Medicare Payment Issues Affecting Inpatient Rehabilitation Facilities (IRFs) Page: 2 of 24
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Medicare Payment Issues Affecting
Inpatient Rehabilitation Facilities (IRFs)
Medicare spending on post-acute care, either those services provided in a facility
after an acute hospitalization or home health services provided to eligible
beneficiaries in the community, has elicited increasing attention as program spending
on these services has grown. Beneficiaries can receive post-acute care in multiple
settings, elevating the importance of identifying the most appropriate, cost-effective
setting to provide necessary care. Recent implementation of prospective payment
systems for the different settings has amplified concerns that post-acute providers are
making decisions about beneficiaries' rehabilitative care in response to financial
incentives rather than deciding on the basis of which setting is the most appropriate
for the care needs of the patient.
Inpatient rehabilitation facilities (IRFs) are one post-acute provider participating
in Medicare. IRFs are either freestanding hospitals or distinct part units of hospitals
that are exempt from Medicare's payment system used to pay short-term general
hospitals. The majority of the IRFs that participate in Medicare are distinct parts of
other hospitals. In 2003, Medicare program payments to IRFs were estimated at $5.7
billion. Medicare is the largest single payer for inpatient rehabilitation services.
Starting in 2002, Medicare began implementing a prospective payment system
specifically for IRFs (IRF-PPS). Much of this report describes the new payment
system, its adjustments, and a FY2005 payment calculation.
Recent administrative actions by the Centers for Medicare and Medicaid
Services (CMS) to enforce the newly constituted "75% rule" have been causing a
certain amount of consternation among the provider community. The 75% rule
specifies criteria, including qualifying medical conditions and compliance thresholds
(the percentage of patients treated that have those conditions), that a facility must
meet in order to be paid as an IRF and not as a lower-paid general hospital. Local
coverage determinations (LCDs) are policies established by Medicare contractors that
clarify the existing national standards regarding IRF services that will be covered by
Medicare in their respective areas. The magnitude of Medicare's spending on post-
acute care as well as the variety of post-acute providers underscores the importance
of developing policies that ensure beneficiaries receive the appropriate level of care
and service intensity. Policymakers remain concerned that payment incentives in the
Medicare program may influence the type of post-acute care provided and
unnecessarily increase program spending.
Over objections from the Administration, a provision to delay enforcement of
the IRF compliance thresholds was included in the Consolidated Omnibus
Appropriations Act for 2005 (P.L. 108-447). The Secretary of Health and Human
Services (HHS) was given up to 60 days to review an already mandated study by the
Government Accountability Office (GAO) before the 75% rule could be enforced for
most IRFs. The GAO report was issued on April 22, 2005.
This CRS report will be updated as events warrant.
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Medicare Payment Issues Affecting Inpatient Rehabilitation Facilities (IRFs), report, May 4, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc816911/m1/2/: accessed July 22, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.