Health Law Daily $75M increase for IRFs in FY 2018
Tuesday, August 1, 2017

$75M increase for IRFs in FY 2018

By Sheila Lynch-Afryl, J.D., M.A.

Inpatient rehabilitation facilities (IRFs) will receive a $75 million payment increase under the IRF prospective payment system (PPS) for fiscal year (FY) 2018. In an advance release of a Final rule set to be published in the Federal Register on August 3, 2017, and effective October 1, 2017, CMS also removed the 25 percent penalty for late submissions to the IRF patient assessment instrument (IRF-PAI) and revised and updated measures and reporting requirements for the IRF Quality Reporting Program (QRP).

FY 2018 payment update. Pursuant to Section 411(b) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10), which added Soc. Sec. Act Sec. 1886(j)(3)(C)(iii), the increase factor for FY 2018, after the application of the productivity adjustment and other adjustment (see Sec. 3401(d) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148)), must be 1.0 percent. An additional 0.1 percent decrease to aggregate payments due to updating the outlier threshold resulted in an overall estimated update for FY 2018 of approximately 0.9 percent (or $75 million), relative to payments in FY 2017 (see $145M payment increase for rehab facilities in 2017, August 5, 2016). CMS estimated that the FY 2018 payment increase factor for FY 2018 before the enactment of MACRA Sec. 411(b) would have been 1.25 percent.

A case qualifies for an outlier payment if the estimated cost of the case exceeds the adjusted outlier threshold. CMS updated the outlier threshold amount from $7,984 for FY 2017 to $8,679 for FY 2018 to maintain estimated outlier payments at approximately 3 percent of total estimated aggregate IRF payments for FY 2018. CMS finalized the national average urban cost-to-charge ratio (CCR) at 0.416, the national average rural CCR at 0.518, and the national CCR ceiling at 1.31 for FY 2018.

For FY 2018, CMS will continue to hold facility adjustment factors at the FY 2014 levels as it continues to monitor the most current IRF claims data available to assess the effects of the FY 2014 changes.

60 percent rule. For a facility to be paid under the IRF PPS, at least 60 percent of its total inpatient population must require intensive rehabilitative services for the treatment of at least one of 13 specific medical conditions. Medicare administrative contractors evaluate IRFs’ compliance with the 60 percent rule policies annually using two different methods: the presumptive compliance method and the medical review method. In the Final rule, CMS revised the lists of ICD-10-CM diagnosis codes that are used to determine presumptive compliance under the 60 percent rule and provided for a subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists. A list that indicates whether codes are being added, removed, or the code label revised for FY 2018 as a result of this subregulatory process on the CMS website.

IRF-PAI. Soc. Sec. Act Sec. 1886(j)(2)(D) requires IRFs to complete the IRF-PAI upon admission and discharge for all Medicare Part A fee-for-service and Medicare Advantage beneficiaries. 42 C.F.R. Sec. 412.614(c) currently provides for a 25 percent penalty for IRFs that fail to submit timely IRF-PAI data. Effective for all IRF discharges beginning on and after October 1, 2017, CMS removed the 25 percent payment penalty for late IRF-PAI transmissions because the majority of waiver requests met the waiver criteria.

IRF QRP. Pursuant to Section 3004(b) of the ACA, IRFs that fail to submit data on specified quality measures under the IRF QRP receive a 2.0 percent reduction in their fee schedule increase factor. In the Final Rule, CMS replaced the current pressure ulcer measure with an updated version of that measure and removed the All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502). In 2018 CMS will begin publicly reporting two assessment-based measures and four claims-based measures (see CMS proposes modest IRF payment increase, asks for policy feedback, May 3, 2017).

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