CMS-1608-F 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Part 412 

[CMS-1608-F] 

RIN 0938-AS09 

Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for 

Federal Fiscal Year 2015 

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule. 

SUMMARY: This final rule updates the prospective payment rates for inpatient rehabilitation 

facilities (IRFs) for federal fiscal year (FY) 2015 as required by the statute. This final rule 

finalizes a policy to collect data on the amount and mode (that is, Individual, Concurrent, Group, 

and Co-Treatment) of therapy provided in the IRF setting according to therapy discipline, revises 

the list of diagnosis and impairment group codes that presumptively meet the “60 percent rule” 

compliance criteria, provides a way for IRFs to indicate on the Inpatient Rehabilitation FacilityPatient Assessment Instrument (IRF-PAI) form whether the prior treatment and severity 

requirements have been met for arthritis cases to presumptively meet the “60 percent rule” 

compliance criteria, and revises and updates quality measures and reporting requirements under 

the IRF quality reporting program (QRP). This rule also delays the effective date for the 

revisions to the list of diagnosis codes that are used to determine presumptive compliance under 

the “60 percent rule” that were finalized in FY 2014 IRF PPS final rule and adopts the revisions 

to the list of diagnosis codes that are used to determine presumptive compliance under the “60 

percent rule” that are finalized in this rule. This final rule also addresses the implementation of 
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the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM), 

for the IRF prospective payment system (PPS), which will be effective when ICD-10-CM 

becomes the required medical data code set for use on Medicare claims and IRF-PAI 

submissions.

DATES: The updated IRF prospective payment rates are applicable for IRF discharges occurring 

on or after October 1, 2014, and on or before September 30, 2015 (FY 2015). In addition, the 

revisions to the list of diagnosis codes that are used to determine presumptive compliance under 

the “60 percent rule” that were finalized in FY 2014 IRF PPS final rule (78 FR 47860) and the 

revisions to the lists of diagnosis codes and impairment group codes finalized in this rule are 

applicable for compliance review periods beginning on or after October 1, 2015. The change to 

the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI) form to indicate 

whether the prior treatment and severity requirements have been met for arthritis cases to 

presumptively meet the “60 percent rule” compliance criteria is applicable October 1, 2015. The 

implementation of the International Classification of Diseases, 10th Revision, Clinical 

Modification (ICD-10-CM), for the IRF prospective payment system (PPS), is applicable when 

ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRFPAI submissions. The updated quality measures and reporting requirements under the IRF QRP 

are applicable for IRF discharges occurring on or after October 1, 2014. The two new IRF 

quality measures will require data submission beginning with admissions and discharges occurring 

on or after January 1, 2015: (1) National Healthcare Safety Network (NHSN) Facility-Wide 

Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia 

Outcome Measure (NQF #1716); and (2) National Healthcare Safety Network (NHSN) FacilityWide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure 
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(NQF #1717). 

FOR FURTHER INFORMATION CONTACT: 

Gwendolyn Johnson, (410) 786-6954, for general information. 

Charles Padgett, (410) 786-2811, for information about the quality reporting program. 

Kadie Thomas, (410) 786-0468, or Susanne Seagrave, (410) 786-0044, for information about the 

payment policies and the proposed payment rates. 

SUPPLEMENTARY INFORMATION: 

 The IRF PPS Addenda along with other supporting documents and tables referenced in 

this final rule are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

Executive Summary 

A. Purpose 

This final rule updates the payment rates for IRFs for FY 2015 (that is, for discharges 

occurring on or after October 1, 2014, and on or before September 30, 2015) as required under 

section 1886(j)(3)(C) of the Social Security Act (the Act). Section 1886(j)(5) of the Act requires 

the Secretary to publish in the Federal Register on or before the August 1 that precedes the start 

of each fiscal year, the classification and weighting factors for the IRF PPS’s case-mix groups 

and a description of the methodology and data used in computing the prospective payment rates 

for that fiscal year. It also makes policy changes to programs associated with IRFs. 

B. Summary of Major Provisions 

 In this final rule, we use the methods described in the FY 2014 IRF PPS final rule 

(78 FR 47860) to update the federal prospective payment rates for FY 2015 using updated 

FY 2013 IRF claims and the most recent available IRF cost report data. We are also finalizing a 
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policy to collect data on the amount and mode (that is, Individual, Concurrent, Group, and CoTreatment) of therapy provided in the IRF setting according to therapy discipline, revising the 

list of impairment group codes that presumptively meet the “60 percent rule” compliance criteria, 

providing a way for IRFs to indicate on the Inpatient Rehabilitation Facility-Patient Assessment 

Instrument (IRF-PAI) form whether the prior treatment and severity requirements have been met 

for arthritis cases to presumptively meet the “60 percent rule” compliance criteria, and revising 

and updating quality measures and reporting requirements under the IRF QRP. In this final rule, 

we also address the implementation of the International Classification of Diseases, 10th 

Revision, Clinical Modification (ICD-10-CM), for the IRF prospective payment system (PPS), 

effective when ICD-10-CM becomes the required medical data code set for use on Medicare 

claims and IRF-PAI submissions. 

C. Summary of Impacts 

Provision Description Transfers 

FY 2015 IRF PPS payment rate 

update 

The overall economic impact of this final rule is an 

estimated $180 million in increased payments from the 

Federal government to IRFs during FY 2015. 

Provision Description Costs 

New quality reporting program 

requirements 

The total costs in FY 2015 for IRFs as a result of the new 

quality reporting requirements are estimated to be 

$852,238 

New Individual, Concurrent, 

Group, and Co-Treatment Therapy 

reporting requirements 

The total costs in FY 2016 for IRFs as a result of the new 

Individual, Concurrent, Group, and Co-Treatment 

reporting requirements are estimated to be $1.2 million. 

 To assist readers in referencing sections contained in this document, we are providing the 

following Table of Contents. 
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Table of Contents 

I. Background 

 A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment 

System (IRF PPS) 

 B. Provisions of the Affordable Care Act Affecting the IRF PPS in FY 2012 and 

Beyond 

 C. Operational Overview of the Current IRF PPS 

II. Summary of Provisions of the Proposed Rule 

III. Analysis and Responses to Public Comments 

IV. Update to the Case-Mix Group (CMG) Relative Weights and Average Length of Stay 

Values for FY 2015 

V. Freezing the Facility-Level Adjustment Factors at FY 2014 Levels 

A. Background on Facility-Level Adjustments 

 B. Freezing the Facility-Level Adjustment Factors at FY 2014 Levels 

VI. FY 2015 IRF PPS Federal Prospective Payment Rates 

A. Market Basket Increase Factor, Productivity Adjustment, and Other Adjustment 

for FY 2015 

B. Development of an IRF-Specific Market Basket 

C. Secretary’s Final Recommendation 

D. Labor-Related Share for FY 2015 

 E. Wage Adjustment 

F. Description of the IRF Standard Conversion Factor and Payment Rates for 

FY 2015 
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G. Example of the Methodology for Adjusting the Federal Prospective Payment 

Rates 

VII. Update to Payments for High-Cost Outliers under the IRF PPS 

 A. Update to the Outlier Threshold Amount for FY 2015 

 B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/Rural Averages 

VIII. Refinements to the Presumptive Compliance Methodology 

A. Background on the Compliance Percentage 

B. Changes to the Diagnosis Codes That Are Used to Determine Presumptive 

Compliance 

 C. Changes to the Impairment Group Codes That Meet Presumptive Compliance 

Criteria 

IX. Data Collection of the Amount and Mode (Individual, Concurrent, Group, and 

Co-Treatment) of Therapy Provided in IRFs According to Occupational, Speech, and Physical 

Therapy Disciplines 

X. Revision to the IRF-PAI for Arthritis Conditions 

XI. International Classification of Diseases, 10th Revision, Clinical Modification 

(ICD-10-CM), Conversion 

A. Background on the Use of Diagnosis Information in the IRF PPS 

B. Conversion of Diagnosis Information from ICD-9-CM to ICD-10-CM for the IRF 

PPS 

XII. Revisions and Updates to the Quality Reporting Program for IRFs 
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A. Background and Statutory Authority 

B. Quality Measures Previously Finalized for and Currently Used in the IRF Quality 

Reporting Program 

C. New IRF QRP Quality Measures Affecting the FY 2017 Adjustments to the IRF 

PPS Annual Increase Factor and Beyond 

D. IRF QRP Quality Measures and Concepts under Consideration for Future Years 

E. Timeline for Data Submission for New IRF QRP Quality Measures Affecting the 

FY 2017 Adjustments to the IRF PPS Annual Increase Factor 

F. Timing for New IRFs to Begin Reporting Quality Data under the IRF QRP 

Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase Factor and Beyond 

G. IRF QRP Reconsideration and Appeals Procedures for the FY 2016 Adjustments 

to the IRF PPS Annual Increase Factor and Beyond 

H. IRF QRP Data Submission Exception or Extension Requirements for the FY 2017 

Adjustments to the IRF PPS Annual Increase Factor and Beyond 

I. Public Display of Quality Measure Data for the IRF QRP 

J. IRF QRP Data Completion Thresholds for the FY 2016 Adjustments to the IRF 

PPS Annual Increase Factor and Beyond 

K. Data Validation Process for the FY 2017 Adjustments to the IRF PPS Annual 

Increase Factor and Beyond 

L. Electronic Health Record and Health Information Exchange 

M. Method for Applying the Reduction to the FY 2015 IRF Increase Factor for IRFs 

That Fail to Meet the Quality Reporting Requirements 

XIII. Miscellaneous Comments 
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XIV. Provisions of the Final Regulations 

XV. Collection of Information Requirements 

A. ICRs Regarding the IRF QRP 

B. ICRs Regarding Individual, Concurrent, Group, and Co-Treatment Therapy Data 

on the IRF-PAI 

XVI. Regulatory Impact Analysis 

A. Statement of Need 

 B. Overall Impacts 

 C. Detailed Economic Analysis 

 D. Alternatives Considered 

 E. Accounting Statement 

F. Conclusion 

Acronyms, Abbreviations, and Short Forms 

 Because of the many terms to which we refer by acronym, abbreviation, or short form in 

this final rule, we are listing the acronyms, abbreviation, and short forms used and their 

corresponding terms in alphabetical order below. 

The Act The Social Security Act 

ADC Average Daily Census 

The Affordable Care Act Patient Protection and Affordable Care Act (Pub. L. 111-148, 

enacted on March 23, 2010) 

AHIMA American Health Information Management Association 

ASCA Administrative Simplification Compliance Act (Pub. L. 107-105, 

enacted on December 27, 2002) 
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BBA Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on 

August 5, 1997) 

BLS U.S. Bureau of Labor Statistics 

CAH Critical Access Hospitals 

CAUTI Catheter-Associated Urinary Tract Infection 

CBSA Core-Based Statistical Area 

CCR Cost-to-Charge Ratio 

CDC The Centers for Disease Control and Prevention 

CDI Clostridium difficile Infection 

CFR Code of Federal Regulations 

CMG Case-Mix Group 

CMS Centers for Medicare & Medicaid Services 

DRA Deficit Reduction Act of 2005 (Pub. L. 109-171, enacted 

February 8, 2006) 

DSH Disproportionate Share Hospital 

DSH PP Disproportionate Share Patient Percentage 

EHR Electronic Health Record 

ESRD End-Stage Renal Disease 

FR Federal Register 

FY Federal Fiscal Year 

GEMs General Equivalence Mappings 

HAI Healthcare Associated Infection 

HCP Health Care Personnel 
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HHS U.S. Department of Health & Human Services 

HIE Health Information Exchange 

HIPAA Health Insurance Portability and Accountability Act of 1996 

(Pub. L. 104-191, enacted on August 21, 1996) 

ICD-9-CM The International Classification of Diseases, 9th Revision, Clinical 

Modification 

ICD-10-CM The International Classification of Diseases, 10th Revision, 

Clinical Modification 

ICRs Information Collection Requirements 

IGC Impairment Group Code 

IGI IHS Global Insight 

IPF Inpatient Psychiatric Facility 

IPPS Inpatient Prospective Payment System 

IQR Inpatient Quality Reporting Program 

IRF Inpatient Rehabilitation Facility 

IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment Instrument 

IRF PPS Inpatient Rehabilitation Facility Prospective Payment System 

IRVEN Inpatient Rehabilitation Validation and Entry 

LIP Low-Income Percentage 

LPN Licensed Practical Nurse 

LTCH Long-Term Care Hospital 

MAC Medicare Administrative Contractor 

MAP Measure Applications Partnership 
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MA (Medicare Part C) Medicare Advantage 

MedPAC Medicare Payment Advisory Commission 

MDS Minimum Data Set 

MFP Multifactor Productivity 

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 

(Pub. L. 110-173, enacted on December 29, 2007) 

MRSA Methicillin-Resistant Staphylococcus aureus 

MUC Measures under Consideration 

NHSN National Healthcare Safety Network 

NPP National Priorities Partnership 

NQF National Quality Forum 

OMB Office of Management and Budget 

ONC Office of the National Coordinator for Health Information 

Technology 

PAI Patient Assessment Instrument 

PPS Prospective Payment System 

PRA Paperwork Reduction Act of 1995 (Pub. L. 104-13, enacted on 

 May 22, 1995) 

PRRB Provider Reimbursement Review Board 

QM Quality Measure 

QRP Quality Reporting Program 

RIA Regulatory Impact Analysis 

RIC Rehabilitation Impairment Category 
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RFA Regulatory Flexibility Act (Pub. L. 96-354, enacted on 

September 19, 1980) 

RN Registered Nurse 

RPL Rehabilitation, Psychiatric, and Long-Term Care market basket 

SSI Supplemental Security Income 

 I. Background 

A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment System 

(IRF PPS) 

Section 1886(j) of the Act provides for the implementation of a per-discharge prospective 

payment system (PPS) for inpatient rehabilitation hospitals and inpatient rehabilitation units of a 

hospital (collectively, hereinafter referred to as IRFs). Payments under the IRF PPS encompass 

inpatient operating and capital costs of furnishing covered rehabilitation services (that is, routine, 

ancillary, and capital costs), but not direct graduate medical education costs, costs of approved 

nursing and allied health education activities, bad debts, and other services or items outside the 

scope of the IRF PPS. Although a complete discussion of the IRF PPS provisions appears in the 

original FY 2002 IRF PPS final rule (66 FR 41316) and the FY 2006 IRF PPS final rule (70 FR 

47880), we are providing below a general description of the IRF PPS for fiscal years (FYs) 2002 

through 2013. 

Under the IRF PPS from FY 2002 through FY 2005, as described in the FY 2002 IRF 

PPS final rule (66 FR 41316), the federal prospective payment rates were computed across 

100 distinct case-mix groups (CMGs). We constructed 95 CMGs using rehabilitation 

impairment categories (RICs), functional status (both motor and cognitive), and age (in some 

cases, cognitive status and age may not be a factor in defining a CMG). In addition, we 
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constructed five special CMGs to account for very short stays and for patients who expire in the 

IRF. 

 For each of the CMGs, we developed relative weighting factors to account for a patient’s 

clinical characteristics and expected resource needs. Thus, the weighting factors accounted for 

the relative difference in resource use across all CMGs. Within each CMG, we created tiers 

based on the estimated effects that certain comorbidities would have on resource use. 

 We established the federal PPS rates using a standardized payment conversion factor 

(formerly referred to as the budget-neutral conversion factor). For a detailed discussion of the 

budget-neutral conversion factor, please refer to our FY 2004 IRF PPS final rule 

(68 FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 47880), we discussed 

in detail the methodology for determining the standard payment conversion factor. 

 We applied the relative weighting factors to the standard payment conversion factor to 

compute the unadjusted federal prospective payment rates under the IRF PPS from FYs 2002 

through 2005. Within the structure of the payment system, we then made adjustments to account 

for interrupted stays, transfers, short stays, and deaths. Finally, we applied the applicable 

adjustments to account for geographic variations in wages (wage index), the percentage of lowincome patients, location in a rural area (if applicable), and outlier payments (if applicable) to the 

IRFs’ unadjusted federal prospective payment rates. 

 For cost reporting periods that began on or after January 1, 2002, and before 

October 1, 2002, we determined the final prospective payment amounts using the transition 

methodology prescribed in section 1886(j)(1) of the Act. Under this provision, IRFs 

transitioning into the PPS were paid a blend of the federal IRF PPS rate and the payment that the 

IRFs would have received had the IRF PPS not been implemented. This provision also allowed 
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IRFs to elect to bypass this blended payment and immediately be paid 100 percent of the federal 

IRF PPS rate. The transition methodology expired as of cost reporting periods beginning on or 

after October 1, 2002 (FY 2003), and payments for all IRFs now consist of 100 percent of the 

federal IRF PPS rate. 

 We established a CMS website as a primary information resource for the IRF PPS which 

is available at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/index.html. The website may be accessed to download or view 

publications, software, data specifications, educational materials, and other information pertinent 

to the IRF PPS. 

Section 1886(j) of the Act confers broad statutory authority upon the Secretary to propose 

refinements to the IRF PPS. In the FY 2006 IRF PPS final rule (70 FR 47880) and in correcting 

amendments to the FY 2006 IRF PPS final rule (70 FR 57166) that we published on 

September 30, 2005, we finalized a number of refinements to the IRF PPS case-mix 

classification system (the CMGs and the corresponding relative weights) and the case-level and 

facility-level adjustments. These refinements included the adoption of the Office of 

Management and Budget’s (OMB) Core-Based Statistical Area (CBSA) market definitions, 

modifications to the CMGs, tier comorbidities, and CMG relative weights, implementation of a 

new teaching status adjustment for IRFs, revision and rebasing of the market basket index used 

to update IRF payments, and updates to the rural, low-income percentage (LIP), and high-cost 

outlier adjustments. Beginning with the FY 2006 IRF PPS final rule (70 FR 47908 through 

47917), the market basket index used to update IRF payments is a market basket reflecting the 

operating and capital cost structures for freestanding IRFs, freestanding inpatient psychiatric 

facilities (IPFs), and long-term care hospitals (LTCHs) (hereafter referred to as the rehabilitation, 
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psychiatric, and long-term care (RPL) market basket). Any reference to the FY 2006 IRF PPS 

final rule in this final rule also includes the provisions effective in the correcting amendments. 

For a detailed discussion of the final key policy changes for FY 2006, please refer to the 

FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166). 

 In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined the IRF PPS casemix classification system (the CMG relative weights) and the case-level adjustments, to ensure 

that IRF PPS payments would continue to reflect as accurately as possible the costs of care. For 

a detailed discussion of the FY 2007 policy revisions, please refer to the FY 2007 IRF PPS final 

rule (71 FR 48354). 

 In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the federal prospective 

payment rates and the outlier threshold, revised the IRF wage index policy, and clarified how we 

determine high-cost outlier payments for transfer cases. For more information on the policy 

changes implemented for FY 2008, please refer to the FY 2008 IRF PPS final rule 

(72 FR 44284), in which we published the final FY 2008 IRF federal prospective payment rates. 

 After publication of the FY 2008 IRF PPS final rule (72 FR 44284), section 115 of the 

Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173, enacted on 

December 29, 2007) (MMSEA), amended section 1886(j)(3)(C) of the Act to apply a zero 

percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after 

April 1, 2008. Section 1886(j)(3)(C) of the Act required the Secretary to develop an increase 

factor to update the IRF federal prospective payment rates for each FY. Based on the legislative 

change to the increase factor, we revised the FY 2008 federal prospective payment rates for IRF 

discharges occurring on or after April 1, 2008. Thus, the final FY 2008 IRF federal prospective 

payment rates that were published in the FY 2008 IRF PPS final rule (72 FR 44284) were 
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effective for discharges occurring on or after October 1, 2007, and on or before March 31, 2008; 

and the revised FY 2008 IRF federal prospective payment rates were effective for discharges 

occurring on or after April 1, 2008, and on or before September 30, 2008. The revised FY 2008 

federal prospective payment rates are available on the CMS website at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. 

 In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG relative weights, 

the average length of stay values, and the outlier threshold; clarified IRF wage index policies 

regarding the treatment of “New England deemed” counties and multi-campus hospitals; and 

revised the regulation text in response to section 115 of the MMSEA to set the IRF compliance 

percentage at 60 percent (the “60 percent rule”) and continue the practice of including 

comorbidities in the calculation of compliance percentages. We also applied a zero percent 

market basket increase factor for FY 2009 in accordance with section 115 of the MMSEA. For 

more information on the policy changes implemented for FY 2009, please refer to the FY 2009 

IRF PPS final rule (73 FR 46370), in which we published the final FY 2009 IRF federal 

prospective payment rates. 

In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting amendments to the 

FY 2010 IRF PPS final rule (74 FR 50712) that we published on October 1, 2009, we updated 

the federal prospective payment rates, the CMG relative weights, the average length of stay 

values, the rural, LIP, teaching status adjustment factors, and the outlier threshold; implemented 

new IRF coverage requirements for determining whether an IRF claim is reasonable and 

necessary; and revised the regulation text to require IRFs to submit patient assessments on 

Medicare Advantage (MA) (Medicare Part C) patients for use in the 60 percent rule calculations. 
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Any reference to the FY 2010 IRF PPS final rule in this final rule also includes the provisions 

effective in the correcting amendments. For more information on the policy changes 

implemented for FY 2010, please refer to the FY 2010 IRF PPS final rule (74 FR 39762 and 

74 FR 50712), in which we published the final FY 2010 IRF federal prospective payment rates. 

After publication of the FY 2010 IRF PPS final rule (74 FR 39762), section 3401(d) of 

the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), as 

amended by section 10319 of the same Act and by section 1105 of the Health Care and 

Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010) 

(collectively, hereafter referred to as “The Affordable Care Act”), amended section 1886(j)(3)(C) 

of the Act and added section 1886(j)(3)(D) of the Act. Section 1886(j)(3)(C) of the Act requires 

the Secretary to estimate a multi-factor productivity adjustment to the market basket increase 

factor, and to apply other adjustments as defined by the Act. The productivity adjustment 

applies to FYs from 2012 forward. The other adjustments apply to FYs 2010 to 2019. 

Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act defined the adjustments that 

were to be applied to the market basket increase factors in FYs 2010 and 2011. Under these 

provisions, the Secretary was required to reduce the market basket increase factor in FY 2010 by 

a 0.25 percentage point adjustment. Notwithstanding this provision, in accordance with 

section 3401(p) of the Affordable Care Act, the adjusted FY 2010 rate was only to be applied to 

discharges occurring on or after April 1, 2010. Based on the self-implementing legislative 

changes to section 1886(j)(3) of the Act, we adjusted the FY 2010 federal prospective payment 

rates as required, and applied these rates to IRF discharges occurring on or after April 1, 2010, 

and on or before September 30, 2010. Thus, the final FY 2010 IRF federal prospective payment 

rates that were published in the FY 2010 IRF PPS final rule (74 FR 39762) were used for 
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discharges occurring on or after October 1, 2009, and on or before March 31, 2010, and the 

adjusted FY 2010 IRF federal prospective payment rates applied to discharges occurring on or 

after April 1, 2010, and on or before September 30, 2010. The adjusted FY 2010 federal 

prospective payment rates are available on the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. 

In addition, sections 1886(j)(3)(C) and (D) of the Act also affected the FY 2010 IRF 

outlier threshold amount because they required an adjustment to the FY 2010 RPL market basket 

increase factor, which changed the standard payment conversion factor for FY 2010. 

Specifically, the original FY 2010 IRF outlier threshold amount was determined based on the 

original estimated FY 2010 RPL market basket increase factor of 2.5 percent and the standard 

payment conversion factor of $13,661. However, as adjusted, the IRF prospective payments are 

based on the adjusted RPL market basket increase factor of 2.25 percent and the revised standard 

payment conversion factor of $13,627. To maintain estimated outlier payments for FY 2010 

equal to the established standard of 3 percent of total estimated IRF PPS payments for FY 2010, 

we revised the IRF outlier threshold amount for FY 2010 for discharges occurring on or after 

April 1, 2010, and on or before September 30, 2010. The revised IRF outlier threshold amount 

for FY 2010 was $10,721. 

Sections 1886(j)(3)(c)(ii)(II) and 1886(j)(3)(D)(i) of the Act also required the Secretary 

to reduce the market basket increase factor in FY 2011 by a 0.25 percentage point adjustment. 

The FY 2011 IRF PPS notice (75 FR 42836) and the correcting amendments to the FY 2011 IRF 

PPS notice (75 FR 70013) described the required adjustments to the FY 2011 and FY 2010 IRF 

PPS federal prospective payment rates and outlier threshold amount for IRF discharges occurring 
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on or after April 1, 2010, and on or before September 30, 2011. It also updated the FY 2011 

federal prospective payment rates, the CMG relative weights, and the average length of stay 

values. Any reference to the FY 2011 IRF PPS notice in this final rule also includes the 

provisions effective in the correcting amendments. For more information on the FY 2010 and 

FY 2011 adjustments or the updates for FY 2011, please refer to the FY 2011 IRF PPS notice 

(75 FR 42836 and 75 FR 70013). 

In the FY 2012 IRF PPS final rule (76 FR 47836), we updated the IRF federal 

prospective payment rates, rebased and revised the RPL market basket, and established a new 

quality reporting program for IRFs in accordance with section 1886(j)(7) of the Act. We also 

revised regulation text for the purpose of updating and providing greater clarity. For more 

information on the policy changes implemented for FY 2012, please refer to the FY 2012 IRF 

PPS final rule (76 FR 47836), in which we published the final FY 2012 IRF federal prospective 

payment rates. 

The FY 2013 IRF PPS notice (77 FR 44618) described the required adjustments to the 

FY 2013 federal prospective payment rates and outlier threshold amount for IRF discharges 

occurring on or after October 1, 2012, and on or before September 30, 2013. It also updated the 

FY 2013 federal prospective payment rates, the CMG relative weights, and the average length of 

stay values. For more information on the updates for FY 2013, please refer to the FY 2013 

IRF PPS notice (77 FR 44618). 

In the FY 2014 IRF PPS final rule (78 FR 47860), we updated the federal prospective 

payment rates, the CMG relative weights, and the outlier threshold amount. We also updated the 

facility-level adjustment factors using an enhanced estimation methodology, revised the list of 

diagnosis codes that count toward an IRF’s 60 percent rule compliance calculation to determine 
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“presumptive compliance,” revised sections of the Inpatient Rehabilitation Facility-Patient 

Assessment Instrument (IRF-PAI), revised requirements for acute care hospitals that have IRF 

units, clarified the IRF regulation text regarding limitation of review, updated references to 

previously changed sections in the regulations text, and revised and updated quality measures 

and reporting requirements under the IRF quality reporting program. For more information on 

the policy changes implemented for FY 2014, please refer to the FY 2014 IRF PPS final rule 

(78 FR 47860), in which we published the final FY 2014 IRF federal prospective payment rates. 

B. Provisions of the Affordable Care Act Affecting the IRF PPS in FY 2012 and Beyond 

 The Affordable Care Act included several provisions that affect the IRF PPS in FYs 2012 

and beyond. In addition to what was discussed above, section 3401(d) of the Affordable Care 

Act also added section 1886(j)(3)(C)(ii)(I) (providing for a “productivity adjustment” for fiscal 

year 2012 and each subsequent fiscal year). The productivity adjustment for FY 2015 is 

discussed in section VI.A. of this final rule. Section 3401(d) of the Affordable Care Act requires 

an additional 0.2 percentage point adjustment to the IRF increase factor for FY 2015, as 

discussed in section VI.A. of this final rule. Section 1886(j)(3)(C)(ii)(II) of the Act notes that the 

application of these adjustments to the market basket update may result in an update that is less 

than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment rates 

for the preceding fiscal year. 

 Section 3004(b) of the Affordable Care Act also addressed the IRF PPS program. It 

reassigned the previously designated section 1886(j)(7) of the Act to section 1886(j)(8) and 

inserted a new section 1886(j)(7), which contains requirements for the Secretary to establish a 

quality reporting program for IRFs. Under that program, data must be submitted in a form and 

manner and at a time specified by the Secretary. Beginning in FY 2014, section 1886(j)(7)(A)(i) 
CMS-1608-F 07/29/14 21

of the Act requires the application of a 2 percentage point reduction of the applicable market 

basket increase factor for IRFs that fail to comply with the quality data submission requirements. 

Application of the 2 percentage point reduction may result in an update that is less than 0.0 for a 

fiscal year and in payment rates for a fiscal year being less than such payment rates for the 

preceding fiscal year. Reporting-based reductions to the market basket increase factor will not 

be cumulative; they will only apply for the FY involved. 

 Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary is generally required to 

select quality measures for the IRF quality reporting program from those that have been endorsed 

by the consensus-based entity which holds a performance measurement contract under section 

1890(a) of the Act. This contract is currently held by the National Quality Forum (NQF). So 

long as due consideration is given to measures that have been endorsed or adopted by a 

consensus-based organization, section 1886(j)(7)(D)(ii) of the Act authorizes the Secretary to 

select non-endorsed measures for specified areas or medical topics when there are no feasible or 

practical endorsed measure(s). 

 Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for making 

the IRF PPS quality reporting data available to the public. In so doing, the Secretary must ensure 

that IRFs have the opportunity to review any such data prior to its release to the public. Future 

rulemaking will address these public reporting obligations. 

C. Operational Overview of the Current IRF PPS 

 As described in the FY 2002 IRF PPS final rule, upon the admission and discharge of a 

Medicare Part A Fee-for-Service patient, the IRF is required to complete the appropriate sections 

of a patient assessment instrument (PAI), designated as the IRF-PAI. In addition, beginning with 

IRF discharges occurring on or after October 1, 2009, the IRF is also required to complete the 
CMS-1608-F 07/29/14 22

appropriate sections of the IRF-PAI upon the admission and discharge of each Medicare Part C 

(Medicare Advantage) patient, as described in the FY 2010 IRF PPS final rule. All required data 

must be electronically encoded into the IRF-PAI software product. Generally, the software 

product includes patient classification programming called the Grouper software. The Grouper 

software uses specific IRF-PAI data elements to classify (or group) patients into distinct CMGs 

and account for the existence of any relevant comorbidities. 

 The Grouper software produces a 5-character CMG number. The first character is an 

alphabetic character that indicates the comorbidity tier. The last 4 characters are numeric 

characters that represent the distinct CMG number. Free downloads of the Inpatient Rehabilitation 

Validation and Entry (IRVEN) software product, including the Grouper software, are available on 

the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Software.html. 

 Once a Medicare Fee-for-Service Part A patient is discharged, the IRF submits a 

Medicare claim as a Health Insurance Portability and Accountability Act of 1996 

(Pub. L. 104-191, enacted on August 21, 1996) (HIPAA) compliant electronic claim or, if the 

Administrative Simplification Compliance Act of 2002 (Pub. L. 107-105, enacted on December 

27, 2002) (ASCA) permits, a paper claim (a UB-04 or a CMS-1450 as appropriate) using the 

five-character CMG number and sends it to the appropriate Medicare Administrative Contractor 

(MAC). In addition, once a Medicare Advantage patient is discharged, in accordance with the 

Medicare Claims Processing Manual, chapter 3, section 20.3 (Pub. 100-04), hospitals (including 

IRFs) must submit an informational-only bill (TOB 111), which includes Condition Code 04 to 

their MAC. This will ensure that the Medicare Advantage days are included in the hospital’s 

Supplemental Security Income (SSI) ratio (used in calculating the IRF low-income percentage 
CMS-1608-F 07/29/14 23

adjustment) for Fiscal Year 2007 and beyond. Claims submitted to Medicare must comply with 

both ASCA and HIPAA. 

 Section 3 of the ASCA amends section 1862(a) of the Act by adding paragraph (22) 

which requires the Medicare program, subject to section 1862(h) of the Act, to deny payment 

under Part A or Part B for any expenses for items or services “for which a claim is submitted 

other than in an electronic form specified by the Secretary.” Section 1862(h) of the Act, in turn, 

provides that the Secretary shall waive such denial in situations in which there is no method 

available for the submission of claims in an electronic form or the entity submitting the claim is a 

small provider. In addition, the Secretary also has the authority to waive such denial “in such 

unusual cases as the Secretary finds appropriate.” For more information, see the “Medicare 

Program; Electronic Submission of Medicare Claims” final rule (70 FR 71008). Our instructions 

for the limited number of Medicare claims submitted on paper are available at 

http://www.cms.gov/manuals/downloads/clm104c25.pdf. 

 Section 3 of the ASCA operates in the context of the administrative simplification 

provisions of HIPAA, which include, among others, the requirements for transaction standards 

and code sets codified in 45 CFR, parts 160 and 162, subparts A and I through R (generally 

known as the Transactions Rule). The Transactions Rule requires covered entities, including 

covered health care providers, to conduct covered electronic transactions according to the 

applicable transaction standards. (See the CMS program claim memoranda at 

http://www.cms.gov/ElectronicBillingEDITrans/ and listed in the addenda to the Medicare 

Intermediary Manual, Part 3, section 3600). 

The MAC processes the claim through its software system. This software system 

includes pricing programming called the “Pricer” software. The Pricer software uses the CMG 
CMS-1608-F 07/29/14 24

number, along with other specific claim data elements and provider-specific data, to adjust the 

IRF’s prospective payment for interrupted stays, transfers, short stays, and deaths, and then 

applies the applicable adjustments to account for the IRF's wage index, percentage of lowincome patients, rural location, and outlier payments. For discharges occurring on or after 

October 1, 2005, the IRF PPS payment also reflects the teaching status adjustment that became 

effective as of FY 2006, as discussed in the FY 2006 IRF PPS final rule (70 FR 47880). 

II. Summary of Provisions of the Proposed Rule 

In the FY 2015 IRF PPS proposed rule (79 FR 26308), we proposed to update the IRF 

Federal prospective payment rates, to collect data on the amount and mode (that is, Individual, 

Group, and Co-Treatment) of therapies provided in the IRF setting according to therapy 

discipline, to revise the list of diagnosis and impairment group codes that presumptively meet the 

60 percent rule compliance criteria, provide for a new item on the IRF-PAI form to indicate 

whether the prior treatment and severity requirements have been met for arthritis cases to 

presumptively meet the 60 percent rule compliance criteria, and to revise and update quality 

measures and reporting requirements under the IRF QRP. In the FY 2015 IRF PPS proposed 

rule (79 FR 26308), we also addressed the implementation of the International Classification of 

Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF prospective payment 

system (PPS), effective when ICD-10-CM becomes the required medical data code set for use on 

Medicare claims and IRF-PAI submissions. 

The proposed updates to the IRF federal prospective payment rates for FY 2015 were as 

follows: 

● Update the FY 2015 IRF PPS relative weights and average length of stay values using 

the most current and complete Medicare claims and cost report data in a budget-neutral manner, 
CMS-1608-F 07/29/14 25

as discussed in section III of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 through 

26318). 

● Discuss our rationale for freezing the IRF facility-level adjustment factors at FY 2014 

levels, as discussed in section IV of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26318 

through 26319). 

● Update the FY 2015 IRF PPS payment rates by the proposed market basket increase 

factor, based upon the most current data available, with a 0.2 percentage point reduction as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act and a proposed 

productivity adjustment required by section 1886(j)(3)(C)(ii)(I) of the Act, as described in 

section V of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26319 through 26321). 

● Discuss the Secretary’s Proposed Recommendation for updating IRF PPS payments 

for FY 2015, in accordance with the statutory requirements, as described in section V of the 

FY 2015 IRF PPS proposed rule (79 FR 26308 at 26321). 

● Update the FY 2015 IRF PPS payment rates by the FY 2015 wage index and the laborrelated share in a budget-neutral manner, as discussed in section V of the FY 2015 IRF PPS 

proposed rule (79 FR 26308, 26321 through 26322). 

● Describe the calculation of the IRF Standard Payment Conversion Factor for FY 2015, 

as discussed in section V of the FY 2015 IRF PPS proposed rule (79 FR 26308 at 26322). 

● Update the outlier threshold amount for FY 2015, as discussed in section VI of the 

FY 2015 IRF PPS proposed rule (79 FR 26308, 26324 through 26325). 

● Update the cost-to-charge ratio (CCR) ceiling and urban/rural average CCRs for 

FY 2015, as discussed in section VI of the FY 2015 IRF PPS proposed rule (79 FR 26308 at 

26325). 
CMS-1608-F 07/29/14 26

● Describe proposed revisions to the list of eligible diagnosis codes that are used to 

determine presumptive compliance under the 60 percent rule in section VII of the FY 2015 

IRF PPS proposed rule (79 FR 26308 at 26327). 

● Describe proposed revisions to the list of eligible impairment group codes that 

presumptively meet the 60 percent rule compliance criteria in section VII of the FY 2015 IRF 

PPS proposed rule (79 FR 26308, 26328 through 26329). 

● Describe proposed data collection of the amount and mode (that is, of Individual, 

Group, and Co-Treatment) of therapies provided in IRFs according to occupational, speech, and 

physical therapy disciplines via the IRF-PAI in section VIII of the FY 2015 IRF PPS proposed 

rule (79 FR 26308, 26329 through 26330). 

● Describe a proposed revision to the IRF-PAI to add a new data item for arthritis 

conditions in section IX of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26330 through 

26331). 

● Describe the conversion of the IRF PPS to ICD-10-CM, effective when ICD-10-CM 

becomes the required medical data code set for use on Medicare claims and IRF-PAI 

submissions, in section X of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26331 through 

26333). 

● Describe proposed revisions and updates to quality measures and reporting 

requirements under the quality reporting program for IRFs in accordance with section 1886(j)(7) 

of the Act, as discussed in section XI of the FY 2015 IRF PPS proposed rule (79 FR 26308, 

26333 through 26345). 

III. Analysis and Responses to Public Comments 
CMS-1608-F 07/29/14 27

We received 66 timely responses from the public, many of which contained multiple 

comments on the FY 2015 IRF PPS proposed rule (79 FR 26308). We received comments from 

various trade associations, inpatient rehabilitation facilities, individual physicians, therapists, 

clinicians, health care industry organizations, law firms and health care consulting firms. The 

following sections, arranged by subject area, include a summary of the public comments that we 

received, and our responses. 

IV. Update to the Case-Mix Group (CMG) Relative Weights and Average Length of 

Stay Values for FY 2015 

 As specified in §412.620(b)(1), we calculate a relative weight for each CMG that is 

proportional to the resources needed by an average inpatient rehabilitation case in that CMG. 

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. Relative weights account for the variance in cost per 

discharge due to the variance in resource utilization among the payment groups, and their use 

helps to ensure that IRF PPS payments support beneficiary access to care, as well as provider 

efficiency. 

 In the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 through 26318), we 

proposed to update the CMG relative weights and average length of stay values for FY 2015. As 

required by statute, we always use the most recent available data to update the CMG relative 

weights and average lengths of stay. For FY 2015, we proposed to use the FY 2013 IRF claims 

and FY 2012 IRF cost report data. These data are the most current and complete data available 

at this time. Currently, only a small portion of the FY 2013 IRF cost report data are available for 

analysis, but the majority of the FY 2013 IRF claims data are available for analysis. 

 In the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 through 26318), we 
CMS-1608-F 07/29/14 28

proposed to apply these data using the same methodologies that we have used to update the 

CMG relative weights and average length of stay values each fiscal year since we implemented 

an update to the methodology to use the more detailed cost-to-charge ratio (CCRs) data from the 

cost reports of IRF subprovider units of primary acute care hospitals, instead of CCR data from 

the associated primary care hospitals, to calculate IRFs’ average costs per case, as discussed in 

the FY 2009 IRF PPS final rule (73 FR 46372). In calculating the CMG relative weights, we use 

a hospital-specific relative value method to estimate operating (routine and ancillary services) 

and capital costs of IRFs. The process used to calculate the CMG relative weights for this 

proposed rule is as follows: 

 Step 1. We estimate the effects that comorbidities have on costs. 

 Step 2. We adjust the cost of each Medicare discharge (case) to reflect the effects found 

in the first step. 

 Step 3. We use the adjusted costs from the second step to calculate CMG relative 

weights, using the hospital-specific relative value method. 

 Step 4. We normalize the FY 2015 CMG relative weights to the same average CMG 

relative weight from the CMG relative weights implemented in the FY 2014 IRF PPS final rule 

(78 FR 47860). 

 Consistent with the methodology that we have used to update the IRF classification 

system in each instance in the past, we proposed to update the CMG relative weights for 

FY 2015 in such a way that total estimated aggregate payments to IRFs for FY 2015 are the same 

with or without the changes (that is, in a budget-neutral manner) by applying a budget neutrality 

factor to the standard payment amount. To calculate the appropriate budget neutrality factor for 

use in updating the FY 2015 CMG relative weights, we use the following steps: 
CMS-1608-F 07/29/14 29

 Step 1. Calculate the estimated total amount of IRF PPS payments for FY 2015 (with no 

changes to the CMG relative weights). 

 Step 2. Calculate the estimated total amount of IRF PPS payments for FY 2015 by 

applying the changes to the CMG relative weights (as discussed above). 

 Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2 to 

determine the budget neutrality factor (1.0000) that would maintain the same total estimated 

aggregate payments in FY 2015 with and without the changes to the CMG relative weights. 

 Step 4. Apply the budget neutrality factor (1.0000) to the FY 2014 IRF PPS standard 

payment amount after the application of the budget-neutral wage adjustment factor. 

 In section VI.F. of this final rule, we discuss the use of the existing methodology to 

calculate the standard payment conversion factor for FY 2015. 

 Table 1, “Relative Weights and Average Length of Stay Values for Case-Mix Groups,” 

presents the CMGs, the comorbidity tiers, the corresponding relative weights, and the average 

length of stay values for each CMG and tier for FY 2015. The average length of stay for each 

CMG is used to determine when an IRF discharge meets the definition of a short-stay transfer, 

which results in a per diem case level adjustment. 

TABLE 1: Relative Weights and Average Length of Stay Values for Case-Mix Groups 

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0101 Stroke 

M>51.05 0.7853 0.7150 0.6512 0.6248 9 10 8 8 

0102 Stroke 

M>44.45 and M<51.05 and 

C>18.5 0.9836 0.8955 0.8155 0.7826 11 11 10 10 

0103 Stroke 

M>44.45 and M<51.05 and 

C<18.5 1.1636 1.0594 0.9648 0.9258 12 14 12 12 

0104 Stroke 

M>38.85 and M<44.45 1.2121 1.1036 1.0050 0.9644 13 13 12 12 
CMS-1608-F 07/29/14 30

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0105 Stroke 

M>34.25 and M<38.85 1.4155 1.2888 1.1737 1.1262 14 14 14 14 

0106 Stroke 

M>30.05 and M<34.25 1.6135 1.4691 1.3379 1.2838 16 16 15 15 

0107 Stroke 

M>26.15 and M<30.05 1.8026 1.6412 1.4946 1.4342 17 19 17 17 

0108 Stroke 

M<26.15 and A>84.5 2.2467 2.0456 1.8629 1.7876 22 24 21 21 

0109 Stroke 

M>22.35 and M<26.15 and 

A<84.5 2.0570 1.8728 1.7055 1.6366 19 20 19 19 

0110 Stroke 

M<22.35 and A<84.5 2.6928 2.4518 2.2328 2.1425 28 27 24 24 

0201 Traumatic brain injury 

M>53.35 and C>23.5 0.8145 0.6636 0.5954 0.5680 10 9 8 8 

0202 Traumatic brain injury 

M>44.25 and M<53.35 and 

C>23.5 1.0591 0.8629 0.7741 0.7385 12 10 9 10 

0203 Traumatic brain injury 

M>44.25 and C<23.5 1.2162 0.9909 0.8890 0.8481 13 12 12 11 

0204 Traumatic brain injury 

M>40.65 and M<44.25 1.3397 1.0915 0.9793 0.9342 12 13 12 12 

0205 Traumatic brain injury 

M>28.75 and M<40.65 1.5924 1.2974 1.1640 1.1104 14 15 14 14 

0206 Traumatic brain injury 

M>22.05 and M<28.75 1.9327 1.5747 1.4127 1.3477 19 18 16 16 

0207 Traumatic brain injury 

M<22.05 2.5640 2.0890 1.8741 1.7880 32 25 21 20 

0301 Non-traumatic brain injury 

M>41.05 1.1022 0.9324 0.8453 0.7798 10 11 10 10 

0302 Non-traumatic brain injury 

M>35.05 and M<41.05 1.3799 1.1673 1.0582 0.9762 13 13 12 12 

0303 Non-traumatic brain injury 

M>26.15 and M<35.05 1.6371 1.3849 1.2555 1.1583 16 15 14 14 

0304 Non-traumatic brain injury 

M<26.15 2.1541 1.8222 1.6520 1.5240 23 21 18 17 

0401 Traumatic spinal cord injury 

M>48.45 1.0264 0.8790 0.8131 0.7251 12 12 10 9 

0402 Traumatic spinal cord injury 

M>30.35 and M<48.45 1.4108 1.2081 1.1176 0.9966 15 14 14 13 

0403 Traumatic spinal cord injury 

M>16.05 and M<30.35 2.3059 1.9747 1.8268 1.6289 26 21 20 20 

0404 Traumatic spinal cord injury 

M<16.05 and A>63.5 4.0832 3.4967 3.2348 2.8845 54 40 33 33 

0405 Traumatic spinal cord injury 

M<16.05 and A<63.5 3.3355 2.8564 2.6425 2.3563 26 34 29 27 
CMS-1608-F 07/29/14 31

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0501 Non-traumatic spinal cord injury 

M>51.35 0.8418 0.6804 0.6237 0.5643 9 10 9 8 

0502 Non-traumatic spinal cord injury 

M>40.15 and M<51.35 1.1580 0.9359 0.8579 0.7763 11 12 10 10 

0503 Non-traumatic spinal cord injury 

M>31.25 and M<40.15 1.4373 1.1616 1.0648 0.9635 15 13 13 12 

0504 Non-traumatic spinal cord injury 

M>29.25 and M<31.25 1.6935 1.3687 1.2546 1.1352 17 15 15 14 

0505 Non-traumatic spinal cord injury 

M>23.75 and M<29.25 1.9365 1.5651 1.4346 1.2981 20 17 17 16 

0506 Non-traumatic spinal cord injury 

M<23.75 2.7066 2.1875 2.0052 1.8144 26 25 23 21 

0601 Neurological 

M>47.75 1.0293 0.8149 0.7526 0.6862 9 10 9 9 

0602 Neurological 

M>37.35 and M<47.75 1.3283 1.0516 0.9713 0.8856 12 12 11 11 

0603 Neurological 

M>25.85 and M<37.35 1.6727 1.3243 1.2231 1.1152 15 15 13 13 

0604 Neurological 

M<25.85 2.1908 1.7345 1.6020 1.4607 21 19 17 17 

0701 Fracture of lower extremity 

M>42.15 0.9700 0.8060 0.7727 0.7036 10 9 10 9 

0702 Fracture of lower extremity 

M>34.15 and M<42.15 1.2429 1.0327 0.9901 0.9016 13 12 12 11 

0703 Fracture of lower extremity 

M>28.15 and M<34.15 1.5056 1.2511 1.1994 1.0922 15 15 14 13 

0704 Fracture of lower extremity 

M<28.15 1.9359 1.6086 1.5421 1.4044 19 18 17 17 

0801 Replacement of lower extremity 

joint M>49.55 0.7402 0.6068 0.5608 0.5172 8 8 7 7 

0802 Replacement of lower extremity 

joint M>37.05 and M<49.55 0.9891 0.8109 0.7495 0.6912 10 10 9 9 

0803 Replacement of lower extremity 

joint 

M>28.65 and M<37.05 and 

A>83.5 1.3374 1.0963 1.0133 0.9345 13 13 12 12 

0804 Replacement of lower extremity 

joint M>28.65 and M<37.05 and 

A<83.5 1.1821 0.9690 0.8956 0.8260 12 12 11 10 

0805 Replacement of lower extremity 

joint 

M>22.05 and M<28.65 1.4702 1.2053 1.1140 1.0274 14 14 13 12 

0806 Replacement of lower extremity 

joint M<22.05 1.7663 1.4479 1.3383 1.2342 16 17 15 14 

0901 Other orthopedic 

M>44.75 0.9386 0.7581 0.7069 0.6392 10 9 9 8 
CMS-1608-F 07/29/14 32

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0902 Other orthopedic 

M>34.35 and M<44.75 1.2382 1.0000 0.9325 0.8432 12 12 11 10 

0903 Other orthopedic 

M>24.15 and M<34.35 1.5552 1.2561 1.1713 1.0591 15 15 14 13 

0904 Other orthopedic 

M<24.15 1.9772 1.5968 1.4890 1.3464 19 18 17 16 

1001 Amputation, lower extremity 

M>47.65 1.0224 0.9300 0.8055 0.7365 11 12 10 10 

1002 Amputation, lower extremity 

M>36.25 and M<47.65 1.3168 1.1978 1.0374 0.9485 14 14 12 11 

1003 Amputation, lower extremity 

M<36.25 1.8778 1.7081 1.4794 1.3527 18 19 17 16 

1101 Amputation, non-lower extremity 

M>36.35 1.2643 1.0143 1.0050 0.8569 12 13 12 10 

1102 Amputation, non-lower extremity 

M<36.35 1.8936 1.5192 1.5052 1.2835 17 19 16 15 

1201 Osteoarthritis M>37.65 1.0034 0.9522 0.8881 0.8256 10 11 11 10 

1202 Osteoarthritis M>30.75 and 

M<37.65 1.1916 1.1308 1.0547 0.9805 11 12 12 12 

1203 Osteoarthritis M<30.75 1.5133 1.4360 1.3393 1.2452 13 16 15 15 

1301 Rheumatoid, other arthritis 

M>36.35 1.2220 0.9887 0.8677 0.8181 12 12 10 10 

1302 Rheumatoid, other arthritis 

M>26.15 and M<36.35 1.5913 1.2874 1.1299 1.0653 17 14 13 13 

1303 Rheumatoid, other arthritis 

M<26.15 2.0302 1.6425 1.4416 1.3591 18 19 16 15 

1401 Cardiac 

M>48.85 0.9032 0.7324 0.6671 0.6051 9 10 8 8 

1402 Cardiac 

M>38.55 and M<48.85 1.1947 0.9689 0.8825 0.8004 12 11 11 10 

1403 Cardiac 

M>31.15 and M<38.55 1.4699 1.1920 1.0857 0.9847 14 13 12 12 

1404 Cardiac 

M<31.15 1.8493 1.4998 1.3660 1.2390 18 17 15 14 

1501 Pulmonary 

M>49.25 0.9998 0.8150 0.7537 0.7283 10 10 9 8 

1502 Pulmonary 

M>39.05 and M<49.25 1.2986 1.0586 0.9791 0.9461 13 11 11 10 

1503 Pulmonary 

M>29.15 and M<39.05 1.5918 1.2976 1.2001 1.1597 15 14 13 13 

1504 Pulmonary 

M<29.15 1.9688 1.6049 1.4843 1.4343 20 17 15 15 

1601 Pain syndrome 

M>37.15 0.9445 0.8763 0.8085 0.7620 10 10 9 10 

1602 Pain syndrome 

M>26.75 and M<37.15 1.2509 1.1606 1.0708 1.0092 13 13 13 12 
CMS-1608-F 07/29/14 33

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

1603 Pain syndrome 

M<26.75 1.5845 1.4703 1.3565 1.2784 14 17 16 15 

1701 Major multiple trauma without 

brain or spinal cord injury 

M>39.25 1.0432 0.9290 0.8566 0.7881 11 11 10 10 

1702 Major multiple trauma without 

brain or spinal cord injury 

M>31.05 and M<39.25 1.3109 1.1674 1.0764 0.9903 13 14 12 12 

1703 Major multiple trauma without 

brain or spinal cord injury 

M>25.55 and M<31.05 1.5378 1.3694 1.2627 1.1617 16 16 15 14 

1704 Major multiple trauma without 

brain or spinal cord injury 

M<25.55 1.9856 1.7682 1.6303 1.5000 20 20 18 17 

1801 Major multiple trauma with brain 

or spinal cord injury 

M>40.85 1.0662 0.9437 0.8082 0.7231 11 11 10 9 

1802 Major multiple trauma with brain 

or spinal cord injury 

M>23.05 and M<40.85 1.6884 1.4945 1.2798 1.1451 17 16 15 14 

1803 Major multiple trauma with brain 

or spinal cord injury M<23.05 

2.8097 2.4869 2.1297 1.9055 32 28 22 22 

1901 Guillain Barre 

M>35.95 1.0421 0.9341 0.9263 0.8837 15 10 13 11 

1902 Guillain Barre 

M>18.05 and M<35.95 1.8757 1.6814 1.6672 1.5905 25 19 18 19 

1903 Guillain Barre 

M<18.05 3.3752 3.0255 3.0000 2.8620 44 31 36 31 

2001 Miscellaneous 

M>49.15 0.8827 0.7250 0.6681 0.6098 9 8 8 8 

2002 Miscellaneous 

M>38.75 and M<49.15 1.1872 0.9751 0.8986 0.8201 12 11 11 10 

2003 Miscellaneous 

M>27.85 and M<38.75 1.5061 1.2370 1.1400 1.0405 15 14 13 12 

2004 Miscellaneous 

M<27.85 1.9507 1.6021 1.4765 1.3475 20 18 16 15 

2101 Burns 

M>0 1.8405 1.6766 1.5548 1.3534 27 18 17 16 

5001 Short-stay cases, length of stay is 

3 days or fewer 0.1549 2 

5101 Expired, orthopedic, length of stay 

is 13 days or fewer 0.6791 7 

5102 Expired, orthopedic, length of stay 

is 14 days or more 1.5539 16 
CMS-1608-F 07/29/14 34

CMG CMG Description 

(M=motor, C=cognitive, A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

5103 Expired, not orthopedic, length of 

stay is 15 days or fewer 0.7274 8 

5104 Expired, not orthopedic, length of 

stay is 16 days or more 1.9477 21 

 Generally, updates to the CMG relative weights result in some increases and some 

decreases to the CMG relative weight values. Table 2 shows how we estimate that the 

application of the proposed revisions for FY 2015 would affect particular CMG relative weight 

values, which would affect the overall distribution of payments within CMGs and tiers. Note 

that, because we propose to implement the CMG relative weight revisions in a budget-neutral 

manner (as described above), total estimated aggregate payments to IRFs for FY 2015 would not 

be affected as a result of the proposed CMG relative weight revisions. However, the revisions 

will affect the distribution of payments within CMGs and tiers. 

TABLE 2: Distributional Effects of the Changes to the CMG Relative Weights (FY 2014 

Values Compared with FY 2015 Values) 

Percentage Change Number of Cases 

Affected 

Percentage of Cases 

Affected 

Increased by 15% or more 0 0.0

Increased by between 5% and 15% 1,023 0.3

Changed by less than 5% 382,960 99.4

Decreased by between 5% and 15% 1,288 0.3

Decreased by 15% or more 25 0.0

As Table 2 shows, more than 99 percent of all IRF cases are in CMGs and tiers that will 

experience less than a 5 percent change (either increase or decrease) in the CMG relative weight 

value as a result of the revisions for FY 2015. The largest estimated increase in the proposed 

CMG relative weight values that affects the largest number of IRF discharges is a 1.2 percent 

increase in the CMG relative weight value for CMG 0704—Fracture of lower extremity, with a 

motor score less than 28.15-in the “no comorbidity” tier. In the FY 2013 claims data, 
CMS-1608-F 07/29/14 35

20,017 IRF discharges (5.2 percent of all IRF discharges) were classified into this CMG and tier. 

The largest decrease in a CMG relative weight value affecting the largest number of IRF 

cases is a 0.8 percent decrease in the CMG relative weight for CMG 0604—Neurological, with a 

motor score less than 25.85-in the “no comorbidity” tier. In the FY 2013 IRF claims data, this 

change would have affected 8,766 cases (2.3 percent of all IRF cases). 

The changes in the average length of stay values for FY 2015, compared with the 

FY 2014 average length of stay values, are small and do not show any particular trends in IRF 

length of stay patterns. 

We received 1 comment on the proposed update to the CMG relative weights and average 

length of stay values for FY 2015, which is summarized below. 

Comment: The commenter requested that we provide more detail about the use of the 

CCR data in the CMG relative weight calculations. Additionally, the commenter requested that 

we outline the methodology used to calculate the average length of stay values in the IRF PPS 

rule. 

Response: A key variable used to calculate the CMG relative weights is a facility’s 

average cost per case, which is obtained by averaging the estimated cost per case for every 

patient discharged from the facility in a given fiscal year. To obtain the estimated cost per case 

for a given IRF patient, we start by pulling the appropriate charges from the Medicare claim for 

that patient. Then, we calculate the appropriate CCRs from the Medicare cost report submitted 

by the facility. The CCRs are then multiplied by the charges from the Medicare claim to obtain 

the estimated IRF cost for the case. This variable is used as the dependent variable in the 

regression analysis to estimate the CMG relative weights. 

In conjunction with the publication of the IRF PPS FY 2014 final rule, we posted our 
CMS-1608-F 07/29/14 36

methodology for calculating the average length of stay values on the IRF PPS website at 

http://www.cms.gov/medicare/medicare-fee-for-servicepayment/inpatientrehabfacpps/research.html. 

Final Decision: After careful consideration of the public comments, we are finalizing our 

proposal to update the CMG relative weight and average length of stay values for FY 2015. 

These updates are effective October 1, 2014. 

V. Freezing the Facility-Level Adjustment Factors at FY 2014 Levels 

A. Background on Facility-Level Adjustments 

 Section 1886(j)(3)(A)(v) of the Act confers broad authority upon the Secretary to adjust 

the per unit payment rate “by such . . . factors as the Secretary determines are necessary to 

properly reflect variations in necessary costs of treatment among rehabilitation facilities.” For 

example, we adjust the federal prospective payment amount associated with a CMG to account 

for facility-level characteristics such as an IRF’s LIP, teaching status, and location in a rural area, 

if applicable, as described in §412.624(e). 

 In the FY 2010 IRF PPS final rule (74 FR 39762), we updated the adjustment factors for 

calculating the rural, LIP, and teaching status adjustments based on the most recent three 

consecutive years’ worth of IRF claims data (at that time, FY 2006, FY 2007, and FY 2008) and 

the most recent available corresponding IRF cost report data. As discussed in the FY 2010 IRF 

PPS proposed rule (74 FR 21060 through 21061), we observed relatively large year-to-year 

fluctuations in the underlying data used to compute the adjustment factors, especially the 

teaching status adjustment factor. Therefore, we implemented a 3-year moving average 

approach to updating the facility-level adjustment factors in the FY 2010 IRF PPS final rule 

(74 FR 39762) to provide greater stability and predictability of Medicare payments for IRFs. 
CMS-1608-F 07/29/14 37

 Each year, we review the major components of the IRF PPS to maintain and enhance the 

accuracy of the payment system. For FY 2010, we implemented a change to our methodology 

that was designed to decrease the IRF PPS volatility by using a 3-year moving average to 

calculate the facility-level adjustment factors. For FY 2011, we issued a notice to update the 

payment rates, which did not include any policy changes or changes to the IRF facility-level 

adjustments. As we found that the implementation of the 3-year moving average did not fully 

address year-to-year fluctuations, in the FY 2012 IRF PPS proposed rule (76 FR 24214, 24225 

through 24226), we analyzed the effects of having used a weighting methodology. The 

methodology assigned greater weight to some facilities than to others in the regression analysis 

used to estimate the facility-level adjustment factors. As we found that this weighting 

methodology inappropriately exaggerated the cost differences among different types of IRF 

facilities, we proposed to remove the weighting factor from our analysis and update the IRF 

facility-level adjustment factors for FY 2012 using an unweighted regression analysis. However, 

after carefully considering all of the comments that we received on the proposed FY 2012 

updates to the facility-level adjustment factors, we decided to hold the facility-level adjustment 

factors at FY 2011 levels for FY 2012 to conduct further research on the underlying data and the 

best methodology for calculating the facility-level adjustment factors. We based this decision, in 

part, on comments we received about the financial hardships that the proposed updates would 

create for facilities with teaching programs and a higher disproportionate share of low-income 

patients. 

B. Freezing the Facility-Level Adjustment Factors at FY 2014 Levels 

 Since the FY 2012 final rule (76 FR 47836), we have conducted further research into the 

best methodology to use to estimate the IRF facility-level adjustment factors, to ensure that the 
CMS-1608-F 07/29/14 38

adjustment factors reflect as accurately as possible the costs of providing IRF care across the full 

spectrum of IRF providers. Our recent research efforts reflect the significant differences that 

exist between the cost structures of freestanding IRFs and the cost structures of IRF units of 

acute care hospitals (and critical access hospitals, otherwise known as “CAHs”). We have found 

that these cost structure differences substantially influence the estimates of the adjustment 

factors. Therefore, we believe that it is important to control for these cost structure differences 

between hospital-based and freestanding IRFs in our regression analysis, so that these 

differences do not inappropriately influence the adjustment factor estimates. In Medicare’s 

payment system for the treatment of end-stage renal disease (ESRD), we already control for the 

cost structure differences between hospital-based and freestanding facilities in the regression 

analyses that are used to set payment rates. Also, we received comments from an IRF industry 

association on the FY 2012 IRF PPS proposed rule suggesting that the addition of this particular 

control variable to the model could improve the methodology for estimating the IRF facilitylevel adjustment factors. 

 Thus, in the FY 2014 IRF PPS proposed rule, we proposed to add an indicator variable to 

our 3-year moving average methodology for updating the IRF facility-level adjustments that 

would have an assigned value of “1” if the facility is a freestanding IRF hospital or would have 

an assigned value of “0” if the facility is an IRF unit of an acute care hospital (or CAH). Adding 

this variable to the regression analysis enables us to control for the differences in costs that are 

primarily due to the differences in cost structures between freestanding and hospital-based IRFs, 

so that those differences do not become inappropriately intertwined with our estimates of the 

differences in costs between rural and urban facilities, high-LIP percentage and low-LIP 

percentage facilities, and teaching and non-teaching facilities. Further, by including this variable 
CMS-1608-F 07/29/14 39

in the regression analysis, we greatly improve our ability to predict an IRF’s average cost per 

case (that is, the R-squared of the regression model increases from about 11 percent to about 

41 percent). In this way, it enhances the precision with which we can estimate the IRF facilitylevel adjustments. 

 In the FY 2014 IRF PPS final rule (78 FR 47860), we finalized our decision to add an 

indicator variable for a facility’s freestanding/hospital-based status to the payment regression, 

and, with that change, to update the IRF facility-level adjustment factors for FY 2014 using the 

same methodology, with the exception of adding the indicator variable, that we used in updating 

the FY 2010 IRF facility-level adjustment factors, including the 3-year moving average 

approach. Thus, in the FY 2014 IRF PPS final rule, we finalized a rural adjustment of 

14.9 percent, a LIP adjustment factor of 0.3177, and a teaching status adjustment factor of 

1.0163 for FY 2014. 

 Based on the substantive changes to the facility-level adjustment factors that were 

adopted in the FY 2014 final rule, we are freezing the facility-level adjustment factors for 

FY 2015 and all subsequent years at the FY 2014 levels while we continue to monitor the most 

current IRF claims data available and evaluate the effects of the FY 2014 changes. Additionally, 

we want to allow providers time to acclimate to the FY 2014 changes. At such future time as our 

data analysis may indicate the need for further updates to the facility-level adjustment factors, we 

would propose to update the adjustment factors through notice and comment rulemaking. 

We received 4 comments on our proposal to freeze the facility-level adjustment factors at 

FY 2014 levels for FY 2015 and all subsequent years (unless and until we propose to update 

them again through future notice and comment rulemaking), which are summarized below. 

Comment: The majority of commenters support our proposal to freeze the facility-level 
CMS-1608-F 07/29/14 40

adjustment factors. However, those same commenters encourage CMS to continue to analyze 

changes to the facility-level adjustments and adjust all three factors at a minimum of every three 

years. Additionally, commenters recommended that CMS make the methodology and findings 

available to the public. 

Response: We appreciate the commenters’ support with our decision to freeze the 

facility-level adjustment factors. As discussed in the proposed rule, we believe that it is 

appropriate to freeze the facility-level adjustment factors at FY 2014 levels while we continue to 

monitor the most current IRF claims data available and evaluate the effects of the FY 2014 

changes. Additionally, this will allow providers time to acclimate to the FY 2014 changes that 

were implemented. We will continue to monitor the data and periodically update the adjustment 

factors, as needed, to ensure the accuracy of IRF PPS payment rates. Rather than specify an 

exact period, such as every 3 years, for updating the adjustment factors, we believe that it is 

better for the overall efficiency of the IRF PPS payment system to update the adjustment factors 

whenever it appears that the benefits of updating (in terms of improved accuracy of payment 

rates) outweigh the costs (in terms of less stability in the annual payment rates). At such time as 

we determine that the data support updating the adjustment factors or changes in the 

methodology, we will make our findings available through the rulemaking process. 

Comment: One commenter suggested that CMS be more transparent about the criteria 

the agency is using to determine when changes to the facility-level adjustments occur. For 

example, the commenter suggested CMS adopt a minimum threshold of annual change for the 

adjustment factors, such as 5 to 10 percent and examine unfreezing the adjustment factors and 

issuing an update if analysis finds that any of the factors meet or exceed the suggested threshold. 

Response: While we agree with transparency during this process, we do not believe that 
CMS-1608-F 07/29/14 41

setting a minimum threshold of annual change would be beneficial to the industry or to the 

Medicare program. As stated in our previous response, we believe that monitoring the data and 

making periodic changes when the benefits of such changes outweigh the costs is the most 

appropriate way to enhance both the accuracy and the stability of the IRF PPS payment system. 

In addition, we disagree with the suggestion that we should publicize the interim results that we 

use in making these determinations each time. We believe that this would only serve to confuse 

the industry, as the adjustment factors tend to fluctuate significantly from one period to the next 

and providers would potentially be confused about which adjustment factors were being 

proposed for implementation and which ones were not. 

Comment: One commenter suggested that depending on the magnitude of any change in 

facility level adjustments, CMS should also propose a transition to phase in the implementation. 

Response: Thank you for your comment. We will certainly take this recommendation 

into consideration for the future. 

Final Decision: After careful consideration of the public comments, we are finalizing our 

proposal to freeze the facility-level adjustment factors for FY 2015 and all subsequent years 

(unless and until we propose to update them again through future notice and comment 

rulemaking). 

VI. FY 2015 IRF PPS Federal Prospective Payment Rates 

A. Market Basket Increase Factor, Productivity Adjustment, and Other Adjustment for 

FY 2015 

 Section 1886(j)(3)(C) of the Act requires the Secretary to establish an increase factor that 

reflects changes over time in the prices of an appropriate mix of goods and services included in 

the covered IRF services, which is referred to as a market basket index. According to section 
CMS-1608-F 07/29/14 42

1886(j)(3)(A)(i) of the Act, the increase factor shall be used to update the IRF federal 

prospective payment rates for each FY. Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of 

the Act required the application of a 0.2 percentage point reduction to the market basket increase 

factor for FY 2015. In addition, section 1886(j)(3)(C)(ii)(I) of the Act requires the application of 

a productivity adjustment, as described below. Thus, in the FY 2015 IRF PPS proposed rule, we 

proposed to update the IRF PPS payments for FY 2015 by a market basket increase factor based 

upon the most current data available, with a productivity adjustment as required by 

section 1886(j)(3)(C)(ii)(I) of the Act, as described below and a 0.2 percentage point reduction as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act. 

For this final rule, we use the same methodology described in the FY 2012 IRF PPS final 

rule (76 FR 47836 at 47848 through 47863) to compute the FY 2015 market basket increase 

factor and labor-related share. In that final rule, we described the market basket (referred to as 

the RPL market basket) as reflecting a FY 2008 base year. Based on IHS Global Insight’s 

second quarter 2014 forecast, the most recent estimate of the 2008-based RPL market basket 

increase factor for FY 2015 is 2.9 percent. IHS Global Insight (IGI) is an economic and 

financial forecasting firm that contracts with CMS to forecast the components of providers’ 

market baskets. 

In accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and using the methodology 

described in the FY 2012 IRF PPS final rule (76 FR 47836, 47858 through 47859), we apply a 

productivity adjustment to the FY 2015 RPL market basket increase factor. The statute defines 

the productivity adjustment to be equal to the 10-year moving average of changes in annual 

economy-wide private nonfarm business multifactor productivity (MFP) (as projected by the 

Secretary for the 10-year period ending with the applicable FY cost reporting period, or other 
CMS-1608-F 07/29/14 43

annual period) (the “MFP adjustment”). The Bureau of Labor Statistics (BLS) is the agency that 

publishes the official measure of private nonfarm business MFP. We refer readers to the BLS 

website at http://www.bls.gov/mfp to obtain the historical BLS-published MFP data. The 

projection of MFP is currently produced by IGI, using the methodology described in the 

FY 2012 IRF PPS final rule (76 FR 47836, 47859). The most recent estimate of the MFP 

adjustment for FY 2015 (the 10-year moving average of MFP for the period ending FY 2015) is 

0.5 percent, which was calculated using the methodology described in the FY 2012 IRF PPS 

final rule (76 FR 47836, 47858 through 47859) and is based on IGI’s second quarter 2014 

forecast. 

Thus, in accordance with section 1886(j)(3)(C) of the Act, we base the FY 2015 market 

basket update, which is used to determine the applicable percentage increase for the IRF 

payments, on the most recent estimate of the FY 2008-based RPL market basket (currently 

estimated to be 2.9 percent based on IGI’s second quarter 2014 forecast). We then reduce this 

percentage increase by the current estimate of the MFP adjustment for FY 2015 of 0.5 

percentage point (the 10-year moving average of MFP for the period ending FY 2015 based on 

IGI’s second quarter 2014 forecast), which was calculated as described in the FY 2012 IRF PPS 

final rule (76 FR 47836, 47859). Following application of the MFP, we further reduce the 

applicable percentage increase by 0.2 percentage point, as required by sections 

1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act. Therefore, the current estimate of the 

FY 2015 IRF update is 2.2 percent (2.9 percent market basket update, less 0.5 percentage point 

MFP adjustment, less 0.2 percentage point legislative adjustment). 

We received 5 comments on the proposed market basket increase factor, which are 

summarized below. 
CMS-1608-F 07/29/14 44

Comment: While several commenters supported the update to IRF payment rates for 

FY2015, one commenter stated that the update to the IRF payment rates is not warranted based 

on the review of many factors—including indicators of beneficiary access to rehabilitative 

services, the supply of providers, and Medicare margins. The commenter said that Medicare’s 

current payment rates for IRFs appear to be adequate and, therefore, recommended no update to 

IRF payment rates for FY2015. 

Response: We are finalizing the IRF PPS payment update for FY2015 of 2.2 percent 

(2.9 percent market basket update, less 0.5 percentage point MFP adjustment, less 0.2 percentage 

point legislative adjustment), as section 1886(j)(3)(C) of the Act does not provide the Secretary 

with the authority to apply a different update factor to IRF PPS payment rates for FY 2015 

Comment: Several commenters expressed concern about the applicability of the 

productivity adjustment to the IRF setting. One commenter suggested that we take into 

consideration the unique needs of rehabilitation patients and the highly skilled professional teams 

who provide their care. This commenter also stated that CMS should be mindful that increasing 

reimbursement financial pressures without allowing IRFs to improve their efficiency in ways that 

best serve patients may result in barriers to access for the most complex and needy Medicare 

beneficiaries. Another commenter noted that while CMS is bound by the Affordable Care Act to 

apply specific market basket reductions to the full market basket update in FY 2015 and 

subsequent years, they believe it is unlikely that productivity improvements will be generated by 

rehabilitation hospitals at a pace matching the productivity of the economy at large on an 

ongoing, consistent basis. The commenter also noted that services provided in rehabilitation 

hospitals are very labor intensive through the provision of hands-on care by physical therapists, 

occupational therapists, speech therapists and rehabilitation nursing staff, and that many of the 
CMS-1608-F 07/29/14 45

treatment plans do not lend themselves to continual productivity improvements. The commenter 

said that we should carefully monitor the impact that the productivity adjustments have on IRFs 

and provide feedback to Congress as appropriate. 

Response: Section 1886(j)(3)(C)(ii)(I) of the Act requires the application of a 

productivity adjustment that must be applied to the IRF PPS market basket update. We will 

continue to monitor the impact of the payment updates, including the effects of the productivity 

adjustment, on IRF provider margins as well as beneficiary access to care. 

Final Decision: Based on careful consideration of the comments, we are finalizing the 

FY 2015 market basket update for IRF payments of 2.2 percent, which is the most recent 

estimate of the FY 2008-based RPL market basket adjusted for productivity and the 

FY15 legislative reduction. Therefore, the current estimate of the FY 2015 IRF update is 

2.2 percent (2.9 percent market basket update, less 0.5 percentage point MFP adjustment, less 

0.2 percentage point legislative adjustment). 

B. Development of an IRF-Specific Market Basket 

In the FY 2010 IRF PPS proposed rule (74 FR 21062), we expressed our interest in 

exploring the possibility of creating a stand-alone, or IRF-specific, market basket that reflects the 

cost structures of only IRF providers. We noted that, of the available options, one would be to 

join the Medicare cost report data from freestanding IRF providers with data from hospital-based 

IRF providers. We indicated that an examination of the Medicare cost report data comparing 

freestanding and hospital-based IRFs revealed considerable differences between the two for cost 

levels and cost structures. At that time, we stated that we were unable to fully explain the 

differences in costs between freestanding and hospital-based IRFs and solicited comments 

regarding our findings. We summarized and responded to several public comments we received 
CMS-1608-F 07/29/14 46

on the potential creation of a stand-alone IRF market basket in the FY 2010 IRF final rule 

(74 FR 39776 through 39778). At that time, we stated the need for further research regarding the 

differences in cost levels and cost structures between freestanding IRFs and hospital-based IRFs. 

Since the FY 2010 IRF PPS final rule was published, we have made significant progress 

on the development of a stand-alone, or IRF-specific, market basket. Our research has focused 

on addressing several concerns regarding the use of the hospital-based IRF Medicare cost report 

data in the calculation of the major market basket cost weights. As discussed above, one concern 

is the cost level differences for hospital-based IRFs relative to freestanding IRFs that were not 

readily explained by the specific characteristics of the individual providers and the patients that 

they serve (for example, characteristics related to case mix, urban/rural status, teaching status). 

Furthermore, we are concerned about the variability in the cost report data among these hospitalbased IRF providers and the potential impact on the market basket cost weights. These concerns 

led us to consider whether it is appropriate to use the universe of IRF providers to derive an IRFspecific market basket. 

Recently, we have investigated the use of regression analysis to evaluate the effect of 

including hospital-based IRF Medicare cost report data in the calculation of cost 

distributions. We created preliminary regression models to try to explain variations in costs per 

discharge across both freestanding and hospital-based IRFs. These models were intended to 

capture the effects of facility-level and patient-level characteristics (for example, wage index, 

urban/rural status, ownership status, length-of-stay, occupancy rate, case mix, and Medicare 

utilization) on IRF costs per discharge. Using the results from the preliminary regression 

analyses, we identified smaller subsets of hospital-based and freestanding IRF providers where 

the predicted costs per discharge using the regression model closely matched the actual costs per 
CMS-1608-F 07/29/14 47

discharge for each IRF. We then derived different sets of cost distributions using (1) these 

subsets of IRF providers and (2) the entire universe of freestanding and hospital-based IRF 

providers (including those IRFs for which the variability in cost levels remains unexplained). 

After comparing these sets of cost distributions, the differences were not substantial enough for 

us to conclude that the inclusion of those IRF providers with unexplained variability in costs in 

the calculation of the cost distributions is a major cause of concern. 

Another concern with incorporating the hospital-based IRF data in the derivation of an 

IRF-specific market basket is the complexity of the Medicare cost report data for these providers. 

The freestanding IRFs independently submit a Medicare cost report for their facilities, making it 

relatively straightforward to obtain the cost categories necessary to determine the major market 

basket cost weights. However, cost report data submitted for a hospital-based IRF are embedded 

in the Medicare cost report submitted for the entire hospital facility in which the IRF is located. 

Therefore, adjustments would have to be made to obtain cost weights that represent just the 

hospital-based IRF (as opposed to the hospital as a whole). For example, ancillary costs for 

services such as therapy, radiology, and laboratory services for the entire hospital would need to 

be appropriately converted to a value that only represents the hospital-based IRF unit’s costs. 

The preliminary method we have developed to allocate these costs is complex and still needs to 

be fully evaluated before we are ready to propose an IRF-specific market basket that would 

reflect both hospital-based and freestanding IRF data. 

In our ongoing research, we are also evaluating the differences in salary costs as a percent 

of total costs for both hospital-based and freestanding IRFs. Salary costs are historically the 

largest component of the market baskets. Based on our review of the data reported on the 

applicable Medicare cost reports, our initial findings (using the preliminary allocation method as 
CMS-1608-F 07/29/14 48

discussed above) have shown that the hospital-based IRF salary costs as a percent of total costs 

tend to be lower than those of freestanding IRFs. We are still evaluating the method for deriving 

salary costs as a percent of total costs, and one of the main issues is to further investigate the 

percentage of ancillary costs that should be appropriately allocated to the IRF salary costs for the 

hospital-based IRF, as discussed above. 

Also, as stated in the FY 2012 IRF PPS final rule (76 FR 47836, 47851), effective for 

cost reports beginning on or after May 1, 2010, we finalized a revised Hospital and Hospital 

Health Care Complex Cost Report, Form CMS 2552–10 (74 FR 31738). The report is available 

for download from the CMS website at http://www.cms.gov/Research-Statistics-Data-andSystems/Files-for-Order/CostReports/Hospital-2010-form.html. The revised Hospital and 

Hospital Health Care Complex Cost Report includes a new worksheet (Worksheet S–3, part V) 

that identifies the contract labor costs and benefit costs for the hospital/hospital care complex, is 

applicable to sub-providers and units. As we gain access to the data reported by IRFs on this 

new form, we plan to evaluate the appropriateness of using these data to derive benefits and 

contract labor cost weights for the market basket instead of the data and methods currently used 

for the RPL market basket. This includes comparing these data with costs submitted on the other 

forms composing the Medicare cost report. 

For the reasons discussed above, while we believe we have made significant progress on 

the development of an IRF-specific market basket, we believe that further research is required at 

this time. As a result, we did not propose an IRF-specific market basket for FY 2015. We plan 

to complete our research during the remainder of this year and, provided that we are prepared to 

draw conclusions from our research, may propose an IRF-specific market basket for the FY 2016 

rulemaking cycle. 
CMS-1608-F 07/29/14 49

We received 4 comments on the development of an IRF-specific market basket, which 

are summarized below. 

Comment: One commenter agreed with the continued use of the RPL market basket 

instead of changing to a rehabilitation-specific market basket. The commenter noted that CMS 

has utilized the RPL Market Basket for several years and that CMS has not been able to 

reconcile the cost structure issues between freestanding and hospital-based rehabilitation 

facilities. The commenter stated that CMS’s description of attempts to adjust and convert costs 

and data from the hospital cost report for the hospital-based rehabilitation units will not 

ultimately reflect the true cost of that hospital-based unit, as it will be artificially derived based 

on assumptions and comparisons to freestanding rehabilitation facilities. Further, the commenter 

stated, the hospital-based rehabilitation unit is part of a higher cost structure facility, and any 

future rehabilitation market basket should reflect that. 

Response: We have made significant progress in addressing our initial concerns of the 

research that showed substantial cost differences between hospital-based and freestanding IRF 

providers. Nonetheless, we concur with the commenter’s concerns about the difficulty of 

disentangling cost of hospital-based IRFs from the overall hospital. We note that our regression 

analysis, detailed above, provides a start at addressing these issues. However, we disagree with 

the commenter’s claim that data from hospital-based providers will not reflect the true cost of the 

hospital-based unit. We believe that the approach described above, while more complicated than 

only using freestanding facility cost report data, would directly reflect the costs of the hospitalbased unit and be a technical improvement. As noted above, we will continue to research and 

analyze the development of an IRF-specific market basket that uses the most appropriate and 

reliable data sources and methods and provide detailed explanations of the proposed 
CMS-1608-F 07/29/14 50

methodology most likely in the FY 2016 proposed rule. 

Comment: Several commenters supported the proposal to have a stand-alone IRF market 

basket, but urged CMS to share findings and materials in a transparent manner in order to allow 

the IRF community to validate and analyze these research activities. 

Response: As the commenters suggested, we will continue to research and analyze the 

development of an IRF-specific market basket that uses the most appropriate and reliable data 

sources and methods. We anticipate proposing to use an IRF-specific market basket in the 

FY 2016 IRF proposed rule, and the public will have the opportunity to comment on our market 

basket methodology and data sources during the 60-day comment period following the 

publication of the proposed rule. 

Final Decision: After careful consideration of the comments, we will continue to 

research the possibility of creating and proposing an IRF-specific market basket based on data 

from both freestanding and hospital-based IRF facilities in the future. 

C. Secretary’s Final Recommendation 

 For FY 2015, the Medicare Payment Advisory Commission (MedPAC) recommends that 

a 0.0 percent update be applied to IRF PPS payment rates. As discussed above, and in 

accordance with sections 1886(j)(3)(C) and 1886(j)(3)(D) of the Act, the Secretary proposes to 

update IRF PPS payment rates for FY 2015 by an adjusted market basket increase factor of 

2.2 percent, as section 1886(j)(3)(C) of the Act does not provide the Secretary with the authority 

to apply a different update factor to IRF PPS payment rates for FY 2015. 

 We did not receive any public comments on the Secretary’s recommendation. 

D. Labor-Related Share for FY 2015 

The labor-related share for FY 2015 is updated using the methodology described in the 
CMS-1608-F 07/29/14 51

FY 2012 IRF PPS final rule (76 FR 47836, 47860 through 47863). Using this method and IGI’s 

second quarter 2014 forecast of the 2008-based RPL market basket, the proposed IRF laborrelated share for FY 2015 is the sum of the FY 2015 relative importance of each labor-related 

cost category. This figure reflects the different rates of price change for these cost categories 

between the base year (FY 2008) and FY 2015. As shown in Table 3, the FY 2015 labor-related 

share is 69.294 percent. 

TABLE 3: FY 2015 IRF RPL Labor-Related Share Relative Importance 

FY 2015 Relative Importance Labor-Related Share 

Wages and Salaries 48.271 

Employee Benefits 12.963 

Professional Fees: Labor-Related 2.058 

Administrative and Business 

Support Services 0.415 

All Other: Labor-Related Services 2.061 

Subtotal 65.741 

Labor-Related Portion of Capital Costs (.46) 3.553 

Total Labor-Related Share 69.294 

Source: IHS Global Insight, Inc. Second quarter 2014 forecast; Historical Data through 1st quarter 2014. 

 We received one comment on the proposed IRF labor-related share for FY 2015, which is 

summarized below. 

 Comment: One commenter supported using the latest available data to update the IRF 

PPS and noted that the current methodology relies upon acute care hospital data for certain items 

(that is, employee benefits, contract labor) that were not collected in RPL settings. The 

commenter also noted that changes to the Medicare cost report (Form 2552-10) were 

implemented to gather additional information on labor costs. The commenter requested that 

CMS continue to review the available data and, if appropriate, implement changes to allow the 

use of IRF-specific data for all cost categories, weights and price proxies. 

 Response: We appreciate the commenter’s concerns with respect to the data for the 
CMS-1608-F 07/29/14 52

benefits and contract labor categories. We have been monitoring and analyzing the data that is 

being reported based on the revised cost report and instructions. We hope to use this data in the 

future if it is statistically representative and we have a reliable response rate for these data. 

 Final Decision: After careful consideration of the comments, we are finalizing the 

FY2015 labor-related share of 69.294 percent. 

E. Wage Adjustment 

Section 1886(j)(6) of the Act requires the Secretary to adjust the proportion of 

rehabilitation facilities’ costs attributable to wages and wage-related costs (as estimated by the 

Secretary from time to time) by a factor (established by the Secretary) reflecting the relative 

hospital wage level in the geographic area of the rehabilitation facility compared to the national 

average wage level for those facilities. The Secretary is required to update the IRF PPS wage 

index on the basis of information available to the Secretary on the wages and wage-related costs 

to furnish rehabilitation services. Any adjustment or updates made under section 1886(j)(6) of 

the Act for a FY are made in a budget-neutral manner. 

 For FY 2015, we are maintaining the policies and methodologies described in the 

FY 2012 IRF PPS final rule (76 FR 47836, at 47863 through 47865) related to the labor market 

area definitions and the wage index methodology for areas with wage data. Thus, we are using 

the CBSA labor market area definitions and the FY 2014 pre-reclassification and pre-floor 

hospital wage index data. In accordance with section 1886(d)(3)(E) of the Act, the FY 2014 

pre-reclassification and pre-floor hospital wage index is based on data submitted for hospital cost 

reporting periods beginning on or after October 1, 2009, and before October 1, 2010 (that is, 

FY 2010 cost report data). 

 The labor market designations made by the OMB include some geographic areas where 
CMS-1608-F 07/29/14 53

there are no hospitals and, thus, no hospital wage index data on which to base the calculation of 

the IRF PPS wage index. We will continue to use the same methodology discussed in the 

FY 2008 IRF PPS final rule (72 FR 44299) to address those geographic areas where there are no 

hospitals and, thus, no hospital wage index data on which to base the calculation for the FY 2015 

IRF PPS wage index. 

In accordance with our established methodology, we have historically adopted any CBSA 

changes that are published in the OMB bulletin that corresponds with the hospital wage data 

used to determine the IRF PPS wage index. The OMB bulletins are available at 

http://www.whitehouse.gov/omb/bulletins/index.html. 

In keeping with the established IRF PPS wage index policy; we will use the prior year’s 

(FY 2014) pre-floor, pre-reclassified hospital wage index data to derive the FY 2015 applicable 

IRF PPS wage index. We anticipate using the FY 2014 pre-floor, pre-reclassified hospital wage 

index data to derive the applicable IRF PPS wage index for FY 2015. We note, however, that 

the FY 2014 pre-floor, pre-reclassified hospital wage index does not use OMB’s new 

2010 Census-based area delineations, which were outlined in the February 28, 2013, OMB 

Bulletin 13-01, as we did not receive these changes in time to incorporate them into the FY 2014 

hospital wage index. We therefore intend to consider the incorporation of these CBSA changes 

during the development of the FY 2015 hospital wage index. Assuming that we would continue 

to follow our established methodology for the IRF PPS wage index, this means that the 2010 

Census-based CBSA changes would not be considered for inclusion in the IRF PPS wage index 

until FY 2016. 

 To calculate the wage-adjusted facility payment for the payment rates set forth in this 

final rule, we multiply the unadjusted Federal payment rate for IRFs by the FY 2015 
CMS-1608-F 07/29/14 54

labor-related share based on the FY 2008-based RPL market basket (69.294 percent) to 

determine the labor-related portion of the standard payment amount. We then multiply the laborrelated portion by the applicable IRF wage index from the tables in the addendum to this final 

rule. These tables are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

Table A is for urban areas, and Table B is for rural areas. 

 Adjustments or updates to the IRF wage index made under section 1886(j)(6) of the Act 

must be made in a budget-neutral manner. We calculate a budget-neutral wage adjustment factor 

as established in the FY 2004 IRF PPS final rule (68 FR 45689), codified at §412.624(e)(1), as 

described in the steps below. We use the listed steps to ensure that the FY 2015 IRF standard 

payment conversion factor reflects the update to the wage indexes (based on the FY 2010 

hospital cost report data) and the labor-related share in a budget-neutral manner: 

 Step 1. Determine the total amount of the estimated FY 2014 IRF PPS rates, using the 

FY 2014 standard payment conversion factor and the labor-related share and the wage indexes 

from FY 2014 (as published in the FY 2014 IRF PPS final rule (78 FR 47860)). 

 Step 2. Calculate the total amount of estimated IRF PPS payments using the FY 2015 

standard payment conversion factor and the FY 2015 labor-related share and CBSA urban and 

rural wage indexes. 

 Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2. The 

resulting quotient is the FY 2015 budget-neutral wage adjustment factor of 1.0017. 

 Step 4. Apply the FY 2015 budget-neutral wage adjustment factor from step 3 to the 

FY 2014 IRF PPS standard payment conversion factor after the application of the adjusted 

market basket update to determine the FY 2015 standard payment conversion factor. 
CMS-1608-F 07/29/14 55

 We discuss the calculation of the standard payment conversion factor for FY 2015 in 

section VI.F. of this final rule. 

 We received 4 comments on the proposed IRF wage adjustment for FY 2015, which are 

summarized below. 

Comment: Several commenters expressed concern regarding the possible incorporation 

of the 2010 Census-based CBSA changes in the calculation of the wage index and the time frame 

over which the changes would be implemented. More specifically, these commenters urged 

CMS to establish a two-year or four-year phase-in for the wage index changes, particularly for 

providers most adversely affected by the new CBSA delineations. 

 Response: We appreciate all of the comments on this topic and support for the proposed 

FY 2015 wage index methodology. We will take these comments into consideration during the 

development of the FY 2016 IRF PPS wage index. 

Comment: Commenters recommended that we develop a new methodology for area 

wage adjustment that eliminates hospital wage index reclassifications for all hospitals and 

reduces the problems associated with annual fluctuations in wage indices and across geographic 

boundaries. These commenters also recommended that we consider wage index policies under 

the current IPPS because IRFs compete in a similar labor pool as acute care hospitals. The 

commenters suggested that the IPPS wage index policies would allow IRFs to benefit from the 

IPPS reclassification and/or floor policies. One commenter further recommended that until a 

new wage index system is implemented, we institute a “smoothing” variable to the current 

process to reduce the fluctuations IRFs annually experience. 

Response: Consistent with our previous responses to these comments (most recently 

published in our FY 2014 IRF PPS final rule (78 FR 47874)), we note that the IRF PPS does not 
CMS-1608-F 07/29/14 56

account for geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act, and 

does not apply the “rural floor” under section 4410 of the BBA. Furthermore, as we do not have 

an IRF-specific wage index, we are unable to determine at this time the degree, if any, to which a 

geographic reclassification adjustment or a “rural floor” policy under the IRF PPS would be 

appropriate. The rationale for our current wage index policies is fully described in the FY 2006 

IRF PPS final rule (70 FR 47880, 47926 through 47928). 

Additionally, while some commenters recommended that we adopt IPPS reclassification 

and/or floor policies, we note the Medicare Payment Advisory Commission (MedPAC’s) 

June 2007 report to the Congress, titled “Report to Congress: Promoting Greater Efficiency in 

Medicare,” (available at http://www.medpac.gov/documents/Jun07_EntireReport.pdf) 

recommends that Congress “repeal the existing hospital wage index statute, including 

reclassification and exceptions, and give the Secretary authority to establish new wage index 

systems.” We continue to believe it would not be prudent at this time to adopt the IPPS wage 

index policies, such as reclassification and/or floor policies, and will, therefore, continue to use 

the CBSA labor market area definitions and the pre-reclassification and pre-floor hospital wage 

index data based on 2010 cost report data in this final rule. 

With regard to issues mentioned about ensuring that the wage index minimizes 

fluctuations, matches the costs of labor in the market, and provides for a single wage index 

policy, section 3137(b) of the Affordable Care Act required us to submit a report to the Congress 

by December 31, 2011 that includes a plan to reform the hospital wage index system. The report 

that we submitted is available online at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/AcuteInpatientPPS/Wage-Index-Reform.html 

However, we will continue to monitor the IPPS wage index to identify any policy 
CMS-1608-F 07/29/14 57

changes that may be appropriate for IRFs. This is consistent with our previous responses to 

these recurring comments. 

Final Decision: After careful consideration of the comments, we are finalizing use of the 

FY 2014 pre-floor, pre-reclassified hospital wage index data to derive the applicable IRF PPS 

wage index for FY 2015. 

F. Description of the IRF Standard Conversion Factor and Payment Rates for FY 2015 

 To calculate the standard payment conversion factor for FY 2015, as illustrated in 

Table 4, we begin by applying the adjusted market basket increase factor for FY 2015 that was 

adjusted in accordance with sections 1886(j)(3)(C) and (D) of the Act, to the standard payment 

conversion factor for FY 2014 ($14,846). Applying the 2.2 percent adjusted market basket 

increase factor for FY 2015 to the standard payment conversion factor for FY 2014 of $14,846 

yields a standard payment amount of $15,173. Then, we apply the budget neutrality factor for 

the FY 2015 wage index and labor-related share of 1.0017, which results in a standard payment 

amount of $15,198. We next apply the budget neutrality factors for the revised CMG relative 

weights of 1.0000, which results in the proposed standard payment conversion factor of $15,198 

for FY 2015. 

TABLE 4: Calculations to Determine the FY 2015 Standard Payment Conversion Factor 

Explanation for Adjustment Calculations 

Standard Payment Conversion Factor for FY 2014 $14,846 

Market Basket Increase Factor for FY 2015 (2.9 percent), reduced by a 

0.5 percentage point reduction for the productivity adjustment as required 

by section 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2 percentage 

points in accordance with paragraphs 1886(j)(3)(C) and (D) of the Act x 1.0220 

Budget Neutrality Factor for the Wage Index and Labor-Related Share x 1.0017 

Budget Neutrality Factor for the Revisions to the CMG Relative Weights x 1.0000 

FY 2015 Standard Payment Conversion Factor = $15,198 

 We did not receive any comments on the proposed FY 2015 standard payment 
CMS-1608-F 07/29/14 58

conversion factor. 

 Final Decision: As we did not receive any comments on the proposed FY 2015 standard 

payment conversion factor, we are finalizing the IRF standard payment conversion factor at 

$15,198 for FY 2015. 

After the application of the CMG relative weights described in section IV of this final 

rule, to the FY 2015 standard payment conversion factor ($15,198), the resulting unadjusted IRF 

prospective payment rates for FY 2015 are shown in Table 5. 

TABLE 5: FY 2015 Payment Rates 

CMG Payment Rate 

Tier 1 

Payment Rate 

Tier 2 

Payment Rate 

Tier 3 

Payment Rate No 

Comorbidity 

0101 $ 11,934.99 $ 10,866.57 $ 9,896.94 $ 9,495.71 

0102 $ 14,948.75 $ 13,609.81 $ 12,393.97 $ 11,893.95 

0103 $ 17,684.39 $ 16,100.76 $ 14,663.03 $ 14,070.31 

0104 $ 18,421.50 $ 16,772.51 $ 15,273.99 $ 14,656.95 

0105 $ 21,512.77 $ 19,587.18 $ 17,837.89 $ 17,115.99 

0106 $ 24,521.97 $ 22,327.38 $ 20,333.40 $ 19,511.19 

0107 $ 27,395.91 $ 24,942.96 $ 22,714.93 $ 21,796.97 

0108 $ 34,145.35 $ 31,089.03 $ 28,312.35 $ 27,167.94 

0109 $ 31,262.29 $ 28,462.81 $ 25,920.19 $ 24,873.05 

0110 $ 40,925.17 $ 37,262.46 $ 33,934.09 $ 32,561.72 

0201 $ 12,378.77 $ 10,085.39 $ 9,048.89 $ 8,632.46 

0202 $ 16,096.20 $ 13,114.35 $ 11,764.77 $ 11,223.72 

0203 $ 18,483.81 $ 15,059.70 $ 13,511.02 $ 12,889.42 

0204 $ 20,360.76 $ 16,588.62 $ 14,883.40 $ 14,197.97 

0205 $ 24,201.30 $ 19,717.89 $ 17,690.47 $ 16,875.86 

0206 $ 29,373.17 $ 23,932.29 $ 21,470.21 $ 20,482.34 

0207 $ 38,967.67 $ 31,748.62 $ 28,482.57 $ 27,174.02 

0301 $ 16,751.24 $ 14,170.62 $ 12,846.87 $ 11,851.40 

0302 $ 20,971.72 $ 17,740.63 $ 16,082.52 $ 14,836.29 

0303 $ 24,880.65 $ 21,047.71 $ 19,081.09 $ 17,603.84 

0304 $ 32,738.01 $ 27,693.80 $ 25,107.10 $ 23,161.75 

0401 $ 15,599.23 $ 13,359.04 $ 12,357.49 $ 11,020.07 

0402 $ 21,441.34 $ 18,360.70 $ 16,985.28 $ 15,146.33 

0403 $ 35,045.07 $ 30,011.49 $ 27,763.71 $ 24,756.02 
CMS-1608-F 07/29/14 59

CMG Payment Rate 

Tier 1 

Payment Rate 

Tier 2 

Payment Rate 

Tier 3 

Payment Rate No 

Comorbidity 

0404 $ 62,056.47 $ 53,142.85 $ 49,162.49 $ 43,838.63 

0405 $ 50,692.93 $ 43,411.57 $ 40,160.72 $ 35,811.05 

0501 $ 12,793.68 $ 10,340.72 $ 9,478.99 $ 8,576.23 

0502 $ 17,599.28 $ 14,223.81 $ 13,038.36 $ 11,798.21 

0503 $ 21,844.09 $ 17,654.00 $ 16,182.83 $ 14,643.27 

0504 $ 25,737.81 $ 20,801.50 $ 19,067.41 $ 17,252.77 

0505 $ 29,430.93 $ 23,786.39 $ 21,803.05 $ 19,728.52 

0506 $ 41,134.91 $ 33,245.63 $ 30,475.03 $ 27,575.25 

0601 $ 15,643.30 $ 12,384.85 $ 11,438.01 $ 10,428.87 

0602 $ 20,187.50 $ 15,982.22 $ 14,761.82 $ 13,459.35 

0603 $ 25,421.69 $ 20,126.71 $ 18,588.67 $ 16,948.81 

0604 $ 33,295.78 $ 26,360.93 $ 24,347.20 $ 22,199.72 

0701 $ 14,742.06 $ 12,249.59 $ 11,743.49 $ 10,693.31 

0702 $ 18,889.59 $ 15,694.97 $ 15,047.54 $ 13,702.52 

0703 $ 22,882.11 $ 19,014.22 $ 18,228.48 $ 16,599.26 

0704 $ 29,421.81 $ 24,447.50 $ 23,436.84 $ 21,344.07 

0801 $ 11,249.56 $ 9,222.15 $ 8,523.04 $ 7,860.41 

0802 $ 15,032.34 $ 12,324.06 $ 11,390.90 $ 10,504.86 

0803 $ 20,325.81 $ 16,661.57 $ 15,400.13 $ 14,202.53 

0804 $ 17,965.56 $ 14,726.86 $ 13,611.33 $ 12,553.55 

0805 $ 22,344.10 $ 18,318.15 $ 16,930.57 $ 15,614.43 

0806 $ 26,844.23 $ 22,005.18 $ 20,339.48 $ 18,757.37 

0901 $ 14,264.84 $ 11,521.60 $ 10,743.47 $ 9,714.56 

0902 $ 18,818.16 $ 15,198.00 $ 14,172.14 $ 12,814.95 

0903 $ 23,635.93 $ 19,090.21 $ 17,801.42 $ 16,096.20 

0904 $ 30,049.49 $ 24,268.17 $ 22,629.82 $ 20,462.59 

1001 $ 15,538.44 $ 14,134.14 $ 12,241.99 $ 11,193.33 

1002 $ 20,012.73 $ 18,204.16 $ 15,766.41 $ 14,415.30 

1003 $ 28,538.80 $ 25,959.70 $ 22,483.92 $ 20,558.33 

1101 $ 19,214.83 $ 15,415.33 $ 15,273.99 $ 13,023.17 

1102 $ 28,778.93 $ 23,088.80 $ 22,876.03 $ 19,506.63 

1201 $ 15,249.67 $ 14,471.54 $ 13,497.34 $ 12,547.47 

1202 $ 18,109.94 $ 17,185.90 $ 16,029.33 $ 14,901.64 

1203 $ 22,999.13 $ 21,824.33 $ 20,354.68 $ 18,924.55 

1301 $ 18,571.96 $ 15,026.26 $ 13,187.30 $ 12,433.48 

1302 $ 24,184.58 $ 19,565.91 $ 17,172.22 $ 16,190.43 

1303 $ 30,854.98 $ 24,962.72 $ 21,909.44 $ 20,655.60 
CMS-1608-F 07/29/14 60

CMG Payment Rate 

Tier 1 

Payment Rate 

Tier 2 

Payment Rate 

Tier 3 

Payment Rate No 

Comorbidity 

1401 $ 13,726.83 $ 11,131.02 $ 10,138.59 $ 9,196.31 

1402 $ 18,157.05 $ 14,725.34 $ 13,412.24 $ 12,164.48 

1403 $ 22,339.54 $ 18,116.02 $ 16,500.47 $ 14,965.47 

1404 $ 28,105.66 $ 22,793.96 $ 20,760.47 $ 18,830.32 

1501 $ 15,194.96 $ 12,386.37 $ 11,454.73 $ 11,068.70 

1502 $ 19,736.12 $ 16,088.60 $ 14,880.36 $ 14,378.83 

1503 $ 24,192.18 $ 19,720.92 $ 18,239.12 $ 17,625.12 

1504 $ 29,921.82 $ 24,391.27 $ 22,558.39 $ 21,798.49 

1601 $ 14,354.51 $ 13,318.01 $ 12,287.58 $ 11,580.88 

1602 $ 19,011.18 $ 17,638.80 $ 16,274.02 $ 15,337.82 

1603 $ 24,081.23 $ 22,345.62 $ 20,616.09 $ 19,429.12 

1701 $ 15,854.55 $ 14,118.94 $ 13,018.61 $ 11,977.54 

1702 $ 19,923.06 $ 17,742.15 $ 16,359.13 $ 15,050.58 

1703 $ 23,371.48 $ 20,812.14 $ 19,190.51 $ 17,655.52 

1704 $ 30,177.15 $ 26,873.10 $ 24,777.30 $ 22,797.00 

1801 $ 16,204.11 $ 14,342.35 $ 12,283.02 $ 10,989.67 

1802 $ 25,660.30 $ 22,713.41 $ 19,450.40 $ 17,403.23 

1803 $ 42,701.82 $ 37,795.91 $ 32,367.18 $ 28,959.79 

1901 $ 15,837.84 $ 14,196.45 $ 14,077.91 $ 13,430.47 

1902 $ 28,506.89 $ 25,553.92 $ 25,338.11 $ 24,172.42 

1903 $ 51,296.29 $ 45,981.55 $ 45,594.00 $ 43,496.68 

2001 $ 13,415.27 $ 11,018.55 $ 10,153.78 $ 9,267.74 

2002 $ 18,043.07 $ 14,819.57 $ 13,656.92 $ 12,463.88 

2003 $ 22,889.71 $ 18,799.93 $ 17,325.72 $ 15,813.52 

2004 $ 29,646.74 $ 24,348.72 $ 22,439.85 $ 20,479.31 

2101 $ 27,971.92 $ 25,480.97 $ 23,629.85 $ 20,568.97 

5001 $ - $ - $ - $ 2,354.17 

5101 $ - $ - $ - $ 10,320.96 

5102 $ - $ - $ - $ 23,616.17 

5103 $ - $ - $ - $ 11,055.03 

5104 $ - $ - $ - $ 29,601.14 

G. Example of the Methodology for Adjusting the Federal Prospective Payment Rates 

 Table 6 illustrates the methodology for adjusting the federal prospective payments (as 

described in sections VI.A. through VI.F. of this final rule). The following examples are based 
CMS-1608-F 07/29/14 61

on two hypothetical Medicare beneficiaries, both classified into CMG 0110 (without 

comorbidities). The unadjusted federal prospective payment rate for CMG 0110 (without 

comorbidities) appears in Table 6. 

 Example: One beneficiary is in Facility A, an IRF located in rural Spencer County, 

Indiana, and another beneficiary is in Facility B, an IRF located in urban Harrison County, 

Indiana. Facility A, a rural non-teaching hospital has a Disproportionate Share Hospital (DSH) 

percentage of 5 percent (which would result in a LIP adjustment of 1.0156), a wage index of 

0.8513, and a rural adjustment of 14.9 percent. Facility B, an urban teaching hospital, has a DSH 

percentage of 15 percent (which would result in a LIP adjustment of 1.0454 percent), a wage 

index of 0.8852, and a teaching status adjustment of 0.0784. 

 To calculate each IRF’s labor and non-labor portion of the Federal prospective payment, 

we begin by taking the unadjusted Federal prospective payment rate for CMG 0110 (without 

comorbidities) from Table 5. Then, we multiply the labor-related share for FY 2015 (69.294 

percent) described in section VI.D. of this final rule by the unadjusted federal prospective 

payment rate. To determine the non-labor portion of the federal prospective payment rate, we 

subtract the labor portion of the federal payment from the unadjusted federal prospective 

payment. 

 To compute the wage-adjusted federal prospective payment, we multiply the labor 

portion of the federal payment by the appropriate wage index found in tables A and B. These 

tables are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

The resulting figure is the wage-adjusted labor amount. Next, we compute the wage-adjusted 

federal payment by adding the wage-adjusted labor amount to the non-labor portion. 
CMS-1608-F 07/29/14 62

 Adjusting the wage-adjusted federal payment by the facility-level adjustments involves 

several steps. First, we take the wage-adjusted Federal prospective payment and multiply it by 

the appropriate rural and LIP adjustments (if applicable). Second, to determine the appropriate 

amount of additional payment for the teaching status adjustment (if applicable), we multiply the 

teaching status adjustment (0.0784, in this example) by the wage-adjusted and rural-adjusted 

amount (if applicable). Finally, we add the additional teaching status payments (if applicable) to 

the wage, rural, and LIP-adjusted federal prospective payment rates. Table 6 illustrates the 

components of the adjusted payment calculation. 

TABLE 6: Example of Computing the IRF FY 2015 Federal Prospective Payment 

Steps Rural Facility A (Spencer Co., 

IN) 

Urban Facility B 

(Harrison Co., IN) 

1 

Unadjusted Federal Prospective 

Payment $ 32,561.72 $ 32,561.72 

2 Labor Share X 0.69294 X 0.69294 

3 

Labor Portion of Federal Payment 

= $22,563.32 = $22,563.32 

4 

CBSA-Based Wage Index (shown 

in the Addendum, Tables 1 and 2) 

X 0.8513 X 0.8852 

5 Wage-Adjusted Amount = $19,208.15 = $19,973.05 

6 Non-Labor Amount + $ 9,998.40 + $9,998.40 

7 Wage-Adjusted Federal Payment = $29,206.55 = $29,971.45 

8 Rural Adjustment X 1.149 X 1.000 

9 

Wage- and Rural-Adjusted Federal 

Payment = $33,558.33 = $29,971.45 

10 LIP Adjustment X 1.0156 X 1.0454 

11 

FY 2015 Wage-, Rural- and LIPAdjusted Federal Prospective 

Payment Rate = $34,081.84 = $31,332.15 

12 

FY 2015 Wage- and RuralAdjusted Federal Prospective 

Payment $33,558.33 $29,971.45 

13 Teaching Status Adjustment X 0 X 0.0784 

14 

Teaching Status Adjustment 

Amount = $0.00 = $2,349.76 
CMS-1608-F 07/29/14 63

Steps Rural Facility A (Spencer Co., 

IN) 

Urban Facility B 

(Harrison Co., IN) 

15 

FY 2015 Wage-, Rural-, and LIPAdjusted Federal Prospective 

Payment Rate + $34,081.84 + $31,332.15 

16 

Total FY 2015 Adjusted Federal 

Prospective Payment = $34,081.84 = $33,681.92 

Thus, the adjusted payment for Facility A would be $34,081.84, and the adjusted 

payment for Facility B would be $33,681.92. 

VII. Update to Payments for High-Cost Outliers under the IRF PPS

A. Update to the Outlier Threshold Amount for FY 2015 

 Section 1886(j)(4) of the Act provides the Secretary with the authority to make payments 

in addition to the basic IRF prospective payments for cases incurring extraordinarily high costs. 

A case qualifies for an outlier payment if the estimated cost of the case exceeds the adjusted 

outlier threshold. We calculate the adjusted outlier threshold by adding the IRF PPS payment for 

the case (that is, the CMG payment adjusted by all of the relevant facility-level adjustments) and 

the adjusted threshold amount (also adjusted by all of the relevant facility-level adjustments). 

Then, we calculate the estimated cost of a case by multiplying the IRF’s overall CCR by the 

Medicare allowable covered charge. If the estimated cost of the case is higher than the adjusted 

outlier threshold, we make an outlier payment for the case equal to 80 percent of the difference 

between the estimated cost of the case and the outlier threshold. 

 In the FY 2002 IRF PPS final rule (66 FR 41362 through 41363), we discussed our 

rationale for setting the outlier threshold amount for the IRF PPS so that estimated outlier 

payments would equal 3 percent of total estimated payments. For the 2002 IRF PPS final rule, 

we analyzed various outlier policies using 3, 4, and 5 percent of the total estimated payments, 

and we concluded that an outlier policy set at 3 percent of total estimated payments would 
CMS-1608-F 07/29/14 64

optimize the extent to which we could reduce the financial risk to IRFs of caring for high-cost 

patients, while still providing for adequate payments for all other (non-high cost outlier) cases. 

 Subsequently, we updated the IRF outlier threshold amount in the FYs 2006 through 

2014 IRF PPS final rules and the FY 2011 and FY 2013 notices (70 FR 47880, 71 FR 48354, 

72 FR 44284, 73 FR 46370, 74 FR 39762, 75 FR 42836, 76 FR 47836, 76 FR 59256, and 

77 FR 44618, 78 FR 47860, respectively) to maintain estimated outlier payments at 3 percent of 

total estimated payments. We also stated in the FY 2009 final rule (73 FR 46370 at 46385) that 

we would continue to analyze the estimated outlier payments for subsequent years and adjust the 

outlier threshold amount as appropriate to maintain the 3 percent target. 

 To update the IRF outlier threshold amount for FY 2015, we proposed to use FY 2013 

claims data and the same methodology that we used to set the initial outlier threshold amount in 

the FY 2002 IRF PPS final rule (66 FR 41316 and 41362 through 41363), which is also the same 

methodology that we used to update the outlier threshold amounts for FYs 2006 through 2014. 

Based on an analysis of this updated data, we estimate that IRF outlier payments as a percentage 

of total estimated payments are approximately 2.8 percent in FY 2014. Therefore, we update the 

outlier threshold amount to $8,848 to maintain estimated outlier payments at approximately 

3 percent of total estimated aggregate IRF payments for FY 2015. 

 We received 3 comments on the proposed update to the FY 2015 outlier threshold 

amount to maintain estimated outlier payments at approximately 3 percent of total estimated IRF 

payments, which are summarized below. 

 Comment: Several commenters expressed support for the proposed update to the outlier 

threshold amount to maintain estimated IRF outlier payments for FY 2015 at 3 percent of total 

IRF PPS payments. However, some commenters expressed concerns that actual IRF outlier 
CMS-1608-F 07/29/14 65

payments in recent years have tended to fall below 3 percent of total IRF PPS payments. These 

commenters requested that we revise the methodology used to set the outlier threshold amount to 

ensure that we pay out the full 3 percent in outlier payments or incorporate any unused outlier 

payments from years in which aggregate outlier payments are below the 3 percent target back 

into the IRF PPS base payments for subsequent years. 

 Response: We will continue to monitor our IRF outlier policies to ensure that they 

continue to compensate IRFs for treating unusually high-cost patients and, thereby, promote 

access to care for patients who are likely to require unusually high-cost care. Although actual 

outlier payments in the most recent 4-year period have tended to be just slightly below the 

3 percent target, actual outlier payments ranged at or above 3 percent for the 4-year period from 

FY 2007 through FY 2010. In fact, actual outlier payments in FY 2008 were 4.2 percent of total 

IRF PPS payments. 

 As we have indicated in previous IRF PPS final rules, we do not make adjustments to 

IRF PPS payment rates for the sole purpose of accounting for differences between projected and 

actual outlier payments. We use the best available data at the time to establish an outlier 

threshold for IRF PPS payments prior to the beginning of each fiscal year so that estimated 

outlier payments for that fiscal year will equal 3 percent of total estimated IRF PPS payments. 

We evaluate the status of our outlier expenditures annually, and if there is a difference from our 

projection, that information is used to make a prospective adjustment to lower or raise the outlier 

threshold for the upcoming fiscal year. We believe a retrospective adjustment would not be 

appropriate. This includes instances where we have overestimated, as well as underestimated, 

outlier payments. If outlier payments for a given year turn out to be greater than projected, we 

do not recoup money from hospitals; if outlier payments for a given year are lower than 
CMS-1608-F 07/29/14 66

projected, we do not make an adjustment to account for the difference. Payments for a given 

discharge in a given fiscal year are generally intended to reflect or address the average costs of 

that discharge in that year; that goal would be undermined if we adjusted IRF PPS payments to 

account for “underpayments” or “overpayments” in IRF outliers in previous years. 

 Final Decision: Having carefully considered the public comments received and also 

taking into account the most recent available data, we are finalizing the outlier threshold amount 

of $8,848 to maintain estimated outlier payments at approximately 3 percent of total estimated 

aggregate IRF payments for FY 2015. This update is effective October 1, 2014. We will 

continue to monitor trends in IRF outlier payments to ensure that they are working as intended to 

compensate IRFs for treating exceptionally high-cost IRF patients. 

B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/Rural Averages 

 In accordance with the methodology stated in the FY 2004 IRF PPS final rule 

(68 FR 45674, 45692 through 45694), we apply a ceiling to IRFs’ CCRs. Using the 

methodology described in that final rule, we update the national urban and rural CCRs for IRFs, 

as well as the national CCR ceiling for FY 2015, based on analysis of the most recent data that is 

available. We apply the national urban and rural CCRs in the following situations: 

● New IRFs that have not yet submitted their first Medicare cost report. 

● IRFs whose overall CCR is in excess of the national CCR ceiling for FY 2015, as 

discussed below. 

● Other IRFs for which accurate data to calculate an overall CCR are not available. 

 Specifically, for FY 2015, we estimate a national average CCR of 0.569 for rural IRFs, 

which we calculated by taking an average of the CCRs for all rural IRFs using their most 

recently submitted cost report data. Similarly, we estimate a national average CCR of 0.443 for 
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urban IRFs, which we calculated by taking an average of the CCRs for all urban IRFs using their 

most recently submitted cost report data. We apply weights to both of these averages using the 

IRFs’ estimated costs, meaning that the CCRs of IRFs with higher costs factor more heavily into 

the averages than the CCRs of IRFs with lower costs. For this final rule, we have used the most 

recent available cost report data (FY 2012). This includes all IRFs whose cost reporting periods 

begin on or after October 1, 2011, and before October 1, 2012. If, for any IRF, the FY 2012 cost 

report was missing or had an “as submitted” status, we used data from a previous fiscal year’s 

(that is, FY 2004 through FY 2011) settled cost report for that IRF. We do not use cost report 

data from before FY 2004 for any IRF because changes in IRF utilization since FY 2004 

resulting from the 60 percent rule and IRF medical review activities suggest that these older data 

do not adequately reflect the current cost of care. 

 In accordance with past practice, we will set the national CCR ceiling at 3 standard 

deviations above the mean CCR. Using this method, the national CCR ceiling would be 1.37 for 

FY 2015. This means that, if an individual IRF’s CCR exceeds this proposed ceiling of 1.37 for 

FY 2015, we would replace the IRF’s CCR with the appropriate national average CCR (either 

rural or urban, depending on the geographic location of the IRF). We calculated the national 

CCR ceiling by: 

 Step 1. Taking the national average CCR (weighted by each IRF’s total costs, as 

discussed above) of all IRFs for which we have sufficient cost report data (both rural and urban 

IRFs combined). 

 Step 2. Estimating the standard deviation of the national average CCR computed in 

step 1. 

 Step 3. Multiplying the standard deviation of the national average CCR computed in step 
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2 by a factor of 3 to compute a statistically significant reliable ceiling. 

 Step 4. Adding the result from step 3 to the national average CCR of all IRFs for which 

we have sufficient cost report data, from step 1. 

 We did not receive any comments on the proposed updates to the IRF CCR ceilings and 

urban/rural averages. 

 Final Decision: As we did not receive any comments on the proposed updates to the IRF 

CCR ceiling and the urban/rural averages for FY 2015, we are finalizing the national average 

urban CCR at 0.443, the national average rural CCR at 0.569, and the national CCR ceiling at 

1.37 percent for FY 2015. These updates are effective October 1, 2014. 

VIII. Refinements to the Presumptive Compliance Methodology 

A. Background on the Compliance Percentage 

The compliance percentage has been part of the criteria for defining IRFs since 

implementation of the Inpatient Prospective Payment System (IPPS) in 1983. In the 

September 1, 1983, interim final rule with comment period (48 FR 39752), which allowed IRFs 

to be paid separately from the IPPS, the initial compliance percentage was set at 75 percent. The 

1983 interim rule stipulated that in accordance with sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) 

of the Act, a rehabilitation hospital and a rehabilitation unit were excluded from the IPPS. 

Sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act also give the Secretary the discretion to 

define a rehabilitation hospital and unit. 

A hospital or unit deemed excluded from the IPPS and paid under the IRF PPS must meet 

the general requirements in subpart B and subpart P of part 412. Subject to the special payment 

provisions of §412.22(c), a hospital or unit must meet the general criteria set forth in §412.22 

and in the regulations at §412.23(b), §412.25, and §412.29 that specify the criteria for a provider 
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to be classified as a rehabilitation hospital or unit. Hospitals and units meeting these criteria are 

eligible to be paid on a prospective payment basis as an IRF under the IRF PPS. 

The 1983 interim final rule stipulated that one of the criteria for being classified as an 

IRF was that, during the facility’s most recently completed 12-month cost reporting period, the 

hospital must be primarily engaged in furnishing intensive rehabilitation services, as 

demonstrated by patient medical records, indicating that at least 75 percent of the IRF’s patient 

population were treated for one or more of the 10 medical conditions specified in the regulation 

that typically required the intensive inpatient rehabilitation treatment provided in an IRF. These 

criteria, along with other related criteria, distinguished an inpatient rehabilitation hospital or unit 

from a hospital that furnished general medical or surgical services, as well as rehabilitation 

services. We believed then, as we do now, that by examining the types of conditions for which a 

hospital’s inpatients are treated, and the proportion of patients treated for conditions that 

typically require intensive inpatient rehabilitation, we would be able to distinguish those 

hospitals in which the provision of rehabilitation services was primary rather than secondary. 

Thus, Medicare pays for rehabilitation services at IRFs at a higher rate than other hospitals 

because IRFs are designed to offer specialized inpatient rehabilitation care to patients with 

intensive needs. 

 The original medical conditions specified under the compliance percentage, or 

“75 percent rule,” were stroke, spinal cord injury, congenital deformity, amputation, major 

multiple trauma, fracture of femur (hip fracture), brain injury, and polyarthritis (including 

rheumatoid arthritis). In the January 3, 1984, final rule (49 FR 234), we expanded the list of 

eligible medical conditions to include neurological disorders (including multiple sclerosis, motor 

neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson’s disease) and burns. In 
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the May 7, 2004 final rule (69 FR 25752), we modified and expanded the list of eligible medical 

conditions by removing polyarthritis and substituting three more clearly defined arthritis-related 

conditions. The three conditions that replaced polyarthritis included the following: 

● Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and seronegative 

arthropathies resulting in significant functional impairment of ambulation and other activities of 

daily living, which has 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 which results from a systemic disease 

activation immediately before admission, but has the potential to improve with more intensive 

rehabilitation. 

● Systemic vasculidities with joint inflammation, resulting in significant functional 

impairment of ambulation and other activities of daily living, which has 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 which results from a systemic disease activation immediately before admission, 

but has the potential to improve with more intensive rehabilitation. 

● Severe or advanced osteoarthritis (osteoarthrosis or degenerative joint disease) 

involving three or more major joints (elbow, shoulders, hips, or knees) with joint deformity and 

substantial loss of range of motion, atrophy, significant functional impairment of ambulation and 

other activities of daily living, which has 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, but has the potential to 

improve with more intensive rehabilitation. (A joint replaced by a prosthesis is no longer 
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considered to have osteoarthritis, or other arthritis, even though this condition was the reason for 

the joint replacement.) 

In the May 7, 2004 final rule (69 FR 25752), a 13th condition was also added to include 

patients who undergo knee and/or hip joint replacement during an acute hospitalization 

immediately preceding the inpatient rehabilitation stay and also meet at least one of the 

following specific criteria: 

● Underwent bilateral knee or hip joint replacement surgery during the acute 

hospitalization immediately preceding the IRF admission. 

● Are extremely obese patients as measured by the patient's Body Mass Index (BMI) of 

at least 50, at the time of admission to the IRF. 

● Are patients considered to be ''frail elderly,'' as determined by a patient's age of 85 or 

older, at the time of admission to the IRF (the provision currently states only that the patients be 

age 85 or older at the time of admission to the IRF). 

In 2002, we surveyed Medicare fiscal intermediaries to determine how they were 

enforcing the 75 percent rule. Although the 75 percent rule was one of the criteria that were used 

to distinguish an IRF from an acute care hospital from 1983 to 2004, we found evidence that 

different fiscal intermediaries were enforcing the rule differently. We found fiscal intermediaries 

were using inconsistent methods to determine whether IRFs were in compliance with the 

regulation, and that some IRFs were not being reviewed for compliance at all. This led to 

concerns that some IRFs might have been out of compliance with the regulation and 

inappropriately classified as IRFs, while other IRFs may have been held to overly high standards. 

Because of these concerns we sought to establish a more uniform enforcement of the 75 percent 

rule. 
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 In the May 16, 2003, IRF PPS proposed rule (68 FR 26786), we solicited comments on 

the regulatory requirements of the 75 percent rule. Though we did not, at that time, propose 

amending the regulatory requirements for the 75 percent rule located in then §412.23(b)(2), we 

did propose to amend these requirements in the September 9, 2003, proposed rule titled, 

“Medicare Program; Changes to the Criteria for Being Classified as an Inpatient Rehabilitation 

Facility” (68 FR 53266). In that rule, we proposed some revisions to the 75 percent rule, 

including lowering the compliance percentage to 65 percent during a 3-year transition period for 

cost reporting periods between January 1, 2004, and January 1, 2007. Also, in response to 

comments on the September 9, 2003, proposed rule and as stated above, the May 7, 2004, final 

rule (69 FR 25752) expanded the number of medical conditions that would meet the compliance 

percentage from 10 to 13 and provided that patient comorbidities may also be included in 

determining an IRF’s compliance with the requirements during the transition period. 

 In the September 9, 2003, proposed rule, we defined “comorbidity” as a specific patient 

condition that is secondary to the patient’s principal diagnosis or impairment that is the primary 

reason for the inpatient rehabilitation stay. In the May 7, 2004, rule, we adopted the provision to 

use a patient with a comorbidity counting towards the compliance threshold during the transition 

period. In the determination of the compliance percentage, a patient comorbidity counts toward 

the percentage if the comorbidity falls in one of the conditions specified at §412.29(b)(2) and has 

caused significant decline in functional ability in the individual that even in the absence of the 

admitting condition, the individual would require the intensive rehabilitation treatment that is 

unique to IRFs. 

Anticipating that IRFs needed some time to adjust and adapt their processes to the 

changes in the enforcement of the 75 percent rule, in the May 7, 2004 final rule, we provided 
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IRFs with a 3-year phase-in period (cost reporting periods beginning on or after July 1, 2004, 

through July 1, 2007) to establish the compliance threshold of 75 percent of the IRF’s total 

patient population. The 3-year phase-in period was intended to begin with cost reporting periods 

on or after July 1, 2004, with the threshold at 50 percent of the IRF’s population and gradually 

increase to 60 percent, then to 65 percent, and then to expire with cost reporting periods 

beginning on or after July 1, 2007, when the compliance percentage would once again be at 

75 percent. 

Section 5005 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171, enacted 

February 8, 2006) and section 1886(d)(1)(B) of the Act modified the provisions of the 75 percent 

rule originally specified in the May 7, 2004, final rule. To reflect these statutory changes, in the 

August 7, 2007, final rule (72 FR 44284), we revised the regulations to prolong the overall 

duration of the phased transition to the full 75 percent threshold by stipulating that an IRF must 

meet the full 75 percent compliance threshold as of its first cost reporting period that starts on or 

after July 1, 2008. We also extended the policy of using a patient’s comorbidities to the extent 

they met the conditions as outlined in the regulations to determine compliance with the 

classification criteria at then §412.23(b)(2)(1) to the first cost reporting period that starts on or 

after July 1, 2008. 

Subsequently, section 115 of the MMSEA amended section 5005 of the DRA to revise 

elements of the 75 percent rule that are used to classify IRFs. In accordance with the statute, in 

the August 8, 2008, final rule (73 FR 46370), we revised the compliance rate that IRFs must 

meet to be excluded from the IPPS and be paid under the IRF PPS to 60 percent for cost 

reporting periods beginning in or after July 1, 2006. Also, in accordance with the statute, we 

required that patient comorbidities that satisfy the criteria as specified at then §412.23(b)(2)(i) 
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[now located at §412.29(b)(1) and §412.29(b)(2)] be included in calculations used to determine 

whether an IRF meets the 60 percent compliance percentage for cost reporting periods beginning 

on or after July 1, 2007. As a result of these changes, the requirements started being referred to 

as the “60 percent rule,” instead of the “75 percent rule.” The regulations finalized in the 

FY 2009 IRF PPS final rule (73 FR 46370) continue to be in effect. 

Though an IRF must serve an inpatient population of whom at least 60 percent meet the 

compliance percentage criteria specified at §412.29(b), the existing regulation allows for 

40 percent of reasonable and necessary admissions to an IRF to fall outside of the 13 qualifying 

medical conditions. Still, the 60 percent rule is one of the primary ways we distinguish an IRF 

from an acute care hospital. As Medicare payments for IRF services are generally significantly 

higher than Medicare payments for similar services provided in acute care hospital settings, we 

believe that it is important to maintain and enforce the criteria for medical conditions that may be 

counted toward an IRF’s compliance calculation for the 60 percent rule to ensure that the higher 

Medicare payments are appropriately allocated to those providers that are providing IRF-level 

services. 

B. Changes to the Diagnosis Codes That Are Used to Determine Presumptive Compliance 

In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 47895), we revised the 

list of ICD-9-CM diagnosis codes that are used to determine presumptive compliance, effective 

for compliance review periods beginning on or after October 1, 2014. These revisions were 

based on an analysis of the ICD-9-CM code list that determined the clinical appropriateness of 

each individual ICD-9-CM code’s inclusion on the list. As a result of this analysis, we also 

intended to remove all of the status post-amputation diagnoses codes, but these codes were 

inadvertently omitted from the FY 2014 IRF PPS proposed and final rules. These codes, listed in 
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Table 7, are used to indicate that a patient has the sequela or residual effect of a condition. 

As we stated in the FY 2014 IRF PPS final rule (78 FR 47860, 47881), the ICD-9-CM 

diagnosis codes included on the ‘‘ICD–9–CM Codes That Meet Presumptive Compliance 

Criteria’’ list are ones that demonstrate that the patient meets criteria for the medical conditions 

that may be counted toward an IRF’s compliance percentage under the presumptive compliance 

methodology. Further, we stated that the underlying premise of the presumptive compliance 

methodology list is that it represents particular diagnosis codes that, if applicable to a given 

patient, would more than likely mean that the patient required intensive rehabilitation services in 

an IRF for treatment of one or more of the conditions specified at §412.29(b)(2) or that they had 

a comorbidity that caused significant decline in functional ability such that, even in the absence 

of the admitting condition, the patient would require the intensive rehabilitation treatment that is 

unique to IRFs and cannot be appropriately treated in another care setting. For the reasons 

described below, we do not believe that the ICD-9-CM diagnosis codes listed in Table 7 meet 

either of these criteria. We believe it is impossible to determine, from the presence of such 

diagnosis codes alone, whether a patient with an amputation status or prosthetic fitting and 

adjustment needs has a condition for which he or she would qualify for treatment in an IRF. 

Some patients with an amputation status or prosthetic fitting and adjustment needs will not 

require close medical supervision by a physician or weekly interdisciplinary team conferences to 

achieve their goals, while others may require these services. We believe that rehabilitation 

associated with an amputation status or prosthetic fitting and adjustment needs does not 

necessarily need to be accompanied by the close medical management provided in IRFs, as long 

as the patient does not have any additional comorbidities that have caused significant decline in 

his or her functional ability that, in the absence of an amputation status or prosthetic fitting and 
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adjustment needs, would necessitate treatment in an IRF. That is to say, a patient’s need for 

intensive rehabilitation services provided in an IRF may depend on other conditions which 

cannot be solely identified through the presence of an amputation status or prosthetic fitting and 

adjustment diagnosis code. If a patient with one of the diagnosis codes listed in Table 7 has 

additional comorbidities that would necessitate treatment in an IRF, then those additional 

comorbidities would qualify the patient for inclusion in the calculation of the IRF’s compliance 

percentage under the presumptive compliance methodology. Thus, we are removing the status 

post-amputation diagnosis codes listed in Table 7 from the list of “ICD-9-CM Codes That Meet 

Presumptive Compliance Criteria.” The removal of these codes will be effective for compliance 

review periods beginning on or after October 1, 2015, and the changes will be incorporated into 

the ICD-10 lists (discussed below) when ICD-10-CM becomes the required medical data code 

set for use on Medicare claims and IRF-PAI submissions. 

TABLE 7: ICD–9–CM Codes Removed From “ICD–9–CM Codes That Meet Presumptive 

Compliance Criteria” 

ICD-9-CM 

Code Diagnosis 

V49.65 Below elbow amputation status 

V49.66 Above elbow amputation status 

V49.67 Shoulder amputation status 

V49.73 Foot amputation status 

V49.74 Ankle amputation status 

V49.75 Below knee amputation status 

V49.76 Above knee amputation status 

V49.77 Hip amputation status 

V52.0 Fitting and adjustment of artificial arm (complete) (partial) 

V52.1 Fitting and adjustment of artificial leg (complete) (partial) 

We received 44 comments on the proposed changes to the diagnosis codes that are used 

to determine presumptive compliance, which are summarized below. 
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Comment: Citing studies, several commenters emphasized that research indicates that 

amputees receive substantial benefits from care in the IRF setting compared to other post-acute 

care settings. Another commenter stated that proper fitting and training for the use of a 

prosthesis is a complex clinical exercise that requires the intensive multidisciplinary services 

provided in IRFs. 

Response: We agree that some patients that present with an amputation status or 

prosthetic fitting or adjustment may require the close medical supervision by a rehabilitation 

physician and weekly interdisciplinary team conferences uniquely provided in IRFs to achieve 

their therapeutic goals. However, we believe that it cannot be determined from the amputation 

status or prosthetic fitting or adjustment diagnosis codes alone whether a patient presents with 

the clinical complexity that would require an IRF level of care. Indeed, we believe that many 

patients who are appropriately coded with these diagnosis codes can be effectively cared for in 

other care settings. As we stated in the FY 2015 IRF PPS proposed rule (79 FR 26308, 26327) 

and the FY 2014 IRF PPS final rule (78 FR 47860, 47881), the underlying premise of the 

presumptive compliance methodology list is that it represents particular diagnosis codes that, if 

applicable to a given patient, would more than likely mean that the patient required intensive 

rehabilitation services in an IRF for treatment of one or more of the conditions specified at 

§412.29(b)(2) or that they had a comorbidity that caused significant decline in functional ability 

such that, even in the absence of the admitting condition, the patient would require the intensive 

rehabilitation treatment that is unique to IRFs and cannot be appropriately treated in another care 

setting. Therefore, we believe that the mere presence of an amputation status or prosthetic fitting 

or adjustment code alone does not provide us with enough information to determine whether the 

patient meets all of the requirements necessary to count for the 60 percent rule in §412.29(b)(2). 
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Comment: One commenter suggested that the rationale provided by CMS for the 

removal of the amputation status codes confuses the concepts of medical necessity with IRF 

classification. The commenter stated that an amputee would only be admitted to a rehabilitation 

hospital by a rehabilitation physician if he or she needed intensive rehabilitation services. The 

commenter further stated that even though many amputees may not need intensive inpatient 

rehabilitation services, the mere referral and subsequent admission to an IRF would mean that 

the patient needs the intensive services provided by the IRF. 

Response: We disagree with this comment. The regulatory requirements at §412.29(b) 

specify that at least 60 percent of an IRF’s patient population must require intensive 

rehabilitation services in an IRF for treatment of one or more of the conditions specified at 

§412.29(b)(2) or that they have a comorbidity that caused significant decline in functional ability 

such that, even in the absence of the admitting condition, the patient would require the intensive 

rehabilitation treatment that is unique to IRFs and cannot be appropriately treated in another care 

setting. For a patient to require intensive rehabilitation services in an IRF for treatment of a 

particular condition, that patient must require the close medical supervision and interdisciplinary 

approach to care that are unique to care in an IRF. This is not based on the IRF coverage 

requirements, but rather it is based directly on the regulatory language in §412.29(b) that details 

the requirements that IRFs must meet to adhere to the 60 percent rule and thereby be classified 

for payment under the IRF PPS. 

Comment: Several commenters stated that the proposed removal of the status post 

amputation diagnoses codes from “ICD-9-CM Codes That Meet Presumptive Compliance 

Criteria” list would limit access to patients that would meet admission criteria as specified in 

§412.29(b)(2). One commenter stated that the effect of the proposed removal of the amputation 
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status post diagnosis codes would be to cause more IRFs to have to undergo medical review, and 

the IRFs would respond by restricting admission for certain types of patients in order to avoid 

having to go through medical review. 

 Response: We do not believe that the proposed removal of these diagnosis codes will 

have a significant effect on access to care for these patients, as we estimate that only about 

2 percent of all IRF patients are currently coded with these diagnoses, and these diagnosis codes 

are only used to meet the 60 percent rule requirements 0.3 percent of the time. In addition, the 

proposed removal of these codes from the presumptive compliance method does not necessarily 

mean that a patient with one of these diagnosis codes cannot be included in the IRF’s population 

that meets the 60 percent rule. As we described in the FY 2014 IRF PPS final rule, we use a 

bifurcated sub-regulatory approach to determining compliance with the rule, in which an IRF’s 

data is first evaluated to determine whether or not the IRF is presumptively compliant with the 

60 percent rule requirements. If so, then the IRF is presumed to meet the regulatory 

requirements. If not, then the IRF is evaluated using the more intensive medical review 

compliance method. If a patient with one of these diagnosis codes presents with the clinical 

complexity that would require an IRF level of care, then this information can be determined by 

the medical review, and the patient can then be included in the IRF’s patient population that 

meets the 60 percent rule requirements. We will closely monitor the data to ensure that there are 

no unintended consequences of these policies on access to care. 

Comment: One commenter stated that amputations in older adult populations are often 

the byproduct of multiple comorbid conditions (for example, diabetes or peripheral vascular 

disease) that make this population more at risk for post-surgical complications, such as risk of 

non-healing surgical incision. 
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Response: We agree that a patient with multiple comorbid conditions, such as diabetes or 

peripheral vascular disease affecting the surgical stump incision, may present with a need for 

intensive rehabilitation services provided in an IRF that could not be solely identified through the 

presence of an amputation status or prosthetic fitting or adjustment diagnosis code. These 

patients may meet the 60 percent rule requirements based on the presence of one of their other 

comorbid conditions, or the patients’ clinical complexity may be determined on medical review, 

and the patient can then be included in the IRF’s patient population that meets the 60 percent rule 

requirements. 

Comment: One commenter requested that we apply any changes to the presumptive 

compliance methodology to an IRF’s full 12-month compliance review period, instead of 

applying them to only part of an IRF’s compliance review period. 

Response: As the commenter suggested, all of the proposed changes to the presumptive 

compliance methodology are being applied effective for full 12-month compliance review 

periods, and will not be applied to only part of an IRF’s compliance review period. 

Comment: Several commenters suggested that we delay implementation of the proposed 

removal of the amputation status diagnosis codes and the other changes to the presumptive 

compliance methodology. For example, one commenter specifically recommended that we delay 

implementation of changes to the presumptive compliance methodology until changes to the 

IRF-PAI and the associated limited medical review process are implemented. Another 

commenter recommended that we delay implementation of any further changes to the 

presumptive compliance method until at least October 1, 2015, and one commenter 

recommended that we delay implementation of any changes to the “non-specific ICD codes,” 

which we finalized in the FY 2014 IRF PPS final rule (78 FR 47884 through 47887), for at least 
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one year following the implementation of the ICD-10-CM medical code data set, to give 

providers more time to adapt to the added specificity of the coding provided for under ICD-10-

CM. Another commenter suggested that we delay implementation of the changes to the 

presumptive compliance method to give us more time to thoroughly evaluate the policies, since 

the changes to the presumptive compliance method that we finalized in the FY 2014 IRF PPS 

final rule and the changes to the presumptive compliance method that we proposed in the FY 

2015 IRF PPS proposed rule, taken together, would cause as many as 15 percent of IRF 

Medicare cases to fail the presumptive compliance method. Finally, several commenters 

recommended that we keep the ICD-9-CM codes used in the presumptive compliance method as 

they are now—as of the date of this final rule, neither the changes finalized in the FY 2014 IRF 

PPS nor the changes proposed in the FY 2015 IRF PPS proposed rule have taken effect—or 

delay implementation of additional IGC exclusions until we transition to ICD-10-CM. 

Response: We agree with these commenters that delaying the effective date of the 

changes to the presumptive compliance method would give CMS more time to put processes in 

place to mitigate some of the additional burden of increased medical reviews, and would allow 

providers more time to adapt to these changes. Though several of the commenters explicitly 

recommended that we delay the changes to the presumptive compliance method that were 

proposed in the FY 2015 IRF PPS proposed rule, none of the commenters explicitly stated that 

we should delay implementation of the changes to the presumptive compliance method that we 

finalized in the FY 2014 IRF PPS final rule. However, we interpret several of the comments to 

mean that we should delay both sets of changes, so as to effectuate all of the related policies at 

the same time. For example, several of the commenters suggested delaying implementation of 

the “presumptive compliance” changes, without distinguishing between the changes that we 
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finalized in the FY 2014 IRF PPS final rule and the changes that we proposed in the FY 2015 

IRF PPS proposed rule. In addition, one commenter referred specifically to the impetus for 

recommending a delay being the significant impact that the changes would have on “15 percent” 

of IRF cases that would no longer meet the presumptive compliance criteria. Other commenters 

referenced this “15 percent” figure as the percentage of IRF cases that would be affected if we 

were to change from using the current presumptive compliance method to using the revised 

presumptive compliance method that would result from both the changes that we finalized in the 

FY 2014 IRF PPS final rule and the changes that were proposed in the FY 2015 IRF PPS 

proposed rule. Thus, we believe that the commenter was recommending a delay of both sets of 

presumptive compliance method changes, so as to effectuate all of the related policies at the 

same time. 

Therefore, based on our review of these comments, and to allow for the revisions to the 

IRF-PAI and the associated limited medical review process discussed in section X. of this final 

rule to take effect prior to implementation of the changes to the presumptive compliance method, 

we are implementing all of the changes to the presumptive compliance method for compliance 

review periods beginning on or after October 1, 2015. That is, we are delaying the effective date 

of the changes to the presumptive compliance method that we finalized in the FY 2014 IRF PPS 

final rule until compliance review periods beginning on or after October 1, 2015, and we are also 

delaying the changes to the presumptive compliance method that we are finalizing in this final 

rule so that they also take effect for compliance review periods beginning on or after October 1, 

2015. This represents a one-year delayed effective date for all of these changes. We believe that 

it will be much less confusing for providers to have all of the changes to the presumptive 

compliance method take effect at the same time. 
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We do not believe that it is necessary to delay implementation of these changes for an 

additional year after ICD-10-CM becomes the required medical code data set for use on IRF 

claims and on the IRF-PAI. Given that the effective date of the use of ICD-10-CM has been 

delayed twice, and given that the ICD-10-CM code lists, which will be used when ICD-10-CM 

becomes the required medical code data set with respect to IRF claims and the IRF-PAI, are 

available for download on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/InpatientRehabFacPPS/Data-Files.html in conjunction with the publication of 

this final rule, we believe that IRFs will have sufficient opportunity to become familiar with the 

added specificity of the coding offered in ICD-10-CM. 

Comment: Several commenters suggested that CMS continue to count amputation status 

codes toward an IRF’s compliance percentage, but do so in conjunction with other related 

information provided in the IRF-PAI. The commenters stated that the amputation status codes 

could be used in combination with the Etiologic Diagnosis, which would reflect recent injury. 

One commenter suggested that an indicator could be added that could be “paired up” with the 

codes in order to maintain automation and avoid the burden of increased medical review. 

Another commenter stated that comorbid conditions listed on the IRF-PAI could also provide an 

appropriate clinical picture that would “presumptively” indicate that the patient meets conditions 

outlined at §412.29(b)(2). Moreover, one commenter suggested that the added specificity of 

coding provided for in the ICD-10-CM coding may supply additional information that may help 

support the amputation status diagnosis as a “presumptively” qualifying condition. 

Response: We thank the commenters for their suggestions. However, we continue to 

believe that it cannot be determined from the amputation status or prosthetic fitting or adjustment 

diagnosis codes alone whether a patient presents with the clinical complexity that would require 
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an IRF level of care, and, for this reason, we do not believe that it is appropriate to continue to 

include these codes on the “ICD-9-CM Codes That Meet Presumptive Compliance” list. 

However, as we indicated above, these patients can continue to be counted under the medical 

review methodology if their clinical complexity is shown in the medical record to require an IRF 

level of care. In fact, as the one commenter mentioned, the patient’s comorbid conditions as 

listed on the IRF-PAI and described in the patient’s medical record do contribute to an overall 

“picture” of the patient’s condition, but at this time, this information cannot be determined using 

a computer program and can only be determined through a medical review of the patient’s 

clinical record. 

While we agree that ICD-10-CM coding will likely provide more specificity and more 

information, we continue to believe that these amputation status or prosthetic fitting or 

adjustment diagnosis codes, even under ICD-10-CM, do not provide enough information about 

the clinical complexity of the case to warrant continued inclusion on the list of diagnosis codes 

that meets the presumptive compliance criteria. We will consider the commenters suggestions 

for future refinements to the IRF-PAI and to the presumptive compliance methodology. 

Comment: One commenter recommended that CMS ensure that MACs understand the 

importance of IRF care to patients with amputations (especially those with other comorbidities) 

since there could be an increase in medical review for amputation cases. 

Response: We appreciate the commenter’s suggestion, and we plan to carry out training 

and outreach with MACs to review policy changes to the presumptive compliance methodology. 

Final Decision: After carefully considering the comments that we received on the 

proposed removal of the status post-amputation diagnoses codes from the “ICD-9-CM Codes 

That Meet Presumptive Compliance Criteria” list, we are finalizing these proposed changes to 
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the list. The changes to the list of diagnosis codes that are used to determine presumptive 

compliance under the 60 percent rule are effective for compliance review periods beginning on 

or after October 1, 2015. 

C. Changes to the Impairment Group Codes That Meet Presumptive Compliance Criteria 

An “impairment group code” is not an ICD diagnosis code, but part of a separate unique 

set of codes specifically developed for the IRF PPS for assigning the primary reason for 

admission to an IRF. These codes are listed in the IRF-PAI Training Manual (see section II, 

item #21, and Appendix A). The IRF-PAI Training Manual is available through the Internet on 

the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html. 

If an IRF is eligible to use the presumptive methodology to evaluate its compliance with 

the 60 percent rule, all of its IRF-PAI assessments from the most recently completed 12-month 

compliance review period are examined (with the use of a computer program) to determine 

whether they contain any of the codes listed on the presumptive methodology lists (that is, 

“ICD-9-CM Codes That Meet Presumptive Compliance Criteria” and “Impairment Groups That 

Meet Presumptive Compliance Criteria”). Each selected assessment is presumptively 

categorized as either meeting or not meeting the IRF 60 percent rule requirements based upon 

the primary reason for the patient to be treated in the IRF (the impairment group) and the ICD 

diagnosis codes listed as either the etiologic diagnosis (the etiologic problem that led to the 

condition for which the patient is receiving rehabilitation) or one of 25 comorbidities on the 

assessment. 

Not all impairment group codes (IGCs) meet the presumptive compliance criteria. The 

underlying premise of the list of eligible IGCs that are used to determine presumptive 
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compliance (similar to the diagnosis codes listed in “ICD-9-CM Codes That Meet Presumptive 

Compliance Criteria”) includes particular IGCs that, if applicable to a given patient, would more 

than likely mean that the patient required intensive rehabilitation services for treatment of one or 

more of the conditions specified at §412.29(b)(2). The current list of eligible IGCs that meet 

presumptive compliance criteria, Appendix B: Impairment Group Codes That Meet Presumptive 

Compliance Criteria, can be downloaded from the October 1, 2007, IRF Compliance Rule 

Specification Files on the Medicare IRF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Criteria.html. Again, this list contains only those IGCs that 

meet the presumptive compliance criteria. 

1. Removal of IGCs for Unilateral Upper Extremity Amputations and Arthritis from 

Appendix B: Impairment Group Codes That Meet Presumptive Compliance Criteria 

In the FY 2014 IRF PPS final rule (78 FR 47889 through 47895), we finalized 

(applicable for compliance review periods beginning on or after October 1, 2014) the removal of 

certain ICD-9-CM codes for unilateral upper extremity amputations from the list of “ICD-9-CM 

Codes That Meet Presumptive Compliance Criteria” because we believed that it is impossible to 

determine, from the presence of such ICD–9–CM codes alone, whether a patient with such a 

unilateral upper extremity amputation has a condition for which he or she would need intensive 

rehabilitation services for treatment of one or more of the conditions specified in §412.29(b)(2). 

Further, we stated that a patient’s need for intensive inpatient rehabilitative services for the 

treatment of one or more of these conditions would depend on the presence of additional 

comorbidities that caused significant decline in his or her functional ability to an extent that 

would necessitate treatment in an IRF. If the patient has one or more of the comorbidities on the 
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list of “ICD-9-CM Codes That Meet Presumptive Compliance Criteria,” then the patient would 

already qualify as meeting the presumptive compliance criteria. We concluded that if the 

diagnosis codes for such a patient’s comorbidities do not appear on the list of “ICD-9-CM Codes 

That Meet Presumptive Compliance Criteria,” then the patient could still be considered for 

inclusion in the IRF’s compliance percentage following medical review and confirmation that the 

case meets the criteria for one or more of the medical conditions in the regulations. 

In the FY 2014 IRF PPS final rule (78 FR 47887 through 47895), we also finalized 

(applicable for compliance review periods beginning on or after October 1, 2014) the removal of 

ICD-9-CM diagnosis codes for arthritis conditions from the list of “ICD-9-CM Codes That Meet 

Presumptive Compliance Criteria” because the inclusion of patients with these medical 

conditions in the presumptive compliance calculation of the IRF’s compliance percentage is 

conditioned on those patients meeting the described severity and prior treatment requirements. 

However, the ICD–9–CM diagnosis codes that reflect these arthritis and arthropathy conditions 

do not provide any information about the severity of the condition or whether the prior treatment 

requirements were met. Therefore, we stated in the FY 2014 IRF PPS final rule that we believe 

that additional information beyond the presence of the code is necessary to determine if the 

medical record would support inclusion of individuals with the arthritis and arthropathy 

conditions outlined in our regulations under §412.29(b)(2)(x) through §412.29(b)(2)(xii) in the 

presumptive compliance calculation of the facility’s compliance percentage. For this reason, we 

finalized the removal of the ICD–9–CM diagnosis codes associated with the medical conditions 

outlined in our regulations under §412.29(b)(2)(x) through §412.29(b)(2)(xii) from the list of 

“ICD-9-CM Codes That Meet Presumptive Compliance Criteria.” However, we also stated that 

we expect that the MACs will be able, upon medical review, to include those patients in a 
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facility’s compliance percentage upon confirmation that the severity and prior treatment 

requirements were met. 

Consistent with our rationale in the FY 2014 IRF PPS final rule for removing the 

ICD-9-CM diagnoses codes for unilateral upper extremity amputations and the arthritis and 

arthropathy conditions, we are making conforming changes to the IGCs in this final rule by 

removing four IGCs from Appendix B: Impairment Group Codes That Meet Presumptive 

Compliance Criteria. Thus, we will remove the following codes from Appendix B: Impairment 

Group Codes That Meet Presumptive Compliance Criteria: 

• IGC 0005.1—Unilateral Upper Limb Above the Elbow (AE), 

• IGC 0005.2—Unilateral Upper Limb Below the Elbow (BE), 

• IGC 0006.1—Rheumatoid Arthritis, and 

• IGC 0006.9—Other Arthritis. 

2. Other Changes to Appendix B: Impairment Group Codes That Meet Presumptive 

Compliance Criteria 

We will revise Appendix B: Impairment Group Codes That Meet Presumptive 

Compliance Criteria by revising the diagnosis codes listed as exclusions on the table and by 

revising the title of the table. 

In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 47895), we finalized 

(applicable for compliance review periods beginning on or after October 1, 2014) the removal of 

certain ICD-9-CM codes from the list of “ICD-9-CM Codes That Meet Presumptive Compliance 

Criteria.” Accordingly, we exclude these diagnosis codes from counting if they are the patient’s 

Etiologic Diagnosis (that is, the etiologic problem that led to the condition for which the patient 

is receiving rehabilitation). That is, a given IGC that would otherwise meet the presumptive 
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compliance criteria will not meet such criteria if the patient has one of the “excluded” Etiologic 

Diagnoses for that IGC. 

In addition, in the FY 2014 IRF PPS final rule (78 FR 47860, 47883), we implemented a 

change in the titles of some tables used in the presumptive compliance methodology to no longer 

use alphabet characters or the “Appendix” labels to identify these tables. Consistent with the 

intent to reduce confusion among tables, and effective October 1, 2014, we will identify 

Appendix B: Impairment Group Codes That Meet Presumptive Compliance Criteria as 

“Impairment Group Codes That Meet Presumptive Compliance Criteria.” 

In addition, we provided an additional new table, “Impairment Group Codes That Meet 

Presumptive Compliance Criteria,” that lists Etiologic Diagnosis codes that are excluded from 

counting under related IGCs in ICD-10-CM code format. For example, ICD-10-CM code G72.3, 

“Periodic Paralysis” is an excluded Etiologic Diagnosis code under IGC 0003.8, “Neuromuscular 

Disorders.” Further, to accommodate the Etiologic Diagnosis code exclusions, we have 

reformatted this table. A revised table containing the “Impairment Group Codes That Meet 

Presumptive Compliance Criteria,” with the ICD-10-CM Etiologic Diagnosis exclusions, can be 

viewed on the Medicare IRF PPS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/InpatientRehabFacPPS/Data-Files.html. The changes to the table, “Impairment 

Group Codes That Meet Presumptive Compliance Criteria,” will be effective for compliance 

review periods beginning on or after October 1, 2015. 

We received 49 comments on the proposed changes to the impairment group codes that 

meet presumptive compliance criteria, which are summarized below. 

Comment: Several commenters expressed concerns that a potential unintended 

consequence of excluding the proposed arthritis diagnosis codes under IGCs 0008.51, 0008.52, 
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0008.61, 0008.62, 0008.71, and 0008.72 would be that most lower extremity joint replacement 

cases that currently satisfy the 60 percent rule, that is, bilateral joint replacement cases and 

unilateral joint replacement cases involving patients 85 years of age or older and/or who have a 

BMI of 50 or greater, would no longer be included in an IRF’s presumptive compliance 

percentage. 

Response: We appreciate the commenters’ careful review of the proposed Etiologic 

Diagnosis exclusions for IGCs 0008.51, 0008.52, 0008.61, 0008.62, 0008.71, and 0008.72, and 

we agree with these commenters that there would have been unintended consequences of 

excluding the proposed arthritis diagnosis codes from these IGCs. As we intend to continue to 

count bilateral lower-extremity joint replacement cases and unilateral lower-extremity joint 

replacement cases involving patients 85 years of age or older and/or who have a BMI of 50 or 

greater as meeting the 60 percent rule criteria under the presumptive compliance method, we will 

remove the proposed Etiologic Diagnosis exclusions from IGCs 0008.51, 0008.52, 0008.61, 

0008.62, 0008.71, and 0008.72. 

Comment: Several commenters expressed concern that the impact of the proposed 

changes to the presumptive compliance criteria, the changes proposed in the FY 2015 proposed 

rule and the changes finalized in the FY 2014, will be to increase the number of IRFs that will 

fail to meet presumptive compliance. 

Response: We agree with commenters that one of the likely consequences of the changes 

to the presumptive compliance method will be an increase in the number of IRFs that will fail the 

presumptive compliance method and will have to be evaluated using the medical review method. 

However, we believe that the proposed changes to the IGCs That Meet Presumptive Compliance 

Criteria are necessary to continue appropriate enforcement of the regulations in §412.29(b). We 
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believe that it is impossible to determine from the presence of one of the IGCs or Etiologic 

Diagnoses alone whether the patient’s clinical complexity requires an IRF level of care, or, in the 

case of an arthritis code, whether the patient meets the severity and prior treatment requirements 

in regulation at §412.29(b)(2). This information can only be obtained through a review of the 

patient’s medical record. 

However, to mitigate some of the added burden on providers of the additional medical 

reviews, we discuss a new policy in section X of this final rule that will allow some arthritis 

cases to count toward the presumptive compliance method based on a limited medical review of 

these cases. We believe that this new policy will alleviate some of the burden associated with 

additional medical reviews. 

 Comment: One commenter expressed concern about the removal of IGC 0005.1—

Unilateral upper limb above the elbow (AE) and IGC 0005.2—Unilateral upper limb below the 

elbow (BE), as the commenter said that these patients have impairments related to the ability to 

conduct activities of daily living that are most appropriately treated using the intensive 

rehabilitation therapy provided in an IRF. 

Response: As we indicated in the FY 2014 IRF PPS final rule (78 FR 47860, at 47890), 

we believe that some patients with upper extremity amputations might require treatment in an 

IRF, depending on the clinical complexity of the particular case or the presence of any other 

complicating factors or comorbidities. However, we expect that many patients with these upper 

extremity amputations will not require close medical supervision by a physician or weekly 

interdisciplinary team conferences to achieve their goals, and can be treated effectively in other 

care settings. If the patient has additional comorbidities causing significant decline in his or her 

functional ability which, in the absence of the unilateral upper extremity amputation, would 
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require treatment in an IRF, then the patient will still be able to be counted towards meeting the 

60 percent rule criteria. Additionally, the patient can still be counted towards meeting the 60 

percent rule criteria on medical review, if appropriate. However, we continue to believe that a 

patient’s need for the intensive rehabilitation services provided in an IRF depends on other 

factors which cannot be adequately determined through the mere presence of IGC 0005.1—

Unilateral upper limb above the elbow (AE) and IGC 0005.2—Unilateral upper limb below the 

elbow (BE). Thus, we are removing these IGCs from the IGCs That Meet the Presumptive 

Compliance Criteria. 

Comment: One commenter expressed concern about the proposed addition of nonspecific diagnosis codes to the Etiologic Diagnosis exclusions for some of the IGCs because this 

commenter said that it is often “administratively unrealistic” to obtain detailed medical 

information from a transferring facility, especially in cases where the IRF admission is not 

directly from an acute care hospital. The commenter said that non-specific codes should not be 

viewed as reflecting poor documentation or poor coding. 

Response: As we stated in the FY 2014 IRF PPS final rule (78 FR 47860, 47884), we 

believe that highly descriptive coding provides the best and clearest way to document the 

appropriateness of a given patient’s admission, and would improve our ability to use the 

presumptive compliance method of calculating a facility’s 60 percent rule compliance 

percentage. Therefore, whenever possible, we believe that the most specific code that describes 

a medical disease, condition, or injury should be used to document diagnoses on the IRF-PAI. 

We also stated in the FY 2014 IRF PPS final rule (78 FR 47860, 47884) that we believe 

imprecise codes would inappropriately categorize an overly broad segment of the patient 

population as having the conditions required for inclusion in a facility’s presumptive compliance 
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calculation, which would result in an inflated compliance percentage. In the FY 2014 IRF PPS 

final rule (78 FR 47860, 47885), we also stated that if the IRF does not have enough information 

about the patient’s condition to code the more specific codes on the IRF-PAI, we would expect 

the IRF to seek out additional information from the patient’s acute care hospital medical record 

to determine the appropriate, more specific code to use. The ICD-9-CM diagnosis codes that are 

listed as exclusions on “Impairment Group Codes That Meet Presumptive Compliance Criteria” 

are consistent with the list of diagnosis codes we removed from “ICD-9-CM Codes That Meet 

Presumptive Compliance Criteria.” 

Comment: Several commenters expressed concerns about possible inconsistencies in the 

specific IGC exclusions that we proposed in the FY 2015 IRF PPS proposed rule. For example, 

one commenter pointed out that we were proposing to exclude the Etiologic Diagnosis of ICD-9-

CM code 850.5—Concussion with loss of consciousness of unspecified duration for 

IGC 0002.22—Brain dysfunction, Traumatic, Closed Injury. However, we were not proposing 

to exclude, ICD-9-CM code 850.0—Concussion with no loss of consciousness from this same 

IGC. 

Response: We thank the commenter for their careful review and analysis of the IGCs 

That Meet Presumptive Compliance Criteria. We have reviewed the IGCs That Meet 

Presumptive Compliance Criteria in light of these comments, and we agree with the commenter’s 

suggestion that this represents an inadvertent inconsistency. Thus, we are adding ICD-9-CM 

code 850.0—Concussion with no loss of consciousness as an Etiologic Diagnosis exclusion to 

the list of Etiologic Diagnosis exclusions under IGC 0002.22—Brain dysfunction, Traumatic, 

Closed Injury. 
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Comment: One commenter stated that we excluded ICD-9-CM diagnosis code 438.20—

Late effects of cerebrovascular disease, hemiplegia affecting unspecified side from 

IGC 0001.9—Other Stroke, but did not list this diagnosis code as an exclusion for other stroke 

IGCs. 

Response: ICD-9-CM diagnosis code 438.20 is not listed as an exclusion for the other 

stroke IGCs because the other stroke IGCs either specify side of body involvement or no paresis. 

Comment: One commenter suggested that as many as 10 percent of IRF cases will no 

longer qualify toward an IRF’s presumptive compliance percentage should the proposed removal 

of IGC 0005.1, IGC 0005.2, IGC 0006.1, and IGC 0006.9 and the exclusion of Rheumatoid and 

Osteoarthritis diagnosis codes from hip and knee joint replacement be finalized. 

Response: As discussed above, the commenters led us to discover that there would have 

been unintended consequences of excluding the proposed arthritis Etiologic Diagnosis codes 

from IGCs0008.51, 0008.52, 0008.61, 0008.62, 0008.71, and 0008.72. As we intend to continue 

to count bilateral lower-extremity joint replacement cases and unilateral lower-extremity joint 

replacement cases involving patients 85 years of age or older and/or who have a BMI of 50 or 

greater as meeting the 60 percent rule criteria under the presumptive compliance method, we are 

removing the proposed Etiologic Diagnosis exclusions from these IGCs. We believe that this 

change substantially reduces the estimated percentage of IRF cases that will no longer qualify 

toward an IRF’s presumptive compliance percentage. However, with respect to the remaining 

IRF cases that will no longer qualify toward an IRF’s presumptive compliance percentage, we 

continue to believe that this is appropriate because the case’s compliance with the 60 percent rule 

criteria cannot be adequately determined through the mere presence of the IGC or ICD-9-CM 

diagnosis code alone. 
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Comment: Several commenters indicated that the proposed changes to “Impairment 

Group Codes That Meet Presumptive Compliance Criteria” (and the above discussed removal of 

the amputation status diagnosis codes) would likely lead to reduced access to IRF care. The 

commenters noted that for certain types of patients, IRFs would be in the position of choosing 

between admitting these patients and facing “additional risk” associated with medical reviews, or 

not admitting these types of patients. Many of these commenters said that such changes are 

unnecessary in light of past regulatory actions, such as the regulatory refinements of the 

60 percent rule that were implemented in 2004 and the more stringent IRF coverage 

requirements that were implemented in 2010, that have already reduced the number of IRF 

admissions and increased the average IRF case mix. 

Response: We acknowledge that some IRFs may seek to avoid the possibility of medical 

review by limiting admission of patients with certain conditions, such as arthritis or unilateral 

upper-extremity amputations. However, this is not our intent in implementing this policy. The 

intent of these changes to the presumptive compliance method is obtain enough information to 

ensure that patients who are counted as meeting the 60 percent rule in §412.29(b) are 

appropriately meeting the regulatory requirements. Although previous regulatory refinements 

have improved the IRF payment system, we believe that the proposed updates to the presumptive 

compliance method serve to further enhance the accuracy and appropriateness of the payment 

system. As discussed in section X. of this final rule, we are concurrently implementing policies 

designed to minimize the burden created by the operational aspects of this policy. 

Comment: One commenter suggested that the removal of IGC 0006.1—Rheumatoid 

Arthritis and IGC 0006.9—Other Arthritis should coincide with the implementation of the 

proposed new IRF-PAI item, so that these IGCs could still be used to presumptively determine 
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an IRF’s compliance with the 60 percent rule. The commenter also suggested that the new IRFPAI item and associated limited medical review should replace the current policy of requiring a 

full medical review if an IRF fails the presumptive compliance method. 

Response: We agree with the commenter’s suggestion that the effective date of the 

removal of IGC 0006.1—Rheumatoid Arthritis and IGC 0006.9—Other Arthritis should coincide 

with the implementation of the new proposed IRF-PAI item. Additionally, we believe that it 

makes the most sense to implement the changes to the presumptive methodology, both those that 

were finalized in the FY 2014 IRF PPS final rule and those that we are finalizing in this section 

of this final rule, for compliance review periods beginning on or after October 1, 2015, to aid in 

mitigating the potential burden for additional medical review as a result of the finalized policy 

changes. As discussed in more detail in section X. of this final rule, the new IRF-PAI item for 

arthritis conditions will allow IRFs to indicate whether there are any arthritis codes (either IGC 

or ICD-9-CM diagnosis codes) on a patient’s IRF-PAI that meet all of the regulatory 

requirements specified in §412.29(b)(2)(x), (xi), or (xii). If so, then we will perform a limited 

medical review on these cases to ensure that the requirements are met. If we find that all of the 

requirements are met, those arthritis cases will be allowed to count toward the IRF’s presumptive 

compliance percentage. As the new IRF-PAI item is being added for IRF discharges occurring 

on or after October 1, 2015, we believe it makes sense to delay the effective dates of the changes 

to the presumptive methodology finalized in the FY 2014 IRF PPS final rule and those changes 

to the presumptive methodology being finalized in this section of this final rule. Therefore, we 

are delaying the effective date of the presumptive methodology changes finalized in the FY 2014 

IRF PPS final rule and the additional presumptive methodology changes that we are finalizing in 
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this section of this final rule, so that they will become effective for compliance review periods 

beginning on or after October 1, 2015. 

However, we do not agree with the suggestion that the limited medical review should 

replace the full medical review entirely. The medical review method has been the more detailed 

and comprehensive method for enforcing the 60 percent rule since the rule was first implemented 

in the mid-1980s, and continues to be an important way of accurately determining whether IRFs 

meet the criteria in §412.29(b) to be excluded from the IPPS and be paid instead under the IRF 

PPS. 

Comment: One commenter expressed concern that the changes to the presumptive 

compliance methodology finalized in the FY 2014 IRF PPS final rule and the changes proposed 

in the FY 2015 IRF PPS proposed rule constitute an “end run” around the statutory limit on the 

compliance threshold of 60 percent established by Congress. 

Response: We disagree with the commenter’s assertion that we are changing the 

60 percent compliance threshold. We do not believe that the changes finalized in the FY 2014 

IRF PPS final rule or the changes proposed in the FY 2015 IRF PPS proposed rule erode the 

underlying principle of the 60 percent rule that requires an IRF to demonstrate that it “served an 

inpatient population of whom at least 60 percent required intensive rehabilitation services for 

treatment of one or more of the conditions specified at paragraph (b)(2).” We are not revising 

the criteria that govern the 13 medical conditions that may be counted toward an IRF’s 

60 percent rule compliance percentage. As we have stated in the FY 2014 IRF PPS final rule 

and the FY 2015 IRF PPS proposed rule, we are refining the lists used for the presumptive 

compliance methodology because we believe that certain ICD diagnosis codes on the lists do not 

necessarily demonstrate a patient’s meeting the medical condition (including severity and prior 
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treatment) requirements for inclusion in a facility’s 60 percent compliance calculation under the 

presumptive methodology method. Thus, we are removing these codes so that the presumptive 

methodology lists better reflect the regulations. Furthermore, the criteria under which a case 

may count under medical review have not changed. 

Comment: Several commenters stated that ICD-9-CM codes 820.8—Closed fracture of 

unspecified part of neck of femur and 820.9—Open fracture of unspecified part of neck of femur 

should not be exclusions under IGC 0008.11—Status Post Unilateral Hip Fracture and 

IGC 0008.12—Status Post Bilateral Hip Fractures. The commenters said that the ICD-9-CM 

codes 820.8 and 820.9 are often used as Etiologic Diagnoses in combination with IGCs 0008.11 

and 0008.12. One commenter said that the diagnosis codes 820.8 and 820.9 still represent a hip 

fracture and that the more specific information regarding where on the neck of the femur the 

fracture occurred would not be readily available to the IRF and would in any case not 

meaningfully impact care. 

Response: The use of an ICD-9-CM code beginning with 820, by definition, indicates 

that the patient has experienced a fracture of the neck of the femur. However, this code requires 

that decimal points be used following the number to ensure specificity. Diagnosis codes 820.00 

through 820.32, by differentiating between an intracapsular and an extracapsular fracture of the 

proximal femur, provide a degree of specificity not offered by diagnosis codes 820.8 and 

820.9. Therefore, as we proposed, we will exclude ICD-9-CM codes 820.8 and 820.9 as 

Etiologic Diagnosis codes under IGC 0008.11—Status Post Unilateral Hip Fracture and 

IGC 0008.12—Status Post Bilateral Hip Fractures. IGC 0008.11 and IGC 0008.12 will continue 

to count toward 60 percent compliance under the presumptive compliance method if coded with 

Etiologic Diagnosis codes 820.00 through 820.32. 
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Final Decision: After carefully considering the comments that we received on the 

proposed changes to the IGCs That Meet Presumptive Compliance Criteria, we are revising the 

list of excluded ICD-9-CM diagnosis codes for some IGCs from “Impairment Group Codes That 

Meet Presumptive Compliance Criteria” as follows: We are removing the ICD-9-CM diagnosis 

code exclusions under IGC 0008.51 through IGC 0008.72. We are also excluding ICD-9-CM 

diagnosis code 850.0 under IGC 0002.22. The final “Impairment Group Codes That Meet 

Presumptive Compliance Criteria” list that reflects specific changes to the proposed policies 

listed above, is available for download from the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. The presumptive methodology changes that we had finalized in the FY 2014 IRF 

PPS final rule and the additional presumptive methodology changes that we are finalizing in this 

section of this final rule will become effective for compliance review periods beginning on or 

after October 1, 2015. 

IX. Data Collection of the Amount and Mode (Individual, Concurrent, Group, and 

Co-Treatment) of Therapy Provided in IRFs According to Occupational, Speech, and 

Physical Therapy Disciplines 

Prior to the implementation of the IRF PPS in January 2002, Medicare payment for IRF 

services under section 101(a) of the Tax Equity and Fiscal Responsibility Act of 1982 

(Pub. L. 97-248, enacted September 3, 1982) was based on the reasonable costs incurred in 

furnishing services to Medicare beneficiaries, subject to a limit on allowable costs per discharge. 

Thus, for therapy services, Medicare reimbursed IRFs based on the reasonable costs incurred in 

furnishing appropriate levels of Individual Therapy or Group Therapy, which meant that IRFs 

had limited financial incentives to provide more of one mode of therapy than another. We 
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presumed that decisions about the mode of therapy delivery were likely to be based on the needs 

of the patient and on the best way to assist patients in meeting their individualized rehabilitation 

goals. With the advent of the IRF PPS beginning in January 2002, Medicare began reimbursing 

IRFs using a set prospective payment amount that was intended to cover the costs of all 

treatment and services, including therapy services, provided to patients in the IRF. This 

increased the financial incentives for IRFs to give patients more Group Therapy and less 

Individual Therapy, because Individual Therapy is more costly to provide. Although we know 

that the financial incentives for the provision of Individual Therapy and Group Therapy changed, 

we do not know whether IRFs provided different modes of therapy in response to the new 

incentives or how much Individual Therapy and Group Therapy IRFs currently provide. 

Medicare does not currently collect data from IRFs on the amount of Individual, Concurrent, 

Group, and Co-Treatment Therapies provided by therapy discipline. We believe that it is 

important to begin collecting these data to determine what services Medicare is paying for under 

the IRF prospective payment system, which would allow us to analyze whether we are paying 

appropriately for services currently rendered by IRFs. Medicare administrative data (such as the 

IRF claims data) do not currently provide the level of detailed information about the mode and 

type of therapy provided to IRF patients that we need to perform these analyses. Thus, this 

proposed new data collection will assist us in the development of appropriate coverage and 

payment criteria for the provision of Group Therapy in the IRF setting. We believe that these 

coverage and payment criteria are important to balance the beneficial aspects of Group Therapy 

for certain patients in certain instances with the IRF requirements for an intensive rehabilitation 

therapy program. 

In the FY 2010 IRF PPS proposed rule (74 FR 21070, 21071), in which we proposed a 
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revised set of Medicare coverage requirements for IRF services, we discussed the relative value 

of Individual Therapy versus Group Therapy in the IRF setting. To improve our understanding 

of when Group Therapy is most appropriate in IRFs, we solicited comments in that proposed rule 

on the types of patients for whom Group Therapy is appropriate, and the specific amount of 

Group Therapy that may be beneficial for these types of patients. Subsequently, we discussed 

the comments in the FY 2010 IRF PPS final rule (74 FR 39796, 39797). Although the comments 

on the FY 2010 IRF PPS proposed rule did not offer any clinical study results or any data that 

would be helpful to us in developing coverage and payment criteria for the provision of Group 

Therapy in IRFs, the comments did suggest an important role for Group Therapy in the provision 

of therapies in IRFs. However, the majority of commenters remarked that Group Therapy should 

be limited in some way. Many commenters agreed that Group Therapy is a good adjunct to 

Individual Therapy, but should not be the primary source of therapy services provided in IRFs. 

Several commenters recommended that we limit the amount of Group Therapies provided in 

IRFs, and that we also limit the number of patients who can participate in a Group Therapy 

session. Commenters also suggested that Group Therapy sessions should be comprised of 

patients with similar diagnoses. We agreed with the commenters that Group Therapy should not 

be the primary source of therapy given to patients in IRFs. Group Therapy should be used in 

IRFs primarily as an adjunct to Individual Therapy services, which is the standard of care in 

IRFs, as Group Therapy may not uniformly represent the level of intensive rehabilitation therapy 

required and paid for in the IRF setting. In the final rule, we also stated that we would consider 

adopting specific coverage and payment criteria for Group Therapy practice in IRFs through 

future rulemaking. 

When an authorized clinician deems it to be necessary, we continue to believe that Group 
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Therapy can serve as an appropriate mode of therapy delivery that can be beneficial to the 

particular needs of IRF patients as an adjunct to Individual Therapy. Anecdotally, we understand 

that Group Therapy remains a widely used mode of therapy in the IRF setting. But as we stated 

in the FY 2010 IRF PPS final rule, we believe that it would be inappropriate for IRFs to provide 

essentially all therapy in the form of Group Therapy because we do not believe that this is in the 

best interest of the patients, or that it reflects the services for which the IRF prospective payment 

system was established to pay. Therefore, to better understand the ways in which therapy 

services are currently being provided in IRFs, we are adding a new Therapy Information Section 

to the IRF-PAI to record the amount and mode of therapy (that is, Individual, Concurrent, Group, 

and Co-Treatment) patients receive in each therapy discipline (that is, physical therapy, 

occupational therapy, and speech-language pathology). 

For purposes of recording therapy services in IRFs, we proposed to define Individual 

Therapy as the provision of therapy services by one licensed or certified therapist (or licensed 

therapy assistant, under the appropriate direction of a licensed or certified therapist) to one 

patient at a time (this is sometimes referred to as “one-on-one” therapy). In the proposed rule, 

we defined Group Therapy as the provision of therapy services by one licensed or certified 

therapist (or licensed therapy assistant, under the appropriate direction of a licensed or certified 

therapist) to between 2 and 6 IRF patients at one time, regardless of whether those 2 to 6 IRF 

patients are performing the same activity or different activities. As discussed in our responses to 

comments below, we will instead define Group Therapy as one licensed or certified therapist (or 

licensed therapy assistant, under the appropriate direction of a licensed therapist) treating 2 to 6 

patients at the same time who are performing the same or similar activities. We proposed to 

define Co-Treatment as the provision of therapy services by more than one licensed or certified 
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therapist (or licensed therapy assistant, under the appropriate direction of a licensed therapist) 

from different therapy disciplines to one patient at the same time. For example, Co-Treatment 

could involve one physical therapist and one occupational therapist working with one patient at 

the same time to achieve the patient’s goals. Because Co-Treatment is appropriate for specific 

clinical circumstances and is not suitable for all patients, its use should be limited. As discussed 

in our responses to comments below, we will define Concurrent Therapy as one licensed or 

certified therapist treating 2 patients at the same time who are performing different activities. 

We will collect this information in a new Therapy Information Section on the IRF-PAI, 

which will be effective for IRF discharges beginning on or after October 1, 2015. The new 

Therapy Information section will be completed as part of the patient’s discharge assessment. In 

this new section, the IRF will record how many minutes of Individual, Concurrent, Group, and 

Co-Treatment Therapies the patient received, according to each therapy discipline (that is, 

physical therapy, occupational therapy, and speech-language pathology), during the first week 

(7 calendar day period) of the IRF stay; how many minutes of Individual, Concurrent, Group, 

and Co-Treatment Therapies the patient received, according to each therapy discipline, during 

the second week (7 calendar day period) of the IRF stay. In the proposed rule, we proposed that 

IRFs would also collect the average number of minutes of Individual, Group, and Co-Treatment 

therapies the patient received, according to each therapy discipline, during all subsequent weeks 

(7 calendar day periods) of the IRF stay, beginning with the third week. For Co-Treatment, each 

therapist will record the amount of time spent with the patient. That is, if a physical therapist and 

an occupational therapist both worked with the patient from 9:00 am to 9:30 am, then each 

therapist would record 30 minutes with the patient in the Co-Treatment section of the IRF-PAI. 

The draft of the IRF-PAI for FY 2016 that includes this new Therapy Information section is 
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available for download from the IRF PPS website at http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the 

publication of this final rule. We will use these data for the following purposes: 

● To analyze the types of therapy services Medicare is currently paying for under the 

IRF prospective payment system; and 

● To monitor the amount of therapy given and the use of different therapy modes in 

IRFs to support future rulemaking in this area.

For example, we are considering using these data to propose limits on the amount of 

Group Therapy that may be provided in IRFs through future rulemaking. One such limit that we 

are currently considering is that an IRF patient may receive no more than 25 percent of his or her 

total therapy treatment time in Group Therapy, similar to the limit that currently exists in the 

skilled nursing facility (SNF) setting, as discussed in the FY 2000 SNF PPS and Consolidated 

Billing final rule (64 FR 41644, 41662). We specifically solicited public comment on all of 

these proposals, including whether 25 percent is the most appropriate limit to establish for the 

IRF setting. 

We received 43 comments on the data collection regarding the amount and mode 

(Individual, Concurrent, Group, and Co-Treatment) of therapy provided in IRFs according to 

Occupational, Speech, and Physical Therapy Disciplines, which are summarized below. 

 Comment: Overall, several commenters supported CMS’s proposed therapy collection 

item on the IRF-PAI, with one commenter indicating that collection of these data could lead to 

significant improvements in quality of care and accuracy of payments in the IRF PPS. 

Response: We appreciate the support from the commenters regarding the new therapy 

item on the IRF-PAI. To date, we have been unable to track changes in the provision of therapy 
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to patients because Medicare does not collect data on therapy modalities (Individual, Concurrent, 

Group, and Co-Treatment) by each therapy discipline (that is, physical therapy, occupational 

therapy, and speech-language pathology). We believe that by adding this item to the IRF-PAI, 

we will be able to determine the current services for which Medicare is paying and whether 

limits on the amount of group therapy that may be provided to IRF patients are needed. 

Comment: Several commenters expressed concern that the proposed collection method 

changes the collection criteria for the weeks subsequent to the second week. Commenters 

suggested that this change introduces the potential for confusion and error because facilities will 

have to monitor every patient on the unit to determine when the third week of the stay will begin. 

Additionally, these commenters suggested that we should collect data on the total number of 

minutes of therapy provided to patients, by mode and type of therapy, only once at discharge 

based on the total number of minutes provided to the patient throughout the IRF stay, as it would 

lessen the burden of the data collection. 

Response: After careful consideration of these comments, we agree that collecting 

average number of minutes of therapy, by mode and type of therapy, for weeks 3 and beyond 

may have the potential to create confusion for providers. For this reason and in order to 

minimize provider burden, we are choosing not to finalize this proposal, and will instead only 

collect total number of minutes of therapy by mode and discipline for weeks 1 and 2. We 

believe that it would greatly improve our understanding of the provision of therapy in IRFs to 

collect data on the amount of therapy provided, by mode and type of therapy, for week 1 of the 

IRF stay (that is, the first 7 consecutive calendar days starting with the day of admission) and for 

week 2 of the IRF stay (that is, the second 7 consecutive calendar days of the IRF stay). Since 

the average length of stay in an IRF is 13 days, and to minimize the burden of this data collection 
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effort, we will not require data to be reported beyond week 2 of the IRF stay. We believe that 

collecting total number of minutes of therapy, by mode and type of therapy, only for weeks 1 and 

2 of the IRF stay is sufficient to help us to be able to develop future policy and improve the 

quality of care and accuracy of payments in the IRF PPS. Additionally, since our intent is to 

collect the most specific information regarding therapy data that we can, we recognize that 

collecting the average amount of therapy for weeks 3 and on, will perhaps not provide us with 

the specificity that we are seeking at this time. However, we may propose to require data 

collection on weeks 3 and beyond of the IRF stay through future notice and comment rulemaking 

if we later determine that such data is needed to better inform future policymaking. 

While we recognize that the commenters believe that collecting the number of minutes of 

therapy, by mode and type of therapy, for the whole IRF stay only at the time of the patient’s 

discharge from the IRF would lessen the burden of this data collection, we do not believe that 

this would provide us with level of detail that we believe we would need to develop future policy 

in this area or to understand what services we are paying for with the IRF benefit. 

Comment: Several commenters suggested that CMS should seek to achieve its objective 

of better understanding therapy usage and outcomes within IRFs, by funding a study on the 

utilization of various therapy modes in IRFs. 

Response: Unfortunately, we are not able to fund a study of therapy usage and outcomes, 

but we would welcome learning from such studies conducted by others. Clinical evidence 

linking therapy usage with patient outcomes would greatly improve our understanding of these 

issues, and would not only enhance future policymaking in this area, but we believe would also 

inform and enhance the quality of care provided in IRFs and other post-acute care settings. 
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Comment: Several commenters expressed concern regarding CMS’s definition of each 

therapy mode, most specifically, Group Therapy. One commenter suggested that we should be 

more consistent in our definitions of the different modes of therapy across Medicare payment 

settings. Many of the commenters indicated that studies regarding the benefits of one mode of 

therapy over another are very limited, and wanted to know what clinical basis we used when 

deciding that a group should be comprised of 2-6 patients. Other commenters urged CMS to 

recognize Concurrent Therapy as a distinct mode of therapy and not include it in the Group 

Therapy definition. 

Response: After carefully reviewing the comments regarding the definitions of the 

different modes of therapy, we agree with commenters that Concurrent Therapy should be 

removed from the definition of Group Therapy and recognized as a distinct mode of therapy. 

We initially included Concurrent Therapy with Group Therapy because we wanted to lessen the 

burden on providers. However, we understand from the comments that separating out 

Concurrent Therapy from Group Therapy may actually make it easier for providers to report the 

data, as they already record data separately according to Concurrent Therapy and Group Therapy 

in the medical record. We also understand from the comments that it would make it easier for 

providers if we were to use the same definitions for the different modes of therapy, to the extent 

feasible, across Medicare’s post-acute care settings. We believe that such consistency across 

settings will serve to improve the accuracy and reliability of the data we receive. As we also 

believe that it would be useful for us to better understand the provision of Concurrent Therapy in 

IRFs, separate from the provision of Group Therapy, we are revising our proposal, and will 

collect data instead on Individual, Concurrent, Group, and Co-Treatment Therapies. 
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Furthermore, in response to comments, we will generally define these terms using the 

same definitions for Individual, Concurrent, and Co-Treatment, that we currently use in the SNF 

PPS (see Chapter 3 Sec. O of the Minimum Data Set (MDS) Manual, version 3.0 located at, 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/MDS30RAIManual.html). We generally concur that, 

when appropriate, it is important to apply definitions consistently across Medicare’s post-acute 

care settings. Thus, we are defining Individual Therapy as the provision of therapy services by 

one licensed or certified therapist (or licensed therapy assistant, under the appropriate direction 

of a licensed or certified therapist) to one patient at a time (this is sometimes referred to as “oneon-one” therapy), Co-Treatment as the provision of therapy services by more than one licensed 

or certified therapist (or licensed therapy assistant, under the appropriate direction of a licensed 

therapist) from different therapy disciplines to 1 patient at the same time, and Concurrent 

Therapy as one licensed or certified therapist treating 2 patients at the same time who are 

performing different activities. However, we have decided not to use the exact SNF definition 

for Group Therapy in IRFs. Based on our review of the public comments, we believe it is 

appropriate to broaden the SNF definition for the purposes of this IRF data collection effort. We 

may still consider changes to the definition of Group Therapy for the IRF setting in the future, 

based on our review of the data we receive and based on any additional feedback from providers. 

In the SNF setting, the data collection regarding Group Therapy is used to allocate a therapist’s 

time for the purpose of classifying a particular patient into the appropriate case-mix group for 

payment. Since the purpose of the data collection in the IRF setting differs, we believe that the 

same interpretation is not needed. Additionally, since we have decided to separate Concurrent 

Therapy from the definition of Group Therapy, we have changed the definition of Group 
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Therapy to ensure patients are performing the same or similar activities. Two patients 

performing different activities would now be defined as Concurrent Therapy. We will define 

Group Therapy as the provision of therapy services by one licensed or certified therapist (or 

licensed therapy assistant, under the appropriate direction of a licensed or certified therapist) 

treating 2 to 6 patients at the same time who are performing the same or similar activities. 

We plan to update the IRF-PAI Training Manual to inform providers, in more detail, 

regarding completion of the Therapy Data Collection Section. 

 We agree with many of the commenters that evidence regarding the clinical efficacy of 

the various modes of therapy for different patient populations is lacking. In the FY 2010 IRF 

PPS proposed rule (74 FR 21052, 21070), we specifically asked for this type of information, and 

the commenters told us that such information is largely unavailable. We would welcome any 

information that might be available to better understand this issue. However, we believe that the 

absence of such clinical evidence makes it all the more imperative that we start by collecting data 

on the amounts, types, and modes of therapy provided in IRFs to inform future policymaking. 

 We do not specifically know of the existence of any clinical evidence on the optimal 

number of patients for Group Therapy. We would be interested in any studies that developed 

such clinical evidence. In the absence of such evidence and solely for the purposes of collecting 

the data, we proposed to define Group Therapy as one therapist working with 2 to 6 patients at 

the same time. We proposed 6 patients as the upper limit for group therapy in IRFs because we 

believe that more than 6 patients in a group would likely make the group more difficult for a 

therapist to supervise and manage, and might decrease the benefits to patients of the group 

interaction. We did not receive any comments suggesting that a Group Therapy session in an 

IRF should include more than 6 patients, and in fact received several comments in support of 
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using 6 as an upper limit on the number of patients. Thus, we will use the definition of Group 

Therapy as one therapist working with 2 to 6 patients who are all performing the same or similar 

activities solely for the purposes of this data collection effort. We may consider revising this 

definition for the IRF setting through future rulemaking based on the availability of new 

evidence or further feedback on this issue. 

Comment: While a few commenters were supportive of our consideration of 25 percent 

as the most appropriate limit to establish for the provision of Group Therapy in the IRF setting, 

the majority of commenters urged CMS not to by impose a 25 percent threshold limiting the 

amount of Group Therapy an IRF patient can receive. Many commenters said that a potential 

cap on the provision of Group Therapy in IRFs was premature in the absence of data and studies 

to support an appropriate limit. These commenters also indicated that such a limit would not 

sufficiently recognize the professional judgment of the treating clinicians who, they believe, are 

best equipped to determine the modality and duration of therapy a patient needs. Additionally, 

several commenters suggested that IRF patients should not be held to the same therapy standards 

and assignment of minutes as SNF patients since the two populations are very different. 

Response: While we appreciate the positive feedback from the commenters who 

supported the idea of a potential threshold, after careful review of the comments, the majority of 

commenters suggested placing a cap on the amount of Group Therapy that IRF patients should 

receive would be premature at this time. We appreciate the concerns raised by these commenters 

and believe that it would be prudent to give more consideration to setting a cap, and the 

appropriate threshold for such a cap, regarding the provision of Group Therapy. We believe that 

collecting and analyzing the current delivery of therapy services will help inform any future 

policymaking. At such time that we believe a threshold is needed on the amount of Group 
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Therapy provided, we will consider policy development through notice and comment 

rulemaking. 

 If, through future rulemaking, we do decide to impose a Group Therapy threshold, we do 

not believe that this would limit the professional judgment of the treating clinicians. We know 

that clinicians are best equipped to determine the modality and duration of therapy that any 

particular patient needs. With that being said, we believe that the preponderance of therapy 

given in an IRF should be Individual, since that is the only way that we believe that an IRF 

patient is truly receiving the intensive rehabilitation therapy program typically provided in an 

IRF, and we want to be sure that continues to be the standard. A potential threshold for the 

provision of group therapy in IRFs would serve to further clarify what we mean by 

“preponderance.” 

Comment: One commenter expressed concern that we might believe that all IRF patients 

should receive 100 percent individual therapy. Another commenter suggested that we explicitly 

recognize the clinical value that Group Therapy provides over other therapy modes for certain 

patients. 

Response: We do not believe that all IRF patients should only receive individualized 

therapy. We understand that different types of patients need different motivation and various 

forms of therapy in order to achieve their therapy goals. As we indicated in the proposed rule 

(79 FR 26329), when an authorized clinician deems it to be necessary, we continue to believe 

that Group Therapy can serve as an appropriate mode of therapy delivery that can be beneficial 

to the particular needs of IRF patients as an adjunct to Individual Therapy. An important goal of 

rehabilitation is community reintegration and groups are important to that process. The 

interaction with other patients provides tremendous psychosocial benefits, providing 
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encouragement and confidence in skills learned. However, we believe that the preponderance of 

therapy provided to patients in IRFs should be individual therapy in order to reflect the intensity 

of therapy provided in IRFs. 

Comment: Several commenters suggested that we provide additional information about 

how IRFs should allocate or attribute minutes among patients participating in a Concurrent 

Therapy or Group Therapy session on the IRF-PAI. 

Response: We will include more detailed information regarding completion of the 

Therapy Data Collection Section of the IRF-PAI in an update to the IRF-PAI Training Manual 

that we will post on the IRF PPS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/InpatientRehabFacPPS prior to October 1, 2015. 

Final Decision: After careful consideration of the comments we received on the 

proposed therapy data collection on the IRF-PAI, we are finalizing our collection of data on the 

amount and mode (that is, Individual, Concurrent, Group, and Co-Treatment) of therapy 

provided in the IRF setting according to therapy discipline (that is, physical therapy, 

occupational therapy, and speech-language pathology). These data will be collected on a revised 

IRF-PAI form which is available for download from the CMS website 

[http://cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/index.html] in conjunction with this final rule. This 

requirement will become effective for IRF discharges occurring on or after October 1, 2015. 

X. Revision to the IRF-PAI for Arthritis Conditions 

In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 47895), we revised the 

list of ICD-9-CM diagnosis codes used to determine presumptive compliance, effective for 

compliance review periods beginning on or after October 1, 2014. As part of these revisions, we 
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removed all of the ICD-9-CM codes for arthritis conditions because we found that such codes 

did not provide any information as to whether the patients met the severity and prior treatment 

requirement portions of the criteria for the medical conditions that may be counted toward an 

IRF’s compliance percentage under the presumptive compliance method. As we said in the 

FY 2014 IRF PPS final rule, we did not adopt any and all arthritis conditions in the May 7, 2004, 

final rule (69 FR 25752). Rather, we only included certain kinds of arthritic conditions which 

met defined severity and prior treatment requirements. We anticipated that less severe arthritic 

conditions could be satisfactorily managed outside of IRFs, as these cases would not require the 

intensive therapy provided in the inpatient rehabilitation setting. 

 We received a number of comments on the FY 2014 IRF PPS proposed rule 

(78 FR 26880) regarding the proposed removal of the ICD-9-CM codes for arthritis. The 

majority of commenters suggested that removing ICD-9-CM codes for arthritis would increase 

the use of the medical review method, which is more burdensome for both CMS and for IRFs. 

Several commenters suggested that IRFs should not be required to undergo a “full medical 

review” if they fail to meet the required compliance percentage using the presumptive 

compliance method. Instead, commenters suggested use of a “limited medical review” in which 

only arthritis and systemic vasculidities cases would be reviewed. We said in the FY 2014 IRF 

PPS final rule (78 FR 47860 at 47888 through 47889) that we would use the time afforded by the 

1-year delayed implementation to consider the feasibility of minimizing any burdens created by 

the operational aspects of this policy. 

 In keeping with what we stated in the FY 2014 IRF PPS final rule, in the FY 2015 IRF 

PPS proposed rule (79 FR 26308 at 26330 through 26331), we proposed to add an item to the 

IRF-PAI form for an IRF to record the specific arthritis diagnosis code(s) for each patient that 
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meets the severity and prior treatment requirements outlined in the regulation. By coding 

arthritis diagnosis codes in this section, the IRF would indicate that the patient’s arthritis 

conditions met all of the severity and prior treatment requirements (as outlined in regulation at 

§412.29(b)(2)(x) through §412.29(b)(2)(xii)) to be counted toward an IRF’s compliance 

percentage under the presumptive compliance method. 

The purpose of the proposed new item is to provide us with the additional severity and 

prior treatment information necessary for us to identify the arthritis diagnoses that are 

appropriate to count toward an IRF’s compliance percentage under the presumptive compliance 

method, thus reducing the medical review burden. If an IRF’s presumptive compliance 

percentage is below the compliance threshold (currently, 60 percent), but inclusion of the 

arthritis codes reported in the new proposed data item would result in the IRF’s presumptive 

compliance percentage meeting or exceeding the compliance threshold, then we proposed to 

perform a “limited” medical review on a statistically valid random sample of the cases 

documented under this new proposed item to ensure that the severity and prior treatment 

requirements were actually met. The number of cases from the statistically valid random sample 

found to meet the severity and prior treatment requirements would be extrapolated to the total 

number of cases documented under the new proposed item (that is, if 70 percent of the cases in 

the statistically valid random sample meet the severity and prior treatment requirements, we 

would presume that 70 percent of all of the cases documented in the new proposed item met the 

severity and prior treatment requirements). If the IRF’s presumptive compliance percentage 

meets or exceeds the compliance threshold (currently, 60 percent) with the addition of the 

compliant cases documented under the new proposed item, then the IRF will be presumed to 

meet the 60 percent rule requirements using the presumptive compliance method. However, if 
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the number of compliant cases documented under the new proposed item does not result in the 

IRF’s presumptive compliance percentage meeting or exceeding the compliance threshold 

(currently 60 percent), then the normal medical review procedures for IRFs not meeting the 

compliance threshold (currently 60 percent) under the presumptive compliance method would 

apply. A draft of the proposed new IRF-PAI for FY 2016, with the new proposed item, was 

made available for download on the IRF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the release of the proposed 

rule. 

The purpose of the proposal is to reduce the medical review burden associated with the 

removal of the ICD-9-CM codes for arthritis conditions from the presumptive methodology, 

while still allowing us to ensure that the arthritis diagnosis codes included in the calculation of an 

IRF’s compliance percentage under the presumptive compliance method meet the severity and 

prior treatment regulatory requirements. 

We received 21 comments on our proposed revision to the IRF-PAI to add a data item for 

arthritis conditions, which are summarized below. 

Comment: Several commenters supported the proposed revision to the IRF-PAI to allow 

providers to indicate whether the case coded with the arthritis condition met the prior treatment 

and severity requirements. Commenters especially supported the associated limited medical 

review process as described in the proposed rule. However, many commenters said that asking 

IRFs to code the arthritis diagnosis codes twice would create confusion, increase provider 

burden, and possibly lead to duplicative coding. Several commenters suggested that we instead 

provide for a simplified yes/no field on the IRF-PAI to indicate whether the case meets the prior 
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treatment and severity regulatory requirements. 

Response: We appreciate the commenters’ suggestions. Based on our review of the 

suggestions offered by the commenters, we believe that a much simpler approach than what we 

had proposed would be to provide an item on the IRF-PAI allowing the IRF to indicate whether 

or not the IRF-PAI contains any arthritis codes which meet the severity and prior treatment 

regulatory requirements at §412.29(b)(2)(x) through §412.29(b)(2)(xii). This approach would 

also be easier to administer. Thus, we are adopting this change to item #24A of the IRF-PAI 

form, instead of the additional IRF-PAI item that had been proposed for that item. The new item 

#24A would instead ask the IRF to mark the box if there are any arthritis codes listed in items 

#21, 22, or 24 that meet the severity and prior treatment regulatory requirements at 

§412.29(b)(2)(x) through §412.29(b)(2)(xii). 

Comment: Several commenters indicated that IRFs are sometimes unable to obtain the 

necessary information about a patient’s course of treatment prior to the IRF admission. These 

commenters suggested that the prior treatment requirements should be removed from the 

regulation. 

Response: The requirement that patients with arthritis conditions admitted to IRFs must 

not have shown adequate improvement following an appropriate, aggressive, and sustained 

course of outpatient therapy services or services in other less intensive rehabilitation settings has 

been in regulation since this requirement was finalized in the May 7, 2004 final rule 

(69 FR 25752). As stated in that final rule, the rehabilitation prescriptions for many types of 

arthritis conditions, especially osteoarthritis, typically involve outpatient therapy several times a 

week for 4 weeks or more. Although we recognized in that final rule that some very unusual 

cases may require intensive therapies and the interdisciplinary approach to care typically 
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provided in IRFs, we believe that patients should have participated in a required course of 

appropriate, sustained, and aggressive outpatient treatment (or treatment in a less-intensive 

setting) which failed to improve the patient’s condition in order to demonstrate that the IRF 

admission is reasonable and necessary. This requirement allows us to be able to count toward 

the 60 percent rule those “exceptional” cases that the IRF is able to demonstrate truly require the 

intensive and interdisciplinary level of care provided in an IRF, without counting the majority of 

cases we believe do not represent the type of patient requiring intensive rehabilitation in an IRF. 

These requirements have been in regulation for almost a decade. Until now, IRFs have 

not expressed any concerns to us regarding their inability to obtain the required prior treatment 

information, and many IRFs treat a significant number of these patients. We do not believe 

difficulties obtaining prior treatment information are a widespread problem among IRFs. 

Further, we believe that a patient’s prior course of treatment is useful and important clinical 

information for the treating physicians and therapists in the IRF to design the most effective 

treatment plan for the patient. Thus, we believe that the prior treatment information is necessary 

and important information for the IRF to obtain, both to meet the regulatory requirements and to 

provide the most effective care to the patient, and we disagree with the commenter’s suggestion 

that this requirement should be removed from the regulation. 

 Final Decision: After carefully considering the comments we received on the proposed 

new item on the IRF-PAI to indicate the arthritis codes that meet the prior treatment and severity 

regulatory requirements, we are modifying our proposal, based on the commenters’ suggestions, 

to simplify it. Instead of the new item we had proposed for item #24A on the IRF-PAI, we will 

instead ask IRFs to mark the box in item #24A if there are any arthritis codes listed in items #21, 

22, or 24 that meet the severity and prior treatment regulatory requirements at §412.29(b)(2)(x) 
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through §412.29(b)(2)(xii). If an IRF’s presumptive compliance percentage is below the 

compliance threshold (currently, 60 percent), but inclusion of the cases that have been marked in 

the affirmative in the new item #24A in the IRF’s presumptive compliance percentage would 

cause the IRF’s presumptive compliance percentage to exceed 60 percent, then we will perform a 

“limited” medical review on a statistically valid random sample of such cases. The number of 

cases from the statistically valid random sample that are found to meet the severity and prior 

treatment requirements would be extrapolated to the total number of cases that have been marked 

in the affirmative by the IRF in the new item #24A. For example, if 70 percent of the IRF’s 

cases in the statistically valid random sample are found to meet the severity and prior treatment 

requirements, we would presume that 70 percent of all of the IRF’s cases marked in the 

affirmative by the IRF in the new item #24A met the severity and prior treatment requirements. 

If the IRF’s presumptive compliance percentage meets or exceeds the compliance threshold 

(currently, 60 percent) with the addition of the compliant cases that are found to meet the 

severity and prior treatment requirements by this method, then the IRF will be presumed to meet 

the 60 percent rule requirements using the presumptive compliance method. However, if the 

number of compliant cases that are found to meet the severity and prior treatment requirements 

by this method do not result in the IRF’s presumptive compliance percentage meeting or 

exceeding the compliance threshold (currently 60 percent), medical review procedures for IRFs 

not meeting the compliance threshold (currently 60 percent) under the presumptive compliance 

method would apply. A draft of the proposed new IRF-PAI for FY 2016, with the simpler item 

#24A, is available for download on the IRF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html in conjunction with this final rule. 
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Because item #24A is specifically intended to mitigate some of the burden of additional 

medical reviews that would be required as a result of the refinements to the presumptive 

compliance method that are finalized in section VIII of this final rule, we believe that this change 

to the IRF-PAI should have an effective date that is as close as possible to the effective date of 

the refinements to the presumptive compliance method. However, as noted in section VIII of 

this final rule, the refinements to the presumptive compliance method are effective for 

compliance review periods beginning on or after October 1, 2015, but changes to the IRF-PAI 

must instead be implemented for all IRF discharges occurring on or after a specific date and 

cannot be done on a compliance review period basis. Thus, an effective date for new IRF-PAI 

item #24A of October 1, 2015, will enable this change to take effect on or before any IRFs are 

subject to the new presumptive compliance method. This change to the IRF-PAI is effective for 

IRF discharges on or after October 1, 2015. 

XI. International Classification of Diseases, 10th Revision, Clinical Modification 

(ICD-10-CM), Conversion 

A. Background on the Use of Diagnosis Information in the IRF PPS 

 As described in section I.C. of this final rule, IRFs are required to complete the 

appropriate sections of a PAI, designated as the IRF-PAI, upon the admission and discharge of a 

Medicare Part A Fee-for-Service patient. In addition, beginning with IRF discharges occurring 

on or after October 1, 2009, the IRF is also required to complete the appropriate sections of the 

IRF-PAI upon the admission and discharge of each Medicare Part C (Medicare Advantage) 

patient, as described in the FY 2010 IRF PPS final rule (74 FR 39762, 39798 through 39800). 

Several sections of the IRF-PAI (currently, items #22, 24, 46, and 47) require IRFs to report 

diagnosis information for patients. Until ICD-10-CM becomes the required medical data code 
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set for use on Medicare claims and IRF-PAI submissions, we will continue to use the ICD-9-CM 

medical data code set. Medicare uses the diagnosis information recorded on the IRF-PAI for the 

following purposes: 

(1) To case-mix adjust the IRF PPS payment for a patient by assigning the patient to an 

appropriate payment tier based on the patient’s comorbidities. 

(2) To determine, using the presumptive compliance method, whether an IRF 

presumptively meets the 60 percent rule requirements in §412.29(b). 

 As described in more detail in the FY 2002 IRF PPS final rule (66 FR 41316), we 

developed a list of diagnosis codes (previously, ICD-9-CM codes) that, if coded as a comorbidity 

in item #22 on a patient’s IRF-PAI, would result in that patient being assigned to one of three 

higher-paying payment tiers under the IRF PPS. In the FY 2006 IRF PPS final rule (70 FR 

57166), we updated and revised the list of diagnosis codes (at that time, ICD-9-CM codes). We 

refer to the current list of diagnosis codes that, if present on a patient’s IRF-PAI, result in the 

patient being assigned to a higher-paying tier as the “List of Comorbidities” in this final rule. 

 In addition to determining the appropriate tier assignment for case-mix adjusting IRF PPS 

payments, the diagnosis coding on the IRF-PAI is also used within the presumptive compliance 

method that typically serves as the first step in determining an IRF’s compliance with the 

60 percent rule. As discussed in more detail in section VII. of this final rule, the presumptive 

compliance method is one of two ways that MACs may evaluate an IRF’s compliance with the 

60 percent rule (the other method being the medical review method). The diagnosis coding on 

the IRF-PAI assessments from an IRF’s most recently completed 12-month compliance review 

period are examined (with the use of a computer program) to determine whether they contain any 

of the diagnosis codes that are listed in the “ICD-9-CM Codes That Meet Presumptive 
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Compliance Criteria” (which is also known as the presumptive methodology list). 

Additionally, the computer program examines the impairment group codes, which are not 

ICD-9-CM or ICD-10-CM codes, but are instead part of a separate unique set of codes 

specifically developed for the IRF PPS for assigning the primary reason for admission to an IRF. 

The computer program compares the impairment group codes listed in item #21 to the list of 

“Impairment Group Codes That Meet Presumptive Compliance Criteria” to determine whether 

the patient’s impairment group code presumptively meets the 60 percent rule requirements. In 

certain cases, the list of “Impairment Group Codes That Meet Presumptive Compliance Criteria” 

contains Etiologic Diagnosis exclusions. For example, impairment group code 0005.4, which 

represents a unilateral lower limb amputation below the knee is included on the list of 

“Impairment Group Codes that Meet Presumptive Compliance Criteria,” unless the associated 

Etiologic Diagnosis recorded on the patient’s IRF-PAI in item #22 is 895.0 (under ICD-9-CM), 

which indicates a traumatic amputation of the toe or toes. Therefore, the list of “Impairment 

Group Codes That Meet Presumptive Compliance Criteria” contains diagnosis code information 

(currently ICD-9-CM codes) in addition to impairment group codes. 

These lists contain diagnosis code information (currently in the form of ICD-9-CM 

diagnosis codes) which is used to case-mix adjust payments, determine an IRF’s presumptive 

compliance with the 60 percent rule, and to assist IRFs in accurately completing the impairment 

group code information on the IRF-PAI. As such, these lists must all be converted to ICD-10-

CM for the IRF PPS to assign payments and classify IRF facilities appropriately when ICD-10-

CM becomes the required medical data code set for use on Medicare claims and IRF-PAI 

submissions. 

B. Conversion of Diagnosis Information from ICD-9-CM to ICD-10-CM for the IRF PPS 
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In the September 5, 2012, final rule, “Administrative Simplification: Adoption of a 

Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier 

Requirements; and a Change to the Compliance Date for the International Classification of 

Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) Medical Data Code Sets” (77 FR 54664), 

the Department of Health and Human Services announced a delay in the implementation of the 

ICD-10-CM and ICD-10-PCS code sets from October 1, 2013, to October 1, 2014. The 

transition to the ICD-10 code sets is required for entities covered by the Health Insurance 

Portability and Accountability Act of 1996 (HIPAA). On April 1, 2014, the Protecting Access to 

Medicare Act of 2014 (Pub. L. No. 113-93) (PAMA) was enacted. Section 212 of PAMA, titled 

“Delay in Transition from ICD-9 to ICD-10 Code Sets,” provides that “[t]he Secretary of Health 

and Human Services may not, prior to October 1, 2015, adopt ICD-10 code sets as the standard 

for code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) and section 

162.1002 of title 45, Code of Federal Regulations.” As of now, the Secretary has not 

implemented this provision under HIPAA. 

We are addressing the conversion of ICD-9-CM to ICD-10-CM codes for the IRF PPS in 

this final rule, but in light of PAMA, the effective date of those changes would be the date when 

ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRFPAI submissions. Until that time, we will continue to require use of the ICD-9-CM codes for the 

IRF PPS. 

CMS, along with our support contractor 3M, has spent several years implementing a 

process for the transition from the use of ICD-9-CM diagnosis codes to ICD-10-CM codes 

within both the IRF PPS Grouper and the software for evaluating IRFs’ compliance with the 

60 percent rule. As this will be the first time that ICD-10-CM codes have been used for the IRF 
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PPS, we invited public comment in the proposed rule on our translation of the diagnosis code 

lists into ICD-10-CM. 

To ensure a smooth transition from the use of ICD-9-CM diagnosis codes to ICD-10-CM 

codes for the IRF PPS and to allow for public comment on these lists, we proposed ICD-10-CM 

lists that were available for download from the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. The proposed ICD-10-CM code lists were intended to be used when ICD-10-CM 

becomes the required medical data code set for use on Medicare claims and IRF-PAI 

submissions. To convert these lists from ICD-9-CM to ICD-10-CM, we used the General 

Equivalence Mappings (GEMs) that were developed as a tool to assist in converting ICD-9-CMbased applications to ICD-10-CM. The GEMs tool is a comprehensive translation dictionary that 

was developed over a 3-year period by CMS and the Centers for Disease Control and Prevention 

(CDC), with input from both the American Hospital Association and the American Health 

Information Management Association (AHIMA). They can be used to translate any ICD-9-CMbased data into ICD-10-CM. For more information on GEMs, please refer to the General 

Equivalence Mappings Frequently Asked Questions Booklet, which is available for download 

from the CMS website at http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. Like a translation dictionary, the GEMs tool is based on the complete 

meaning of a given code, where “meaning” refers to the correspondence between the official 

documents (tabular and index) that define each code set. The GEMs tool contains a complete 

and comprehensive bidirectional set of mappings between ICD-9-CM and ICD-10-CM. 

 Our intention in converting the ICD-9-CM diagnosis codes to ICD-10-CM diagnosis 

codes within the IRF PPS was for the converted codes to reflect the same “meaning” as the 
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original codes. That is, except for the specific changes to the “Impairment Group Codes that 

Meet Presumptive Compliance Criteria” list and to the “ICD-9-CM Codes that Meet Presumptive 

Compliance Criteria” list described in section VIII of this final rule, we did not intend to add 

conditions to, or delete conditions from, the ICD-9-CM codes used in the IRF PPS. Thus, for all 

IRF lists containing an ICD-9-CM code, we used the 2014 GEMs, which can be downloaded 

from the CMS website at http://www.cms.gov/Medicare/Coding/ICD10/2014-ICD-10-CM-andGEMs.html to create a translation list, and then we reviewed and revised that translation list to 

ensure that all of the codes on the new ICD-10-CM list reflect as closely as possible the same 

“meaning” as the codes that were present on the old ICD-9-CM list. 

 The majority of ICD-9-CM codes have straightforward translation alternative(s) in 

ICD-10-CM, where the diagnoses classified to a given ICD-9-CM code are replaced by one or 

more ICD-10-CM codes. Wherever possible, we erred on the side of including a given 

ICD-10-CM code if we believed that a patient coded with that ICD-10-CM code would have 

been correctly coded with the associated ICD-9-CM prior to the transition from ICD-9-CM to 

ICD-10-CM. Our intent is that the meaning of the diagnosis codes is thereby unchanged because 

all of the patient records that would have been correctly coded using the ICD-9-CM codes are 

correctly coded using one or more of the specific ICD-10-CM codes. For example, the 

ICD-9-CM code 582.1, “Human herpesvirus 6 encephalitis,” translates directly to the ICD-10-

CM code B1001, “Human herpesvirus 6 encephalitis.” 

 Below, we note two issues within ICD-10-CM coding that differ from ICD-9-CM coding, 

and therefore, require special attention to ensure correct coding of patient diagnoses under 

ICD-10-CM. 

● Combination Diagnosis Codes in ICD-9-CM and ICD-10-CM – Both ICD-9-CM and 
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ICD-10-CM contain diagnosis codes called combination codes, meaning that one code contains 

two or more diagnoses. Typically, one diagnosis in the combination code is a chronic disease, 

such as diabetes, and the other diagnosis is an associated manifestation or complication of the 

disease, such as diabetic nephropathy. 

ICD-10-CM contains many new combination codes that are not contained in ICD-9-CM. 

In terms of a coded record, this means that the same diagnoses coded with one ICD-10-CM 

combination code may require two or more ICD-9-CM codes to capture a comparable level of 

detail. In addition, ICD-9-CM contains combination codes with diagnosis terminology that was 

revised or deleted from ICD-10-CM, with the result that the same diagnoses coded with one 

ICD-9-CM code may require two or more ICD-10-CM codes to capture a comparable level of 

detail. For example, ICD-9-CM code 115.11, “Infection by Histoplasma duboisii, meningitis” 

translates to a pair of ICD-10-CM codes, “B39.5—Histoplasmosis duboisii” and code “G02—

Meningitis in other infectious and parasitic diseases classified elsewhere.” In such instances, the 

intent of our policy is unchanged because the patient records that would have been correctly 

coded using the single ICD-9-CM code will now be correctly coded using a combination of ICD10-CM codes. Furthermore, to maintain the same meaning and reflect the same diagnoses as the 

ICD-9-CM code in such instances, we require the patient’s IRF-PAI record to have all of the 

relevant combination of ICD-10-CM codes present to reflect the condition on the list. If only 

one of the ICD-10-CM codes required to reflect the condition on the list is included on the IRFPAI, the record will not accurately reflect the same diagnoses as the ICD-9-CM code. We note 

that, in some cases, IRFs may need to use a combination of ICD-10-CM codes to represent an 

Etiologic Diagnosis on the IRF-PAI form. For this reason, we will add additional spaces to the 

Etiologic Diagnosis field (Item #22) on the IRF-PAI, effective October 1, 2015. The new draft 
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IRF-PAI form for IRF discharges occurring on or after October 1, 2015, is available for 

download from the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html. 

● Seventh Character Extensions in ICD-10-CM – Certain codes in ICD-10-CM require 

the use of a seventh character in the code, where each seventh character of the code has one of 

the following meanings: 

++ The seventh character “A” in the code indicates that the diagnosis is an initial 

encounter. 

++ The seventh character “D” in the code indicates that the patient is receiving aftercare 

for the injury or illness. 

++ The seventh character “S” in the code indicates that the patient no longer requires 

care for any aspect of the initial injury or illness itself, but that the patient is receiving care for a 

late effect of the injury or illness. 

In the IRF PPS context, these seventh character extensions only apply to ICD-10-CM 

diagnosis codes related to certain types of injuries. The corresponding ICD-9-CM diagnosis 

codes currently listed on the “List of Comorbidities,” “ICD-9-CM Codes That Meet Presumptive 

Compliance Criteria,” and “Impairment Group Codes That Meet Presumptive Compliance 

Criteria” only map to the seventh character extensions of “A” and “S,” but not to the seventh 

character extension of “D,” using the GEMs tool. Thus, including codes under ICD-10-CM with 

the seventh character extension of “D” would mean adding conditions to the lists that were not 

included on the lists under ICD-9-CM. As we indicated previously, we did not intend to add, 

delete, or alter the conditions included on these lists in transitioning from ICD-9-CM to ICD-10-

CM. Thus, we are not including ICD-10-CM codes with the seventh character extension of “D” 
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on the ICD-10-CM versions of the “List of Comorbidities,” “ICD-9-CM Codes That Meet 

Presumptive Compliance Criteria,” or “Impairment Group Codes That Meet Presumptive 

Compliance Criteria.” In the IRF context, we define the patient as having a current diagnosis 

requiring the use of the seventh character extension of “A” if the patient requires current 

treatment for the injury and if the diagnosis has a direct effect on the patient’s rehabilitation 

therapy program in the IRF. 

In addition, ICD-10-CM injury codes specify that traumatic fractures are coded using the 

appropriate seventh character extension for an initial encounter, where each seventh character of 

the code has one of the following meanings: 

● The seventh character “A” in the code indicates that the diagnosis is an initial 

encounter for closed fracture. 

● The seventh character “B” in the code indicates that the diagnosis is an initial 

encounter for open fracture. 

● The seventh character “C” in the code indicates that the diagnosis is an initial 

encounter for open fracture type IIIA, IIIB, or IIIC. 

We used the GEMs tool and the guiding rationales described above to translate the following 

lists of ICD-9-CM diagnosis codes for the IRF PPS into lists of ICD-10-CM diagnosis codes: 

● List of Comorbidities - This file contains the list of comorbidities (ICD-9-CM codes) 

that are used to determine placement in tiers within the IRF Grouper software. Placement in one 

of the higher-paying tiers, which is triggered by the presence of one of the comorbidities on this 

list, results in a higher prospective payment amount for the IRF. 

● ICD-9-CM Codes That Meet Presumptive Compliance Criteria – This file contains the 

list of diagnoses (ICD-9-CM codes) that are used for determining presumptive compliance with 
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the IRF 60 percent rule. 

● Impairment Group Codes That Meet Presumptive Compliance Criteria – This file 

contains the list of IGCs that meet presumptive compliance criteria for the 60 percent rule. 

While the IGC codes themselves are not ICD-9-CM diagnosis codes, the file contains a list of 

Etiologic Diagnosis codes (ICD-9-CM codes) that are excluded from particular IGCs. That is, a 

given IGC that would otherwise meet the presumptive compliance criteria will not meet such 

criteria if the patient has one of the “excluded” Etiologic Diagnoses for that IGC. 

 The converted ICD-10-CM code tables associated with each of these lists are available 

for download from the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/InpatientRehabFacPPS/Data-Files.html in conjunction with this final rule. 

 We received 3 comments on our proposed translation of the lists into ICD-10-CM, 

effective when ICD-10-CM becomes the required medical data code set for use on Medicare 

claims and IRF-PAI submissions, which are summarized below. 

 Comment: One commenter expressed concern about using the GEMs tool as the only 

means of converting the diagnosis codes from ICD-9-CM to ICD-10-CM, as this commenter said 

that the GEMs tool is limited in its ability to capture all of the clinical nuances of the coding 

conversion. This commenter suggested some enhanced conversions related to specific codes. 

 Response: As we described in the proposed rule, we used the GEMs tool as our starting 

point in converting the ICD-9-CM codes to ICD-10-CM, but we also reviewed and revised the 

resulting translation list from GEMs to ensure that all of the codes on the new ICD-10-CM list 

reflect as closely as possible the same “meaning” as the codes that were present on the old ICD9-CM list. Thus, we did not use the GEMs tool as the sole method of converting the codes, but 

instead started with the GEMs tool translation and then reviewed and revised the translated lists 
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from a clinical perspective to ensure that we were appropriately capturing the clinical nuances of 

the ICD-9-CM to ICD-10-CM conversions. We appreciate the commenter’s specific suggestions 

regarding particular code translations, and we will carefully consider the suggestions in 

finalizing the ICD-10-CM lists for implementation when ICD-10-CM becomes the required 

medical data code set for use on Medicare claims and IRF-PAI submissions. 

 Comment: One commenter requested that we provide a crosswalk from ICD-9-CM to 

ICD-10-CM to assist IRFs in better understanding the specific diagnosis codes that will be used 

for the IRF PPS when ICD-10-CM becomes the required medical data code set for use on 

Medicare claims and IRF-PAI submissions. 

 Response: The GEMs tool already provides a crosswalk from ICD-9-CM to ICD-10-

CM, and it is readily available for download from the CMS website at 

http://www.cms.gov/Medicare/Coding/ICD10/2014-ICD-10-CM-and-GEMs.html for use by all 

providers. We believe that providing a crosswalk ourselves apart from the GEMs tool that 

already exists would potentially create added confusion. 

 Comment: One commenter expressed support for our proposal to use the GEMs tool to 

convert diagnosis codes from ICD-9-CM to ICD-10-CM, but indicated some specific ICD-10-

CM codes that the commenter believed should be added to the various ICD-10-CM lists. The 

specific ICD-10-CM codes that this commenter suggested for inclusion on the lists are divided 

into 3 categories. The first category includes those ICD-10-CM codes that the commenter said 

they believe may represent inconsistencies between the GEMs tool conversion of ICD-9-CM 

codes and our proposed translation of those codes in the proposed ICD-10-CM code lists. The 

second and third categories contain ICD-10-CM diagnosis codes that represent clinical 

conditions that the commenter said they believe should be added to the ICD-10-CM Codes That 
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Meet Presumptive Compliance Criteria and the List of Comorbidities, respectively, and that are 

not currently reflected on these same lists in ICD-9-CM. 

 Response: We appreciate the commenter’s detailed analysis of the converted ICD-10-

CM lists that were published on the CMS website in conjunction with the proposed rule, and the 

specific suggestions this commenter provided regarding codes that we may have inadvertently 

omitted from the lists. We will carefully consider all of the specific ICD-10-CM codes that the 

commenter noted to ensure that we do not inadvertently omit any ICD-10-CM codes that should 

be included based on the use of the GEMs tool and our subsequent review and revision of these 

ICD-10-CM codes to ensure that they reflect the same clinical meaning as the ICD-9-CM codes 

that are currently on the respective lists. However, as we indicated in the proposed rule, we do 

not intend to add conditions to, or delete conditions from, the ICD-10-CM Codes That Meet 

Presumptive Compliance Criteria or the List of Comorbidities in translating the codes from ICD9-CM to ICD-10-CM. Thus, at this time, we will not add the ICD-10-CM codes that would add 

additional clinical conditions to the lists. However, we will take the commenter’s suggestions 

into consideration for future rulemaking. 

 Final Decision: After carefully considering the comments that we received on our 

proposed translation of the ICD-9-CM code lists into ICD-10-CM using the GEMs tool, we are 

finalizing the ICD-10-CM lists that are available for download from the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html for use when ICD-10-CM becomes the required medical data code set for use on 

Medicare claims and IRF-PAI submissions. 

XII. Revisions and Updates to the Quality Reporting Program for IRFs 
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A. Background and Statutory Authority 

Section 3004(b) of the Affordable Care Act added section 1886(j)(7) to the Act, which 

requires the Secretary to implement a quality reporting program (QRP) for IRFs. This program 

applies to freestanding IRFs, as well as IRF units that are affiliated with acute care facilities, 

which includes critical access hospitals (CAHs). 

Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the reduction of the

applicable IRF PPS annual increase factor, as previously modified under section 1886(j)(3)(D) of 

the Act, by 2 percentage points for any IRF that fails to submit data to the Secretary in accordance 

with requirements established by the Secretary for that fiscal year. Section 1886(j)(7)(A)(ii) of 

the Act notes that this reduction may result in the increase factor being less than 0.0 for a fiscal 

year, and in payment rates under subsection (j) for a fiscal year being less than such payment rates 

for the preceding fiscal year. Any reduction based on failure to comply with the reporting 

requirements is, in accordance with section 1886(j)(7)(B) of the Act, limited to the particular fiscal 

year involved. The reductions are not to be cumulative and will not be taken into account in 

computing the payment amount under subsection (j) for a subsequent fiscal year. 

Section 1886(j)(7)(C) of the Act requires that each IRF submit data to the Secretary for 

quality measures specified by the Secretary. The required quality measure data must be

submitted to the Secretary in a form, manner, and time specified by the Secretary. 

The Secretary is generally required to specify measures that have been endorsed by the

entity with a contract under section 1890(a) of the Act. This contract is currently held by the

National Quality Forum (NQF), which is a voluntary consensus standard-setting organization. 

The NQF was established to standardize health care quality measurement and reporting through

its consensus development process. Additional information regarding NQF and its consensus 
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development process is available at 

http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.

We have adopted NQF-endorsed measures in our reporting programs. However, section 

1886(j)(7)(D)(ii) of the Act provides that “[i]n the case of a specified area or medical topic 

determined appropriate by the Secretary for which a feasible and practical measure has not been 

endorsed by the entity with a contract under section 1890(a) [of the Act], the Secretary may 

specify a measure that is not so endorsed as long as due consideration is given to measures that 

have been endorsed or adopted by a consensus organization identified by the Secretary.” 

Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for making 

data submitted under the IRF QRP available to the public. The Secretary must ensure that each 

IRF is given the opportunity to review the data that is to be made public prior to the publication 

or posting of this data. 

We seek to promote higher quality and more efficient health care for all patients who 

receive care in acute and post-acute care settings. Our efforts are, in part, effectuated by quality

reporting programs coupled with the public reporting of data collected under those programs. The 

initial framework of the IRF QRP was established in the FY 2012 IRF PPS final rule

(76 FR 47873). 

B. Quality Measures Previously Finalized for and Currently Used in the IRF Quality 

Reporting Program 

1. Measures Finalized in the FY 2012 IRF PPS Final Rule 

In the FY 2012 IRF PPS final rule (76 FR 47874 through 47878), we adopted applications

of 2 quality measures for use in the first data reporting cycle of the IRF QRP: (1) An application

of Catheter-Associated Urinary Tract Infection (CAUTI) for Intensive Care Unit Patients
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(NQF#0138); and (2) an application of Percent of Residents with Pressure Ulcers That Are New 

or Worsened (Short-Stay) (NQF #0678). We adopted applications of these 2 measures because

neither of them, at the time, was endorsed by the NQF for the IRF setting. We also discussed our 

plans to propose a 30-Day All-Cause Risk-Standardized Post-IRF Discharge Hospital

Readmission Measure. 

2. Measures Finalized in the CY 2013 OPPS/ASC Final Rule 

In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we adopted: 

● Updates to the CAUTI measure to reflect the NQF’s expansion of this quality measure 

to the IRF setting, replacing our previous adoption of an application of the quality measure for the 

IRF QRP; 

● A policy that would allow any quality measure adopted for use in the IRF QRP to 

remain in effect until the measure was actively removed, suspended, or replaced (and specifically

applied this policy to the CAUTI and Pressure Ulcer measures that had already been adopted for 

use in the IRF QRP); and 

● A subregulatory process to incorporate NQF updates to IRF quality measure

specifications that do not substantively change the nature of the measure. 

At the time of the CY 2013 OPPS/ASC final rule, the NQF had endorsed the Pressure 

Ulcer measure for the IRF setting, and retitled it to cover both residents and patients within LongTerm Care Hospitals (LTCH) and IRF settings, in addition to the Nursing Home/Skilled Nursing 

Facility setting. Although the quality measure had been expanded to the IRF setting, we 

concluded that it was not possible to adopt the NQF-endorsed measure Percent of Residents or 

Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) because it is 

a risk-adjusted measure, and the “Quality Indicator” section of the IRF-PAI did not contain the 
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data elements that would be needed to calculate a risk-adjusted quality measure. As a result, we 

decided to: (1) adopt an application of the Pressure Ulcer measure that was a non-risk-adjusted 

Pressure Ulcer measure (numerator and denominator data only); (2) collect the data required for 

the numerator and the denominator using the then-current version of the IRF-PAI; (3) delay 

public reporting of Pressure Ulcer measure results until we could amend the IRF-PAI to add the 

data elements necessary for risk-adjusting the Pressure Ulcer measure, and then (4) adopt the 

NQF-endorsed version of the measure covering the IRF setting through rulemaking 

(77 FR 68507). 

a. National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract 

Infection (CAUTI) Outcome Measure (NQF #0138) 

In the CY 2013 OPPS/ASC final rule, we adopted the current version of NHSN CAUTI 

Outcome Measure (NQF #0138) (replacing an application of this measure that we initially 

adopted in the FY 2012 IRF PPS (76 FR 47874 through 47886)). The NQF-endorsed measure 

applies to the FY 2015 adjustments to the IRF PPS annual increase factor and all subsequent 

annual increase factors (77 FR 68504 through 68505). 

Since the publication of the CY 2013 OPPS/ASC final rule, the NHSN CAUTI quality 

measure has not changed, and it remains an active part of the IRF QRP. Additional information 

about this measure can be found at http://www.qualityforum.org/QPS/0138. Our procedures for 

data submission for this measure have also remained the same. IRFs should continue to submit 

their CAUTI measure data to the Centers for Disease Control and Prevention (CDC) NHSN. 

Details regarding submission of IRF CAUTI data to the NHSN can be found at the NHSN website 

at http://www.cdc.gov/nhsn/inpatient-rehab/index.html. 
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b. Application of Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (Short-Stay) (NQF #0678) 

In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we adopted a nonrisk-adjusted application of this measure using the 2012 version of the IRF-PAI. 

3. Measures Finalized in the FY 2014 IRF/PPS Final Rule 

For the FY 2016 adjustments to the IRF PPS annual increase factor, in addition to 

retaining the previously discussed CAUTI and Pressure Ulcer measures, we finalized the 

adoption of one new measure: Influenza Vaccination Coverage among Healthcare Personnel 

(NQF #0431) (78 FR 47902 through 47921). In addition, for the FY 2017 adjustments to the 

IRF PPS annual increase factor, we adopted 3 quality measures: (1) All-Cause Unplanned 

Readmission Measure for 30 Days Post-Discharge from Inpatient Rehabilitation Facilities; 

(2) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal 

Influenza Vaccine (Short-Stay) (NQF #0680); and (3) the NQF-endorsed version of Percent of 

Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 

(NQF #0678). 

a. Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) 

In the FY 2014 IRF PPS final rule (78 FR 47905 through 47906), we adopted the CDC 

developed Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) quality 

measure that is currently collected by the CDC via the NHSN. This measure reports on the 

percentage of IRF health care personnel (HCP) who receive the influenza vaccination. 

In the FY 2014 IRF PPS final rule, we finalized that the Influenza Vaccination Coverage 

among Healthcare Personnel (NQF #0431) measure have its own reporting period to align with 

the influenza vaccination season, which is defined by the CDC as October 1 (or when the vaccine 
CMS-1608-F 07/29/14 136

becomes available) through March 31. We further finalized that IRFs will submit their data for 

this measure to the NHSN (http://www.cdc.gov/nhsn/). The NHSN is a secure Internet-based 

healthcare-associated infection tracking system maintained by the CDC and can be utilized by all 

types of health care facilities in the United States, including IRFs. The NHSN collects data via a 

web-based tool hosted by the CDC. Information on the NHSN system, including protocols, report 

forms, and guidance documents, can be found at http://www.cdc.gov/nhsn/. NHSN will submit 

the HCP influenza vaccination adherence percentage data to CMS on behalf of the facility. We 

also finalized that for the FY 2016 adjustments to the IRF PPS annual increase factor, data 

collection will cover the period from October 1, 2014 (or when the vaccine becomes available), 

through March 31, 2015. 

Details related to the use of the NHSN for data submission and information on definitions, 

numerator data, denominator data, data analyses, and measure specifications for the Influenza

Vaccination Coverage among Healthcare Personnel (NQF #0431) measure can be found at

http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html. Because IRFs are already using

the NHSN for the submission of CAUTI measure data, the additional administrative burden 

related to data collection and submission for this measure under the IRF QRP should be minimal. 

While IRFs can enter information in NHSN at any point during the influenza vaccination 

season for the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) 

measure, data submission is only required once per influenza vaccination season, unlike the 

CAUTI measure, which is the other quality measure finalized for the IRF QRP that utilizes the 

CDC NHSN. We finalized that the final deadline for data submission associated with this 

quality measure will be May 15th of each year. 
CMS-1608-F 07/29/14 137

Also, the data collection period for this quality measure is not 12 months, as with other 

measures, but is approximately 6 months (that is, October 1, or when the vaccine becomes 

available, through March 31 of the following year). This data collection period is applicable only 

to Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), and is not 

applicable to any other IRF QRP measures, proposed or adopted, unless explicitly stated. The 

measure specifications for this measure can be found at http://www.cdc.gov/nhsn/inpatientrehab/hcp-vacc/index.html and at http://www.qualityforum.org/QPS/0431. 

b. All-Cause Unplanned Readmission Measure for 30 Days Post- Discharge from Inpatient 

Rehabilitation Facilities (NQF #2502, Under Review at NQF; see 

http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx) 

In the FY 2014 IRF PPS final rule (78 FR 47906 through 47910), we adopted an AllCause Unplanned Readmission Measure for 30 Days Post-Discharge from Inpatient

Rehabilitation Facilities. This quality measure estimates the risk-standardized rate of unplanned, 

all-cause hospital readmissions for cases discharged from an IRF who were readmitted to a shortstay acute care hospital or LTCH, within 30 days of an IRF discharge. We noted that this is a

claims-based measure that will not require reporting of new data by IRFs and thus will not be 

used to determine IRF reporting compliance for the IRF QRP. Please note that this measure is 

not NQF-endorsed, but it was submitted by CMS to the NQF for review on February 5, 2014 

(http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx). 

c. Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) 

In the FY 2014 IRF PPS final rule (78 FR 47906 through 47911), we adopted the Percent 

of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza 
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Vaccine (Short-Stay) (NQF #0680) measure for the IRF QRP, and we will collect the data for 

this measure through the addition of data items to the “Quality Indicator” section of the IRF-PAI. 

We also added the data elements needed for this measure, as an influenza data item set, to 

the “Quality Indicator” section of the IRF-PAI, and data for this measure will be collected using 

this revised version of the IRF-PAI. The revised IRF-PAI will become effective on 

October 1, 2014. These data elements are harmonized with data elements (O0250: Influenza 

Vaccination Status) from the Minimum Data Set (MDS) 3.0 and the LTCH CARE Data Set 

Version 2.01, and the specifications and data elements for this measure are available at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html.

For purposes of this quality measure, the influenza vaccination season takes place from 

October 1 (or when the vaccine becomes available) through March 31 each year. The measure 

calculation and public reporting of this measure (once public reporting is implemented) will also 

be based on the influenza vaccination season, starting on October 1 (or when the vaccine 

becomes available) and ending on March 31 of the subsequent year. 

The IRF-PAI Training Manual indicates how providers should complete these items 

during the time period outside of the vaccination season (that is, prior to October 1, or when the 

vaccine becomes available, and after March 31 of the following year). The measure

specifications for this measure, Percent of Residents or Patients Who Were Assessed and

Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680), can be found on 

the CMS website at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/NHQIQualityMeasures.html. Additional information on 

this measure can also be found at http://www.qualityforum.org/QPS/0680. 
CMS-1608-F 07/29/14 139

d. Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (ShortStay) (NQF #0678) – Adoption of the NQF-Endorsed Version of this Measure 

In the FY 2014 IRF PPS final rule (78 FR 47911 through 47912), we adopted the NQFendorsed version of the Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (Short-Stay) (NQF #0678), with data collection beginning October 1, 2014, using the 

revised version of the IRF-PAI, for quality reporting affecting the FY 2017 adjustments to the IRF 

PPS annual increase factor and subsequent year annual increase factors. We noted in the rule that, 

until September 30, 2014, IRFs should continue to submit pressure ulcer data using the version of 

the IRF-PAI released on October 1, 2012, for the purposes of data submission requirements for 

the FY 2015 and FY 2016 adjustments to the annual IRF PPS increase factor. 

In the FY 2014 IRF PPS final rule (78 FR 47912 through 47916), we also adopted a 

revised version of the IRF-PAI starting October 1, 2014, for the FY 2017 adjustments to the IRF 

PPS annual increase factor and subsequent year annual increase factors. 

We received several comments and questions related to previously finalized measures 

and our current policies. While we greatly appreciate the commenters’ views on such previously 

finalized measures and policies, we did not make any proposals relating to them in the FY 2015 

IRF PPS proposed rule. As such, we will not address these comments in this final rule. 

However, we will consider all of these comments in future rulemaking and program 

development. 

TABLE 8: Quality Measures Finalized in the FY 2014 IRF PPS Final Rule Affecting the 

FY 2016 and 2017 Adjustments to the IRF Annual Increase Factors and 

Subsequent Year Increase Factors 

NQF Measure ID Measure Title 

NQF #0431+ Influenza Vaccination Coverage among Healthcare Personnel

NQF #0680* Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay)

NQF #0678* Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened 
CMS-1608-F 07/29/14 140

(Short-Stay) – Adoption of the NQF-Endorsed Version of this Measure.

NQF #2502** All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 

Inpatient Rehabilitation Facilities +

Using the CDC NHSN 

* Using the IRF-PAI Version 1.2 that is effective on October 1, 2014; available at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Downloads/IRF-PAI-FINAL-for-Use-Oct2014-updatedv4.pdf

** Not NQF-endorsed, currently under review by NQF. (See 

http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx) 

C. New IRF QRP Quality Measures Affecting the FY 2017 Adjustments to the IRF PPS 

Annual Increase Factor and Beyond 

1. General Considerations Used for Selection of Quality Measures for the IRF QRP 

In the FY 2014 IRF PPS final rule (78 FR 47094), we noted that the successful 

development of an IRF quality reporting program that promotes the delivery of high-quality 

health care services in IRFs is our paramount concern. We discussed several of the factors we 

had taken into account in selecting measures to propose and finalize. We do wish to note here 

that, in our measure selection activities for the IRF QRP, we must take into consideration input 

we receive from a multi-stakeholder group, the Measure Applications Partnership (MAP), which 

is convened by the NQF as part of a pre-rulemaking process that we have established and are 

required to follow under section 1890A of the Act. The MAP is a public-private partnership 

comprised of multi-stakeholder groups convened by the NQF for the primary purpose of 

providing input to CMS on the selection of certain categories of quality and efficiency measures, 

as required by section 1890A(a)(3) of the Act. By February 1 of each year, the NQF must 

provide MAP input to CMS. We have taken the MAP’s input into consideration in selecting 

measures for this rule. Input from the MAP is located at

https://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Progr
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ams.aspx. We also take into account national priorities, such as those established by the National

Priorities Partnership (NPP) at

http://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx, the HHS 

Strategic Plan at http://www.hhs.gov/secretary/about/priorities/priorities.html, the National 

Strategy for Quality Improvement in Health Care at 

http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf, and the CMS Quality Strategy 

at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.

To the extent practicable, we have sought to adopt measures that have been endorsed by a 

national consensus organization, recommended by multi-stakeholder organizations, and 

developed with the input of providers, purchasers/payers, and other stakeholders. 

For the FY 2017 adjustments to the IRF PPS annual increase factor, in addition to retaining 

the previously discussed CAUTI (NQF #0138), Pressure Ulcer, Patient Influenza Vaccination 

(NQF #0680), Healthcare Personnel Influenza Vaccination (NQF #0431), and Hospital 

Readmission (NQF #2502) quality measures, we proposed in the FY 2015 IRF PPS proposed rule 

(79 FR 26336 through 26338) to adopt two new quality measures: (1) National Healthcare Safety 

Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus 

aureus (MRSA) Bacteremia Outcome Measure (NQF #1716), and (2) National Healthcare Safety 

Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) 

Outcome Measure (NQF #1717). These quality measures are discussed in more detail below. 

a. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure 

(NQF #1716). 
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In the FY 2015 IRF PPS proposed rule (79 FR 26336 through 26337), we proposed to 

adopt the CDC-developed National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 

Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 

Measure (NQF #1716). The MRSA measure is a measure of hospital-onset unique blood source 

MRSA laboratory-identified events among all inpatients in the facility. This measure was 

adopted by the Hospital Inpatient Quality Reporting (IQR) Program in the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51630, 51645) for the FY 2015 payment determination, with data 

collection beginning on January 1, 2013. It was also adopted by the LTCH Quality Reporting 

(LTCHQR) Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50712 through 50717) 

for the FY 2017 payment determination, with data collection beginning on January 1, 2015. This 

measure is NQF-endorsed. We included the MRSA measure in the December 1, 2013 Measures 

under Consideration (MUC) list. The MAP conditionally supported the direction of this quality 

measure, noting that the measure is not ready for implementation and suggesting that we 

harmonize this measure with other infection measures. We respectfully disagree with the 

position of the MAP, as the MRSA measure is fully endorsed by the NQF for various settings, 

including the IRF setting, which speaks to its suitability for use in that setting. Methicillinresistant Staphylococcus aureus (S. aureus) infections are caused by a strain of S. aureus bacteria 

that has become resistant to antibiotics commonly used to treat S. aureus infections. Between 

2003 and 2004, an estimated 4.1 million persons in the United States had nasal colonization with 

MRSA.1

 In addition, in 2005 there were an estimated 94,000 invasive MRSA infections in the 

United States, which were associated with an estimated 18,000 deaths.2 Healthcare-associated 

 

1 Gorwitz RJ, Kruszon-Moran D, McAllister SK, et al. Changes in the prevalence of nasal colonization 

with Staphylococcus aureus in the United States, 2001-2004. J Infect Dis 2008; 197: 1226-34. 

2 Department of Health and Human Services. National Action Plan to Prevent Healthcare-Associated 

Infections: Roadmap to Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html. 
CMS-1608-F 07/29/14 143

MRSA infections occur frequently in patients whose treatment involves the use of invasive 

devices, such as catheters or ventilators. 

Currently, there are 22 States that have implemented a MRSA Prevention Collaborative, 

and at least 15 states that have reporting mandates for MRSA bacteremia in NHSN.3

 For 

Medicare populations, MRSA infection is associated with increased cost, hospital length of stay, 

morbidity, and mortality. MRSA infections can be a consequence of poor quality of care.4,5 

Older adults and patients in health care settings are most vulnerable to MRSA infections, as these 

patients may have weakened immune systems. A recent study reported that 9.2 percent of 

patients without a history of MRSA tested positive for MRSA at the time of the IRF admission.6

 

We also recently analyzed IRF claims submitted to Medicare during CY 2009. According to our 

analysis, IRFs reported a total of 3,464 cases of MRSA in 2009, including cases either present on 

admission or acquired during the IRF stay (“present on admission” indicators for ICD-9 codes 

are not available on the IRF claims).7 We believe it is important to collect data on MRSA 

infections acquired during the IRF stay, because MRSA infection is associated with increased 

cost, hospital length of stay, morbidity, and mortality. 

In the FY 2015 IRF PPS proposed rule (79 FR 26336 through 26337), we proposed to use 

the CDC/NHSN data collection and submission framework for reporting of the MRSA measure. 

 

3 Centers for Disease Control and Prevention. State Has Implemented a MRSA Prevention Collaborative. 

Available at http://www.cdc.gov/hai/stateplans/states-w-MRSA-collaborative.html.

4 Centers for Disease Control and Prevention. People at Risk of Acquiring MRSA Infections. Available at 

http://www.cdc.gov/mrsa/index.html. 

5 Centers for Disease Control and Prevention. Management of Multidrug-Resistant Organisms in Healthcare 

Settings, 2006. Available at http://www.cdc.gov/hicpac/pdf/guidelines/MDROGuideline2006.pdf. 

6 Rabinowitz RP, Kufera JA, Makely MJ. A Hidden Reservoir of Methicillin-resistant Staphylococcus 

aureus and Vancomyvin-resistant Enterococcus in Patients Newly Admitted to an Acute Rehabilitation 

Hospital. Physical Medicine & Rehabilitation 2012 (4):18-22.

7 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. 

Study to support a CMS Report to Congress: Assess feasibility of extending the hospital-acquired 

conditions—present on admission IPPS payment policy to non-IPPS payment environments. Prepared for 

the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
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This is the same framework currently used for reporting the CAUTI (NQF #0138) and Influenza 

Vaccination Coverage among Healthcare Personnel (NQF #0431) quality measures. Details 

related to the procedures for using the NHSN for data submission and information on definitions, 

numerator data, denominator data, data analyses, and measure specifications for the MRSA 

measure can be found at http://www.qualityforum.org/QPS/1716 and

http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html. For January 2012 through 

January 2013, an estimated 15 IRFs reported laboratory-identified MRSA event data into NHSN. 

We refer readers to section XI.B.3.a. of this final rule for more information on data collection 

and submission. We sought public comments on the National Healthcare Safety Network 

(NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus

(MRSA) Bacteremia Outcome Measure (NQF #1716) for the FY 2017 IRF PPS annual increase 

factor and subsequent years. Our responses to public comments on this measure are discussed in 

this section of the final rule. 

Comment: Several commenters expressed support of our proposal to adopt the MRSA 

measure, citing the importance of focusing on outcomes, such as healthcare-associated 

infections, because they are meaningful to patients and because of their impact on provider 

behavior. One commenter noted, as stated above, that the measure is NQF-endorsed for the IRF 

setting. A few commenters expressed support for CMS’s effort to align IRF QRP quality 

measures with measures in other quality reporting initiatives. 

Response: We appreciate the commenters’ support for this outcome measure and 

recognition of our efforts to adopt measures for the IRF QRP that emphasize high-priority patient 

safety concerns and harmonize measures across settings, when applicable. 
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Comment: Several commenters objected to the proposed MRSA healthcare-associated 

infection measure due to the low prevalence of MRSA in IRFs, indicating that the measure 

would not be a meaningful quality measure in IRFs. Several comments noted the MRSA 

measure received only ‘‘conditional support’’ from the MAP, and several commenters noted that 

it would add additional data collection burden. 

Response: The MRSA measure is endorsed by the National Quality Forum for use in 

several settings, including IRFs. Because of the scope of the patient safety problem posed by 

MRSA to the IRF patient population, as discussed earlier in this section of the final rule, as well 

as its burden on the health care system, we continue to believe it is in the best interest of patients 

to adopt this measure for the IRF QRP in order to promote awareness and encourage 

implementation of MRSA control procedures in the IRF setting. The measure is on the list of 

NQF-endorsed measures and can be found on the NQF website at 

http://www.qualityforum.org/QPS/1716. We note that we have taken the MAP’s input into 

consideration in selecting quality measures, as we are required to do under section 1890(a)(4) of 

the Act. However, we are not required to follow the MAP’s recommendations, but to take them 

into account when selecting measures for proposal. In addition to MAP input, we take a variety 

of other factors into account in selecting measures. In this instance, for example, the MRSA 

measure is NQF-endorsed for the IRF setting, an indication that it is appropriate for IRF patients. 

In addition, this measure is appropriate in light of the fact that MRSA infection most commonly 

affects older adults in hospitals or in facilities with longer lengths of stay and is associated with 

increased costs, hospital length of stay, morbidity, and mortality. For the reasons listed above, 

we continue to believe that this measure is appropriate for IRF patients. 
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Comment: One commenter was concerned that it may be difficult to distinguish 

infections present on admission from those that are healthcare-associated infections. Several 

commenters expressed concern that adoption of this quality measure would lead to additional 

and inappropriate screening for these conditions when patients are admitted to an IRF, and one 

commenter noted a concern about antibiotic resistance. 

Response: The definition of MRSA laboratory-identified (LabID) events--used in the 

measure we proposed, National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 

Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716)--is provided in the measure 

specifications, which are posted on the NQF website at http://www.qualityforum.org/QPS/1716, 

and it specifically addresses attribution through categorization of MRSA LabID events based on 

date admitted to the facility and date specimen collected, as well as by the current date and prior 

dates of specimen collection. As specified in the measure, Community-Onset (CO) is a LabID 

event collected as an outpatient or an inpatient less than or equal to 3 days after admission to the 

facility (that is, days 1, 2, or 3 of admission), while Healthcare Facility-Onset (HO) is defined as 

a LabID event collected from a patient greater than 3 days after admission to the facility (that is, 

days 4 or later of admission). Data from emergency department and outpatient observation 

locations (that is, outpatient encounters) are also included in this reporting of CO and HO events, 

in order to ensure that events are accurately categorized and identified. The CO definition 

accounts for infections acquired outside the IRF setting, either in the community or in other 

health care settings. 

Regarding the commenter’s concern that adoption of this quality measure would lead to 

additional and inappropriate screening, per NHSN protocol, LabID events are to be reported only 

from specimens collected for clinical decision-making and never from screening or surveillance 
CMS-1608-F 07/29/14 147

cultures. Because these required LabID events are to be reported only from MRSA blood 

specimens, they represent actual and serious infections that should be treated appropriately and 

according to physician decision, as MRSA bacteria should never be found in blood. Therefore, 

this reporting should not be a driver of inappropriate antibiotic use. Additionally, we believe it is 

imperative that we close the gap with respect to monitoring for this serious infection within the 

continuum of care. Because this measure has been finalized for several other health care settings 

(see the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630, 51645) for IQR Program; FY 2014 

IPPS/LTCH PPS final rule (78 FR 50712 through 50717) for the LTCHQR Program), we believe 

that requiring IRFs to monitor for MRSA infections is necessary and will help further improve 

the quality of care provided to patients receiving services across the continuum of care. 

Comment: One commenter suggested collecting MRSA data for one year in order to 

determine if the measure is valuable. 

Response: We believe that this is unnecessary because quality measures already undergo 

maintenance review at regular intervals in order to evaluate the value of ongoing use of these 

measures. As noted above, it is important to collect data on MRSA infections acquired during 

the IRF stay because MRSA infections are associated with increased cost, hospital length of stay, 

morbidity, and mortality.

Final Decision: Having carefully considered the comments we received on the National 

Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia 

Outcome Measure (NQF #1716), we are finalizing the adoption of this measure as proposed for 

use in the IRF QRP. 

b. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). 
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In the FY 2015 IRF PPS proposed rule (79 FR 26337 through 26338), we proposed to 

adopt the CDC-developed National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 

Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) that is 

currently collected by the CDC via the NHSN. The CDI measure is a measure of hospital-onset 

CDI laboratory-identified events among all inpatients in the facility. This measure was adopted 

by the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 

51631) for the FY 2015 payment determination, with data collection having begun on 

January 1, 2013. It was also adopted by the LTCHQR program in the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50712 through 50717) for the FY 2017 payment determination, with data 

collection beginning on January 1, 2015. This measure is NQF-endorsed. We included the CDI 

measure in the December 1, 2013 MUC list. The MAP supported this measure.8 CDI can cause 

a range of serious symptoms, including diarrhea, serious intestinal conditions, sepsis, and death.9 

In the United States, CDI is responsible for an estimated 337,000 infections and 14,000 deaths 

annually.10 According to the HHS National Action Plan to Prevent Health Care-Associated 

Infections, CDI rates have increased in recent years.11 The CDC estimates that CDIs cost more 

than $1 billion in additional health care costs each year.12 In recent years, CDIs have become 

more frequent, more severe, and more difficult to treat. Mortality rates for CDIs are highest in 

 

8 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2014 

Recommendations of Measures Under Consideration by HHS: February 2014. Available at: 

https://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.asp

x. 

9 McDonald LC, Coignard B, Dubberke E, et al. Recommendations for surveillance of Clostridium 

difficile-associated disease. Infect Control Hosp Epidemiol 2007;28:140-145. Available at: 

http://www.jstor.org/stable/pdfplus/10.1086/511798.pdf?acceptTC=true. 

10 Centers for Disease Control and Prevention. Investigating Clostridium difficile Infections Across the 

U.S. Available at http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf. 

11 Department of Health and Human Services. National Action Plan to Prevent Health Care-Associated 

Infections: Roadmap to Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html.

12 Centers for Disease Control and Prevention. Making Health Care Safer: Stopping C. difficile 

Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html. 
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elderly patients.13 Rates of CDI among hospitalized patients aged 65 years and older increased 

200 percent between 1996 and 2009, while deaths related to CDIs increased 400 percent between 

2000 and 2007, partly attributed to a stronger germ strain.14,15 Further, the emergence and 

continued rise of CDI as a leading cause of gastroenteritis hospitalizations and deaths, 

particularly in the elderly, has been documented.16 CDI is associated with increased patient care 

costs, hospital lengths of stay, morbidity, and mortality. CDI can be a consequence of poor 

quality of care for Medicare patients.17

Illness from CDI most commonly affects older adults in hospitals or in facilities with 

longer lengths of stay, where germs spread more easily, antibiotic use is more common, and 

people are especially vulnerable to infection.18 Considering CDIs are increasing in all health 

care facilities, and the IRF population is highly vulnerable to CDI, it is important to measure 

these rates in IRFs.19 According to an analysis of ICD-9 codes reported on Medicare claims, 

IRFs reported 7,720 cases of CDI-associated disease in 2009.20 Currently, the “present on 

 

13 Centers for Disease Control and Prevention. Investigating Clostridium difficile Infections Across the 

U.S. Available at: http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf. 

14 Centers for Disease Control and Prevention. QuickStats: Rates of Clostridium difficile Infection Among 

Hospitalized Patients Aged ≥65 Years,* by Age Group—National Hospital Discharge Survey, United States, 

1996—2009. MMWR, 60(34); 1171. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6034a7.htm. 

15 Centers for Disease Control and Prevention. Making Health Care Safer: Stopping C. difficile 

Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html. 

16 Aron J. Hall, Aaron T. Curns, L. Clifford McDonald, Umesh D. Parashar, and Ben A. Lopman. The Roles of 

Clostridium difficile and Norovirus Among Gastroenteritis-Associated Deaths in the 

United States, 1999–2007. Clinical Infectious Diseases 2012;55(2):216–23 

Published by Oxford University Press on behalf of the Infectious Diseases Society of 

America 2012. DOI: 10.1093/cid/cis386. 

17 Dubberke ER, Reske KA, Olsen MA, McDonald LC, Fraser VJ. Short- and long-term attributable 

costs of Clostridium difficile-associated disease in nonsurgical inpatients. Clin Infect Dis 2008; 46:497-

504. Available at: http://cid.oxfordjournals.org/content/46/4/497.long. 

18 Centers for Disease Control and Prevention. Frequently Asked Questions about Clostridium difficile 

for Healthcare Providers. Available at: http://www.cdc.gov/HAI/organisms/cdiff/Cdiff_faqs_HCP.html. 

19 Marciniak C, Chen D, Stein A, et al. Prevalence of Clostridium Difficile Colonization at Admission to 

Rehabilitation. Archives of Physical Medicine and Rehabilitation 2006; 87(8):1086-1090. 

20 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. 

Study to support a CMS Report to Congress: Assess feasibility of extending the hospital-acquired 
CMS-1608-F 07/29/14 150

admission” indicators for ICD-9 codes are not available on IRF claims. Therefore, we are unable 

to determine whether the 7,720 reported cases of CDI were present on admission or acquired 

during the IRF stay. There is evidence that CDIs are preventable, and therefore, surveillance and 

measuring infection rates is important to reducing infections and improving patient safety. 

Thirty-seven states have implemented a C. difficile Prevention Collaborative, and at least 

15 states have reporting mandates for CDI LabID events in NHSN.21 The goal for the CDI 

measure is to collect and publicly report IRF data on CDIs so that IRFs will be better informed 

about the incidence of this condition and better equipped to prevent it. 

In the FY 2015 IRF PPS proposed rule (79 FR 26337 through 26338), we proposed to use 

the CDC/NHSN data collection and submission framework for reporting of the NHSN FacilityWide Inpatient Hospital-Onset CDI Outcome Measure (NQF #1717). This framework is 

currently used for reporting the CAUTI (NQF #0138) and Influenza Vaccination Coverage 

among Healthcare Personnel (NQF #0431) measures. Details related to the procedures for using 

the NHSN for data submission and information on definitions, numerator data, denominator data, 

data analyses, and measure specifications for the NHSN Facility-Wide Inpatient Hospital-Onset 

CDI Outcome Measure (NQF #1717) can be found at http://www.qualityforum.org/QPS/1717

and http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html. 

We sought public comments on the National Healthcare Safety Network (NHSN) 

Facility-Wide Inpatient Hospital-Onset CDI Outcome Measure (NQF #1717) for the FY 2017 

IRF PPS annual increase factor and subsequent years. The responses to public comments on this 

measure are discussed below in this section of the final rule. 

 

conditions—present on admission IPPS payment policy to non-IPPS payment environments. Prepared for 

the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011. 

21 Centers for Disease Control and Prevention. State Has Implemented a C. diff Prevention 

Collaborative. Available at: http://www.cdc.gov/hai/stateplans/states-w-CDI-collaborative.html.
CMS-1608-F 07/29/14 151

Comment: Several commenters supported the CMS proposal to adopt the CDI measure, 

citing the importance of focusing on outcomes, such as healthcare-associated infections, because 

they are meaningful to patients and because it can impact provider behavior. One commenter 

supported the measure because it encourages hospitals to focus on prevention and appropriate 

treatment and has important implications for patient outcomes, society, and reduced health care 

expenditures. One commenter noted the measure is NQF-endorsed for the IRF setting, and two 

commenters expressed support for CMS’s effort to align IRF QRP quality measures with 

measures in other quality reporting initiatives. A commenter who supports the measure 

suggested the significance of reporting CDIs is increased due to a higher than expected number 

of cases. 

Response: We appreciate the commenters’ support and recognition of the importance of 

the expansion of the IRF QRP to include this measure. C. difficile is a pathogen of serious 

concern, causing morbidity and mortality throughout the continuum of care. Transmission can 

only be controlled and infection prevented if monitoring occurs across the health care settings. 

Comment: Several commenters objected to the proposed CDI measure due to the low 

prevalence of CDIs in IRFs, indicating that the measure would not be a meaningful quality 

measure in IRFs. One commenter noted that it adds additional data collection burden. 

Response: The CDI measure is endorsed by the NQF for use in several settings, 

including the IRF setting. As with MRSA, because of the scope of the patient safety problem 

posed by CDI to the very vulnerable IRF population, as well as its burden on the health care 

system, we believe it is in the best interest of patients to adopt this measure to promote 

awareness and encourage immediate implementation of CDI control procedures within the IRF 

setting. The measure is on the list of NQF-endorsed measures and can be found on the NQF 
CMS-1608-F 07/29/14 152

Web site at http://www.qualityforum.org/QPS/1717. In addition, the MAP supported this quality 

measure for the IRF setting. This measure is appropriate in light of the fact that illness from CDI 

most commonly affects older adults in hospitals or in facilities with longer lengths of stay and is 

associated with increased costs, hospital length of stay, and those who have been treated with 

antibiotics. C. difficile is a pathogen of serious concern that causes patient morbidity and 

mortality throughout all health care settings. Furthermore, lack of monitoring for this serious 

infection in the IRF setting creates a monitoring gap within the continuum of care. Because this 

measure has been proposed and finalized for several other hospital settings, we believe that 

requiring IRFs to monitor for CDI is necessary and will help further improve the quality of care 

provided to Medicare beneficiaries. For all of the reasons we have discussed, we continue to 

believe this measure is appropriate for IRF patients. 

Comment: One commenter was concerned that it may be difficult to distinguish 

infections present on admission from those that are hospital-acquired infections. The commenter 

expressed concern about inappropriate screening for these conditions if the quality measure was 

adopted. 

Response: The definition of CDI LabID events, as provided in the measure 

specifications, which are posted on the NQF Web site at http://www.qualityforum.org/QPS/1717, 

specifically addresses attribution through categorization of CDI LabID events based on date 

admitted to the facility and date specimen collected, as well as by the current date and prior dates 

of specimen collection. As specified in the measure, Community-Onset (CO) is a LabID event 

collected as an outpatient or an inpatient less than or equal to 3 days after admission to the 

facility (that is, days 1, 2, or 3 of admission), while Community-Onset Healthcare FacilityAssociated (CO–HCFA) is defined as a CO LabID event collected from a patient who was 
CMS-1608-F 07/29/14 153

discharged from the facility within 4 weeks prior to current date of stool specimen collection. 

Data from emergency department and outpatient observation locations (that is, outpatient 

encounters) are also included in this reporting of CO and HO events, in order to ensure that 

events are accurately categorized and identified. A Healthcare Facility-Onset (HO) is a LabID 

event collected more than 3 days after admission to the facility (that is, on or after day 4). The 

CDI measure is already in use in the hospital inpatient setting, where similar concerns have been 

raised and successfully addressed (see the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 

through 51631) for the IQR program). We also note that the definition of CDI LabID events (as 

required by this measure) is based on laboratory testing and admission date data, and not clinical 

evaluation of the patient, allowing for a much less labor-intensive method to track CDIs. This 

provides an infection measure of CDI health care acquisition, exposure burden, and infection 

burden based almost exclusively on laboratory data and limited admission date data, including 

patient care location. LabID events use NHSN forms to collect all required data, using the 

definitions of each data field. Per NHSN protocol, LabID events are to be reported only from 

specimens collected for clinical decision-making (that is, collected from patients with greater 

than or equal to 3 unformed stools within 24 hours) and never from screening or surveillance 

cultures. 

 Final Decision: Having carefully considered the comments we received on the National 

Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile 

Infection (CDI) Outcome Measure (NQF #1717), we are finalizing the adoption of this measure 

as proposed for use in the IRF QRP. 

D. IRF QRP Quality Measures and Concepts under Consideration for Future Years 
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We are considering whether to propose one or more of the quality measures and quality 

measure topics listed in Table 9 for future years in the IRF QRP. We invited public comment on 

these quality measures and quality measure topics, specifically the clinical importance of 

reported measure data, the feasibility of measure data collection and implementation, current use 

of reported measure data, and usefulness of the reported measure data to inform quality of care 

delivered to IRF patients. 

TABLE 9: Future Measures and Measure Topics under Consideration for Proposal for the 

IRF Quality Reporting Program 

National Quality Strategy Priority: Patient Safety 

 Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) 

National Quality Strategy Priority: Patient and Caregiver-Centered Care 

 Application of Percent of Residents Who Self-Report Moderate to Severe Pain (Short-Stay) (NQF #0676) 

 Not Endorsed/Under Development – IRF Functional Outcome Measure: Change in Mobility Score for Medical 

Rehabilitation Patients 

 Not Endorsed/Under Development – IRF Functional Outcome Measure: Change in Self-Care Score for Medical 

Rehabilitation Patients 

 Not Endorsed/Under Development – IRF Functional Outcome Measure: Discharge Mobility Score for Medical 

Rehabilitation Patients 

 Not Endorsed/Under Development – IRF Functional Outcome Measure: Discharge Self-Care Score for Medical 

Rehabilitation Patients 

In particular, we are considering whether to propose one or more of the following 

measures for future year IRP PPS increase factors: (1) IRF Functional Outcome Measure: 

Change in Mobility Score for Medical Rehabilitation Patients; (2) IRF Functional Outcome 

Measure: Change in Self-Care Score for Medical Rehabilitation Patients; (3) IRF Functional 

Outcome Measure: Discharge Mobility Score for Medical Rehabilitation Patients; (4) IRF 

Functional Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation Patients; 

(5) Application of the Percent of Residents Experiencing One or More Falls with Major Injury 

(Long-Stay) (NQF #0674); and (6) Application of Percent of Residents Who Self-Report 

Moderate to Severe Pain (Short-Stay) (NQF #0676). 
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IRFs are designed to provide intensive rehabilitation services to patients. Patients 

seeking care in IRFs are those whose illness, injury, or condition has resulted in a loss of 

function, and for whom rehabilitative care is expected to help regain that function. Examples of 

conditions treated in IRFs include stroke, spinal cord injury, hip fracture, brain injury, 

neurological disorders, and other diagnoses characterized by loss of function. 

Given that the primary goal of rehabilitation is improvement in functional status, IRF 

clinicians have traditionally assessed and documented patients’ functional statuses at admission 

and discharge to evaluate the effectiveness of the rehabilitation care provided to individual 

patients, as well as the effectiveness of the rehabilitation unit or hospital overall. In addition, 

research results have found differences in IRF patients’ functional outcomes, thus we believe 

there is an opportunity for improvement in this area. Differences in IRF patients’ functional 

outcomes have been found by geographic region, insurance type, and race/ethnicity after 

adjusting for key patient demographic characteristics and admission clinical status. This 

supports the need to monitor IRF patients’ functional outcomes. For example, Reistetter22

examined discharge motor function and functional gain among IRF patients with stroke and 

found statistically significant differences in functional outcomes by U.S. geographic region, 

insurance type, and race/ethnicity group after risk adjustment. O’Brien and colleagues23 found 

differences in functional outcomes across race/ethnicity groups in their analysis of Medicare 

assessment data for patients with stroke after risk adjustment. O’Brien and colleagues24 also 

 

22 Reistetter TA, Karmarkar AM, Graham JE, et al. Regional variation in stroke rehabilitation outcomes. 

Arch Phys Med Rehabil.95(1):29-38, Jan. 2014. 

23 O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of stay is associated with worse functional 

outcomes for medicare beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 2013. 

24 O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of stay is associated with worse functional 

outcomes for medicare beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 2013. 
CMS-1608-F 07/29/14 156

noted that the overall IRF length of stay decreased 1.8 days between 2002 and 2007 and that 

shorter IRF stays were significantly associated with lower functioning at discharge. 

We are currently developing 4 functional status quality measures for the IRF setting: 

(1) Quality Measure: IRF Functional Outcome Measure: Change in Mobility Score for 

Medical Rehabilitation Patients for Medical Rehabilitation Patients; 

(2) Quality Measure: IRF Functional Outcome Measure: Change in Self-Care Score for 

Medical Rehabilitation Patients for Medical Rehabilitation Patients; 

(3) Quality Measure: IRF Functional Outcome Measure: Discharge Mobility Score for 

Medical Rehabilitation Patients for Medical Rehabilitation Patients; and 

(4) Quality Measure: IRF Functional Outcome Measure: Discharge Self-Care Score for 

Medical Rehabilitation Patients for Medical Rehabilitation Patients. 

We invited public comment on our intent to propose these measures for the FY 2019 

adjustments to the IRF PPS annual increase factor and subsequent year increase factors. The draft 

measure specifications for these measures are posted at http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-ReportingProgram-Details.html. The development of these measures is expected to be completed in 2014, 

at which time they will be submitted to the NQF, the entity with a contract under section 1890(a) 

of the Act, for review. Our responses to public comments on these quality measures are 

discussed in this section of the final rule. 

Comment: Several comments were received about the quality measure Application of the 

Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF 

#0674). One commenter supported this measure. Several commenters opposed the measure, 
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citing that the measure is not appropriate for the IRF setting and that it is unclear how a major 

fall is defined and what tool will be used to collect this data. 

Response: We thank the commenters for their input and will take these comments into 

consideration to inform our ongoing measure development efforts for this measure and our 

ongoing consideration of the potential to adopt this measure in the IRF QRP through future 

rulemaking. For the purpose of this measure, “major injury” is defined as including bone 

fractures, joint dislocations, closed head injuries with altered consciousness, or subdural 

hematoma. If selected for proposal, and finalized through the future rulemaking process, for data 

collection purposes, we would revise the IRF PAI to include the items used for this quality 

measure, which are found in the Minimum Data Set version 3.0. We believe that this measure is 

appropriate for the IRF setting. Fall-related injuries are the most common cause of accidental 

death in people aged 65 years and older, resulting in approximately 41 fall-related deaths per 

100,000 people per year.25,26 In 2010, the total direct medical costs of fall injuries for people 

aged 65 years and older was $30 billion. The annual direct and indirect cost of fall injuries is 

expected to reach $54.9 billion by 2020.27 Falls thus represent a significant cost burden to the 

entire health care system, with injurious falls accounting for 6 percent of medical expenses 

among those aged 65 years and older.28 This measure was developed by CMS and is currently 

NQF-endorsed for the Nursing Home/Skilled Nursing Facility setting. Further, we adopted this 

measure for the LTCH Quality Reporting Program in the FY 2014 IPPS/LTCH PPS final rule 

 

25 L. Currie, Chapter 10: Fall and Injury Prevention. In: Patient Safety and Quality: An Evidence-Based 

Handbook for Nurses (Rockville: Agency for Healthcare Research and Quality, 2008).

26 US Department of Health & Human Services, "Implementation Guide to Prevention of Falls with 

Injury," http://www.dcha.org/wp-content/uploads/falls_change-package_508.pdf. 

27 Centers for Disease Control and Prevention, "Costs of Falls Among Older Adults," 

http://www.cdc.gov/homeandrecreationalsafety/falls/fallcost.html. 

28 L. Z. Rubenstein, C. M. Powers, and C. H. MacLean, "Quality indicators for the management and 

prevention of falls and mobility problems in vulnerable elders," Ann Intern Med 135, no. 8 Pt 2 (2001).
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(78 FR 50874 through 50877). We included the Falls with Major Injury quality measure in the 

December 1, 2013 Measures Under Consideration (MUC) list, and the MAP conditionally 

supported this quality measure for the IRF setting. Additional information regarding NQF 

#0674, on which our application of the measure will be based, if proposed and adopted through 

future rulemaking process, is available at http://www.qualityforum.org/QPS/0674. 

Comment: Several comments were received about the quality measure Application of 

Percent of Residents Who Self-Report Moderate to Severe Pain (Short-Stay) (NQF #0676). One 

commenter supported this measure. Several commenters opposed the measure, indicating that it 

is not appropriate for the IRF setting and does not take into account pain that may be a healthy 

part of a treatment protocol. One commenter opposed the measure because it was unclear when 

the assessment would be completed, noting that patients whose pain was inadequately assessed at 

a previous facility would be admitted to the IRF experiencing pain, and the commenter did not 

want pain present at the time of admission to be attributed to the IRF. This commenter also 

noted that it is not addressed how the self-report of pain would be conducted for cognitively 

impaired patients. 

Response: We thank the commenters for their input and will take these comments into 

consideration to inform our ongoing measure development efforts and our ongoing consideration 

of including this measure in the future. 

Comment: Several commenters expressed strong support for functional status quality 

measures because functional improvement is a key focus of IRF care. The commenters noted 

several issues that CMS should consider in the development of these functional status quality 

measures, including NQF endorsement as well as the importance of adequate risk adjustment and 

specified exclusion criteria. Several commenters requested that CMS consider using the FIM® 
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instrument as part of the quality measure. One commenter suggested expediting the 

development of the functional status quality measures. 

Response: We appreciate the strong support for functional status measures in the IRF 

setting. The functional status quality measures are in development and will be submitted to NQF 

for consideration of endorsement in the fall. The draft quality measure specifications (version 2), 

including the inclusion and exclusion criteria, the risk adjustment variables and risk adjustment 

approach can be found on the CMS website at http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/IRF-Quality-Reporting/Downloads/Draft-Specifications-for-theFunctional-Status-Quality-Measures-for-Inpatient-Rehabilitation-Facilities-Version-2.pdf. We 

appreciate the commenters for their input on the quality measures and will take this feedback 

under consideration as we finalize the development of the IRF functional status quality measures. 

Comment: Several commenters questioned CMS’s future proposal of the self-care and 

mobility functional status quality measures due to their concern that the measures are not yet 

fully developed nor adequately risk adjusted. 

Response: The functional status quality measures have been under development for more 

than 3 years. The steps in measure development have included analysis, technical expert panel 

review, and public posting of specifications with public input. Nearing their completion, we 

anticipate submission of the quality measures to the NQF for its review this fall. The current 

specifications for the self-care quality measure lists 41 risk adjustors, and the mobility quality 

measure list 43 risk adjustors. The risk adjustors were selected based on our review of the 

literature, input from the function expert panel and feedback from public comments. 
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 Comment: One commenter conveyed their concern regarding the use of the Continuity 

Assessment Record and Evaluation Tool (CARE Tool) as currently proposed, because the CARE 

Tool is not appropriate for data collection for the IRF setting. 

 Response: We interpret the commenter’s comment to mean that they were concerned 

that we would use the CARE Tool as the data source for the functional status quality measures. 

We further interpret the commenter to mean that we would use the CARE Tool in its entirety for 

the collection of these measures because they believe that the use of the CARE Tool in its 

entirety would be inappropriate in an IRF. We would like to clarify that the functional status 

quality measures do not require data collection of the entire CARE Tool. The functional status 

measures were developed using a subset of the CARE Tool items (and their response codes), not 

the CARE Tool in its entirety. These particular assessment items (and response codes) used for 

the functional status measures, were derived from a subset of items within the CARE Tool which 

had been tested for reliability and validity in the IRF setting as part of the Post-Acute Payment 

Reform Demonstration (PAC PRD). A summary of the reliability and validity results are 

provided in the draft measure specifications posted at http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-ReportingProgram-Details.html. 

Comment: Several commenters conveyed concern related to undue burden associated 

with “double documentation” for the functional status quality measures. 

Response: We interpret the comment to refer to the collection of both existing data 

elements and additional similar or redundant data elements. We appreciate the concerns related 

to any undue burden, including collection of both existing data elements and additional similar 

data elements, and take such concerns under consideration. 
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Comment: One commenter was concerned about relying on data from a demonstration 

that had flaws in data collection and testing, and wondered whether these quality measures will 

perform as intended. 

Response: We interpreted the commenter’s concern to be a concern about the validity of 

the CARE items tested as part of the PAC PRD. We further interpret their concern being related 

to the measures performing “as intended” to imply that they wonder if the measures would be 

able to depict quality. We have described the development and the assessment of the CARE 

items and examined the validity and reliability of these CARE items in reports that summarize 

this work and these reports are posted on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-AcuteCare-Quality-Initiatives/Downloads/The-Development-and-Testing-of-the-ContinuityAssessment-Record-and-Evaluation-CARE-Item-Set-Final-Report-on-the-Development-of-theCARE-Item-Set-and-Current-Assessment-Comparisons-Volume-3-of-3.pdf and 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-AcuteCare-Quality-Initiatives/Downloads/The-Development-and-Testing-of-the-ContinuityAssessment-Record-and-Evaluation-CARE-Item-Set-Final-Report-on-the-Development-of-theCARE-Item-Set-Volume-1-of-3.pdf. We anticipate that the quality measures will perform as 

intended and that they will provide information pertaining to quality due to the rigor applied in 

the development of the measures, including the risk adjustment variables used in measure 

calculation. In addition, we intend to perform ongoing analysis of the performance of the 

measures as part of our obligation as a quality measure steward. 
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Comment: We received several comments pertaining to concerns surrounding the ability 

of the quality measures to capture small, but important levels of functional change, specifically 

concerns related to “floor and ceiling effects.” 

Response: We interpret the commenter to mean that “floor and ceiling effects” pertain to 

the assessment items used in the measure not being able to capture change for patients who 

would fall at the lower or upper ends of the measurement scale. We appreciate concerns related 

to any instrument that would have limitations such as these floor and ceiling effects. In the 

development of these quality measures this major concern was taken under consideration, and 

there was a focus on including items that would cover a wide range of functioning, thus 

minimizing limitations in measuring change for patients who are low functioning and patients 

who are high functioning. Details about the development of the CARE items can be found on 

the CMS website at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/Downloads/Draft-Specifications-for-the-Functional-StatusQuality-Measures-for-Inpatient-Rehabilitation-Facilities-Version-2.pdf. 

Comment: Several commenters indicated concerns about the need for standardized 

training to ensure inter-rater reliability for the CARE function items and noted that this training 

would add additional burden to facilities. 

 Response: We appreciate the commenters concerns related to data collection and the 

requirements that accompany the implementation of new quality measures and have addressed 

this in the past with public outreach including training sessions, webinars, open door forums, and 

help desk support. 

E. Timeline for Data Submission for New IRF QRP Quality Measures Affecting the FY 

2017 Adjustments to the IRF PPS Annual Increase Factor 
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In the FY 2015 IRF PPS proposed rule (79 FR 26339), we proposed the following data 

submission timeline for the quality measures for the FY 2017 adjustments to the IRF PPS annual 

increase factor. We proposed that IRFs would be required to submit data on admissions and 

discharges occurring between January 1, 2015, and December 31, 2015 (CY 2015), for the FY 

2017 adjustments to the IRF PPS annual increase factor. We proposed this time frame because 

we believe this will provide sufficient time for IRFs and CMS to put processes and procedures in 

place to meet the additional quality reporting requirements. Given these measures are collected 

through the CDC’s NHSN, and IRFs are already familiar with the NHSN reporting system, as 

they currently report the CAUTI measure, we believe this time frame will allow IRFs ample 

opportunity to begin reporting the MRSA and CDI measures. We also proposed the quarterly 

data submission deadlines for the FY 2017 adjustments to the IRF PPS annual increase factor to 

occur approximately 135 days after the end of each quarter, as outlined in the Table 10. Each 

quarterly deadline would be the date by which all data collected during the preceding quarter 

would be required to be submitted to us for measures using the IRF-PAI and to the CDC for 

measures using the NHSN. We invited public comment on these proposed timelines for data 

submission for the proposed IRF QRP quality measures for the FY 2017 adjustments to the IRF 

PPS annual increase factor. 

Comment: Several commenters recommended that CMS delay the adoption of the 

National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure 

(NQF #1716), because it is not ready for implementation. They recommended additional 

education and training as well as additional testing should be conducted before implementation. 
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Response: As the MRSA quality measure is already NQF-endorsed for the IRF setting, 

we do not believe that additional testing is required before implementation. By utilizing CDC’s 

NHSN for MRSA reporting, we are building upon IRFs’ ongoing experience with data reporting 

via the NHSN. Quality measures undergo maintenance review at regular intervals in order to 

evaluate the value of ongoing use of these measures. 

Comment: Several commenters recommended that CMS delay the adoption of the 

National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717), because it is not ready for 

implementation. They recommended additional testing should be conducted before 

implementation. 

Response: As the CDI quality measure is NQF-endorsed for the IRF setting, we do not 

believe that additional testing is required before implementation. By utilizing CDC’s NHSN for 

CDI reporting, we are building upon IRFs’ ongoing experience with data reporting via the 

NHSN, but recognize that additional education and training would be helpful. 

Final Decision: After careful consideration of the comments we received, we are 

finalizing our proposal to begin to submit data for the MRSA and CDI measures on admissions 

and discharges starting January 1, 2015, including the quarterly submission deadlines. While we 

have taken into consideration comments suggesting that we delay implementation of these 

measures, we do not believe we can delay closing the monitoring gap that would continue to 

exist if we delayed implementation of these important measures. Adjustments to the IRF PPS 

annual increase factor for the MRSA and CDI measures will begin with FY 2017. 

TABLE 10: Timelines for Submission of IRF QRP Quality Data Using CDC/NSHN for 

FY 2017 Adjustments to the IRF PPS Annual Increase Factor: National Health 

Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset MethicillinResistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
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#1716) and National Healthcare Safety Network (NHSN) Facility-Wide 

Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome 

Measure (NQF #1717)* 

Quarter CDC/NHSN Data Collection Period CDC/NHSN

Data Submission Deadline

FY 2017 Increase Factor 

Quarter 1 January 1, 2015 – March 31, 2015 August 15, 2015 

Quarter 2 April 1, 2015 – June 30, 2015 November 15, 2015 

Quarter 3 July 1, 2015 – September 30, 2015 February 15, 2016 

Quarter 4 October 1, 2015 – December 31, 2015 May 15, 2016 

* The quarterly deadlines provided in this table apply to the CDC/NHSN data only. Timelines for submission of 

IRF-PAI data for the IRF PPS and Quality Indicator items are provided separately. 

TABLE 11: Summary of IRF QRP Measures Affecting the FY 2017 Adjustments to the 

IRF PPS Annual Increase Factor and Subsequent Year Increase Factors 

Continued IRF QRP Measure Affecting the FY 2015 Adjustments to the IRF PPS Annual Increase Factor and 

Subsequent Year Increase Factors: 

• NQF #0138: National Health Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) 

Outcome Measure+

Continued IRF QRP Measure Affecting the FY 2016 Adjustments to the IRF PPS Annual Increase Factor and 

Subsequent Year Increase Factors: 

• NQF #0431: Influenza Vaccination Coverage among Healthcare Personnel+

Continued IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase Factor and 

Subsequent Year Increase Factors: 

• NQF #2502: All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 

Inpatient Rehabilitation Facilities^**

• NQF #0680: Percent of Residents or Patients Who Were Assessed and Appropriately Given the

Seasonal Influenza Vaccine (Short-Stay)* 

• NQF #0678: Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (ShortStay)* 

New IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase Factor and Subsequent 

Year Increase Factors 

• NQF #1716: National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure 

• NQF #1717: National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) Outcome Measure 

+Using CDC/NHSN 

*Using the IRF-PAI effective October 1, 2014 

^Medicare Fee-for-Service claims data 

** This measure is under review at NQF (http://www.qualityforum.org/AllCause_Admissions_and_Readmissions_Measures.aspx) 

F. Timing for New IRFs to Begin Reporting Quality Data under the IRF QRP Affecting the 

FY 2017 Adjustments to the IRF PPS Annual Increase Factor and Beyond 

 In the FY 2015 IRF PPS proposed rule (79 FR 26340 through 26341), we proposed that 

for the FY 2017 adjustments to the IRF PPS annual increase factor and subsequent year increase 

factors, that new IRFs be required to begin reporting quality data under the IRF QRP by no later 
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than the first day of the calendar quarter subsequent to the quarter in which they have been 

designated as operating in the CASPER system. We invited public comment on this proposed 

timing for new IRFs to begin reporting quality data under the IRF QRP. 

 Comment: We did not receive any comments on the above proposal. 

 Final Decision: We are finalizing our policy regarding the timing for new IRFs to begin 

reporting quality data under the IRF QRP affecting the FY 2017 adjustments to the IRF PPS 

annual increase factor and beyond, as proposed. 

G. IRF QRP Reconsideration and Appeals Procedures for the FY 2016 Adjustments to the 

IRF PPS Annual Increase Factor and Beyond 

1. IRF QRP Reconsideration and Appeals for the FY 2014 and FY 2015 Adjustments to the IRF 

PPS Annual Increase Factor 

In the FY 2014 IRF PPS final rule (78 FR 47919), we finalized a voluntary process that 

allowed IRF providers the opportunity to seek reconsideration of our initial noncompliance 

decision for the FY 2014 and FY 2015 adjustments to the IRF PPS annual increase factor. We 

stated that we would notify IRFs found to be noncompliant with the IRF QRP reporting 

requirements that they may be subject to the 2-percentage point reduction to their IRF PPS annual 

increase factor. The purpose of this notification is to put the IRF on notice of the following: 

(1) that the IRF has been identified as being noncompliant with the IRF QRP reporting 

requirements for a given reporting period; (2) that the IRF will be scheduled to receive a 2-

percentage point reduction to its IRF PPS annual increase factor for the applicable fiscal year; (3) 

that the IRF may file a request for reconsideration if it believes that the finding of noncompliance 

is erroneous, or that if it was noncompliant, it had a valid and justifiable excuse for this 

noncompliance; and (4) that, to receive reconsideration, the IRF must follow a defined process on 
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how to file a request for reconsideration, which will be described in the notification. This defined 

process for filing a request for reconsideration was described on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/Reconsideration-and-Disaster-Waiver-Requests.html. 

We further stated that upon the conclusion of our review of each request for 

reconsideration, we would render a decision. We may reverse our initial finding of 

noncompliance if: (1) the IRF provides adequate proof of full compliance with all IRF QRP 

reporting requirements during the reporting period; or (2) the IRF provides adequate proof of a 

valid or justifiable excuse for noncompliance if the IRF was not able to comply with the 

requirements during the reporting period. We will uphold our initial finding of noncompliance if 

the IRF cannot show any justification for noncompliance. 

If an IRF is dissatisfied with either our initial finding of noncompliance or a CMS decision 

rendered at the reconsideration level, it can appeal the decision with the Provider Reimbursement 

Review Board (PRRB) under 42 CFR part 405, subpart R. We recommended, however, that IRF 

providers submit requests for reconsideration to us before submitting appeals to the PRRB. We 

noted that this order of appeals has had good success under other established quality reporting 

programs and, from an IRF perspective, it allows for the opportunity to resolve issues earlier in 

the process, when we have dedicated resources to consider all reconsideration requests before 

payment changes are applied to the IRF’s annual payment. 

2. IRF QRP Program Reconsideration and Appeals Procedures for the FY 2016 Adjustments to 

the IRF PPS Annual Increase Factor and Beyond 

In the FY 2015 IRF PPS proposed rule (79 FR 26340 through 26341), we proposed, for 

the FY 2016 adjustments to the IRF PPS annual increase factor and subsequent year increase 

factors, to adopt an updated process, as described below, that will enable an IRF to request a 
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reconsideration of our initial noncompliance decision in the event that an IRF believes that it was 

incorrectly identified as being subject to the 2-percentage point reduction to its IRF PPS annual 

increase factor due to noncompliance with the IRF QRP reporting requirements for a given 

reporting period. 

For the FY 2016 adjustments to the IRF PPS annual increase factor and subsequent year 

increase factors, we proposed that an IRF would receive a notification of noncompliance if we 

determine that the IRF did not submit data in accordance with section 1886(j)(7)(C) of the Act for 

the applicable fiscal year, and therefore, that the IRF is subject to a 2-percentage point reduction 

in the applicable IRF PPS annual increase factor as required by section 1886(j)(7)(A)(i) of the 

Act. We will only consider requests for reconsideration once a provider has been found to be 

noncompliant and not before. IRFs will have 30 days from the date of the initial notification of 

noncompliance to review the CMS determination and submit to us a request for reconsideration. 

This proposed time frame allows us to balance our desire to ensure that IRFs have the opportunity 

to request reconsideration with our need to complete the reconsideration process and provide IRFs 

with our decision in a timely manner. Notifications of noncompliance and any subsequent 

notifications from CMS will be sent via a traceable delivery method such as certified U.S. mail or 

registered U.S. mail. We will not accept any requests for reconsideration that are submitted after 

the 30-day deadline. 

We further proposed that as part of the IRF’s request for reconsideration, the IRF will be 

required to submit all supporting documentation and evidence demonstrating (1) full compliance 

with all IRF QRP reporting requirements during the reporting period or (2) a valid or justifiable 

excuse for noncompliance if the IRF was not able to comply with the requirements during the 

reporting period. We will be unable to review any reconsideration request that fails to provide the 
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necessary documentation and evidence along with the request. The documentation and evidence 

may include copies of any communications that demonstrate its compliance with all IRF QRP 

reporting requirements, as well as any other records that support the IRF’s rationale for seeking 

reconsideration. A sample list of the proposed acceptable supporting documentation and 

evidence, as well as instructions for IRF providers to retrieve copies of the data submitted to CMS 

for the appropriate program year, can be found on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/Reconsideration-and-Disaster-Waiver-Requests.html. 

We proposed that providers may withdraw reconsideration requests at any time and may 

file new requests within the proposed 30-day deadline. We also proposed that, in very limited 

circumstances, we may extend the proposed deadline for submitting reconsideration requests. It 

will be the responsibility of a provider to request an extension and demonstrate that extenuating 

circumstances existed that prevented the filing of the reconsideration request by the proposed 

deadline. We will not respond to any other types of requests, such as requests for administrative 

review of the methodology and standards that determine the quality reporting requirements. 

We proposed that an IRF provider wishing to request a reconsideration of our initial 

noncompliance determination will be required to do so by submitting an e-mail to the following email address: IRFQRPReconsiderations@cms.hhs.gov. Any request for reconsideration 

submitted to us by an IRF will be required to follow the guidelines outlined on the CMS website 

at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRFQuality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. Following receipt of a 

request for reconsideration, we will provide-- 

● An e-mail acknowledgment, using the contact information provided in the 

reconsideration request, to the CEO or CEO-designated representative that the request has been 
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received; and 

● Once we have reached a decision regarding the reconsideration request, an e-mail to the 

IRF CEO or CEO-designated representative, using the contact information provided in the 

reconsideration request, regarding our decision. 

We proposed to require any IRF that believes it was incorrectly identified as being subject 

to the 2-percentage point reduction to its IRF PPS annual increase factor to submit a request for 

reconsideration and receive a decision on that request before the IRF can file an appeal with the 

PRRB, as authorized by the Administrative Procedure Act. If the IRF is dissatisfied with the 

decision rendered at the reconsideration level, the IRF can appeal the decision with the PRRB 

under §405.1835. We believe this proposed process is more efficient and less costly for us and 

for IRFs because it decreases the number of PRRB appeals by resolving issues earlier in the 

process. Additional information about the reconsideration process including requirements for 

submitting reconsideration request is posted on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/Reconsideration-and-Disaster-Waiver-Requests.html. We invited public comment on 

the proposed procedures for reconsideration and appeals. The responses to the public comments 

we received on this proposal are discussed below. 

 Comment: Several commenters supported the proposal to continue the reconsideration 

process for FY 2016. 

Response: We thank the commenters for taking the time to express their support. 

Comment: One commenter supported the reconsideration process, but believed that it 

should be expanded to include reconsideration of the results of the data validation process 

described in section XII.K. of this final rule. Specifically, if two clinicians do not document the 
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patient’s condition in the same way, but the rationale for the difference can be explained through 

the reconsideration and appeals process, then the provider should be allowed to use this process. 

Response: We thank the commenter for their support of the proposed reconsideration process. 

We believe the current reconsideration process could be utilized for reconsideration of the results 

of the validation process, as long as all of the supporting documentation necessary for the request 

for reconsideration was previously submitted at the time of validation (that is, as long as the 

reconsideration request was based on the same documentation that was submitted for validation). 

Final Decision: Having carefully considered the comments we received on the IRF QRP 

Reconsideration and Appeals procedures for the FY 2016 adjustments to the IRF PPS annual 

increase factor and beyond, we are finalizing this policy as proposed. 

H. IRF QRP Data Submission Exception or Extension Requirements for the FY 2017 

Adjustments to the IRF PPS Annual Increase Factor and Beyond 

In the FY 2015 IRF PPS proposed rule (79 FR 26341 through 26342), for the IRF QRP’s 

data submission exception or extension requirements for the FY 2017 adjustments to the IRF PPS 

annual increase factor and subsequent year increase factors, we proposed to continue using the 

IRF QRP’s disaster waiver requirements that were adopted in the FY 2014 IRF PPS final rule 

(78 FR 47920) for the FY 2015 adjustments to the IRF PPS annual increase factor and subsequent 

year increase factors, which are outlined in this section, with the exception that the phrase 

“exception or extension” will be substituted for the word “waiver.” We also proposed, for the 

FY 2017 adjustments to the IRF PPS annual increase factor and subsequent year increase factors, 

that we may grant an exception or extension to IRFs if we determine that a systemic problem with 

one of our data collection systems directly affected the ability of the IRF to submit data. Because 

we do not anticipate that these types of systemic errors will happen often, we do not anticipate 
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granting an exception or extension on this proposed basis frequently. We proposed that if we 

make the determination to grant an exception or extension, we will communicate this decision 

through routine communication channels to IRFs and vendors, including, but not limited to, 

issuing memos, e-mails, and notices on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html. 

In the FY 2014 IRF PPS final rule (78 FR 47920), we finalized a process for IRF 

providers to request and for us to grant exceptions or extensions for the quality data reporting 

requirements of the IRF QRP for one or more quarters, beginning with the FY 2015 adjustments 

to the IRF PPS annual increase factor and subsequent year increase factors, when there are 

extraordinary circumstances beyond the control of the provider. 

In the event that an IRF seeks to request an exception or extension for quality reporting 

purposes, the IRF must request an exception or extension within 30 days of the occurrence of an 

extraordinary event by submitting a written request to CMS via e-mail to the IRF QRP mailbox at 

IRFQRPReconsiderations@cms.hhs.gov. Exception or extension requests sent to us through any 

other channel will not be considered as a valid request for an exception or extension from the IRF 

QRP reporting requirements for any adjustment to the IRF PPS annual increase factor. The 

written request must contain all of the finalized requirements in the FY 2014 IRF PPS final rule 

(78 FR 47920) and on the CMS website at http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-WaiverRequests.html. When an exceptions or extension is granted, an IRF will not incur payment 

reduction penalties for failure to comply with the requirements of the IRF QRP, for the time frame 

specified by CMS. If an IRF is granted an exception, we will not require that the IRF submit any 
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quality data for a given period of time. If we grant an extension to an IRF, the IRF will still 

remain responsible for submitting quality data collected during the time frame in question, 

although we will specify a revised deadline by which the IRF must submit this quality data. It is 

important to note that requesting an exception or extension from the requirements of the IRF QRP 

is separate and distinct from the purpose and requirements of §412.614, which outline the 

requirements to follow if an IRF is requesting a waiver regarding consequences of failure to 

submit complete and timely IRF-PAI payment data specified in that regulation. IRFs that have 

filed and were granted an IRF-PAI waiver in accordance with §412.614 may so indicate when 

requesting an exception or extension from the IRF QRP requirements, but the submission of an 

IRF-PAI waiver request pursuant to §412.614 will not be considered a valid request for an 

exception or extension from the IRF QRP requirements. To request an exception or extension 

from the IRF QRP requirements, the previously discussed process must be followed. 

Additionally, in the FY 2014 IRF PPS final rule (78 FR 47920), we finalized a policy that 

allowed us to grant waivers (which we are now calling exceptions or extensions) to IRFs that have 

not requested them if we determine that an extraordinary circumstance, such as an act of nature, 

affects an entire region or locale. We stated that if this determination was made, we will 

communicate this decision through routine communication channels to IRFs and vendors, 

including, but not limited to, issuing memos, e-mails, and notices on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html. 

We invited public comment on these proposals regarding the IRF QRP’s data submission 

exception or extension requirements for the FY 2017 adjustments to the IRF PPS annual increase 

factor and subsequent year increase factors. The responses to the public comments we received 
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on this proposal are discussed below. 

 Comment: Several commenters supported the proposed Exception/Exemption waiver 

proposal. 

Response: We thank the commenters for taking time to express their support. 

Final Decision: Having carefully considered the comments we received on the proposed 

IRF QRP data submission exception or extension requirements for the FY 2017 adjustments to the 

IRF PPS annual increase factor and beyond, we are finalizing these requirements, as proposed. 

I. Public Display of Quality Measure Data for the IRF QRP 

Under section 1886(j)(7)(E) of the Act, the Secretary is required to establish procedures 

for making data submitted under the IRF QRP available to the public. Section 1886(j)(7)(E) of 

the Act also requires these procedures to ensure that each IRF provider has the opportunity to 

review the data that is to be made public for its facility, prior to such data being made public. 

Section 1886(j)(7)(E) of the Act requires the Secretary to report quality measures that relate to 

services furnished in IRFs on the CMS website at http://www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/InpatientRehabFacPPS/. 

Currently, the Agency is developing plans regarding the implementation of these 

provisions. We appreciate the need for transparency into the processes and procedures that will 

be implemented to allow for the public reporting of the IRF QRP data and to afford providers the 

opportunity to preview that data before it is made public. At this time, we have not established 

procedures or timelines for public reporting of data, but we intend to make the public aware of our 

strategy in the future. We invited public comments on what we should consider when developing 

future proposals related to public reporting. Our responses to the public comments we received 

on this topic are discussed below. 
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 Comment: Several commenters encouraged CMS to report IRF quality data on Hospital 

Compare in the same manner that it reports data for acute care hospitals. One commenter 

encouraged CMS to report on IRF quality data as soon as possible. 

Response: We thank the commenters for taking the time to express these views and 

suggestions regarding public reporting and will take them into consideration for future public 

reporting development. 

J. IRF QRP Data Completion Thresholds for the FY 2016 Adjustments to the IRF PPS Annual 

Increase Factor and Beyond 

 Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the reduction of the 

applicable IRF PPS annual increase factor, as previously modified under section 1886(j)(3)(D) of 

the Act, by 2 percentage points for any IRF that fails to submit data on quality measures specified 

by the Secretary in accordance with the form and manner specified by the Secretary for that fiscal 

year. To date, we have not established a standard for compliance other than for IRF providers to 

submit all applicable required data for all finalized IRF QRP quality measures, by the previously 

finalized quarterly deadlines. We have also specifically required monthly submission of such 

quality data for the healthcare-associated infection or vaccination data, which is reported to the 

CDC. In the FY 2015 IRF PPS proposed rule (79 FR 26342 through 26343), in reaction to the 

input received from our stakeholders seeking additional specificity related to required IRF QRP 

compliance affecting FY annual increase factor determinations and, due to the importance of 

ensuring the integrity of quality data submitted to CMS, we proposed to set specific IRF QRP 

thresholds for completeness of provider quality data beginning with data affecting the FY 2016 

annual increase factor determination and beyond. 

The IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 OPPS/ASC final rule, 
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and FY 2014 IRF PPS final rule, requires providers to submit quality data using 2 separate data 

collection/submission mechanisms: measures collected using the quality indicator section of the 

IRF-PAI are submitted through the CMS Quality Improvement Evaluation System (QIES); and 

measures stewarded by the Centers for Disease Control and Prevention (CDC) (Healthcareassociated Infection (HAI) measures and vaccination measures) are submitted using the CDC’s 

National Healthcare Safety Network (NHSN). While we have previously finalized a claims-based 

measure (All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Inpatient 

Rehabilitation Facilities), such measures do not require IRFs to actually submit quality data to us, 

as they are calculated using claims data submitted to us for payment purposes. Thus, with claimsbased measures, there is no quality data to which we could apply the proposed data completion 

thresholds. To ensure that IRF providers are meeting an acceptable standard for completeness of 

submitted data, we proposed that for the FY 2016 annual increase factor and beyond, IRF 

providers must meet or exceed two separate program thresholds: one threshold for quality 

measures data collected using the quality indicator section of the IRF-PAI and submitted through 

QIES; and a second threshold for quality measures data collected and submitted using the CDC’s 

NHSN. We proposed that IRFs must meet or exceed both thresholds discussed below to avoid 

receiving a 2 percentage point reduction to their IRF PPS annual increase factor for a given FY, 

beginning with FY 2016, which considers quality data submitted during CY 2014. We proposed 

to hold IRF providers accountable for two different data completion thresholds for each of the 

2 data submission mechanisms: a 95 percent data completion threshold for data collected using 

the quality indicator items on the IRF-PAI and submitted through QIES; and a 100 percent 

threshold for data collected and submitted through the CDC’s NHSN. We have chosen to hold 

providers to the lower threshold of 95 percent for the quality indicator items on the IRF-PAI, as 
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there has to be some margin for error related to IRF patients that have been discharged emergently 

or against medical advice, as these situations make it more difficult to collect and submit the 

mandatory IRF-PAI quality indicator items at discharge. We do not believe the same 

impediments exist for the infection, vaccination, or other quality measures data that IRFs submit 

to the CDC’s NHSN. 

1. IRF QRP Completion Threshold for the Required Quality Indicator Data Items on the IRF-PAI 

The quality indicator section of the IRF-PAI is composed of data collection items 

designed to inform quality measure calculations, including risk-adjustment calculations as well as 

internal consistency checks for logical inaccuracies. In the FY 2015 IRF PPS proposed rule 

(79 FR 26342 through 26343), we proposed that beginning with quality data affecting the FY 

2016 IRF PPS annual increase factor (CY 2014 data) and beyond, IRF providers must meet or 

exceed a proposed IRF-PAI quality indicator data completion threshold of 95 percent. We 

proposed to assess the completeness of submitted data by verifying that, for all IRF-PAI 

Assessments submitted by any given IRF, at least 95 percent of those IRF-PAI Assessments must 

have 100 percent of the mandatory quality indicator data items completed where, for the purposes 

of this proposed rule, “completed” is defined as having provided actual patient data as opposed to 

a non-informative response, such as a dash (-), that indicates the IRF was unable to provide 

patient data. The proposed threshold of 95 percent is based on the need for complete records, 

which allows appropriate analysis of quality measure data for the purposes of updating quality 

measure specifications as they undergo yearly and triennial measure maintenance reviews with 

the NQF. Additionally, complete data is needed to understand the validity and reliability of 

quality data items, including risk-adjustment models. Finally, we want to ensure complete quality 

data from IRF providers, which will ultimately be reported to the public, allowing our 
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beneficiaries to gain an understanding of provider performance related to these quality metrics, 

and helping them to make informed health care choices. Our data suggests that the majority of 

current IRF providers are in compliance with, or exceeding this proposed threshold already. 

However, we take comment on circumstances that might prevent IRFs from meeting this level of 

compliance. All items that we propose to require under the IRF QRP are identified in Chapter 4 

of the IRF PAI Training Manual, which is available for download on the CMS website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html?redirect=/IRF-Quality-Reporting/. We additionally proposed that any IRF 

that does not meet the proposed requirement that 95 percent of all IRF-PAI assessments submitted 

contain 100 percent of all required quality indicator data items, will be subject to a reduction of 

2 percentage points to the applicable FY IRF PPS annual increase factor beginning with FY 2016. 

To establish this program threshold, we analyzed IRF-PAI quality indicator data item submissions 

from January 2013 through September 2013, and we believe that the majority of IRF providers 

will be able to meet the proposed 95 percent data completion threshold. It is our intent to raise 

this threshold over the next 2 years, through the notice and comment rulemaking process. We 

proposed that this threshold will have to be met by IRFs, in addition to the CDC NHSN threshold 

discussed below, to avoid receiving a 2 percentage point reduction to the applicable FY IRF PPS 

annual increase factor. 

2. IRF QRP Data Completion Threshold for Measures Submitted Using the Centers for Disease 

Control and Prevention (CDC) National Healthcare Safety Network (NHSN) 

The IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 OPPS/ASC final rule, 

and FY 2014 IRF PPS final rule, requires that IRFs submit CDC-stewarded quality measure data 

using the CDC’s NHSH, including data for the previously finalized CAUTI and Influenza 
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Vaccination Coverage Among Healthcare Personnel (HCP) quality measures. More specifically, 

we require that IRFs follow CDC quality measure protocols, which require them to complete all 

data fields required for both numerator and denominator data within NHSN, including the “no 

events” field for any month during which no infection events were identified. IRFs are required 

to submit this data on a monthly basis (except for the HCP measure, which is only required to be 

reported once per year). However, IRFs have until the associated quarterly deadline 

(135 calendar days beyond the end of each CY quarter) by which to report infection data to the 

CDC for each of the 3 months within any give quarter. For more information on the IRF QRP 

quarterly deadlines, we refer you to Table 10 in section XI.E of this final rule. In the FY 2015 

IRF PPS proposed rule (79 FR 26343), we proposed that, beginning with FY 2016 IRF PPS 

annual increase factor and beyond, this previously finalized requirement for monthly reporting 

must be met, in addition to the proposed IRF-PAI quality indicator data item completion threshold 

discussed above, to avoid a 2 percentage point reduction to the applicable FY IRF PPS annual 

increase factor. That is, we proposed that IRFs must meet a threshold of 100 percent for measures 

submitted via the NHSN, achieved by submitting relevant infection or vaccination data for each 

month of any given CY, in addition to meeting the above proposed data item completion 

threshold for required quality indicator items on the IRF-PAI. As the IRF QRP expands and IRFs 

begin reporting measures that were previously finalized, but not yet implemented, or newly 

proposed and finalized measures, we proposed to apply this same threshold. 

a. Application of the 2 Percentage Point Reduction for IRF Providers That Fail to Meet the 

Above-Proposed Data Completion Thresholds 

In the FY 2015 IRF PPS proposed rule (79 FR 26343), we proposed that IRFs must meet 

two separate data completion thresholds to avoid a 2 percentage point reduction to their applicable 
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FY annual increase factor: a data completion threshold of 95 percent for those mandatory data 

elements collected using the quality indicator items on the IRF-PAI and submitted through QIES; 

and a second data completion threshold of 100 percent for quality measure data submitted through 

the CDC’s NHSN. We also proposed that these data completion thresholds must be met in 

addition to the below proposed data accuracy validation threshold of 75 percent, to avoid a 

2 percentage point reduction to their applicable FY annual increase factor. While we proposed 

that IRFs must meet both the data completion and data accuracy thresholds, IRFs cannot have 

their applicable annual increase factor reduced twice. That is, should an IRF provider fail to meet 

either one or both of the proposed thresholds, they will only receive one reduction of 2 percentage 

points to their applicable FY annual increase factor. 

 We invited comment on these proposals. Our responses to the public comments we 

received on this proposal are discussed below. 

 Comment: A few commenters supported our proposal of data completeness standards, 

stating that these standards will facilitate more accurate public reporting in the future. 

 Response: We thank the commenters for taking the time to express their support of our 

proposal. 

 Comment: Several commenters believed we should delay the implementation of our data 

completion threshold. One commenter stated we should not implement this threshold until 

FY 2016, at the earliest. Other commenters stated that we should apply the standards no earlier 

than FY 2017. 

 Response: We would submit that we proposed to begin applying this data completion 

threshold, beginning with the FY 2016 annual increase factor for IRFs (based on CY 2014 data), 

and interpret that the commenter stating that we should not implement this proposal until FY 
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2016, at the earliest, meant that we should apply this threshold to data collected during CY 2016, 

at the earliest. We believe that it is important that we begin evaluating the completeness of the 

quality data submitted to CMS as early as possible, in order to ensure the integrity of the IRF QRP 

data. This data may not only be used for public reporting, but is also used to inform important 

updates to quality measures undergoing maintenance at the NQF, that occurs on an annual or 

triennial basis. Additionally, quality data being submitted via the CDC’s NHSN during CY 2014, 

will be used to calculate a baseline “expected” ratio, as well as a Standard Infection Ratio (SIR). 

Incomplete quality data, including missing monthly submissions of NHSN data, will result in an 

incomplete, and therefore potentially misleading, SIR. We believe delaying implementation of 

the application of these data completion thresholds would be a disservice to Medicare 

beneficiaries, who will eventually use publically reported data to make better informed health care 

choices for themselves and their families. 

 Comment: Several commenters stated that CMS should delay implementation and apply 

these standards no earlier than FY 2017, and additionally commented that it would be 

inappropriate and unfair to apply the data completeness standards to data submitted before the 

standards were proposed, and therefore, known to IRFs. One commenter stated that in the 

hospital IQR program, changes to data submission standards are proposed in advance of – not 

during or after – the data collection period. One commenter stated that it would be impermissibly 

retroactive to apply data completeness thresholds to IRF data submitted prior to October 1, 2014. 

 Response: We respectfully disagree with the commenters, and believe that we are within 

our authority to apply these data completion standards to quality data submitted to CMS prior to 

the effective date of this final rule. Currently, the compliance standard applicable to each IRF is 

to timely submit all required quality data to CMS, and IRFs should already be ensuring that the 
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data they submit is complete and accurate. Thus, applying a data completion threshold to data 

submitted during CY 2014 ensures that IRFs are complying with applicable standards, and that 

payments made to IRFs are based on complete and accurate data. 

 Comment: One commenter stated that it would be unfair for CMS to apply the proposed 

data completion threshold to data collected for the first 6 months using the newly revised IRF-PAI 

that will go into effect on October 1, 2014, and that CMS should only consider the second 

6 months of data submitted using the new IRF-PAI when making compliance determinations. 

The commenter further stated that CMS has, in the past, used a partial year’s data to make 

compliance determinations, and should do so for the FY 2017 compliance determinations, as IRFs 

will have a greater chance of submitting inaccurate or incomplete data until they are familiar with 

the updated IRF-PAI. 

 Response: We thank the commenter for expressing their concern. However, we 

respectfully disagree with the commenter. While IRFs will be using a new version of the IRFPAI beginning October 1, 2014, we do not believe that the expanded quality indicator section 

used for reporting quality data is so substantially different that IRFs will have difficulty 

submitting complete and accurate data. The newly expanded quality indicator section of the IRFPAI includes only 1 additional mandatory item compared to the version that is in use currently. 

Additionally, the data completion threshold, initially, will only look at the mandatory pressure 

ulcer items, which remain the same; the new mandatory item is related to the Patient Influenza 

measure, and will not be considered when applying the data completion threshold for FY 2017 

compliance determinations. Any expansion of the application of this data completion threshold to 

IRF quality data will be addressed through notice-and-comment rulemaking. 

 Final Decision: Having carefully considered the comments we received on the proposed 
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IRF QRP data completion threshold, and for the reasons discussed above, we are finalizing the 

IRF data completion threshold for the FY 2016 adjustments to the IRF PPS annual increase factor 

and beyond, as proposed. 

K. Data Validation Process for the FY 2017 Adjustments to the IRF PPS Annual Increase 

Factor and Beyond 

Historically, we have built consistency and internal validation checks into our data 

submission specifications to ensure that the basic elements of the IRF-PAI assessment conform to 

requirements such as proper format and facility information. These internal validation checks are 

automated and occur during the provider submission process, and help ensure the integrity of the 

data submitted by providers by rejecting submissions or issuing warnings when provider data 

contain logical inconsistencies. These edit checks are further outlined in the Inpatient 

Rehabilitation Facility-Patient Assessment Instrument Data Submission Specifications, which are 

available for download at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Software.html. 

Validation is intended to provide added assurance of the accuracy of the data that will be 

reported to the public as required by section 1886(j)(7)(E) of the Act. In the FY 2015 IRF PPS 

proposed rule (79 FR 26343 through 26344), we proposed, for the FY 2016 adjustments to the 

IRF PPS annual increase factor and subsequent years, to validate the data submitted for quality 

purposes. Initially, for FY 2016 this data accuracy validation will apply only to the quality 

indicator items on the IRF-PAI that inform the measure Percent of Patients or Residents with 

Pressure Ulcers That Are New or Worsened (NQF #0678), including those mandatory data 

elements that inform the measure calculation, as well as those that inform internal consistency 

checks for logical inaccuracies. We proposed that as the IRF QRP expands, and as IRFs begin to 
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submit additional data using the quality indicator section of the IRF-PAI, to include those 

additional data elements in this validation process. We will inform any such expansion of this 

validation process prior to its occurrence through our routine channels of communication 

including, but not limited to the IRF QRP website, CMS open door forums, national IRF provider 

trainings, and the Medicare Learning Network Newsletter. 

We proposed to validate the data elements submitted to CMS for Percent of Residents or 

Patients with Pressure Ulcers That Are New or Have Worsened (Short-Stay) (NQF #0678) under 

the IRF QRP by requesting the minimum chart data necessary to confirm a statistically valid 

random sample of 260 providers. From each of those 260 providers, 5 IRF-PAI assessments 

submitted through National Assessment Collection Database will be randomly selected. In 

accordance with §164.512(d)(1)(iii) of the HIPAA Privacy Rule, we will request from these 

providers the specified portions of the 5 Medicare patient charts that correspond to the randomly 

selected assessments, which will need to be copied and submitted via traceable mail to a CMS 

contractor for validation. We proposed that the specific portions of the 5 beneficiary charts will 

be identified in the written request, but may include: admission and discharge assessments, 

relevant nursing notes following the admission, relevant nursing notes preceding the discharge, 

physician admission summary and discharge summary, and any Assessment of Pressure Ulcer 

Form the facility may utilize. We proposed that the CMS contractor would utilize the portions of 

the patient charts to compare that information with the quality data submitted to CMS. 

Differences that would affect measure outcomes or measure rates would be identified and 

reported to CMS. These differences could include, but are not limited to, unreported worsened 

pressure ulcers. 

We proposed that all data that has been submitted to the National Assessment Collection 
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Database under the IRF QRP would be subject to the data validation process. Specifically, we 

proposed that the contractor will request copies of the randomly selected medical charts from each 

facility via certified mail (or other traceable methods that require a facility representative to sign 

for CMS correspondence), and the facility will have 45 days from the date of the request (as 

documented on the request letter) to submit the requested records to the contractor. If the facility 

does not comply within 30 days, the contractor will send a second certified letter to the facility, 

reminding the facility that it must return copies of the requested medical records within 

45 calendar days following the date of the initial contractor medical record request. If the facility 

still does not comply, then the contractor will assign a “zero” score to each measure in each 

missing record. If, however, the facility does comply, the contractor will review the data 

submitted by the facility using the IRF-PAI for the mandatory data elements associated with the 

Pressure Ulcer measure, until such time that IRFs begin to submit additional quality measures that 

are collected using the quality indicator section of the IRF-PAI. Initially, this review will consist 

solely of those mandatory data elements that inform the pressure ulcer measure calculations, as 

well as those that inform checks for logical inconsistencies. We proposed that as IRFs begin to 

report additional finalized measures, we intend to propose expanding this validation process to 

other such measures at that time. The contractor will then calculate the percentage of matching 

data elements which will constitute a validation score. Because we would not be validating all 

records, we would need to calculate a confidence interval that incorporates a potential sampling 

error. 

To receive the full FY 2016 IRF annual increase factor, we proposed that IRFs in the 

random sample must attain at least a 75 percent validation score, based upon our validation 

process, which will use charts requested from patient assessments submitted for FY 2014. We 
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will calculate a 95 percent confidence interval associated with the observed validation score. If 

the upper bound of this confidence interval is below the 75 percent cutoff point, we will not 

consider a hospital's data to be “validated” for payment purposes. For example, for a provider 

who submits all 5 of their charts, each with 9 elements, the provider’s score will be based on 

45 possible opportunities to report correctly or incorrectly. If the provider correctly scored on 

40 of the 45 elements, then their reliability would be 89 percent (40/45). The upper bound of the 

confidence interval takes into account sampling error and would be higher than this estimated 

reliability, in this case 96 percent. This number is greater than or equal to 75 percent. Therefore 

the provider passes validation. We proposed that providers failing the validation requirements 

would be subject to a 2 percentage point reduction to their applicable annual increase factor. In 

addition, all providers validated would receive educational feedback, including specific case 

details. 

1. Application of the 2 Percentage Point Reduction for IRF Providers That Fail to Meet the 

Above-Proposed Data Accuracy Threshold 

In the FY 2015 IRF PPS proposed rule (79 FR 26344), we proposed that IRFs must meet a 

data accuracy threshold of 75 percent to avoid receiving a 2 percentage point reduction to their 

applicable FY annual increase factor. We additionally proposed that this data accuracy threshold 

of 75 percent must be met in addition to the above data completion thresholds (95 percent for data 

collected using the quality indicator items on the IRF-PAI and submitted using QIES, and 100 

percent for data submitted using the CDC’s NHSN), to avoid receiving a 2 percentage point 

reduction to their applicable FY annual increase factor. While we proposed that IRFs must meet 

both the proposed data accuracy and data completion thresholds, IRFs cannot have their 

applicable annual payment update reduced twice. That is, should an IRF provider fail to meet 
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either one or both of the proposed thresholds (data completion and/or data accuracy), they will 

only receive one reduction of 2 percentage points to their applicable FY annual increase factor. 

We invited public comment on these proposals and suggestions to improve the utility of 

the approach and/or reduce the burden on facilities. Our responses to comments we received on 

this proposal are discussed below. 

Comment: One commenter recommended inclusion of NHSN measures in its proposed 

validation for FY 2017, beginning with the CAUTI measure. Additionally, they suggested CMS 

explore a secure method of electronic submission of records for the validation process. 

Response: We thank the commenter for taking the time to express these views and 

suggestions regarding validation and will take them into consideration for future validation 

proposals. The HIPAA Security Rule and HHS policy require CMS to use secure methods of data 

transmission. We will consider adoption of electronic transmission of records in future 

rulemaking as a secure file transfer product becomes available to the IRF QRP. 

Comment: Several commenters believed that the proposed data validation process is a 

fundamental step to ensure the accuracy of the IRF quality reporting data. 

Response: We thank the commenters for their support of this process. 

Comment: One commenter recommended that CMS not move forward with its proposal 

to complete data validation for the Pressure Ulcer measure or that CMS should delay 

implementation until at least FY 2016 and should consider the use of a different measure for 

validation purposes. Additionally the commenter expressed concern that inconsistencies in the 

medical record would not be the sole factor used to demonstrate a failure to comply. 

Response: We believe that data validation is necessary to ensure the integrity of the data 

we use in the IRF QRP. We are finalizing that the data validation process for FY 2016 is for the 
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Pressure Ulcer measure. This process would validate those data elements submitted to the QRP 

that are found in the medical record. We will not be validating individual inconsistencies in each 

record. However, if we find that record to be non-compliant, yet a facility believed the 

documentation submitted for validation matches the data elements submitted for the Pressure 

Ulcer measure, the facility may seek reconsideration of our initial determination. 

 Comment: One commenter expressed concern that the threshold compliance of 75 percent 

agreement was too high for this first attempt to validate the Pressure Ulcer data. They stated that 

there would be a great deal of variability in the reporting of the pressure ulcer measure and that 

this should be an opportunity for CMS to educate providers on appropriate documentation and 

reporting to improve the process. Instead, they offered a 60 percent compliance threshold as more 

appropriate for this initial round of validation. 

Response: We thank the commenter for taking time to express concern about possible 

variability in the pressure ulcer measure. We note that the 75 percent agreement is the single 

point estimate of the proportion in agreement; we are proposing that the upper bound of a 95 

percent confidence interval be the value that must exceed the 75 percent compliance threshold. 

We believe this takes into account the inherent variability to be found in the Pressure Ulcer 

measure data. In addition, the 75 percent proportion agreement is consistent with the other data 

quality programs currently underway, for example, the Hospital Inpatient Quality Reporting 

Program, 42 CFR 412.140(d)(2), and the Hospital Outpatient Quality Reporting Program, 42 CFR 

419.46(e)(2). We believe it is important, where feasible, to promulgate consistent standards when 

we deal with the various quality data we are collecting. 

 Final Decision: Having carefully considered the comments we received on the proposed 

IRF QRP data validation process and data accuracy threshold, and for the reasons discussed 
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above, we are finalizing the IRF data validation process and data accuracy threshold for the FY 

2017 adjustments to the IRF PPS annual increase factor and beyond, as proposed. 

L. Electronic Health Record and Health Information Exchange 

We believe that all patients, their families, and their health care providers should have 

consistent and timely access to their health information in a standardized format that can be 

securely exchanged between the patient, providers, and others involved in the patient’s 

care.29 We are committed to accelerating health information exchange (HIE) through the use of 

electronic health records (EHRs) and other types of health information technology (HIT) across 

the broader care continuum through a number of initiatives, including: (1) alignment of 

incentives and payment adjustments to encourage provider adoption and optimization of HIT and 

HIE services through Medicare and Medicaid payment policies; (2) adoption of common 

standards and certification requirements for interoperable HIT; (3) support for privacy and 

security of patient information across all HIE-focused initiatives; and (4) governance of health 

information networks. These initiatives are designed to improve care delivery and coordination 

across the entire care continuum and encourage HIE among all health care providers, including 

professionals and hospitals eligible for the Medicare and Medicaid EHR Incentive Programs and 

those who are not eligible for the EHR Incentive Programs. The Office of the National 

Coordinator for Health Information Technology (ONC) is currently exploring regulatory ways to 

expand the ONC HIT Certificate Program to more easily accommodate HIT certification for 

technology used in other types of health care settings where individual or institutional health care 

providers are not typically eligible for incentive payments under the EHR Incentive Programs, 

such as long-term and post-acute care and behavioral health settings. ONC has previously 

 

29 The Department of Health & Human Services August 2013 Statement, “Principles and Strategies for 

Accelerating Health Information Exchange. 
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provided guidance for EHR technology developers serving providers ineligible for incentives 

under the EHR Incentive Programs titled “Certification Guidance for EHR Technology 

Developers Serving Health Care Providers Ineligible for Medicare and Medicaid EHR Incentive 

Payments.”30

We believe that HIE and the use of certified EHR technology by IRFs (and other providers 

ineligible for the Medicare and Medicaid EHR Incentive Programs) can effectively and efficiently 

help providers improve internal care delivery practices, support management of patient care 

across the continuum, and enable the reporting of electronically specified clinical quality 

measures (eCQMs). More information on the identification of EHR certification criteria and 

development of standards applicable to IRFs can be found at: 

● http://healthit.gov/policy-researchers-implementers/standards-and-certificationregulations

● http://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpcworkgroups/certificationadoption

● http://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG

● http://wiki.siframework.org/Longitudinal+Coordination+of+Care

In the FY 2015 IRF PPS proposed rule (79 FR 26344 through 26345), we solicited 

feedback on the feasibility and desirability of electronic health record adoption and use of HIE in 

IRFs. We also solicited public comment on the need to develop electronic clinical quality 

measures, and the benefits and limitations of implementing these measures for IRF providers. 

Our responses to the comments we received on this topic are discussed below. 

Comment: We received several comments in response to its solicitation for input related 

to EHR adoption and usage and HIE among IRFs. A commenter suggested that we consider a 

 

30 http://www.healthit.gov/sites/default/files/generalcertexchangeguidance_final_9-9-13.pdf 
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structural measure similar to the Inpatient Psychiatric Facility Quality Reporting Program to gain 

insight on the feasibility of EHR adoption and use of HIE in IRFs. Some commenters conveyed 

concerns related to current EHR/HIE adoption in IRFs, including burden associated with EHR use 

and time and burden associated with the implementation of the technical infrastructure needed to 

accommodate EHRs. Many commenters noted the lack of EHR incentive funding and integration 

of IRFs in activities such as those related to the design of the HIE exchanges, electronic health 

record interoperability standards, electronic health record incentive payment programs, electronic 

quality measurement development, as well as the Medicare EHR Incentive Programs, and 

therefore conveyed concerns about the feasibility and appropriateness of requiring electronic 

clinical quality measure use at this time in the absence of incentive funding for IRFs. Some 

commenters suggested collaboration with CMS and the IRF community to expand the reach of 

HIEs and the interoperability standards to include IRFs. Some commenters also requested that 

CMS extend incentive payments to IRFs, allowing HIEs to include IRFs in the development of 

clinically appropriate electronic quality measures for IRFs. A commenter recommended that 

CMS not apply the requirement of electronic clinical quality measures reporting at this time, and 

another commenter requested that CMS allow time for the process of data collection using 

electronic measures to mature before requiring them. 

Response: We thank the commenters for their recommendations and concerns. We 

believe that these recommendations, including interoperability standards which we interpret to 

mean those that would align with what has been adopted by the Secretary, and concerns are 

important considerations related to EHR adoption and HIE usage in the IRF setting. We thank the 

commenter for their suggestion for us to consider the implementation of a structural measure 

similar to the Inpatient Psychiatric Facility Report Program in the IRF QRP to gain insight on the 
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feasibility of EHR adoption and use of HIE in IRFs, and we will take this suggestion under 

consideration. 

M. Method for Applying the Reduction to the FY 2015 IRF Increase Factor for IRFs That 

Fail to Meet the Quality Reporting Requirements 

As previously noted, section 1886(j)(7)(A)(i) of the Act requires the application of a 

2-percentage point reduction of the applicable market basket increase factor for IRFs that fail to 

comply with the quality data submission requirements. In compliance with 1886(j)(7)(A)(i) of 

the Act, we will apply a 2-percentage point reduction to the applicable FY 2015 market basket 

increase factor (2.2 percent) in calculating an adjusted FY 2015 standard payment conversion 

factor to apply to payments for only those IRFs that failed to comply with the data submission 

requirements. As previously noted, application of the 2-percentage point reduction may result in 

an update that is less than 0.0 for a fiscal year and in payment rates for a fiscal year being less 

than such payment rates for the preceding fiscal year. Also, reporting-based reductions to the 

market basket increase factor will not be cumulative; they will only apply for the FY involved. 

Table 12 shows the calculation of the adjusted FY 2015 standard payment conversion factor that 

will be used to compute IRF PPS payment rates for any IRF that failed to meet the quality 

reporting requirements for the period from January 1, 2013, through December 31, 2013. 

TABLE 12: Calculations to Determine the Adjusted FY 2015 Standard Payment 

Conversion Factor for IRFs That Failed to Meet the Quality Reporting 

Requirement 

Explanation for Adjustment Calculations 

Standard Payment Conversion Factor for FY 2014 $14,846 

Market Basket Increase Factor for FY 2015 (2.9 percent), reduced by 

0.5 percentage point reduction for the productivity adjustment as required by 

section 1886(j)(3)(C)(ii)(I) of the Act, reduced by 0.2 percentage point in 

accordance with sections 1886(j)(3)(C) and (D) of the Act and further reduced 

by 2 percentage points for IRFs that failed to meet the quality reporting 

requirement x 1.0020 

Budget Neutrality Factor for the Wage Index and Labor-Related Share x 1.0017 
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Explanation for Adjustment Calculations 

Budget Neutrality Factor for the Revisions to the CMG Relative Weights x 1.0000 

Final Adjusted FY 2015 Standard Payment Conversion Factor = $14,901 

We did not receive any comments on the proposed method for applying the reduction to 

the FY 2015 IRF increase factor for IRFs that fail to meet the quality reporting requirements. 

Final Decision: As we did not receive any comments on the proposed method for 

applying the reduction to the FY 2015 IRF increase factor for IRFs that fail to meet the quality 

reporting requirements, we are finalizing the proposed methodology. 

XIII. Miscellaneous Comments

 Comment: Several commenters suggested that we consider imposing a cap on the amount 

of outlier payments an individual IRF can receive under the IRF PPS. 

 Response: As we did not propose any limits on the amount of outlier payments an 

individual IRF can receive, this comment is outside the scope of the proposed rule. However, 

any future consideration given to imposing a limit on outlier payments would have to carefully 

analyze and take into consideration the effect on access to IRF care for certain high-cost patient 

populations. 

 Comment: Several commenters requested that we allow IRFs access to the presumptive 

compliance reports that the MACs use to determine whether or not an IRF has met the 60 percent 

rule requirements under the presumptive methodology. These same commenters also requested 

that we provide IRFs with patient-level detail regarding which patients were counted as 

presumptively meeting the 60 percent rule requirements and which patients were not counted as 

meeting the requirements. Other commenters requested that we ensure that all MACs allow for a 

review process prior to an IRF declassification for the IRF to dispute a 60 percent rule 
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determination. 

 Response: As we did not propose any changes to these operational aspects of the 

60 percent rule enforcement, these comments are outside the scope of the proposed rule. 

However, we will take these suggestions into consideration for future operational enhancements. 

 Comment: Several commenters requested that we release the exact software 

specifications and algorithms for enforcement of the 60 percent rule policies. Other commenters 

expressed concerns that we are fundamentally altering the technical code specifications that are 

used in determining an IRF’s presumptive compliance with the 60 percent rule. Additionally, 

some commenters indicated that there is an inconsistency with the software specifications 

because they mark a record as failing the presumptive methodology test if the case has an IGC 

and one of the excluded Etiologic Diagnoses, even if the case has a comorbidity that would 

qualify the case as counting for the presumptive methodology. 

 Response: As we did not propose changes to the technical specifications, these 

comments are outside the scope of the proposed rule. The technical specifications for the 

presumptive methodology determination are available for download from the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Criteria.html. As we are continually looking to improve the 

technical specifications and the accuracy with which we evaluate providers’ compliance with the 

60 percent rule requirements, we will take these commenters’ suggestions and concerns into 

consideration for future updates to the technical specifications. 

 Comment: Several commenters suggested that we re-examine the conditions that are 

included on the list of tier comorbidities (otherwise known in this final rule as the “List of 

Comorbidities”) using the most recent 3 years of data, and revise this list for FY 2016. In 
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addition, one commenter suggested that we allow for multiple tier payments if a patient has 

multiple comorbidities that qualify for tier payments, instead of only recognizing the one 

comorbidity that qualifies for the highest payment. 

 Response: As we did not propose any changes to the methodology or policy regarding 

the determination of the tier comorbidities, these comments are outside the scope of the proposed 

rule. We appreciate the commenters’ suggestions, and will consider these suggestions for future 

analyses. 

 Comment: One commenter suggested that we continue to explore ways to ensure 

comparability of payments across Medicare’s post-acute care settings. 

 Response: We appreciate the commenter’s suggestion. Although the comment is beyond 

the scope of this rule and reaches beyond the IRF PPS, we appreciate the forward thinking nature 

of this comment and will try to consider ways in which this suggestion may be considered for 

future analysis. 

 Comment: Several commenters expressed concern about the proposal that was included 

in the most recent President’s Budget Proposal to increase the compliance threshold for the 60 

percent rule to 75 percent. 

 Response: Since the Secretary does not have the authority to make this change, this 

comment is outside the scope of the proposed rule. 

XIV. Provisions of the Final Regulations

 In this final rule, we are adopting the provisions set forth in the FY 2015 IRF proposed 

rule (79 FR 26308), except as noted elsewhere in the preamble. Specifically: 

● We will update the FY 2015 IRF PPS relative weights and average length of stay 

values using the most current and complete Medicare claims and cost report data in a budget-
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neutral manner, as discussed in section IV of this final rule. 

● We will freeze the IRF facility-level adjustment factors at FY 2014 levels, as discussed 

in section V of this final rule. 

● We will update the FY 2015 IRF PPS payment rates by the market basket increase 

factor, based upon the most current data available, with a 0.2 percentage point reduction as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act and a productivity 

adjustment required by section 1886(j)(3)(C)(ii)(I) of the Act, as described in section VI of this 

final rule. 

● We will indicate the Secretary’s Final Recommendation for updating IRF PPS 

payments for FY 2015, in accordance with the statutory requirements, as described in section VI 

of this final rule. 

● We will update the FY 2015 IRF PPS payment rates by the FY 2015 wage index and 

the labor-related share in a budget-neutral manner, as discussed in section VI of this final rule. 

● We will calculate the final IRF Standard Payment Conversion Factor for FY 2015, as 

discussed in section VI of this final rule. 

● We will update the outlier threshold amount for FY 2015, as discussed in section VII 

of this final rule. 

● We will update the cost-to-charge ratio (CCR) ceiling and urban/rural average CCRs 

for FY 2015, as discussed in section VII of this final rule. 

● We will adopt revisions to the list of eligible diagnosis codes that are used to 

determine presumptive compliance under the 60 percent rule in section VIII of this final rule. 

● We will adopt revisions to the list of eligible impairment group codes that 

presumptively meet the 60 percent rule compliance criteria in section VIII of this final rule. 
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● We will collect data on the amount and mode (that is, of Individual, Concurrent, 

Group, and Co-Treatment) of therapies provided in IRFs according to occupational, speech, and 

physical therapy disciplines via the IRF-PAI in section IX of this final rule. 

● We will adopt a revision to the IRF-PAI to indicate whether the case meets the 

regulatory requirements for arthritis cases in section X of this final rule. 

● We will adopt the conversion of the IRF PPS to ICD-10-CM, effective when 

ICD-10-CM becomes the required medical data code set for use on Medicare claims and 

IRF-PAI submissions, in section XI of this final rule. 

● We will adopt revisions and updates to quality measures and reporting requirements 

under the quality reporting program for IRFs in accordance with section 1886(j)(7) of the Act, as 

discussed in section XII of this final rule. 

XV. Collection of Information Requirements 

Under the Paperwork Reduction Act of 1995, we are required to provide 30 days’ notice 

in the Federal Register and solicit public comment before a collection of information 

requirement is submitted to the Office of Management and Budget (OMB) for review and 

approval. To fairly evaluate whether an information collection should be approved by OMB, 

section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment 

on the following issues: 

● The need for the information collection and its usefulness in carrying out the proper 

functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The quality, utility, and clarity of the information to be collected. 
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 ● Recommendations to minimize the information collection burden on the affected 

public, including automated collection techniques. 

This final rule does not impose any new information collection requirements as outlined 

in the regulation text. However, this final rule does make reference to associated information 

collections that are not discussed in the regulation text contained in this document. The 

following is a discussion of these information collections, some of which have already received 

OMB approval. 

A. ICRs Regarding the IRF QRP 

Updates to IRF QRP 

 As stated in section XI of this final rule, we have finalized 2 new measures for use in the 

IRF QRP that will affect the increase factor for FY 2017. These quality measures are: National 

Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset MethicillinResistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) and 

National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). We proposed that these 

measures would be collected via the CDC’s NHSN data submission system 

(http://www.cdc.gov/nhsn/). The NHSN is a secure, Internet-based healthcare-associated 

infection tracking system that is maintained and managed by the CDC. 

There are currently approximately 1,140 IRFs in the United States paid under the IRF 

PPS that are already required to submit CAUTI data to the CDC’s NHSN. We believe that any 

burden increase related to complying with the IRF QRP requirements for submission of the 

MRSA and CDI measures will be minimal for those IRFs that are already familiar with the 

NHSN submission process, for several reasons. First, these IRFs have already completed the 
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initial setup and have become familiar with reporting data in the NHSN system due to the 

requirement to report the CAUTI measure. Second, due to their participation in a wide range of 

mandatory reporting and quality improvement programs, there are at least 15 states that require 

IRFs to report MRSA bacteremia data and CDI data to the NHSN. The most significant burden 

associated with these quality measures is the time and effort associated with collecting and 

submitting the data on the MRSA and CDI measures for IRFs that are not currently reporting any 

measures beyond the current CAUTI data requirement into the CDC’s NHSN system. 

 Based on submissions to the NHSN, we now estimate that each IRF will execute 

approximately 5 NHSN submissions per month: 1 MRSA bacteremia event, 1 C. difficile event 

and 3 CAUTI events (60 events per IRF annually). This equates to a total of approximately 

68,400 submissions of events to the NHSN from all IRFs per year. The CDC estimated the 

public reporting burden of the collection of information for each measure to include the time for 

reviewing instructions, searching existing data sources, gathering and maintaining the data 

needed, and completing and reviewing the collection of information. MRSA and C. difficile are 

estimated to be an average of 15 minutes per response (10 minutes of clinical (registered nurse) 

time, and 5 minutes of clerical (Medical Records or Health Information Technician); CAUTI is 

estimated to be an average of 29 minutes per response. Each IRF must also complete a Patient 

Safety Monthly Reporting Plan estimated at 35 minutes and a Denominator for Specialty Care 

Area, which is estimated at 5 hours per month. Based on this estimate, we expect each IRF 

would expend 7.53 hours per month reporting to the NHSN. Additionally, each IRF must submit 

the Healthcare Personnel Vaccination measure, which the CDC estimates will take 10 minutes of 

clerical time. Based on this estimate, we expect each IRF would expend 78.97 clinical hours per 

year reporting to the NHSN, or 90,026 hours for all IRFs. According to the U.S. Bureau of 
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Labor and Statistics, the mean hourly wage for a registered nurse (RN) is $33.13; the mean 

hourly wage for a medical records and health information technician is $16.81. However, to 

account for overhead and fringe benefits, we have doubled the mean hourly wage, making it 

$66.26 for an RN and $33.62 for a Medical Record or Health Information Technician. We 

estimate that the annual cost per each IRF would be $5,162.09 and that the total yearly cost to all 

IRFs for the submission of data to NHSN would be $5,882,782.60. While the quality measures 

previously discussed are subject to the PRA, we believe that the associated burden is approved 

under OMB control number 0920-0666, with an expiration date of November, 31, 2016. 

 In the FY 2014 IRF PPS rule (78 FR 47923 through 47925), we provided burden 

estimates for measures adopted in that rule. Updated Collection of Information Requirements for 

each of those measures is described below: 

a. All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Inpatient 

Rehabilitation Facilities 

As stated in the FY 2014 IRF PPS rule (78 FR 47923 through 47925), data for this 

measure will be derived from Medicare claims, and therefore, will not add any additional 

reporting burden for IRFs. 

b. Percent of Residents or Patients with Pressure Ulcers That Are New or Have Worsened 

(Short-Stay) (NQF #0678) 

 In the FY 2015 IRF PPS proposed rule (79 FR 26346), we stated that we expect that the 

admission and discharge pressure ulcer data will be collected by a clinician such as an RN 

because the assessment and staging of pressure ulcers requires a high degree of clinical judgment 

and experience. We estimated that it will take approximately 10 minutes of time by the RN to 
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perform the admission pressure ulcer assessment. We further estimated that it will take an 

additional 15 minutes of time to complete the discharge pressure ulcer assessment. 

 We estimated that there are 359,000 IRF-PAI submissions per year3 and that there are 

1,140 IRFs in the U.S. reporting quality data to CMS. Based on these figures, we estimated that 

each IRF will submit approximately 315 IRF-PAIs per year. Assuming that each IRF-PAI 

submission requires 25 minutes of time by an RN at an average hourly wage of $66.26 

(including fringe benefits and overhead), to complete the “Quality Indicator” section, the yearly 

cost to each IRF would be $8,696.63 and the annualized cost across all IRFs would be 

$9,914,158.20. 

 In the FY 2015 IRF PPS proposed rule (79 FR 26346), we also stated we expected that 

most IRFs will use administrative personnel, such as a medical secretary or medical data entry 

clerk, to perform the task of entering the IRF-PAI pressure ulcer Assessment data. We estimated 

that this data entry task will take no more than 3 minutes for the “Quality Indicator” section of 

each IRF-PAI record or 15.75 hours for each IRF annually. The average hourly wage for a 

Medical Records & Health Information Technician is $33.62 (including fringe benefits and 

overhead). Again, as we noted above, there are approximately 359,000 IRF-PAI submissions per 

year and 1,140 IRFs reporting quality data to CMS. Given this wage information, the estimated 

total annual cost across all reporting IRFs for the time required for entry of pressure ulcer data 

into the IRF-PAI by a medical record or health information technician (including fringe benefits 

and overhead) is $603,652.80. We further estimated the average yearly cost to each individual 

IRF to be $529.52. 

 We estimated that the combined annualized time burden related to the pressure ulcer data 

item set for work performed, by the both clinical and administrative staff, will be 147 hours for 
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each individual IRF and 167,580 hours across all IRFs. The total estimated annualized cost for 

collection and submission of pressure ulcer data is $9,226.15 for each IRF and $10,517,811 

across all IRFs. We estimated the cost for each pressure ulcer submission to be $29.29. 

c. Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) 

 IRFs are already required to complete and transmit certain IRF-PAI data on all Medicare 

Part A Fee-for-Service and Medicare Part C (Medicare Advantage) patients to receive payment 

from Medicare. In the FY 2015 IRF PPS proposed rule (79 FR 26347), we estimated that 

completion of the Patient Influenza measure data items will take approximately 5 minutes to 

complete. The Patient Influenza item set consists of three data items (for example, questions). 

Each item is straightforward and does not require physical assessment of the patient for 

completion. We estimated that it will take approximately 0.7 minutes to complete each item, or 

2.1 minutes to complete all items related to the Patient Influenza measure. However, in some 

cases, the person completing this item set may need to consult the patient’s medical record to 

obtain data about the patient’s influenza vaccination. Therefore, we have allotted an additional 

1.66 minutes per item, for a total of 7.1 minutes to complete the Patient Influenza measure data 

items. 

 In the FY 2015 IRF PPS proposed rule (79 FR 26347), we noted that there are 

approximately 359,000 IRF-PAIs completed annually across all 1,140 IRFs that report IRF 

quality data to CMS. This breaks down to approximately 315 IRF-PAIs completed by each IRF 

yearly. We additionally estimated that the annual time burden for reporting the Patient Influenza 

measure data is 42,481 hours across all IRFs in the U.S. and 37.26 hours for each individual IRF. 

Again, we have estimated the mean hourly wage for an RN (including fringe benefits and 
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overhead) to be $66.26. Taking all of the above information into consideration, we estimate the 

annual cost across all IRFs for the submission of the Patient Influenza measure data to be 

$2,814,791.06. We further estimated the cost for each individual IRF to be $2,469.11. 

 Lastly, in the FY 2015 IRF PPS proposed rule (79 FR 26347), we proposed to validate 

data submitted to CMS by requesting portions of patient’s charts be copied and mailed to a CMS 

validation contractor. We estimated the size of each section we proposed to request as follows: 

We stated that we anticipate that the first 3 days of nurses notes will be approximately 15 pages; 

the last 3 days of nurses notes will be approximately 10 pages; the physician or physician’s 

assistant’s admission history and physical will be approximately 30 pages; the physician or 

physician’s assistant’s discharge summary will be approximately 15 pages; nurses admission 

database is approximately 40 pages; pressure ulcer assessment assessments will be 

approximately 30 pages; physicians progress notes will be approximately 30 pages; physicians 

orders will be approximately 30 pages and lab reports to be approximately 70 pages. We 

estimated the total submission to be approximately 270 pages in length. The FY 2013 

IPPS/LTCH PPS final rule (77 FR 53745) estimates the appropriate cost for chart submission to 

be 12 cents per page and $4.00 shipping. Two hundred seventy pages at a rate of $0.12 per page 

with a $4.00 shipping cost would be $36.40 per chart. We proposed that 260 providers will be 

randomly selected for validation, and we proposed to request 5 charts from each selected 

provider for a total cost of $47,320 for all IRF providers, or $182.00 for any randomly selected 

IRF provider. 

 We did not receive any public comments on the above IRF QRP Information Collection 

Request section of the FY 2015 IRF PPS proposed rule. Additionally, in section XI of this final 

rule, we have finalized the adoption of the following two measures: NHSN Facility-wide 
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Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia 

Outcome Measure (NQF #1716); and NHSN Facility-wide Inpatient Hospital-onset Clostridium 

difficile Infection (CDI) Outcome Measure (NQF #1717). We further confirmed that the 

previously finalized measures discussed in section XII.B. will continue to be required for the IRF 

QRP.

B. ICRs Regarding Individual, Concurrent, Group, and Co-Treatment Therapy Data on the IRFPAI 

As stated in section IX. of this final rule, we are including a new Therapy Information 

Section in the IRF-PAI that will require IRF providers to submit data regarding the amount and 

mode (that is, Individual, Concurrent, Group, and Co-Treatment) of therapy that patients are 

receiving and in which therapy discipline (PT, OT, speech/language) beginning on 

October 1, 2015. 

Under Medicare’s conditions of participation for hospitals that provide rehabilitation, 

physical therapy, occupational therapy, audiology, or speech pathology services at §482.56, the 

provision of care and the personnel qualifications must be in accordance with national acceptable 

standards of practice and must also meet the requirements at §409.17, according to which IRFs 

are required to furnish physical therapy, occupational therapy or speech-language pathology 

services under a plan that, among other things, “[p]rescribes the type, amount, frequency, and 

duration of the physical therapy, occupational therapy, or speech-language pathology services to 

be furnished to the individual.” (Such services may also be furnished under plan requirements 

specific to the payment policy under which the services are rendered, if applicable.) In addition, 

the IRF coverage requirements at §412.622(a)(3)(ii), (4), require the IRF to document that the 

patient “[g]enerally requires and can reasonably be expected to actively participate in, and 
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benefit from, an intensive rehabilitation therapy program.” As Medicare already requires 

extensive documentation of the type, amount, frequency, and duration of physical therapy, 

occupational therapy, or speech-language pathology services furnished to individuals in the IRF 

setting, we do not believe that IRFs will incur any additional burden related to the collection of 

the data for the proposed new Therapy Information Section. In accordance with 

5 CFR 1320.3(b)(2), we believe the burden associated with this requirement is exempt from the 

PRA as it is a usual and customary business practice. The time, effort, and financial resources 

necessary to comply with this requirement would be incurred in the course of each IRF 

conducting its normal business activities. 

We anticipate that it will take approximately 4 minutes to retrieve the therapy data from 

the patient’s medical record and transfer the required data to the IRF-PAI for submission. We 

believe this task can be completed by any clinician in the IRF. To calculate the burden, we 

obtained hourly wage rates for social worker assistants, licensed practical nurses (LPN), 

recreational therapists, social workers, dietitians and nutritionists, RN, speech language 

pathologists, audiologists, occupational therapists, and physical therapists, all of whom may 

complete the IRF-PAI, from the Bureau of Labor Statistics 

(http://www.bls.gov/ooh/healthcare/home.htm). The $26.52 rate is a blend of all of these 

categories, and reflects the fact that IRF providers have historically used all of these clinicians 

for preparation and coding of the IRF-PAI. However, to account for overhead and fringe 

benefits, we double the average rate, making it $53.04. On average, an IRF submits 

approximately 300 IRF-PAIs annually and when multiplied by 4 minutes to complete the 

proposed new Therapy Information Section, the total estimated annual hour burden per each IRF 

is 20 hours. We estimate the total cost burden to each IRF for reporting the proposed therapy 
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data will be $1,060 annually. Since there are a total of 1,140 IRFs, we estimate the total burden 

cost across all IRFs for submitting therapy data is $1.2 million. 

We received 40 comments on the information collection requirements regarding the 

Individual, Concurrent, Group, and Co-Treatment Therapy data on the IRF-PAI, which are 

summarized below. 

Comment: Many commenters suggested that the therapy collection item would be 

excessively burdensome and should be removed. The commenters suggested that CMS has 

underestimated the cost and time it would take providers to implement this proposed policy, 

implying that additional IRF staff would need to be employed to fulfill the data collection 

requirement. A few commenters even suggested that the therapy data CMS is proposing to 

collect is redundant since the data could be found on IRF patient claims. Additionally, 

commenters suggested that the proposed therapy data collection requirement does not seem to 

provide any value to the patient and would ultimately divert clinical resources from patient care 

to administrative functions compromising patients’ health outcomes instead of increasing quality 

of care. Ultimately, the commenters urged CMS to focus on the outcomes of rehabilitative care 

rather than regulatory mandates. 

Response: We recognize and have taken into account that the addition of the therapy 

collection item will increase the time it takes for providers to complete the IRF-PAI. However, 

IRF clinicians are currently required to thoroughly document all treatment information in the 

patients’ medical record. We believe that in order to fulfill this requirement, IRFs are already 

required to document in detail the amount and mode of therapy that a patient receives. We do 

not believe that it would take an excessive amount of additional time and/or training to transfer 

that information from the medical record to the IRF-PAI. We certainly do not believe that IRFs 
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would need to employ additional staff to meet this data collection requirement. The additional 

cost that a facility would incur in making updates to its electronic systems is considered the cost 

of doing business, and that is not something that we believe should be taken into account when 

preparing our burden estimates. 

In response to the commenters’ suggestions to minimize the burden associated with the 

therapy data collection, we are choosing not to adopt the proposed requirement to record the 

average number of minutes by mode and type of therapy for weeks 3 and beyond of a patient’s 

IRF stay. Instead, we will require IRFs to report only the total number of minutes of therapy 

provided to a patient, by mode and type of therapy, for week 1 and week 2 of the IRF stay. 

Additionally, we are adding Concurrent Therapy and revising the Group Therapy definition so 

that both types of therapy are clearly differentiated. Providers indicated that this change would 

be helpful to reduce burden, as this is more consistent with the way they currently keep their 

records. We believe that these changes will substantially lower the amount of burden associated 

with this data collection. 

We respectfully disagree with the commenters’ assertion that this information is included 

on the IRF claim. The therapy data on the IRF claim is not reported in a consistent manner, and 

we do not believe that it would be as beneficial as the proposed data collection when developing 

future policy regarding IRF therapy. We believe it is important to collect the most accurate and 

reliable information in order to develop future policy to increase the quality of care for IRF 

patients. Ultimately, we believe that by requiring providers to report each patient’s therapy 

information, in an effort to develop future policies and procedures regarding the amount and 

mode of therapy given, we are in fact focusing on improving the outcomes of the intensive 

rehabilitation that patients receive. 
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We will be submitting a revision of the IRF-PAI information collection request currently 

approved under OMB control number 0938–0842. 

If you comment on these information collection and recordkeeping requirements, please 

submit your comments to the Office of Information and Regulatory Affairs, Office of 

Management and Budget, 

 Attention: CMS Desk Officer, [CMS-1608-F] 

 Fax: (202) 395-6974; or 

 Email: OIRA_submission@omb.eop.gov

XVI. Regulatory Impact Analysis 

A. Statement of Need 

This final rule updates the IRF prospective payment rates for FY 2015 as required under 

section 1886(j)(3)(C) of the Act. It responds to section 1886(j)(5) of the Act, which requires the 

Secretary to publish in the Federal Register on or before the August 1 that precedes the start of 

each fiscal year, the classification and weighting factors for the IRF PPS’s case-mix groups and a 

description of the methodology and data used in computing the prospective payment rates for 

that fiscal year. 

This rule implements sections 1886(j)(3)(C) and (D) of the Act. 

Section 1886(j)(3)(C)(ii)(I) of the Act requires the Secretary to apply a multi-factor productivity 

adjustment to the market basket increase factor, and to apply other adjustments as defined by the 

Act. The productivity adjustment applies to FYs from 2012 forward. The other adjustments 

apply to FYs 2010 through 2019. 

This rule also adopts some policy changes within the statutory discretion afforded to the 

Secretary under section 1886(j) of the Act. We will collect data on the amount and mode (that is, 
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Individual, Concurrent, Group, and Co-Treatment) of therapy provided in the IRF setting 

according to therapy discipline, revise the list of impairment group codes that presumptively 

meet the 60 percent rule compliance criteria, provide a way for IRFs to indicate on the IRF-PAI 

form whether the prior treatment and severity requirements have been met for arthritis cases to 

presumptively meet the 60 percent rule compliance criteria, and revise and update quality 

measures and reporting requirements under the IRF quality reporting program. In this final rule, 

we also address the implementation of the International Classification of Diseases, 10th 

Revision, Clinical Modification (ICD-10-CM) for the IRF prospective payment system (PPS), 

effective when ICD-10-CM becomes the required medical data code set for use on Medicare 

claims and IRF-PAI submissions. 

B. Overall Impacts 

 We have examined the impacts of this final rule as required by Executive Order 12866 

(September 30, 1993, Regulatory Planning and Review), Executive Order 13563 on Improving 

Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96-354) (RFA), section 1102(b) of the Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism 

(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). 

 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of 

available regulatory alternatives and, if regulation is necessary, to select regulatory approaches 

that maximize net benefits (including potential economic, environmental, public health and 

safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the 

importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and 

of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for a major final 
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rule with economically significant effects ($100 million or more in any 1 year). We estimate the 

total impact of the policy updates described in this final rule by comparing the estimated 

payments in FY 2015 with those in FY 2014. This analysis results in an estimated $180 million 

increase for FY 2015 IRF PPS payments. As a result, this final rule is designated as 

economically “significant” under section 3(f)(1) of Executive Order 12866, and hence a major 

rule under the Congressional Review Act. Also, the rule has been reviewed by OMB. 

The Regulatory Flexibility Act (RFA) requires agencies to analyze options for regulatory 

relief of small entities, if a rule has a significant impact on a substantial number of small entities. 

For purposes of the RFA, small entities include small businesses, nonprofit organizations, and 

small governmental jurisdictions. Most IRFs and most other providers and suppliers are small 

entities, either by having revenues of $7 million to $35.5 million or less in any 1 year depending 

on industry classification, or by being nonprofit organizations that are not dominant in their 

markets. (For details, see the Small Business Administration's final rule that set forth size 

standards for health care industries, at 65 FR 69432 at 

http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf, effective March 26, 2012.) 

Because we lack data on individual hospital receipts, we cannot determine the number of small 

proprietary IRFs or the proportion of IRFs' revenue that is derived from Medicare payments. 

Therefore, we assume that all IRFs (an approximate total of 1,100 IRFs, of which approximately 

60 percent are nonprofit facilities) are considered small entities and that Medicare payment 

constitutes the majority of their revenues. The Department of Health and Human Services 

generally uses a revenue impact of 3 to 5 percent as a significance threshold under the RFA. As 

shown in Table 13, we estimate that the net revenue impact of this final rule on all IRFs is to 

increase estimated payments by approximately 2.4 percent. However, we find that certain 
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categories of IRF providers would be expected to experience revenue impacts in the 3 percent 

range. We estimate a 3.1 percent overall impact for 141 urban IRFs and 15 rural IRFs in the 

Middle Atlantic region, a 3.2 increase for 101 urban IRFs in the Pacific region, a 3.3 increase for 

27 rural IRFs in the West North Central region, and a 4.4 increase for four rural IRFs in the 

Pacific region. As a result, we anticipate this final rule will have a net positive impact on a 

substantial number of small entities. Medicare Administrative Contractors are not considered to 

be small entities. Individuals and states are not included in the definition of a small entity. 

 In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis 

if a rule may have a significant impact on the operations of a substantial number of small rural 

hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes 

of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside 

of a Metropolitan Statistical Area and has fewer than 100 beds. As discussed in detail below, the 

rates and policies set forth in this final rule will not have a significant impact (not greater than 

3 percent) on rural hospitals based on the data of the 165 rural units and 17 rural hospitals in our 

database of 1,142 IRFs for which data were available. 

 Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-04, enacted on 

March 22, 1995) also requires that agencies assess anticipated costs and benefits before issuing 

any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated 

annually for inflation. In 2014, that threshold level is approximately $141 million. This final 

rule will not impose spending costs on state, local, or tribal governments, in the aggregate, or by 

the private sector, of greater than $141 million. 

 Executive Order 13132 establishes certain requirements that an agency must meet when it 

promulgates a final rule that imposes substantial direct requirement costs on state and local 
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governments, preempts state law, or otherwise has federalism implications. As stated above, this 

final rule will not have a substantial effect on state and local governments, preempt state law, or 

otherwise have a federalism implication. 

C. Detailed Economic Analysis 

1. Basis and Methodology of Estimates 

This final rule sets forth policy changes and updates to the IRF PPS rates contained in the 

FY 2014 IRF PPS final rule (78 FR 47860). Specifically, this final rule updates the 

CMG relative weights and average length of stay values, the wage index, and the outlier 

threshold for high-cost cases. This final rule also applies a MFP adjustment to the FY 2015 RPL 

market basket increase factor in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 

0.2 percentage point reduction to the FY 2015 RPL market basket increase factor in accordance 

with sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act. Further, this final rule contains 

additional changes to the presumptive methodology and additional therapy and quality data 

collection that are expected to result in some additional financial effects on IRFs. In addition, 

section XII of this rule discusses the implementation of the required 2 percentage point reduction 

of the market basket increase factor for any IRF that fails to meet the IRF quality reporting 

requirements, in accordance with section 1886(j)(7) of the Act. 

 We estimate that the impact of the changes and updates described in this final rule will be 

a net estimated increase of $180 million in payments to IRF providers. This estimate does not 

include the estimated impacts of the additional changes to the presumptive compliance method 

and the additional therapy and quality data collection, as discussed in section 8 of this Economic 

Analysis. In addition, it does not include the implementation of the required 2 percentage point 

reduction of the market basket increase factor for any IRF that fails to meet the IRF quality 
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reporting requirements (as discussed in section 9 of this Economic Analysis). The impact 

analysis in Table 13 of this final rule represents the projected effects of the updates to IRF PPS 

payments for FY 2015 compared with the estimated IRF PPS payments in FY 2014. We 

determine the effects by estimating payments while holding all other payment variables constant. 

We use the best data available, but we do not attempt to predict behavioral responses to these 

changes, and we do not make adjustments for future changes in such variables as number of 

discharges or case-mix. 

 We note that certain events may combine to limit the scope or accuracy of our impact 

analysis, because such an analysis is future-oriented and, thus, susceptible to forecasting errors 

because of other changes in the forecasted impact time period. Some examples could be 

legislative changes made by the Congress to the Medicare program that would impact program 

funding, or changes specifically related to IRFs. Although some of these changes may not 

necessarily be specific to the IRF PPS, the nature of the Medicare program is such that the 

changes may interact, and the complexity of the interaction of these changes could make it 

difficult to predict accurately the full scope of the impact upon IRFs. 

 In updating the rates for FY 2015, we are adopting standard annual revisions described in 

this final rule (for example, the update to the wage and market basket indexes used to adjust the 

federal rates). We are also implementing a productivity adjustment to the FY 2015 RPL market 

basket increase factor in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 

0.2 percentage point reduction to the FY 2015 RPL market basket increase factor in accordance 

with sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act. We estimate the total increase in 

payments to IRFs in FY 2015, relative to FY 2014, will be approximately $180 million. 
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 This estimate is derived from the application of the FY 2015 RPL market basket increase 

factor, as reduced by a productivity adjustment in accordance with section 1886(j)(3)(C)(ii)(I) of 

the Act, and a 0.2 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) 

and -(D)(iv) of the Act, which yields an estimated increase in aggregate payments to IRFs of 

$165 million. Furthermore, there is an additional estimated $15 million increase in aggregate 

payments to IRFs due to the update to the outlier threshold amount. Outlier payments are 

estimated to increase from approximately 2.8 percent in FY 2014 to 3.0 percent in FY 2015. 

Therefore, summed together, we estimate that these updates will result in a net increase in 

estimated payments of $180 million from FY 2014 to FY 2015. 

 The effects of the updates that impact IRF PPS payment rates are shown in Table 13. 

The following updates that affect the IRF PPS payment rates are discussed separately below: 

● The effects of the update to the outlier threshold amount, from approximately 

2.8 percent to 3.0 percent of total estimated payments for FY 2015, consistent with section 

1886(j)(4) of the Act. 

● The effects of the annual market basket update (using the RPL market basket) to 

IRF PPS payment rates, as required by section 1886(j)(3)(A)(i) and sections 1886(j)(3)(C) and -

(D) of the Act, including a productivity adjustment in accordance with section 1886(j)(3)(C)(i)(I) 

of the Act, and a 0.2 percentage point reduction in accordance with sections 1886(j)(3)(C) and -

(D) of the Act. 

● The effects of applying the budget-neutral labor-related share and wage index 

adjustment, as required under section 1886(j)(6) of the Act. 

● The effects of the budget-neutral changes to the CMG relative weights and average 

length of stay values, under the authority of section 1886(j)(2)(C)(i) of the Act. 
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● The total change in estimated payments based on the FY 2015 payment changes 

relative to the estimated FY 2014 payments. 

2. Description of Table 13 

 Table 13 categorizes IRFs by geographic location, including urban or rural location, and 

location for CMS's 9 census divisions (as defined on the cost report) of the country. In addition, 

the table divides IRFs into those that are separate rehabilitation hospitals (otherwise called 

freestanding hospitals in this section), those that are rehabilitation units of a hospital (otherwise 

called hospital units in this section), rural or urban facilities, ownership (otherwise called forprofit, non-profit, and government), by teaching status, and by disproportionate share patient 

percentage (DSH PP). The top row of Table 13 shows the overall impact on the 1,142 IRFs 

included in the analysis. 

 The next 12 rows of Table 13 contain IRFs categorized according to their geographic 

location, designation as either a freestanding hospital or a unit of a hospital, and by type of 

ownership; all urban, which is further divided into urban units of a hospital, urban freestanding 

hospitals, and by type of ownership; and all rural, which is further divided into rural units of a 

hospital, rural freestanding hospitals, and by type of ownership. There are 960 IRFs located in 

urban areas included in our analysis. Among these, there are 732 IRF units of hospitals located 

in urban areas and 228 freestanding IRF hospitals located in urban areas. There are 182 IRFs 

located in rural areas included in our analysis. Among these, there are 165 IRF units of hospitals 

located in rural areas and 17 freestanding IRF hospitals located in rural areas. There are 339 forprofit IRFs. Among these, there are 335 IRFs in urban areas and 64 IRFs in rural areas. There 

are 673 non-profit IRFs. Among these, there are 567 urban IRFs and 106 rural IRFs. There are 

70 government-owned IRFs. Among these, there are 58 urban IRFs and 12 rural IRFs. 
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The remaining four parts of Table 13 show IRFs grouped by their geographic location 

within a region, by teaching status, and by DSH PP. First, IRFs located in urban areas are 

categorized for their location within a particular one of the nine Census geographic regions. 

Second, IRFs located in rural areas are categorized for their location within a particular one of 

the nine Census geographic regions. In some cases, especially for rural IRFs located in the New 

England, Mountain, and Pacific regions, the number of IRFs represented is small. IRFs are then 

grouped by teaching status, including non-teaching IRFs, IRFs with an intern and resident to 

average daily census (ADC) ratio less than 10 percent, IRFs with an intern and resident to ADC 

ratio greater than or equal to 10 percent and less than or equal to 19 percent, and IRFs with an 

intern and resident to ADC ratio greater than 19 percent. Finally, IRFs are grouped by DSH PP, 

including IRFs with zero DSH PP, IRFs with a DSH PP less than 5 percent, IRFs with a DSH PP 

between 5 and less than 10 percent, IRFs with a DSH PP between 10 and 20 percent, and IRFs 

with a DSH PP greater than 20 percent. 

The estimated impacts of each policy described in this final rule to the facility categories 

listed above are shown in the columns of Table 13. The description of each column is as 

follows: 

● Column (1) shows the facility classification categories described above. 

● Column (2) shows the number of IRFs in each category in our FY 2013 analysis file. 

● Column (3) shows the number of cases in each category in our FY 2013 analysis file. 

● Column (4) shows the estimated effect of the adjustment to the outlier threshold 

amount. 

● Column (5) shows the estimated effect of the update to the IRF PPS payment rates, 

which includes a productivity adjustment in accordance with section 1886(j)(3)(C)(ii)(I) of the 
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Act, and a 0.2 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) and -

(D)(iv) of the Act. 

● Column (6) shows the estimated effect of the update to the IRF labor-related share and 

wage index, in a budget-neutral manner. 

● Column (7) shows the estimated effect of the update to the CMG relative weights and 

average length of stay values, in a budget-neutral manner. 

● Column (8) compares our estimates of the payments per discharge, incorporating all of 

the proposed policies reflected in this final rule for FY 2015 to our estimates of payments per 

discharge in FY 2014. 

The average estimated increase for all IRFs is approximately 2.4 percent. This estimated 

net increase includes the effects of the RPL market basket increase factor for FY 2015 of 

2.9 percent, reduced by a productivity adjustment of 0.5 percentage point in accordance with 

section 1886(j)(3)(C)(ii)(I) of the Act, and further reduced by 0.2 percentage point in accordance 

with sections 1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act. It also includes the approximate 

0.2 percent overall increase in estimated IRF outlier payments from the update to the outlier 

threshold amount. Since we are making the updates to the IRF wage index and the CMG relative 

weights in a budget-neutral manner, they will not be expected to affect total estimated IRF 

payments in the aggregate. However, as described in more detail in each section, they will be 

expected to affect the estimated distribution of payments among providers. 
CMS-1608-F 07/29/14 218

TABLE 13: IRF Impact Table for FY 2015 (Columns 4-9 in %) 

Facility Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20151 

FY 2015 

CBSA 

wage index 

and laborshare CMG 

Total 

Percent 

Change 

(1) (2) (3) (4) (5) (6) (7) (9) 

Total 

 

1,142 

 

389,157 0.2 2.2 0.0 0.0 2.4

Urban unit 

 

732 

 

179,336 0.3 2.2 0.0 0.0 2.6

Rural unit 

 

165 

 

26,444 0.3 2.2 0.0 0.1 2.6

Urban hospital 

 

228 

 

177,726 0.1 2.2 0.0 0.0 2.2

Rural hospital 

 

17 

 

5,651 0.1 2.2 -0.1 0.0 2.2

Urban For-Profit 

 

335 

 

165,971 0.1 2.2 -0.2 0.0 2.1

Rural For-Profit 

 

64 

 

12,484 0.2 2.2 -0.2 0.1 2.4

Urban Non-Profit 

 

567 

 

175,276 0.3 2.2 0.2 0.0 2.6

Rural Non-Profit 

 

106 

 

17,698 0.3 2.2 0.1 0.1 2.7

Urban Government 

 

58 

 

15,815 0.3 2.2 -0.1 0.0 2.4

Rural Government 

 

12 

 

1,913 0.4 2.2 -0.5 0.1 2.2

Urban 

 

960 

 

357,062 0.2 2.2 0.0 0.0 2.4

Rural 

 

182 

 

32,095 0.3 2.2 -0.1 0.1 2.5

Urban by region 

Urban New England 

 

30 

 

16,946 0.1 2.2 0.4 -0.1 2.6

Urban Middle Atlantic 

 

141 

 

58,438 0.2 2.2 0.8 0.0 3.1

Urban South Atlantic 

 

138 

 

64,756 0.2 2.2 -0.1 -0.1 2.2

Urban East North 

Central 

 

180 

 

53,400 0.2 2.2 -0.2 0.0 2.2

Urban East South 

Central 

 

50 

 

24,482 0.1 2.2 -0.5 -0.1 1.7

Urban West North 

Central 

 

73 

 

18,700 0.2 2.2 -0.4 0.0 2.0
CMS-1608-F 07/29/14 219

Facility Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20151 

FY 2015 

CBSA 

wage index 

and laborshare CMG 

Total 

Percent 

Change 

Urban West South 

Central 

 

173 

 

71,028 0.2 2.2 -0.3 0.1 2.1

Urban Mountain 

 

74 

 

23,158 0.2 2.2 -0.7 0.0 1.7

Urban Pacific 

 

101 

 

26,154 0.4 2.2 0.6 0.0 3.2

Rural by region 

Rural New England 

 

5 

 

1,270 0.2 2.2 0.0 -0.1 2.3

Rural Middle Atlantic 

 

15 

 

2,557 0.2 2.2 0.5 0.2 3.1

Rural South Atlantic 

 

24 

 

6,028 0.1 2.2 -0.1 0.1 2.4

Rural East North 

Central 

 

31 

 

5,244 0.3 2.2 -0.2 0.1 2.4

Rural East South 

Central 

 

21 

 

3,497 0.3 2.2 -0.1 0.1 2.5

Rural West North 

Central 

 

27 

 

3,460 0.5 2.2 0.5 0.1 3.3

Rural West South 

Central 

 

48 

 

8,974 0.2 2.2 -0.4 0.2 2.2

Rural Mountain 

 

7 

 

683 0.7 2.2 -0.1 0.0 2.8

Rural Pacific 

 

4 

 

382 0.9 2.2 1.2 0.0 4.4

Teaching Status 

Non-teaching 

 

1,033 

 

343,078 0.2 2.2 0.0 0.0 2.4

Resident to ADC less 

than 10% 

 

60 

 

31,090 0.2 2.2 0.3 -0.1 2.6

Resident to ADC 10%-

19% 

 

39 

 

13,981 0.3 2.2 -0.1 -0.1 2.4

Resident to ADC 

greater than 19% 

 

10 

 

1,008 0.2 2.2 0.2 0.0 2.5

Disproportionate 

Share Patient 

Percentage (DSH PP) 

DSH PP = 0% 

 

37 

 

6,323 0.5 2.2 0.0 0.0 2.8

DSH PP less than 5% 

 

185 

 

65,137 0.2 2.2 0.1 0.1 2.6

DSH PP 5% - 10% 

 

333 

 

130,367 0.2 2.2 -0.1 0.0 2.3

DSH PP 10% - 20% 0.2 2.2 0.1 0.0 2.5
CMS-1608-F 07/29/14 220

Facility Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20151 

FY 2015 

CBSA 

wage index 

and laborshare CMG 

Total 

Percent 

Change 

362 126,848 

DSH PP greater than 

20% 

 

225 

 

60,482 0.3 2.2 -0.1 -0.1 2.3

1

This column reflects the impact of the RPL market basket increase factor for FY 2015 (2.9 percent), 

reduced by a 0.5 percentage point reduction for the productivity adjustment as required by section 

1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2 percentage points in accordance with paragraphs 

1886(j)(3)(C) and (D) of the Act. 
CMS-1608-F 07/29/14 221

3. Impact of the Update to the Outlier Threshold Amount 

The estimated effects of the update to the outlier threshold adjustment are presented in 

column 4 of Table 13. In the FY 2014 IRF PPS final rule (78 FR 47860), we used FY 2012 IRF 

claims data (the best, most complete data available at that time) to set the outlier threshold 

amount for FY 2014 so that estimated outlier payments would equal 3 percent of total estimated 

payments for FY 2014. 

For this final rule, we are updating our analysis using FY 2013 IRF claims data and, 

based on this updated analysis, we estimate that IRF outlier payments as a percentage of total 

estimated IRF payments are 2.8 percent in FY 2014. Thus, we are adjusting the outlier threshold 

amount in this final rule to set total estimated outlier payments equal to 3 percent of total 

estimated payments in FY 2015. The estimated change in total IRF payments for FY 2015, 

therefore, includes an approximate 0.2 percent increase in payments because the estimated 

outlier portion of total payments is estimated to increase from approximately 2.8 percent to 

3 percent. 

The impact of this outlier adjustment update (as shown in column 4 of Table 13) is to 

increase estimated overall payments to IRFs by about 0.2 percent. We estimate the largest 

increase in payments from the update to the outlier threshold amount to be 0.9 percent for rural 

IRFs in the Pacific region. We do not estimate that any group of IRFs would experience a 

decrease in payments from this proposed update. 

4. Impact of the Market Basket Update to the IRF PPS Payment Rates 

 The estimated effects of the market basket update to the IRF PPS payment rates are 

presented in column 5 of Table 13. In the aggregate the update would result in a net 2.2 percent 

increase in overall estimated payments to IRFs. This net increase reflects the estimated RPL 
CMS-1608-F 07/29/14 222

market basket increase factor for FY 2014 of 2.9 percent, reduced by the 0.2 percentage point in 

accordance with sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act, and further 

reduced by a 0.5 percentage point productivity adjustment as required by section 

1886(j)(3)(C)(ii)(I) of the Act. 

5. Impact of the CBSA Wage Index and Labor-Related Share 

 In column 6 of Table 13, we present the effects of the budget-neutral update of the wage 

index and labor-related share. The changes to the wage index and the labor-related share are 

discussed together because the wage index is applied to the labor-related share portion of 

payments, so the proposed changes in the two have a combined effect on payments to providers. 

As discussed in section VI.D. of this final rule, we will decrease the labor-related share from 

69.494 percent in FY 2014 to 69.294 percent in FY 2015. 

 In the aggregate, since these updates to the wage index and the labor-related share are 

applied in a budget-neutral manner as required under section 1886(j)(6) of the Act, we do not 

estimate that these updates will affect overall estimated payments to IRFs. However, we 

estimate that these updates will have small distributional effects. For example, we estimate the 

largest increase in payments from the update to the CBSA wage index and labor-related share of 

1.2 percent for rural IRFs in the Pacific region. We estimate the largest decrease in payments 

from the update to the CBSA wage index and labor-related share to be a 0.7 percent decrease for 

urban IRFs in the Mountain region. 

6. Impact of the Update to the CMG Relative Weights and Average Length of Stay Values. 

In column 7 of Table 13, we present the effects of the budget-neutral update of the CMG 

relative weights and average length of stay values. In the aggregate, we do not estimate that 

these updates will affect overall estimated payments of IRFs. However, we do expect these 
CMS-1608-F 07/29/14 223

updates to have small distributional effects. The largest estimated increase in payments is a 0.2 

percent increase in rural Middle Atlantic and rural West South Central IRFs. Urban areas in 

New England, South Atlantic, and East South Central and rural New England are estimated to 

experiences a 0.1 percent decrease in payments due to the CMG relative weights change. 

7. Effects of the Changes to the Presumptive Compliance Method for Compliance Review 

Periods Beginning on or After October 1, 2014 

 As discussed in section VIII. of this final rule, we are making some additional changes to 

the presumptive compliance method for compliance review periods beginning on or after 

October 1, 2015. We do not estimate that the removal of the “amputation status” codes will have 

any significant financial effects on IRFs, as our data analysis indicates that IRFs are only using 

these codes for about 2 percent of cases and these codes are only being used to count patients 

towards the 60 percent rule in 0.3 percent of cases. Similarly, we do not estimate that the 

proposed exclusion of the non-specific Etiologic Diagnosis codes from the IGCs will have any 

significant financial effects on IRFs, as we estimate that IRFs will be able to switch to using the 

more specific codes that are available for the Etiologic Diagnoses instead. 

 We do, however, believe that there could be a financial effect on IRFs from the removal 

of the Unilateral Upper Extremity Amputations and Arthritis IGCs from the presumptive 

compliance method, as the removal of these IGCs from presumptively counting toward meeting 

the 60 percent rule compliance threshold could result in more IRFs failing to meet the 

requirements solely on the basis of the presumptive compliance method and being required to be 

evaluated using the medical review method. We estimate that these effects would be 

concentrated in approximately 10 percent of IRFs that admit a high number of patients with 

Unilateral Upper Extremity Amputation and Arthritis conditions, and that the effects would vary 
CMS-1608-F 07/29/14 224

substantially among IRFs. As discussed in section X. of this final rule, we are providing IRFs 

with the ability to indicate on the IRF-PAI that a particular arthritis case meets the severity and 

prior treatment regulatory requirements, the purpose of which is to mitigate some of the financial 

effects for these IRFs while still allowing Medicare to ensure that the regulatory requirements are 

being met. 

 Comment: One commenter disagreed with our statement that the removal of non-specific 

codes from the presumptive methodology determination will not have a financial effect on IRFs 

because they will be able to change their coding practices to use more specific diagnosis codes 

instead. This commenter said that the information needed to report more specific diagnosis 

codes is not always available to IRFs. 

 Response: As we indicated in the FY 2014 IRF PPS final rule (78 FR 47860, 47887), we 

previously decided to allow some non-specific codes to count toward the presumptive 

methodology because we recognized that it would be extremely difficult for IRFs to gather the 

necessary information to code a more specific code in those particular cases. However, after 

careful analysis, we believe that the remaining non-specific codes that will not count toward an 

IRF’s presumptive compliance with the 60 percent rule are ones that the IRF can and should 

make every effort to code more specifically. Even if the necessary information to code more 

specifically is not available in the acute care medical record, we believe that the IRF should 

make every effort to obtain the necessary information to code more specifically. This is 

consistent with reduction in the use of non-specific codes for other Medicare settings. 

8. Effects of New Therapy Information Section 

 Because the type, amount, frequency, and duration of therapy provided in IRFs is 

documented in detail in the IRF medical records as part of the requirements for meeting 
CMS-1608-F 07/29/14 225

Medicare’s conditions of participation and IRF coverage requirements, we estimate that the 

additional costs incurred by IRFs for FY 2016 for the new proposed Therapy Information 

Section of the IRF-PAI would be based on the 4 additional minutes per IRF-PAI form to transfer 

the information from the IRF medical record to the IRF-PAI form. We estimate that this would 

result in an additional cost of $1.2 million to all IRFs for FY 2016. 

Comment: Many commenters said that our estimates of the overall costs to IRFs of the 

therapy data collection on the IRF-PAI are too low. They said that the costs of making the 

necessary modifications to their medical record systems and the training that will be required for 

therapists, nurses, and other clinical staff to ensure that they can record the data in a form and 

manner that will be compatible with the new data collection requirements will be substantial. In 

addition, there were comments regarding the added burden due to our original proposal to 

include the average number of minutes by mode and type of therapy for weeks 3 and beyond of a 

patient’s IRF stay. 

Response: We appreciate the detailed comments that we received on this issue, and we 

understand, based on these comments, that the proposed collection of average number of minutes 

by mode and type of therapy for weeks 3 and beyond of a patient’s IRF stay would require 

additional resources from the IRFs to operationalize. For this reason, we have withdrawn the 

proposal to collect the average number of minutes for weeks 3 and beyond. Instead, we will 

require IRFs to report on the IRF-PAI the total number of minutes of therapy provided to a 

patient, by mode and therapy discipline, for only week 1 and week 2 of the IRF stay. As 

described in section IX of this final rule, we believe that this will give us the minimum 

information that we need to develop future policy and to understand the nature of the services 

that Medicare is paying for under the IRF PPS, while also minimizing the costs to providers. We 
CMS-1608-F 07/29/14 226

carefully considered commenters suggestions that we add the collection of Concurrent Therapy 

as a mode and revise the definition of Group Therapy so that new data collection items would be 

consistent with the way in which facilities were already recording the information in the patient’s 

medical record. We believe this will reduce the need for training and help to minimize burden. 

Finally, although we understand that updating specific software that IRFs use to collect this 

information can include additional costs, we view this as a provider business decision. Providers 

may always opt to use the IRVEN software supplied by CMS for collecting and submitting the 

IRF-PAI information. Given the revisions to the data collection described in section IX of this 

final rule, we believe that the cost estimate indicated for this data collection in the proposed rule 

is accurate. 

9. Effects of Updates to the IRF QRP 

As discussed in section XI.A. of this final rule and in accordance with section 1886(j)(7) 

of the Act, we will implement a 2 percentage point reduction in the FY 2015 increase factor for 

IRFs that have failed to report the required quality reporting data to us during the most recent 

IRF quality reporting period. In section XI.A of this final rule, we discuss how the 2 percentage 

point reduction will be applied. Only a few IRFs received the 2 percentage point reduction in the 

FY 2014 increase factor for failure to report the required quality reporting data last year, and we 

would anticipate that even fewer IRFs will receive the reduction for FY 2015 as they are now 

more familiar with the IRF QRP reporting requirements. 

In sections XI.K and XI.L of this final rule, we have finalized our proposal to adopt a 

new data completion threshold as well as a new data accuracy validation policy. While we 

cannot estimate the increase in the number of IRFs that will not meet our proposed requirements 

at this time, we believe that these finalized policies may increase the number of IRFs that receive 
CMS-1608-F 07/29/14 227

a 2 percent point reduction to their FY annual increase factor for FY 2016 and beyond. Thus, we 

estimate that this policy will increase impact on overall IRF payments, by increasing the rate of 

non-compliance by an estimated 5 percent, for FY 2016 and beyond, decreasing the number of 

IRF providers that will receive their full annual increase factor for FY 2016 and beyond. 

In this FY 2015 IRF PPS final rule, we finalized our proposal to adopt two new quality measures 

(MRSA and CDI), as well as to adopt a new data accuracy validation policy. Together, we 

estimate that these proposals will increase the cost to all IRF providers by $852,238 annually, for 

an average cost to IRF providers of $747.57 annually. This is an average increase of 

approximately 4.43 percent to all IRF providers over the FY 2014 burden. While we also 

proposed to adopt a data completion threshold policy, this policy, if finalized, will have no 

associated cost burden beyond that discussed in the first paragraph of this section (XI.C.9) of this 

final rule. 

We intend to closely monitor the effects of this new quality reporting program on IRF 

providers and help perpetuate successful reporting outcomes through ongoing stakeholder 

education, national trainings, CMS Open Door Forums, and general and technical help desks. 

We did not receive any public comments with regard to this section of the proposed rule. 

D. Alternatives Considered 

 The following is a discussion of the alternatives considered for the IRF PPS updates 

contained in this final rule. 

 Section 1886(j)(3)(C) of the Act requires the Secretary to update the IRF PPS payment 

rates by an increase factor that reflects changes over time in the prices of an appropriate mix of 

goods and services included in the covered IRF services. Thus, we did not consider alternatives 

to updating payments using the estimated RPL market basket increase factor for FY 2015. 
CMS-1608-F 07/29/14 228

However, as noted previously in this final rule, section 1886(j)(3)(C)(ii)(I) of the Act requires the 

Secretary to apply a productivity adjustment to the market basket increase factor for FY 2015, 

and sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act require the Secretary to apply 

a 0.2 percentage point reduction to the market basket increase factor for FY 2015. Thus, in 

accordance with section 1886(j)(3)(C) of the Act, we are updating the IRF federal prospective 

payments in this final rule by 2.2 percent (which equals the 2.9 percent estimated RPL market 

basket increase factor for FY 2015 reduced by 0.2 percentage points, and further reduced by a 

0.5 percentage point productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the 

Act). 

 We considered maintaining the existing CMG relative weights and average length of stay 

values for FY 2015. However, in light of recently available data and our desire to ensure that the 

CMG relative weights and average length of stay values are as reflective as possible of recent 

changes in IRF utilization and case mix, we believe that it is appropriate to update the CMG 

relative weights and average length of stay values at this time to ensure that IRF PPS payments 

continue to reflect as accurately as possible the current costs of care in IRFs. 

 We considered updating facility-level adjustment factors for FY 2015. However, as 

discussed in more detail in section V.B. of this final rule, we believe that freezing the facilitylevel adjustments at FY 2014 levels for FY 2015 and all subsequent years (unless and until the 

data indicate that they need to be further updated) will allow us an opportunity to monitor the 

effects of the substantial changes to the adjustment factors for FY 2014, and will allow IRFs time 

to adjust to last year’s changes. 

 We considered maintaining the existing outlier threshold amount for FY 2015. However, 

analysis of updated FY 2013 data indicates that estimated outlier payments would be lower than 
CMS-1608-F 07/29/14 229

3 percent of total estimated payments for FY 2015, by approximately 0.2 percent, unless we 

updated the outlier threshold amount. Consequently, we are adjusting the outlier threshold 

amount in this final rule to reflect a 0.2 percent increase thereby setting the total outlier payments 

equal to 3 percent, instead of 2.8 percent, of aggregate estimated payments in FY 2015. 

 We considered making no further changes to the presumptive compliance method in this 

final rule. However, to be consistent with the changes to the presumptive compliance method 

that we implemented in the FY 2014 IRF PPS final rule, and to correct some inadvertent 

omissions in last year’s final rule, we believe it is important to make further changes in this final 

rule. 

 However, to ensure that the IRF-PAI item designed to mitigate some of the burden of 

additional medical reviews that could result from the changes to the presumptive compliance 

method is available on the IRF-PAI on the same date or prior to the effective date of those 

changes, we are delaying the effective date of the changes to the presumptive compliance 

method. Both the changes to the presumptive compliance method that we finalized in the FY 

2014 IRF PPS final rule and the additional changes to the presumptive compliance method that 

are finalized in this rule will become effective for compliance review periods beginning on or 

after October 1, 2015. 

 We considered not including the new Therapy Information Section on the IRF-PAI. 

However, we believe that it is vitally important for Medicare to better understand the ways in 

which therapy services are currently being provided in IRFs and, most importantly, what services 

Medicare is paying for under the IRF benefit. 

E. Accounting Statement 

 As required by OMB Circular A-4 (available at 
CMS-1608-F 07/29/14 230

http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in 

Table 14, we have prepared an accounting statement showing the classification of the 

expenditures associated with the provisions of this final rule. Table 14 provides our best 

estimate of the increase in Medicare payments under the IRF PPS as a result of the updates 

presented in this final rule based on the data for 1,142 IRFs in our database. In addition, Table 

14 presents the costs associated with the new IRF quality reporting program and therapy 

reporting requirements for FY 2015. 

TABLE 14: Accounting Statement: Classification of Estimated Expenditures 

Change in Estimated Transfers from FY 2014 IRF PPS to FY 2015 IRF PPS: 

Category Transfers 

Annualized Monetized Transfers $180 million 

From Whom to Whom? Federal Government to IRF Medicare 

Providers 

FY 2015 Cost to Updating the Quality Reporting Program:

Category Costs 

Cost for IRFs to Submit Data for the Quality 

Reporting Program 

$852,238 

FY 2016 Cost for Therapy Data Collection:

Category Costs

Cost for IRFs to Submit Therapy Data $1.2 million 

 

F. Conclusion 

 Overall, the estimated payments per discharge for IRFs in FY 2015 are projected to 

increase by 2.4 percent, compared with the estimated payments in FY 2014, as reflected in 

column 9 of Table 13. IRF payments per discharge are estimated to increase by 2.4 percent in 
CMS-1608-F 07/29/14 231

urban areas and by 2.5 percent in rural areas, compared with estimated FY 2014 payments. 

Payments per discharge to rehabilitation units are estimated to increase 2.6 percent in urban and 

rural areas. Payments per discharge to freestanding rehabilitation hospitals are estimated to 

increase 2.2 percent in urban and rural areas. 

Overall, IRFs are estimated to experience a net increase in payments as a result of the 

policies in final rule. The largest payment increase is estimated to be a 4.4 percent increase for 

rural IRFs located in the Pacific region. 

Dated: July 24, 2014 

 _______________________________ 

Marilyn Tavenner, 

Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: July 30, 2014 

 __________________________________ 

Sylvia M. Burwell, 

Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P
CMS-1608-F 07/29/14 232

[FR Doc. 2014-18447 Filed 07/31/2014 at 4:15 pm; Publication Date: 08/06/2014]