United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Health,

Committee on Ways and Means, House of

Representatives

MEDICARE

More Specific Criteria 

Needed to Classify Inpatient 

Rehabilitation Facilities 

Statement of Marjorie Kanof 

Managing Director, Health Care

For Release on Delivery 

Expected at 1:00 p.m. EDT 

Thursday, June 16, 2005 

 

GAO-05-825T
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

i i

l

June 16, 2005

MEDICARE

More Specific Criteria Needed to Classify 

Highlights of GAO-05-825T, a report Inpatient Rehabilitation Facilities 

before the Subcommittee on Health,

Committee on Ways and Means, House of

Representatives

Medicare classifies inpatient 

rehabilitation facilities (IRF) using

the “75 percent rule.” If a facility

can show that during a 12-month

period at least 75 percent of its 

patients required intensive 

rehabilitation for 1 of 13 listed 

conditions, it may be classified as

an IRF and paid at a higher rate 

than for less intensive 

rehabilitation in other settings. 

Because this difference can be

substantial, it is important to

classify IRFs correctly. GAO was 

asked to discuss issues relating to

the classification of IRFs, and in

April 2005 it issued a report,

Med care: More Specific Criter a

Needed to C assify Inpatient 

Rehabilitation Facilities (GAO-05-

366). For that report, GAO analyzed

data on all Medicare patients (the

majority of patients in IRFs)

admitted to IRFs in fiscal year

2003, spoke to IRF medical 

directors, and had the Institute of

Medicine (IOM) convene a meeting 

of experts to evaluate the use of a 

list of conditions in the 75 percent

rule. This testimony is based on the

April 2005 report. 

What GAO Recommends

In its April 2005 report, GAO 

recommended that CMS take

several actions, including

describing more thoroughly the

subgroups of patients within a

condition that require IRF services, 

possibly using functional status or 

other factors in addition to

condition. CMS generally agreed

with the recommendations.

As noted in the April 2005 report, GAO found that in fiscal year 2003 fewer 

than half of all IRF Medicare patients were admitted for having a primary

condition on the list in the 75 percent rule. Almost half of all patients with 

conditions not on the list were admitted for orthopedic conditions, and 

among those the largest group was joint replacement patients. The experts 

IOM convened said that uncomplicated unilateral joint replacement patients

rarely need to be admitted to an IRF, and GAO analysis suggested that 

relatively few of the Medicare unilateral joint replacement patients had

comorbid conditions that suggested a possible need for the IRF level of 

services. Additionally, GAO found that only 6 percent of IRFs in fiscal year

2003 were able to meet a 75 percent threshold. 

GAO also found that IRFs varied in the criteria used to assess patients for 

admission, using patient characteristics such as functional status, as well as 

condition. The Centers for Medicare & Medicaid Services (CMS), working 

through its fiscal intermediaries, had not routinely reviewed IRF admission 

decisions to determine whether they were medically justified, although it

reported that such reviews could be used to target problem areas. 

The experts IOM convened and other clinical and nonclinical experts GAO

interviewed differed on whether conditions should be added to the list in the 

75 percent rule. The experts IOM convened questioned the strength of the 

evidence for adding conditions to the list—finding the evidence for certain

orthopedic conditions particularly weak—and some of them reported that 

little information was available on the need for inpatient rehabilitation for 

cardiac, transplant, pulmonary, or oncology patients. They called for further 

research to identify the types of patients that need inpatient rehabilitation 

and to understand the effectiveness of IRFs. There was general agreement 

among all the groups of experts interviewed that condition alone is

insufficient for identifying appropriate types of patients for inpatient 

rehabilitation, since within any condition only a subgroup of patients require 

the level of services of an IRF, and that functional status should also be 

considered in addition to condition. 

GAO concluded that if condition alone is not sufficient for determining

which types of patients are most appropriate for IRFs, more conditions 

should not be added to the list at the present time and the rule should be 

refined to clarify which types of patients should be in IRFs as opposed to 

another setting. 

www.gao.gov/cgi-bin/getrpt?GAO-05-825T.

To view the full product, including the scope 

and methodology, click on the link above.

For more information, contact Marjorie Kanof

at (202) 512-7114.
Madam Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our report entitled Medicare: 

More Specific Cri eria Needed to Class fy Inpatien Rehabil ation 

Facil ies,

t i t it

it

 

1

 which was issued in April 2005. Over the past decade, both the 

number of inpatient rehabilitation facilities (IRF)2

 and Medicare payments

to these facilities have grown steadily. In 2003, there were about 1,200 

such facilities. Medicare payments to IRFs grew from $2.8 billion in 1992 

to an estimated $5.7 billion 2003 and are projected to grow to almost 

$9 billion per year by 2015. 

Because patients treated at IRFs require more intensive rehabilitation than 

is provided in other settings, such as an acute care hospital or a skilled 

nursing facility (SNF),3

 Medicare pays for treatment at an IRF at a higher 

rate than it pays for treatment in other settings. The difference in payment 

to IRFs and other settings can be substantial, and so IRFs need to be

correctly classified to be distinguished from other settings in which less 

intensive rehabilitation is provided. 

To distinguish IRFs from other settings for payment purposes and to

ensure that Medicare patients needing less intensive services are not in 

IRFs, the Centers for Medicare & Medicaid Services (CMS) relies on a 

regulation commonly known as the “75 percent rule.”4

 This rule states that 

if a facility can show that during a 12-month period at least 75 percent of

all its patients, including its Medicare patients, required intensive 

rehabilitation services for the treatment of at least 1 of the 13 conditions 

listed in the rule,

5

 it may be classified as an IRF. The rule allows the 

: i

l

1

See GAO, Medicare More Specific Criteria Needed to Class fy Inpatient Rehabilitation 

Faci ities, GAO-05-366 (Washington, D.C.: Apr. 22, 2005). 

2

IRFs are intended to serve patients recovering from medical conditions that require an

intensive level of rehabilitation. Not all patients with a given condition may require the

level of rehabilitation provided in an IRF. For example, although a subset of patients who 

have had a stroke may require the intensive level of care provided by an IRF, others may be

less severely disabled and require less intensive services. 

3

In addition to IRFs, acute care hospitals, and SNFs, other settings that provide 

rehabilitation services include long-term-care hospitals, outpatient rehabilitation facilities,

and home health care. 

4

See 42 U.S.C. §1395ww(d)(1)(B) (2000). The 75 percent rule was initially issued in 1983

and most recently revised in 2004. See 42 C.F.R. §412.23(b)(2) (2004). 

5

For an annotated list of these conditions, see appendix I. 

Page 1 GAO-05-825T
remaining 25 percent of patients to have other conditions not listed in the 

rule. IRFs are required to assess patients prior to admission to ensure they 

require the level of services provided in an IRF, and CMS is responsible for 

evaluating the appropriateness of individual admissions after the patient 

has been discharged through reviews for medical necessity conducted

under contract by its fiscal intermediaries.6

 An IRF that does not comply 

with the requirements of the 75 percent rule may lose its classification as 

an IRF and therefore no longer be eligible for payment by Medicare at a 

higher rate.

7

IRF compliance with the rule has been problematic, and some IRFs have 

questioned the requirements of the rule. CMS data indicate that in 2002 

only 13 percent of IRFs had at least 75 percent of patients in 1 of the 10 

conditions on the list at that time. IRF officials have contended that the list

of conditions in the rule should be updated because of changes in

medicine that have occurred and the concomitant expansion of the 

population that could benefit from inpatient rehabilitation services. 

The Conference Report that accompanied the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003 directed us to issue a report, 

in consultation with experts in the field of physical medicine and 

rehabilitation, to assess whether the current list of conditions represents a 

clinically appropriate standard for defining IRF services and, if not, to

determine which additional conditions should be added to the list.

8

 In this

testimony, I will discuss our April 2005 report, in which we (1) identified 

the conditions—on and off the list—that IRF Medicare patients have and 

the number of IRFs that meet the requirements of the 75 percent rule; 

(2) described how IRFs assess patients for admission and whether CMS 

reviews admission decisions; and (3) evaluated the approach of using a list

of conditions in the 75 percent rule to classify IRFs. 

 6

Fiscal intermediaries are contractors to CMS that verify compliance with the rule and 

conduct reviews for medical necessity to determine whether an individual admission to an

IRF is covered under Medicare.

7

In addition to the 75 percent rule, an IRF must meet six regulatory criteria showing that it

had (1) a Medicare provider agreement; (2) a preadmission screening procedure; (3)

medical, nursing, and therapy services; (4) a plan of treatment for each patient; (5) a 

coordinated multidisciplinary team approach; and (6) a medical director of rehabilitation

with specified training or experience. IRFs must also meet other criteria identified in 42

C.F.R. §412.22 (2004) and 42 C.F.R. §412.25 (2004). 

8

See H.R. Rep. 108-391, at 649 (2003). 

Page 2 GAO-05-825T
In carrying out our work, we analyzed data from the Inpatient 

Rehabilitation Facility—Patient Assessment Instrument (IRF-PAI) records 

on all Medicare patients (the majority of patients in IRFs) admitted to IRFs

in fiscal year 20039 (the most recent data available at the time). The IRFPAI records contain, for each Medicare patient, the impairment group

code10 identifying the patient’s primary condition and the diagnostic code 

from the International Classification of Diseases, Ninth Revision, Clinical

Modification (ICD-9-CM) identifying the patient’s comorbid condition (if

any).11 We used these codes to determine whether we considered the

patient’s primary or comorbid condition to be linked to a condition on the 

list in the rule.12 We also spoke to 12 IRF medical directors, 10 fiscal

intermediary officials, and contracted with the Institute of Medicine (IOM) 

of the National Academies to convene a 1-day meeting of 14 clinical

experts in physical medicine and rehabilitation to evaluate the approach of 

using a list of conditions in the 75 percent rule. We conducted our work 

from May 2004 through April 2005 in accordance with generally accepted

government auditing standards. 

In brief, as noted in the report, in fiscal year 2003 fewer than half of all IRF

Medicare patients were admitted for having a primary condition on the list

in the 75 percent rule. Almost half of all patients with conditions not on 

the list were admitted for orthopedic conditions, and among those the 

largest group was joint replacement patients. The experts IOM convened 

told us that uncomplicated unilateral joint replacement patients rarely 

need to be admitted to an IRF, and our analysis suggested that relatively 

 9

We analyzed the 2003 data using the 13 conditions in the current regulation even though in

fiscal year 2003 there were 10 conditions on the list. Effective July 1, 2004, the number of 

conditions increased from 10 to 13. 

10The impairment group code identifies the medical condition that caused the patient to be

admitted to an IRF, and its sole function is to determine payment rates. As a result, the

impairment group codes describe every patient in an IRF and include medical conditions

that are on the list in the rule as well as those that are not on the list since IRFs may treat

patients with conditions not on the list. In contrast, the list of conditions in the rule

describes the patient population that is to be treated in an IRF to ensure that a facility is 

appropriately classified to justify payment for the level of services furnished.

11As used in this report, a primary condition is the first or foremost medical condition for

which the patient was admitted to an IRF, and other medical conditions may coexist in the 

patient as comorbid conditions, or comorbidities.

12Throughout this testimony, the “list in the rule” refers to the list of 13 conditions as

specified in the 2004 75 percent rule, and when we say that condition is on (or off) the list,

we mean that we have (or have not) been able to link the condition as identified in the 

patient assessment record to a condition on the list in the rule. 

Page 3 GAO-05-825T
few of the Medicare unilateral joint replacement patients had comorbid

conditions that suggested a possible need for the IRF level of services. 

Additionally, we found that only 6 percent of IRFs in fiscal year 2003 were 

able to meet a 75 percent threshold. We also found that IRFs varied in the 

criteria used to assess patients for admission, using patient characteristics

such as functional status, as well as condition. We noted that CMS, 

working through its fiscal intermediaries, had not routinely reviewed IRF 

admission decisions to determine whether they were medically justified, 

although it reported that such reviews could be used to target problem 

areas. The experts IOM convened and other clinical and nonclinical

experts we interviewed differed on whether conditions should be added to

the list in the 75 percent rule. The experts IOM convened questioned the 

strength of the evidence for adding conditions to the list—finding the 

evidence for certain orthopedic conditions particularly weak—and some 

of them reported that little information was available on the need for 

inpatient rehabilitation for cardiac, transplant, pulmonary, or oncology 

patients. They called for further research to identify the types of patients 

that need inpatient rehabilitation and to understand the effectiveness of

IRFs. There was general agreement among all the groups of experts we

interviewed that condition alone is insufficient for identifying appropriate

types of patients for inpatient rehabilitation, since within any condition 

only a subgroup of patients require the level of services of an IRF, and that

functional status should also be considered in addition to condition. 

We concluded that if condition alone is not sufficient for determining 

which types of patients are most appropriate for IRFs, more conditions 

should not be added to the list at the present time and the rule should be 

refined to clarify which types of patients should be in IRFs as opposed to

another setting. As noted in the report, we recommended that CMS ensure

that targeted reviews for medical necessity are conducted for IRF 

admissions; conduct additional activities to encourage research on IRFs; 

and refine the 75 percent rule to more clearly describe the subgroups of

patients within a condition that are appropriate for IRFs, possibly using 

functional status or other factors in addition to condition. CMS generally

agreed with our recommendations. 

The 75 percent rule was established in 1983 to distinguish IRFs from other

facilities for payment purposes. According to CMS, the conditions on the 

list in the rule at that time accounted for 75 percent of the admissions to

IRFs. In June 2002 CMS suspended the enforcement of the 75 percent rule 

after its study of the fiscal intermediaries revealed that they were using 

inconsistent methods to determine whether an IRF was in compliance and 

Background 

Page 4 GAO-05-825T
that in some cases IRFs were not being reviewed for compliance at all. 

CMS standardized the verification process that the fiscal intermediaries 

were to use, and issued a rule—effective July 1, 2004—that increased the

number of conditions from 10 to 13 and provided a 3-year transition 

period, ending in July 2007, to phase in the 75 percent threshold.13

The current payment and review procedures for IRFs were established in 

recent years. The inpatient rehabilitation facility prospective payment 

system (IRF PPS) was implemented in January 2002. Payment is 

contingent on an IRF’s completing the IRF-PAI after admission and 

transmitting the resulting data to CMS. Two basic requirements must be 

met if inpatient hospital stays for rehabilitation services are to be covered: 

(1) the services must be reasonable and necessary, and (2) it must be 

reasonable and necessary to furnish the care on an inpatient hospital

basis, rather than in a less intensive facility, such as a SNF, or on an 

outpatient basis.14 Determinations of whether hospital stays for 

rehabilitation services are reasonable and necessary must be based on an

assessment of each beneficiary’s individual care needs. Beginning in April 

2002, the fiscal intermediaries, the entities that conduct compliance 

reviews, were specifically authorized to conduct reviews for medical

necessity to determine whether an individual admission to an IRF was 

covered under Medicare.15

 13During the transition period, the threshold increases each year (from 50 percent to 60

percent to 65 percent) before the 75 percent threshold is effective. The transition period 

also allows a patient to be counted toward the required threshold if the patient is admitted 

for either a primary or comorbid condition on the list in the rule. At the end of the 

transition period, a patient cannot be counted toward the required threshold on the basis of 

a comorbidity on the list in the rule. 

14Rehabilitative care in a hospital, rather than a SNF or on an outpatient basis, is

considered to be reasonable and necessary when a patient requires a more coordinated, 

intensive program of multiple services than is generally found outside of a hospital 

(Medicare Benefit Policy Manual, chapter 1, Section 110.1). 

15Prior to this time, Quality Improvement Organizations had this authority. CMS Transmittal 

21 made clear that fiscal intermediaries have the authority to review admissions to IRFs.

Page 5 GAO-05-825T
As we reported in April 2005, among the 506,662 Medicare patients 

admitted to an IRF in fiscal year 2003, less than 44 percent were admitted 

with a primary condition on the list in the 75 percent rule. About another 

18 percent of IRF Medicare patients were admitted with a comorbid 

condition that was on the list in the rule. Among the 194,922 IRF Medicare 

patients that did not have a primary or comorbid condition on the list in

the rule, almost half were admitted for orthopedic conditions, and among 

those the largest group was joint replacement patients whose condition 

did not meet the list’s specific criteria. (See figure 1.) 

Fewer Than Half of 

All IRF Medicare 

Patients in 2003 Were 

Admitted for 

Conditions on List in 

Rule, and Few IRFs

Were Able to Meet a 

75 Percent Threshold 

Page 6 GAO-05-825T
Figure 1: Distribution of IRF Medicare Patients Who Did Not Have Condition on List in Rule, by Condition as Defined by 

Impairment Group, Fiscal Year 2003 

a

Includes joint replacement patients who had a unilateral procedure and those who were under age 

85 and therefore did not meet two of the three specific criteria for joint replacements set out in the 75 

percent rule. (See app. I.) Codes from CMS for the third criterion—body mass index—were not

available.

Although some joint replacement patients may need admission to an IRF, 

such as those with comorbidities that affect the patient’s function, our 

analysis showed that few of these patients had comorbidities that

suggested a possible need for the level of services offered by an IRF. Our 

analysis found that 87 percent of joint replacement patients admitted to

IRFs in fiscal year 2003 did not meet the criteria of the rule, and among 

those, over 84 percent did not have any comorbidities that would have

affected the costs of their care based on our analysis of the payment data. 

Because the data we analyzed were from 2003, when enforcement of the 

rule was suspended, we also looked at newly released data from July

through December 2004, after enforcement had resumed, to determine

whether admission patterns had changed. We focused on the largest 

category of patients admitted to IRFs, joint replacement patients, and 

Page 7 GAO-05-825T
found no material change in the admission of joint replacement patients

for the same time periods in 2003 and 2004. Across all IRFs, the percentage

of Medicare patients admitted for a joint replacement declined by 

0.1 percentage point. 

In conjunction with our finding on the number of patients admitted to

IRFs for conditions not on the list in the rule, we determined that only 

6 percent of IRFs in fiscal year 2003 were able to meet a 75 percent 

threshold. Many IRFs were able to meet the lower thresholds that would

be in place early in the transition period, but progressively fewer IRFs 

were able to meet the higher threshold levels. 

As we stated in our report, the criteria IRFs used to assess patients for 

admission varied by facility and included patient characteristics in 

addition to condition. All the IRF officials we interviewed evaluated a 

patient’s function when assessing whether a patient needed the level of 

services of an IRF. Whereas some IRF officials reported that they used 

function to characterize patients who were appropriate for admission 

(e.g., patients with a potential for functional improvement), others said

they used function to characterize patients not appropriate for admission 

(e.g., patients whose functional level was too high, indicating that they 

could go home, or too low, indicating that they needed to be in a SNF).

Almost half of the IRF officials interviewed stated that function was the 

main factor that should be considered in assessing the need for IRF 

services. 

IRFs Vary in the 

Criteria Used to 

Assess Patients for 

Admission, and CMS 

Does Not Routinely 

Review IRFs’ 

Admission Decisions 

IRF officials reported to us that they did not admit all the patients they

assessed. Typically, the IRF received a request from a physician in the 

acute care hospital requesting a medical consultation from an IRF 

physician, or from a hospital discharge planner or social worker indicating 

that they had a potential patient. An IRF staff member—usually a

physician and/or a nurse—conducted an assessment prior to admission to

determine whether to admit a patient. 

CMS, working through its fiscal intermediaries, has not routinely reviewed

IRF admission decisions, although it reported that such reviews could be 

used to target problem areas. Among the 10 fiscal intermediary officials we

interviewed, over half were not conducting reviews of patients admitted to

IRFs. We concluded that the presence of patients in IRFs who may not

need the intense level of services provided by IRFs called for increased 

scrutiny of IRF admissions, which could target problem areas and 

vulnerabilities and thereby reduce the number of inappropriate admissions

Page 8 GAO-05-825T
in the future. We recommended that CMS ensure that its fiscal 

intermediaries routinely conduct targeted reviews for medical necessity

for IRF admissions. CMS agreed that targeted reviews are necessary and 

said that it expected its contractors to direct their resources toward areas

of risk. It also reported that it has expanded its efforts to provide greater

oversight of IRF admissions through local policies that have been 

implemented or are being developed by the fiscal intermediaries. 

As we reported, the experts IOM convened and other experts we

interviewed differed on whether conditions should be added to the list in

the 75 percent rule but agreed that condition alone does not provide 

sufficient criteria to identify types of patients appropriate for IRFs. 

The experts IOM convened generally questioned the strength of the 

evidence for adding conditions to the list in the rule. They reported that

the evidence on the benefits of IRF services is variable, particularly for 

certain orthopedic conditions, and some of them reported that little

information was available on the need for inpatient rehabilitation for

cardiac, transplant, pulmonary, or oncology conditions. In general, they

reported that, except for a few subpopulations, uncomplicated, unilateral

joint replacement patients rarely need to be admitted to an IRF. Most of

them called for further research to identify the types of patients that need

inpatient rehabilitation and to understand the effectiveness of IRFs in

comparison with other settings of care. IRF officials we interviewed did 

not agree on whether conditions, including a broader category of joint

replacements, should be added to the list in the rule. Half of them

suggested that joint replacement be more broadly defined to include more 

patients saying, for example, that the current requirements were too 

restrictive and arbitrary. Others said that unilateral joint replacement 

patients were not generally appropriate for IRFs. We recommended that

CMS conduct additional activities to encourage research on the 

effectiveness of intensive inpatient rehabilitation and factors that predict 

patient need for these services. CMS agreed and said that it has expanded 

its activities to guide future research efforts by encouraging government

research organizations, academic institutions, and the rehabilitation 

industry to conduct both general and targeted research, and plans to

collaborate with the National Institutes of Health to determine how to best 

promote research. 

Experts Differed on

Adding Conditions to

List in Rule but

Agreed That 

Condition Alone Does 

Not Provide Sufficient 

Criteria 

There was general agreement among all the groups of experts we

interviewed, including the experts IOM convened, that condition alone is

insufficient for identifying appropriate types of patients for inpatient 

Page 9 GAO-05-825T
rehabilitation, because not all patients with a condition on the list need to

be in an IRF. For example, stroke is on the list, but not all stroke patients

need to go to an IRF after their hospitalization. Similarly, cardiac condition

is not on the list, but some cardiac patients may need to be admitted to an

IRF. Among the experts convened by IOM, functional status was identified 

most frequently as the information required in addition to condition. Half

of them commented on the need to add information about functional

status, such as functional need, functional decline, motor and cognitive 

function, and functional disability. However, some of the experts 

convened by IOM recognized the challenge of operationalizing a measure 

of function, and some experts questioned the ability of the current

assessment tools to predict which types of patients will improve if treated

in an IRF.

16

We concluded that if condition alone is not sufficient for determining 

which types of patients are most appropriate for IRFs, more conditions 

should not be added to the list at the present time, and that future efforts 

should refine the rule to increase its clarity about which types of patients

are most appropriate for IRFs. We recommended that CMS use the 

information obtained from reviews for medical necessity, research 

activities, and other sources to refine the rule to describe more thoroughly 

the subgroups of patients within a condition that require IRF services, 

possibly using functional status or other factors, in addition to condition.

CMS stated that while it expected to follow our recommendation, it would

need to give this action careful consideration because it could result in a 

more restrictive policy than the present regulations, and noted that future 

research could guide the agency’s description of subgroups. 

As we stated in our report, we believe that action to conduct reviews for 

medical necessity and to produce more information about the 

effectiveness of inpatient rehabilitation could support future efforts to

refine the rule over time to increase its clarity about which types of

patients are most appropriate for IRFs. These actions could help to ensure 

that Medicare does not pay IRFs for patients who could be treated in a less 

intensive setting and does not misclassify facilities for payment. 

Concluding

Observations 

 16For example, one fiscal intermediary official reported that the instrument that is currently

used does not adequately measure progress in small increments, such as a quadriplegic

patient might experience. Another respondent also reported that the current instrument

only measures functional status at a point in time, but does not predict functional

improvement.

Page 10 GAO-05-825T
Madam Chairman, this concludes my prepared statement. I would be 

happy to respond to any questions you or other Members of the 

Subcommittee may have at this time. 

For further information about this testimony, please contact Marjorie

Kanof at (202) 512-7114. Linda Kohn and Roseanne Price also made key 

contributions to this statement.

Contact and Staff 

Acknowledgments 

Page 11 GAO-05-825T
Page 12 GAO-05-825T

Appendix I: List of Conditions in CMS’s 75 

Percent Rule 

A facility may be classified as an IRF if it can show that, during a 12-month 

period1

 at least 75 percent of all its patients, including its Medicare 

patients, required intensive rehabilitation services for the treatment of one 

or more of the following conditions:2

1. Stroke. 

2. Spinal cord injury. 

3. Congenital deformity. 

4. Amputation. 

5. Major multiple trauma. 

6. Fracture of femur (hip fracture). 

7. Brain injury. 

8. Neurological disorders (including multiple sclerosis, motor neuron 

diseases, polyneuropathy, muscular dystrophy, and Parkinson’s 

disease). 

9. Burns.

10. Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and 

seronegative arthropathies resulting in significant functional 

impairment of ambulation and other activities of daily living that have 

not improved after an appropriate, aggressive, and sustained course of

outpatient therapy services or services in other less intensive 

rehabilitation settings immediately preceding the inpatient 

rehabilitation admission or that result from a systemic disease 

activation immediately before admission, but have the potential to

improve with more intensive rehabilitation.

11. Systemic vasculidities with joint inflammation, resulting in significant 

functional impairment of ambulation and other activities of daily living 

that have not improved after an appropriate, aggressive, and sustained 

course of outpatient therapy services or services in other less intensive 

 1

The time period is defined by CMS or the CMS contractor. 

2

See 42 C.F.R. §412.23(b)(2)(iii) (2004). 
rehabilitation settings immediately preceding the inpatient 

rehabilitation admission or that result from a systemic disease 

activation immediately before admission, but have the potential to

improve with more intensive rehabilitation.

12. Severe or advanced osteoarthritis (osteoarthritis or degenerative joint 

disease) involving two or more major weight bearing joints (elbow, 

shoulders, hips, or knees, but not counting a joint with a prosthesis) 

with joint deformity and substantial loss of range of motion, atrophy of

muscles surrounding the joint, significant functional impairment of

ambulation and other activities of daily living that have not improved 

after the patient has participated in an appropriate, aggressive, and 

sustained course of outpatient therapy services or services in other 

less intensive rehabilitation settings immediately preceding the 

inpatient rehabilitation admission but have the potential to improve 

with more intensive rehabilitation. (A joint replaced by a prosthesis no 

longer is considered to have osteoarthritis, or other arthritis, even

though this condition was the reason for the joint replacement.) 

13. Knee or hip joint replacement, or both, during an acute hospitalization 

immediately preceding the inpatient rehabilitation stay and also meet 

one or more of the following specific criteria: 

a. The patient underwent bilateral knee or bilateral hip joint

replacement surgery during the acute hospital admission 

immediately preceding the IRF admission. 

b. The patient is extremely obese, with a body mass index of at least 50

at the time of admission to the IRF. 

c. The patient is age 85 or older at the time of admission to the IRF. 

(290472) Page 13 GAO-05-825T
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Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

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