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A formal letter from your Medicare Administrative Contractor (MAC) is rarely a welcome surprise. For inpatient rehabilitation facilities (IRFs), a letter informing the provider that they have not met IRF classification requirements related to the 60 percent rule based on “presumptive methodology” and thus will be subject to “medical review methodology” is pretty much never welcome.

With a reported increase in IRFs undergoing medical review to validate compliance with the Centers for Medicare & Medicaid Services (CMS)-13 diagnostic categories, it is wise for providers to understand the process for ensuring ahead of time that they are adhering to the rules.

What is the requirement?

The classification requirements for IRFs specify that 60 percent of the total patient population served by the IRF must be treated for a condition listed in the CMS-13 list of diagnostic categories. Compliance with this requirement is tested annually by the MACs in order to ensure that the providers continue to meet the standard. The “test” for compliance can be done either through “presumptive” methodology or through medical review.

What is Presumptive Compliance?

“Presumptive methodology” allows a MAC to access the IRF-PAI data submitted for Medicare and Medicare Advantage patients. The software used to generate the IRF compliance review report automatically uses the specific diagnosis and impairment group codes listed in compliance rule specification files provided by Medicare. These are the same files utilized by third-party software vendors to generate similar reports for IRFs. The software program runs an algorithm that compares the coding on the IRF-PAI data submitted to a list of compliant ICD-10 codes and Impairment Group Codes (IGCs) to determine the number of cases that fall under certain qualifying criteria. If this percentage meets or exceeds the 60 percent compliance threshold, the IRF is presumed to be compliant with the requirement for the entire population (across all payers) and the IRF is approved for the reporting period.

What prompts a “desk audit” or medical review?

There are cases, however, when the presumptive methodology does not yield a positive result. In these cases, the IRF is then subject to a more in-depth validation process that requires medical review of a sampling of cases admitted during the review period. This same process of utilizing medical review versus the presumptive methodology also occurs when the IRF’s Medicare inpatient population (including both Medicare Fee-for-Service and Medicare Advantage patients) is less than 50 percent.

How does the audit process work?

When the medical review process is triggered, either through a Medicare utilization rate of under 50 percent or failure to meet the 60 percent requirement through the electronic review of the IRF-PAI date, the provider will be notified of the need for a medical review. This process includes:

  • Notification of the provider by the MAC
  • A request for a sample of inpatients for detailed review (this request will include a sample from the total IRF inpatient population, including Medicare and non-Medicare)
  • Review of the sample claims by medical review professionals at the MAC
  • A determination of CMS-13 compliance

Our own clients who have gone through this process have been successful in meeting compliance at this stage. However, if this stage of the audit yields a negative outcome, there is a process for appealing the decision.

What to do if you get a request?

  • Don’t panic – the request is part of normal operations at the MAC.
    • While the number of these types of audits is reportedly increasing, the process is not a new one; it has been in place for many years to ensure that providers have an opportunity to support their own calculations of compliance with the diagnostic categories.
  • Be responsive. The request for data is time-sensitive and the results will impact an IRF’s ability to maintain IRF status for the upcoming reporting period. It is imperative that the information be collected and submitted as quickly as possible. Additionally, IRFs should follow the specific instructions for presentation and submission of the record(s) for review.
  • Have someone who understands both inpatient rehabilitation and the rule review the record. Since the time frame for review is very short and the MAC will not accept additional information, IRFs should carefully review the documentation that will be submitted to ensure that it is complete, accurate, and readable.
  • Create a cover sheet for each claim. To assist the medical review staff in identifying documentation that supports the IRF’s belief that the patients meet one of the required diagnostic categories, prepare a cover sheet that indicates:
    • Whether you believe the case is compliant
    • Whether the case met “presumptive compliance” based on your third-party software report
    • Which of the diagnostic categories/clinical conditions the IRF determined were being met
    • An explanation of where the supporting documentation can be found in the record
    • For specific cases that might have fallen out due to coding issues, indicate any additional information that might support a CMS-13 condition
      • Arthritis: Detail the systemic activation or failed outpatient treatment and where to locate the supporting detail in the record.
      • Total joints related to age and/or weight: Indicate the date of birth and age at the time of admission and/or the BMI
      • Hip fractures: Detail the specific location of the fracture and where it is noted in the record (H&P, radiology report, surgical report from acute, etc.)

What’s the bottom line?

Failure to meet the CMS-13 requirement is extremely serious for an IRF. This would lead to being unable to continue as a Medicare-certified IRF for the coming year, as well as repayment/readjustment of the prior year’s revenues from Medicare. That combination can be extremely costly and could force an IRF to close. Careful attention to compliance rates throughout the year is critical to ensure success in the annual validation.


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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