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The Inpatient Rehabilitation Facility (IRF) Prospective Payment System Final Rule for the 2018 fiscal year was published Aug. 3, 2017 without any major changes in policy and with the expected minimal updates to payment.

Some key provisions of the Final Rule include the following. Specifically, it:

  • Updates the federal prospective payment rates for FY 2018;
  • Removes the 25 percent payment penalty for late transmission;
  • Provides for technical process revisions, including that it:
    • Removes the voluntary swallowing status item (Item 27) from the IRF-PAI;
    • Provides for automatic annual updates to presumptive methodology diagnosis code lists for non-substantive changes; and
    • Provides for the use of height/weight items on the IRF-PAI to determine BMI greater than 50 for cases of single-joint replacement under presumptive compliance
  • Revises some of the ICD-10 codes used to determine presumptive compliance with the 60 percent rule – but also abandons some of the proposed changes related to non-specific arthritis and myopathies; and
  • Revises and updates quality measures and reporting requirements.

Additionally, the final rule addresses comments from the industry related to the Centers for Medicare & Medicaid Services (CMS)-13 and 60 percent rule.

Updates to the Federal Prospective Payment Rates for FY 2018

The overall economic impact of the rule was estimated at $75 million in increased payments to IRFs during FY 2018. This is result of a 1.0 percent increase as mandated by prior legislation and a 0.1 percent decrease to aggregate payments due to updates to the outlier thresholds, providing for a net increase of approximately 0.9 percent relative to payments to IRFs in FY 2017.

This increase improves the IRF standard payment conversion rate from $15,708 to $15,838. The amount of that increase for each IRF will continue to be affected by the types of patients seen by the IRF, with additional refinements to the case-mix group relative weights and average length of stay values for individual CMGs.

Removal of the 25 Percent Payment Penalty for Late Transmission

As recommended, CMS is removing the 25 percent payment penalty for late transmission of IRF-PAI data.

While a few proposed changes were adopted in the Final Rule, others were abandoned based on concerns and comments from providers.

The following additional items were finalized:

  • Counting of certain ICD-10-CM diagnosis codes for patients with traumatic brain injury and hip fracture conditions; and
  • Revising the presumptive methodology list for major multiple trauma by counting IRF cases that contain two or more of the ICD-10-CM codes from three major multiple trauma lists in the specified combination sets.

CMS chose to abandon changes that included the removal of certain ICD-10-CM codes from the presumptive methodology, including certain non-specific and arthritis diagnosis codes, and the code for other specified myopathies.

Quality Measures and Reporting Requirements

With respect to quality measures, CMS:

  • Finalized the replacement of the current pressure ulcer measure with an updated version of the measure that meets the definition of standardized patient assessment data;
  • Removed the all-cause unplanned readmission measure;
  • Finalized the public display of six additional quality measures on IRF Compare by fall 2018. These include:
    • Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (NQF No. 2631)
    • Application of Percent of Residents Experiencing One or More Falls with Major Injury (NQF No. 0674)
    • Medicare Spending Per Beneficiary (PAC IRF QRP)
    • Discharge to Community (PAC IRF QRP)
    • Potentially Preventable 30-Day Post-Discharge Readmission Measure for IRF QRP
    • Potentially Preventable Within Stay Readmission Measure for IRFs

For 2020, the rule finalizes the data that IRFs submit related to functional assessment and care planning and for changes in skin integrity. The remainder of the standardized data elements were not finalized due to comments from the industry.

Criteria Used to Classify Facilities for Payment Under the IRF PPS

In the proposed rule, CMS requested “public comments from stakeholders on the 60 percent rule, including but not limited to the list of conditions, to assist us in generating ideas and information for analyzing refinements and updates to the criteria used to classify facilities for payment under the IRF PPS.”

Most commenters suggested elimination of the 60 percent rule, noting that it does not allow IRF care to be “patient-centered.” Others also recommended elimination of the requirement entirely due to other criteria – preadmission assessment, physician supervision, interdisciplinary care requirements, etc. – that would suffice for defining IRF care. As an alternative, others suggested a reduction in the percentage rates from 60 to 50 percent.

CMS noted appreciation of the comments and future consideration of these suggestions.

The Bottom Line

While the overall impact of the requirements finalized in this rule appears relatively benign, we encourage IRFs to continue to prepare for unified and site-neutral payment – and to use the coming months to assess readiness for the standardized assessment measures, changes in payment methodologies and care delivery, and clinical, environmental, and educational matters.


Angela Phillips, PT

Angela M. Phillips, PT, is President & Chief Executive Officer of Images & Associates. A graduate of the University of Pennsylvania, School of Allied Health Professions, she has almost 45 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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