VACCINATION COVERAGE MEASURE
The Agency proposes to update the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) measure beginning with the FY 2025 IRF QRP. The prior iteration of this measure reported solely on whether HCP had received the first vaccination series for COVID-19. The proposed modification to this measure would require IRFs to report the cumulative number of HCP who are up-to-date with the CDC’s guidance on recommended COVID-19 vaccinations.
CMS Proposes the Removal of Three Measures from the IRF QRP
The Agency proposes to remove three measures that are deemed to no longer provide meaningful distinctions in improved performance or are considered duplicative of similar measures within the IRF QRP. CMS proposes to remove the following three measures from the IRF QRP, starting with the FY 2025 IRF QRP:
- Application of Functional Assessment/Care Plan measure
- IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients (Change in Self-Care Score) measure
- IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients (Change in Mobility Score) measure
CMS PROPOSES PUBLIC REPORTING MEASURE CONCERNING THE TRANSFER OF HEALTH INFORMATION
The Agency proposes to begin public reporting of the Transfer of Health Information to the Provider—PAC Measure and the Transfer of Health Information to the Patient—PAC Measure. These measures report the percentage of patient stays that include a current reconciled medication list in the discharge assessment to provide continuity of care to the subsequent provider (or to patients and caregivers) at the time of discharge or transfer.
CMS REQUESTS INFORMATION ON IRF QRP QUALITY MEASURE SELECTION AND PRIORITIZATION
To inform CMS on a general framework that could be used to identify future IRF QRP measures, the Agency solicits public comment on the following:
- Principles for identifying IRF QRP measures,
- Measurement gaps within the IRF QRP, including in the areas of patient experience and satisfaction, cognitive function, behavioral and mental health, and chronic conditions and pain management,
- Measures and concepts recommended to close measurement gaps, and
- Available data to develop measures, approach to data collection, perceived challenges, and recommended solutions.
CMS PROVIDES UPDATE ON HEALTH EQUITY EFFORTS
In the proposed rule, CMS acknowledges comments received in response to the health equity RFI in the FY2023 IRF PPS proposed rule.[2] The Agency anticipates the development of approaches to advance health equity in the IRF QRP and states its intent to consider the assimilation of the social determinants of health (SDOH) into the IRF QRP. Additionally, the Agency is evaluating whether health equity measures that have been adopted in other settings (e.g. hospitals) could be applied in post-acute care settings. Notably, the alignment of SDOH data items across care settings would support the National Quality Strategy’s Universal Foundation set.[3]
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This Applied Policy® Summary was prepared by Patrick Harrison with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact him at pharrison@appliedpolicy.com or at (202) 558-5272.
[1] See Table 4 on page 38 of the unpublished rule.
[2] 87 FR 20247 through 20254
[3] See CMS, What is the CMS National Quality Strategy? Mod. Feb. 8, 2023. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy