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From Health Law Daily, August 6, 2015

More than just payment updates; IRF Final rule implements policy changes

By Sarah E. Baumann, J.D.

CMS has released a Final rule outlining payment and policy changes for Medicare inpatient rehabilitation facilities (IRFs) in fiscal year (FY) 2016. The rule will implement an IRF-specific market basket and employ changes to the wage index that will result in 19 IRFs being reclassified from rural to urban. The rule also implements changes to the IRF Quality Reporting Program (QRP) (Final rule, 80 FR 47036, August 6, 2015).

Payment updates. FY 2016 IRF prospective payment system (PPS) payments will reflect an estimated 1.8 percent increase, based on an estimated 1.7 percent increase factor, along with a 0.1 percent increase to aggregate payments resulting from updating outlier threshold results. The estimated 1.7 percent increase factor will reflect an estimated IRF-specific market basket of 2.4 percent, reduced by a 0.5 percent multi-factor productivity adjustment and a 0.2 percent reduction required by section 3401(d) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148).

IRF-specific market basket. Currently, IRF payments are based on the Rehabilitation, Psychiatric and Long-Term Care (RPL) market basket; the 2008 RPL cost weights were calculated based upon data from stand-alone Medicare cost reports. The new IRF-specific market basket would exclude data from psychiatric and long-term care facilities and incorporate 2012 cost report data from both freestanding and hospital-based IRFs. The estimated FY 2016 IRF market basket increase is 2.4 percent, the same as that for the RPL market basket; the FY 2016 labor-related share is 71 percent, compared to 69.294 percent for the FY 2015 share, which was based on the 2008 RPL.

Changes to the wage index. The final rule will implement Office of Management and Budget (OMB) changes related to delineations of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas issued in OMB Bulletin No. 13-01 on February 28, 2013. CMS delayed implementation until FY 2016 to allow itself time to assess the changes. Although CMS believes that the new delineations will result in a wage index more representative of actual costs of labor, it recognizes that the changes will also cause a number of facilities to experience a decline in their wage index. To allow them time to transition, all facilities in FY 2016 will be subject to a wage index that will be a blend of 50 percent of the FY 2016 wage index using current OMB delineations and 50 percent of the wage index using the revised OMB delineations.

The OMB delineation changes will also result in 19 providers having their status changed from rural to urban, resulting in a 14.9 percent rural adjustment loss. To allow these providers to transition, they will receive, in addition to the blended wage index, two-thirds of the rural adjustment in FY 2016, one-third in FY 2017, and no adjustment in FY 2018.

Quality Reporting Program. Section 3004(b) of the ACA required the establishment of the IRF QRP that required a 2 percent reduction in the market basket increase factor for IRFs that do not comply with quality data submission requirements beginning in FY 2014. The FY 2016 final rule will implement changes to the IRF QRP mandated by the improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 (P.L. 113-185), adopting measures to satisfy three required quality domains: skin integrity and changes in skin integrity; functional status, cognitive function, and changes in function and cognitive function; and incidence of major falls. It will also adopt four additional functional status quality measures and finalize a previously finalized but newly National Quality Forum (NQF)-endorsed measure. According to the rule, CMS will begin to publicly report quality data in fall 2016.

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