The inpatient rehabilitation facility (IRF) Prospective Payment System (PPS) proposed rule for the 2016 federal fiscal year was published April 27, 2015, and comments are due no later than this coming Monday, June 22, 2015.

IRFs should review the proposed changes and submit their comments by that date. Key provisions of the proposed rule include the following; namely, it:

  • Updates the federal prospective payment rates for 2016 using updated 2014 IRF claims and the most recent cost report data.
  • Introduces no changes to facility-level adjustment factors.
  • Proposes the adoption of an IRF-specific market basket that reflects the cost structures of only IRF providers.
  • Proposes use of the IRF-specific market basket for updating the IRF PPS base payment rate and labor-related shares.
  • Phases in the revised wage index changes.
  • Revises and updates quality measures and quality reporting requirements for the future.

Additionally, in compliance with the final rule for 2015, IRFs will begin to report modes and minutes of therapy along with the attestation statements for certain arthritis conditions for those same discharges occurring from Oct. 1, 2015 and onward.

This article will address several key components of the proposed rule.

Updates to the Federal Prospective Payment Rates for 2016

Consistent with prior years, the regulations update the CMG payment rates, including adjustments to the relative weights and average length-of-stay values for individual CMGs as well as adjustments to the wage index and labor-related share amounts for calculating the individual IRF payments for a given CMG.   

The labor-related share for 2016 increased slightly, to 69.6 percent, and the combination of all the rate adjustments resulted in an overall increase in the IRF standard payment rate of $15,198 in 2015 to $15,529 – an increase of 2.18 percent. For IRFs that failed to meet the quality reporting requirements, however, the standard payment rate will be $15,224 – a substantially lower increase, at only 0.17 percent. IRFs that have failed to collect quality data in the past should recognize the significance of this impact on reimbursement and ensure that quality indicator data is reported correctly in the future.

Facility-Level Adjustment Factors

The 2014 final rule froze the facility-level adjustment factors for 2015 and all subsequent years. As a result, the rural adjustment factor continues to be 14.9 percent. LIP and teaching adjustments remain unchanged.

Yet while these factors have been frozen, there will be a significant number of IRFs that are impacted by the adjustments in core-based statistical areas (CBSAs) as well as changes in classification for some IRFs from rural to urban or urban to rural. These changes are a result of the 2010 decennial U.S. Census data and include the reclassification of 37 counties from urban to rural and 104 rural counties reclassified as urban. Because of the significant payment factor changes associated with rural status, IRFs are encouraged to review the list of changes in the proposed rule to assess their individual status for 2016 and to plan for any potential reductions in payment due to reclassification.

The change in CBSA delineations purportedly would create a more accurate wage index but would impact 188 facilities by introducing a decline in their specific wage index. In order to provide some time for IRFs to adjust to the change in the wage index, the proposed rule includes a one-year transition period during which all IRFs will have a 50/50 blended wage index. The intent of this is to allow those IRFs to have sufficient time to adapt to the change.

Additionally, there are potentially 19 IRFs classified as rural in 2015 that would be designated as urban under the proposed rule. While these IRFs would see an increase in their wage index, they would also lose the 14.9-percent rural adjustment, which would result in a significant financial impact. For this adjustment, there would be a three-year transition period in addition to the one-year transition period for the CBSA adjustments.

IRF-Specific Market Basket Rate

Since 2006, the market basket rate utilized for IRFs was that of the Rehabilitation, Psychiatric, and Long-Term Care (RPL) market basket.  This rate reflected operating and capital costs for the listed providers. The 2010 proposed rule introduced the potential for creating a standalone IRF or an IRF-specific market basket that would be more reflective of the costs associated with IRFs. Because of the variations in costs between freestanding IRFs and IRF units in hospitals, the cost report data available at the time did not provide a good basis for establishing an IRF-specific market basket. More recent analysis has led Medicare to believe that a reasonable methodology could be developed to more appropriately establish an IRF-specific setup. As a result, we now are seeing a proposal to create and adopt a standalone IRF market basket using Medicare cost report data for both freestanding and hospital-based IRFs. The proposed 2012-based IRF market basket is a fixed-weight, Laspeyres-type price index that measures the change in price, over time, of the same mix of goods and services purchased in the base period.

Market Basket Update

CMS is proposing a 2.7-percent market basket increase based on projections using the IRF-specific market basket rate – which, after a 0.6-percent reduction for multi-factor productivity (MFP), a 0.2-percent decrease based on legislative requirements, and a decrease in aggregate payments due to updates in the outlier threshold, provides for an average increase for all IRFs of approximately 1.7 percent.

Revisions and Update Related to Quality Measures and Reporting

As previously noted, IRFs that fail to submit the required quality data will have a reduction in the annual increase factor by 2 percent, and both IRFs that are units of hospitals and free-standing IRFs are required to submit the data. 

While there have been no changes to the previously announced requirements for 2016, CMS is proposing to adopt six new measures that would assess functional status and falls with injury. Those six measures would be tied to the 2018 payments and include:

  • An application of percentage of residents experiencing one or more falls with major injury (long stay) (NQF No. 0674)
  • An application of percentage of LTCH patients with an admission and discharge functional assessment and a care plan that addressed function (NQF No. 2631)
  • Change in self-care score for medical rehabilitation patients (NQF No. 2633)
  • Change in mobility score for medical rehabilitation patients (NQF No. 2634)
  • Discharge self-care score for medical rehabilitation patients (NQF No. 2635)
  • Discharge mobility score for medical rehabilitation patients (NQF No. 2636)

As a reminder, IRFs will continue to report on a significant number of previously identified quality measures, and failure to report on those measures will impact future reductions in payment.

Public Reporting

CMS is proposing to report IRF quality data publically beginning in 2016.  Data will be reported in a format similar to “Hospital Compare,” and the initial proposed reportable data would be from 2015 data collection efforts and include new or worsened pressure ulcers, CAUTI outcome measures, and the all-cause unplanned readmission measure for 30 days post-discharge from IRFs.

Implementation of ICD-10-CM for IRF PPS

CMS is reminding IRFs that Oct. 1, 2015 is the effective date for implementation of ICD-10-CM. While there continue to be efforts to further delay implementation, our current expectation is that IRFs will be utilizing ICD-10 coding, effective for discharges, on and after Oct. 1, 2015.  IRFs should continue to monitor the legislation related to coding, but our recommendation is to be fully prepared for implementation at that time.

Revised Versions of the IRF-PAI Document

CMS has provided a draft IRF-PAI corrected version 1.4, tentatively due for implementation on Oct. 1, 2016. The document incorporates collection of the proposed additional quality measures related to function using the scoring system originally developed and tested as part of the post-acute care payment reform demonstration version of the CARE tool. The scoring methodology for these specific functional measures differs from the FIM, and IRFs should be aware of those differences.

What Should IRFs Do Now?

In preparation for the coming changes, we continue to recommend that IRFs remain proactive in educating all stakeholders in the requirements for documentation of services. Key things to do now include:

  • Educate therapy staff on the definitions for the modes of therapy delivery to avoid confusion later and continue to monitor for finalization of the definitions of the modes of therapy. Monitor the pending updates to the IRF-PAI manual to include the final definitions.
  • Continue to train physician staff in documentation of conditions to ensure that there is appropriate documentation for coding at the level of specificity required for ICD-10.
  • Review, update, and implement new processes, if necessary, to ensure collection of the required quality metrics.
  • Review the updated IRF-PAI document and all manual revisions to be certain that all staff is familiar with the new requirements. Pay particular attention to IRF-PAI manual changes that relate to “mandatory” and “voluntary” reporting of skin issues, as there continues to be some confusion as to whether some of the IRF-PAI fields that have previously been voluntary will actually be required for 2016 reporting.
  • Submit your comments related to the proposed rules as soon as possible. Key areas that you should consider for comments include:
    • The impact of the CBSA changes and the transition periods;
    • The impact of reclassification to urban and rural settings and the transition periods;
    • The potential issues that arise from the IRF-specific wage index; and
    • Future changes to quality indicators and the impact that the additional measures and varying scoring systems would have on IRF operations.
    • Get up to speed on what’s happening with the quality measures – the list is growing, and the scoring methodology varies with the required measure.

About the Author

Angela M. Phillips, PT, is president and chief executive officer of Images & Associates. A graduate of the University of Pennsylvania’s School of Allied Health Professions, she has over 35 years of experience as a consultant, healthcare executive, hospital administrator, educator, and clinician. Ms. Phillips is one of the nation’s leading consultants assisting inpatient rehabilitation facilities in operating effectively under the Medicare Prospective Payment System (PPS) and in addressing key issues related to compliance.

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