CMS Issues Final Rule: Inpatient Rehabilitation Facility PPS & QRP

The agency had proposed a more modest 2% increase ($170 million) but the FY 2023 Inpatient Rehabilitation Facility (IRF)  payments will increase by 3.2% ($275 million) relative to payments in FY 2022. The IRF Quality Reporting Program (QRP) is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a 2% point reduction in their Annual Increase Factor (AIF). Regulations are effective on October 1, 2022.

Inpatient rehabilitation hospitals or inpatient rehabilitation units of hospitals are considered IRFs and are excluded from the inpatient prospective payment system (IPPS) and eligible for payment under the IRF prospective payment system (PPS). They must meet Medicare’s conditions of participation for acute care hospitals and other criteria, including at least 60% of a facility’s total inpatient population must require IRF treatment for one or more of 13 conditions.

The IRF PPS includes an outlier policy for extraordinarily costly cases. From MedPAC payment basics, “Medicare makes outlier payments when an IRF’s estimated total costs for a case exceed a cost threshold. The outlier payment for a case is equal to 80% of costs above this threshold. The cost threshold is equal to the sum of the IRF’s usual payment for the case-mix group plus a fixed-loss amount. High-cost outlier payments are funded by reducing the standard base payment amount for all.”

Last month, the American Hospital Association (AHA) expressed concern about the dramatic scale of the proposed increase in the high-cost outlier threshold – a 37% increase from the FY 2022 threshold – that would significantly decrease the number of cases that qualify for an outlier payment.

CMS didn’t budge, the final contains an adjustment to the outlier threshold to maintain outlier payments at 3% of total payments. This adjustment will result in a 0.6 percentage point decrease in outlier payments. The final rule updates the outlier threshold amount from $9,491 for FY 2022 to $12,526 for FY 2023.

Review the CMS fact sheet on the rule

The final rule isn’t up, but a draft is posted on the Federal Register