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From Health Law Daily, April 24, 2015

FY 2016 prospective payment increase to result in $130M more in payments to IRFs

By Melissa Skinner, J.D.

CMS indicated that the proposed prospective payment system (PPS) increase for fiscal year (FY) 2016 will result in an additional $130 million in payments to inpatient rehabilitation facilities (IRFs) in an Advance Release of the Proposed rule, which is scheduled to publish in the Federal Register on April 27, 2015. In addition to announcing the updates to the IRFs prospective payment rates for FY 2016, the Proposed rule also discussed the potential adoption of an IRF-specific market basket, the introduction and phase-in of revised wage index changes, and improvements in the quality measures and reporting requirements under the current rules..

Relative weights and average length of stay rates. The updates made to the IRF PPS for FY 2016 include an update to the current relative weights and average length of stay values, which is calculated using current Medicare claims and cost report data. CMS uses case mix groups (CMGs) to determine relative weights for IRF payments. The relative weights are proportional to the resources needed by an average inpatient rehabilitation case within the CMG. Relative weights are explained in the Proposed rule this way: “for example, cases in a CMG with a relative weight of 2, on average, will cost twice as much as cases in a CMG with a relative weight of 1.” The use of these weights to calculate payment updates is thought to “ensure that IRF PPS payments support beneficiary access to care, as well as provider efficiency.”

According to the Proposed rule, the changes in IRF payment rates proposed by CMS would impose an increase or decrease of less than 5 percent for 99 percent of all IRFs in CMGs. In regard to average length of stays, CMS noted: “the proposed changes in the average length of stay values for FY 2016, compared with the FY 2015 average length of stay, are small and do not show any particular trends in IRF length of stay patterns.” CMS also announced that it would continue the freeze of the facility-level adjustment factors, which began in FY 2014.

IRF-specific market basket. After review of Medicare cost report data, which is available for hospital-based IRFs, CMS concluded that this data combined with data from freestanding IRFs can be used to create a stand-alone IRF market basket. CMS described a market basket generally as a fixed-weight index that represents “the change in price over time of a constant mix (quantity and intensity) of goods and services needed to furnish IRF services.” CMS intends to create this IRF-specific function based on data from a proposed 2012-based IRF market basket. The use of this IRF market basket is meant to replace the Rehabilitation, Psychiatric, and Long-Term Care (RPL) market basket, which is currently used to update the IRF PPS rates.

Taking into consideration the 2015 first quarter forecast, CMS announced that the projected proposed 2012-based IRF market basket increase factor for FY 2016 would be 2.7 percent. However, CMS also indicated that if subsequent information becomes available, such as a more recent estimation of the market basket, it will update that increase in the FY 2016 Final rule.

Revised wage index. The wage index used to determine the IRF PPS rates is based on pre-classification and pre-floor acute care hospital wage index data and is assigned to an IRF based on its labor market area’s geographical location. The IRF labor market areas are determined using core-based statistical areas (CBSAs), which are created by the Office of Management and Budget (OMB). In the Proposed rule, CMS stated that it is now important to incorporate the newest OMB delineations in order to reflect the current status of the shifting labor market. Therefore, beginning FY 2016, the new labor market areas, which were previously announced in OMB Bulletin No. 13-01 (February 28, 2013), will be used to determine the IRF wage index rate.

Quality measures, reporting requirements, and health reform. Section 3004 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), requires the Secretary of HHS to establish an IRF quality reporting program for freestanding IRFs and those attached to acute care facilities or critical access hospitals (CAHs). Those IRFs that do not comply with such reporting requirements are eligible for a reduction of 2 percentage points beginning in FY 2014. In the Proposed rule, CMS explained its intention to adopt a variety of new quality improvement measures including six additional quality measures that will begin with the FY 2018 payment determination. Additionally, CMS indicated that the total costs in FY 2016 as a result of the new quality reporting requirements will be approximately $24 million.

Section 3401(d) of the ACA requires an additional 0.2 percentage point adjustment to the IRF increase factor for FY 2016. This is also incorporated into the FY 2016 IRF PPS Proposed rule.

MainStory: TopStory ReimbursementNews HealthCareReformNews IRFNews HealthReformNews CMSNews QualityNews

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