Inpatient rehabilitation facilities (IRFs) are projected to receive approximately $6.3 billion in payments from the Medicare program in fiscal year (FY) 2008, under a proposed rule announced today by the Centers for Medicare & Medicaid Services (CMS). The proposed rule would update payment rates and modify payment policies for services furnished to Medicare beneficiaries for discharges occurring on or after October 1, 2007 through September 30, 2008. The rule's provisions are estimated to increase Medicare payments to approximately 1,234 IRFs in FY 2008 by approximately $150 million.

"Today's proposed rule is designed to ensure accurate payments for intensive rehabilitation care provided to Medicare beneficiaries in IRFs," said Acting CMS Administrator Leslie V. Norwalk, Esq. "This continues Medicare's commitment to support access to inpatient rehabilitation facility services while at the same time improving the appropriateness and consistency of payment for beneficiary care in all post acute settings." These settings include IRFs, skilled nursing facilities, home health care, and long-term care hospitals.

The proposed rule would increase the IRF payment rate by 3.3 percent, based on the rehabilitation, psychiatric, and long-term care hospital (RPL) market basket. The RPL market basket is designed to capture inflation in the costs of goods and services required to provide the specialized services offered by these facilities, similar to the market basket that applies to general acute care hospitals.
The IRF Prospective Payment System (PPS) was first implemented for cost reporting periods beginning on or after January 1, 2002. The objective of implementing a PPS for IRFs was to increase the accuracy of the payments made to the facilities for the resources they use to furnish care to Medicare beneficiaries, in addition to enhancing the efficient delivery of quality care. IRFs have received an increase in payment rates each Federal fiscal year since the IRF PPS was implemented.

The proposed rule would continue the existing phase-in to a 75 percent compliance threshold (75 Percent Rule), a requirement that when fully phased in requires that at least 75 percent of an IRF's total inpatient population have one of the 13 designated medical conditions for which intensive inpatient rehabilitation services are medically necessary. The 75 percent rule was initially adopted in 1983 to distinguish those hospitals and hospital units which would be eligible for exemption from the inpatient prospective payment system (IPPS) and would continue to be reimbursed on a cost basis. Since the institution of the IRF PPS, CMS no longer reimburses IRFs on a cost basis. However, in general the IRF PPS provides higher payment levels than would be paid for these cases under the IPPS, thus the need to continue this important classification initiative.

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