Medicare Rehabilitation Hospital Payments

April 25, 2008

CMS published proposed rules on April 25 on Medicare payments for inpatient rehabilitation facilities (IRFs).   These rules affect 1,000 IRFs in general hospitals and 200 free standing IRFs that Medicare pays $5.6 billion annually through case mix group (CMG) prospective amounts per discharge and outlier adjustments.  They serve over 490,000 persons a year recovering from stroke, TBI, and other disabling conditions needing longer stays than are typical in acute care hospitals and higher daily costs than are typical in nursing facilities.  

The proposed changes would update 95 CMG relative weights and the cost threshold for receiving outlier adjustments.  CMS estimates that the net overall impact of the changes, as compared with the current IRF rule, would be a $20 million decrease in FY ’09 Medicare payments, but the revenue impact on individual IRFs could vary widely depending on case mix.  IRFs would be required to show that at least 60% of their patients have one or more of 13 conditions, but co-morbidities or secondary diagnoses may be counted toward this requirement.

Comments on the proposed rule are due on June 25.   A final rule will be published in August, to be effective October 1.  PCG clients should review the proposed rule and consider its impact on their revenues.  It will impact Medicaid as well as Medicare revenues where Medicaid payments are limited to what Medicare would have paid.

Tom Entrikin

Tom Entrikin is a PCG manager and former Medicaid policy specialist with the U.S. Health Care Financing Administration (HCFA), now the Centers for Medicare & Medicaid Services (CMS).