```

[Federal Register Volume 80, Number 80 (Monday, April 27, 2015)]
[Proposed Rules]
[Pages 23331-23399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09617]

[[Page 23331]]

Vol. 80

Monday,

No. 80

April 27, 2015

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 412

Medicare Program; Inpatient Rehabilitation Facility Prospective Payment 
System for Federal Fiscal Year 2016; Proposed Rule

Federal Register / Vol. 80 , No. 80 / Monday, April 27, 2015 / 
Proposed Rules

[[Page 23332]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1624-P]
RIN 0938-AS45

Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2016

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the prospective payment rates 
for inpatient rehabilitation facilities (IRFs) for federal fiscal year 
(FY) 2016 as required by the statute. We are also proposing to adopt an 
IRF-specific market basket that reflects the cost structures of only 
IRF providers, phase in the revised wage index changes, and revise and 
update quality measures and reporting requirements under the IRF 
quality reporting program (QRP).

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 22, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1624-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1624-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1624-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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.
    Catherine Kraemer, (410) 786-0179, for information about the 
revised wage index.
    Bridget Dickensheets, (410) 786-8670, or Heidi Oumarou, (410) 786-
7942, for information about the IRF-specific market basket.

SUPPLEMENTARY INFORMATION: The IRF PPS Addenda along with other 
supporting documents and tables referenced in this proposed rule are 
available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Executive Summary

A. Purpose

    This proposed rule would update the payment rates for IRFs for FY 
2016 (that is, for discharges occurring on or after October 1, 2015, 
and on or before September 30, 2016) 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. This proposed rule 
would also revise and update quality measures and reporting 
requirements under the IRF QRP.

B. Summary of Major Provisions

    In this proposed rule, we use the methods described in the FY 2015 
IRF PPS final rule (79 FR 45872) to propose updates to the federal 
prospective payment rates for FY 2016 using updated FY 2014 IRF claims 
and the most recent available IRF cost report data. We are also 
proposing to adopt an IRF-specific market basket that reflects the cost 
structures of only IRF providers. We are proposing that the IRF-
specific market basket will be used to update the IRF PPS base payment 
rate and to determine the FY 2016 labor-related share. We are also 
proposing to phase in the revised wage index changes, and revise and 
update quality measures and reporting requirements under the IRF QRP.

C. Summary of Impacts

[[Page 23333]]

------------------------------------------------------------------------
         Provision Description                      Transfers
------------------------------------------------------------------------
FY 2016 IRF PPS payment rate update....  The overall economic impact of
                                          this proposed rule is an
                                          estimated $130 million in
                                          increased payments from the
                                          Federal government to IRFs
                                          during FY 2016.
------------------------------------------------------------------------
         Provision Description                        Costs
------------------------------------------------------------------------
New quality reporting program            The total costs in FY 2016 for
 requirements.                            IRFs as a result of the
                                          proposed new quality reporting
                                          requirements are estimated to
                                          be $24,042,291.01.
------------------------------------------------------------------------

    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Background
    A. Historical Overview of the 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. Proposed Update to the Case-Mix Group (CMG) Relative Weights 
and Average Length of Stay Values for FY 2016
IV. Continued Use of FY 2014 Facility-Level Adjustment Factors
V. Proposed FY 2016 IRF PPS Payment Update
    A. Background
    B. Overview of the Proposed 2012-Based IRF Market Basket
    C. Creating an IRF-specific Market Basket
    D. Proposed FY 2016 Market Basket Update and Productivity 
Adjustment
    E. Proposed Labor-Related Share for FY 2016
    F. Proposed Wage Adjustment
    G. Description of the Proposed IRF Standard Payment Conversion 
Factor and Payment Rates for FY 2016
    H. Example of the Methodology for Adjusting the Proposed Federal 
Prospective Payment Rates
VI. Proposed Update to Payments for High-Cost Outliers under the IRF 
PPS
    A. Proposed Update to the Outlier Threshold Amount for FY 2016
    B. Proposed Update to the IRF Cost-to-Charge Ratio Ceiling and 
Urban/Rural Averages
VII. ICD-10-CM Implementation for IRF PPS
VIII. Revisions and Updates to the IRF QRP
    A. Background and Statutory Authority
    B. General Considerations Used for Selection of Quality, 
Resource Use, and Other Measures for the IRF QRP
    C. Policy for Retention of IRF QRP Measures Adopted for Previous 
Payment Determinations
    D. Policy for Adopting Changes to IRF QRP Measures
    E. Quality Measures Previously Finalized for and Currently Used 
in the IRF QRP
    F. Proposal of Previously Adopted IRF QRP Quality Measures for 
the FY 2018 Payment Determination and Subsequent Years
    G. Proposed Additional IRF QRP Quality Measures for the FY 2018 
Payment Determination and Subsequent Years
    H. IRF QRP Quality Measures and Measure Concepts under 
Consideration for Future Years
    I. Proposed Form, Manner, and Timing of Quality Data Submission 
for the FY 2018 Payment Determination and Subsequent Years
    J. Previously Adopted and Proposed Timing for New IRFs to Begin 
Submitting Quality Data under the IRF QRP for the FY 2018 Payment 
Determination and Subsequent Years
    K. IRF QRP Data Completion Thresholds for the FY 2016 Payment 
Determination and Subsequent Years
    L. Proposed Suspension of the IRF QRP Data Validation Process 
for the FY 2016 Payment Determination and Subsequent Years
    M. Previously Adopted and Proposed IRF QRP Submission Exception 
and Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    N. Previously Adopted and Proposed IRF QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and 
Subsequent Years
    O. Proposed Public Display of Quality Measure Data for the IRF 
QRP
    P. Proposed Method for Applying the Reduction to the FY 2016 IRF 
Increase Factor for IRFs That Fail to Meet the Quality Reporting 
Requirements
IX. Collection of Information Requirements
    A. Statutory Requirements for Solicitation of Comments
    B. Collection of Information Requirements for Updates Related to 
the IRF QRP
X. Response to Public Comments
XI. 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.

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)
AHA American Hospital Association
AHE Average Hourly Earnings
AHIMA American Health Information Management Association
ASAP Assessment Submission and Processing
ASCA Administrative Simplification Compliance Act (Pub. L. 107-105, 
enacted on December 27, 2002)
BEA Bureau of Economic Analysis
BLS U.S. Bureau of Labor Statistics
CAH Critical Access Hospitals
CARE Continuity Assessment Record and Evaluation
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
CPI Consumer Price Index
DSH Disproportionate Share Hospital
DSH PP Disproportionate Share Patient Percentage
ECI Employment Cost Index
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FFS Fee-for-Service
FR Federal Register
FY Federal Fiscal Year
GDP Gross Domestic Product
HAI Healthcare Associated Infection
HCP Health Care Personnel
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)
HOMER Home Office Medicare Records
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
IGI IHS Global Insight
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014 (Pub. L. 113-185, enacted on October 6, 2014)
I-O Input-Output
IPF Inpatient Psychiatric Facility
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
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program

[[Page 23334]]

IRVEN Inpatient Rehabilitation Validation and Entry
LIP Low-Income Percentage
LOS Length of Stay
LPN Licensed Practical Nurse
LTCH Long-Term Care Hospital
MAC Medicare Administrative Contractor
MAP Measure Applications Partnership
MA (Medicare Part C) Medicare Advantage
MedPAC Medicare Payment Advisory Commission
MDS Minimum Data Set
MFP Multifactor Productivity
MLN Medicare Learning Network
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173, enacted on December 29, 2007)
MRSA Methicillin-Resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MUC Measures under Consideration
NAICS North American Industry Classification System
NHSN National Healthcare Safety Network
NPP National Priorities Partnership
NPUAP National Pressure Ulcer Advisory Panel
NQF National Quality Forum
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OT Occupational Therapists
PAC Post-Acute Care
PAI Patient Assessment Instrument
PLI Professional Liability Insurance
POA Present on Admission
PPI Producer Price Index
PPS Prospective Payment System
PRA Paperwork Reduction Act of 1995 (Pub. L. 104-13, enacted on May 
22, 1995)
PRRB Provider Reimbursement Review Board
PT Physical Therapist
QIES Quality Improvement Evaluation System
QM Quality Measure
QRP Quality Reporting Program
RIA Regulatory Impact Analysis
RIC Rehabilitation Impairment Category
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
RSRR Risk-standardized readmission rate
SDTI Suspected Deep Tissue Injuries
SIR Standardized Infection Ratio
SLP Speech-Language Pathologist
SOC Standard Occupational Classification System
SNF Skilled Nursing Facilities
SRR Standardized Risk Ratio
SSI Supplemental Security Income
TEP Technical Expert Panel

I. Background

A. Historical Overview of the IRF PPS

    Section 1886(j) of the Act provides for the implementation of a 
per-discharge 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 2015.
    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 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 low-income 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 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 Web site as a primary information resource for 
the IRF PPS which is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/index.html. The Web site 
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 was 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, psychiatric, and long-term care (RPL) market 
basket). Any reference to the FY

[[Page 23335]]

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 case-mix 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 
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 Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.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. 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 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 Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.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

[[Page 23336]]

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 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 ``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.
    In the FY 2015 IRF PPS final rule (79 FR 45872), we updated the 
federal prospective payment rates, the CMG relative weights, and the 
outlier threshold amount. We also further revised the list of diagnosis 
codes that count toward an IRF's 60 percent rule compliance calculation 
to determine ``presumptive compliance,'' revised sections of the IRF-
PAI, 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 2015, please refer 
to the FY 2015 IRF PPS final rule (79 FR 45872) and the FY 2015 IRF PPS 
correction notice (79 FR 59121).

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 previously 
discussed, 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 2016 is discussed in section V.D. of 
this proposed rule. Section 3401(d) of the Affordable Care Act requires 
an additional 0.2 percentage point adjustment to the IRF increase 
factor for FY 2016, as discussed in section V.D. of this proposed 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) 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 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

[[Page 23337]]

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 Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/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 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 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 low-income 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 this proposed rule, we propose to update the IRF federal 
prospective payment rates, adopt an IRF-specific market basket that 
will be used to determine the market basket update and labor-related 
share, phase in the revised wage index changes, and revise and update 
quality measures and reporting requirements under the IRF QRP.
    The proposed updates to the IRF federal prospective payment rates 
for FY 2016 are as follows:
     Update the FY 2016 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, as discussed in 
section III of this proposed rule.
     Describe the continued use of FY 2014 facility-level 
adjustment factors as discussed in section IV of this proposed rule.
     Adopt the proposed IRF-specific market basket, as 
discussed in section V of this proposed rule.
     Update the FY 2016 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 this 
proposed rule.
     Update the FY 2016 IRF PPS payment rates by the FY 2016 
wage index and the labor-related share in a budget-neutral manner and 
discuss the proposed wage adjustment transition as discussed in section 
V of this proposed rule.
     Describe the calculation of the IRF standard payment 
conversion factor for FY 2016, as discussed in section V of this 
proposed rule.
     Update the outlier threshold amount for FY 2016, as 
discussed in section VI of this proposed rule.
     Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2016, as discussed in section VI of this 
proposed rule.
     Discuss implementation of International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for the IRF 
PPS as discussed in section VII of this proposed rule.
     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 VIII of this proposed rule.

III. Proposed Update to the CMG Relative Weights and Average Length of 
Stay Values for FY 2016

    As specified in Sec.  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 this proposed rule, we propose to update the CMG relative 
weights and average length of stay values for FY 2016. As required by 
statute, we always

[[Page 23338]]

use the most recent available data to update the CMG relative weights 
and average lengths of stay. For FY 2016, we propose to use the FY 2014 
IRF claims and FY 2013 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 2014 IRF cost report data are available for 
analysis, but the majority of the FY 2014 IRF claims data are available 
for analysis.
    In this proposed rule, we propose 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 CCR 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 2016 CMG relative weights to the same 
average CMG relative weight from the CMG relative weights implemented 
in the FY 2015 IRF PPS final rule (79 FR 45872).
    Consistent with the methodology that we have used to update the IRF 
classification system in each instance in the past, we propose to 
update the CMG relative weights for FY 2016 in such a way that total 
estimated aggregate payments to IRFs for FY 2016 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 
2016 CMG relative weights, we use the following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2016 (with no changes to the CMG relative weights).
    Step 2. Calculate the estimated total amount of IRF PPS payments 
for FY 2016 by applying the changes to the CMG relative weights (as 
discussed in this proposed rule).
    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 
2016 with and without the changes to the CMG relative weights.
    Step 4. Apply the budget neutrality factor (1.0000) to the FY 2015 
IRF PPS standard payment amount after the application of the budget-
neutral wage adjustment factor.
    In section V.G. of this proposed rule, we discuss the proposed use 
of the existing methodology to calculate the standard payment 
conversion factor for FY 2016.
    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 2016. 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Relative weight                     Average length of stay
                 CMG                       CMG description (M=motor,     -------------------------------------------------------------------------------
                                              C=cognitive, A=age)          Tier 1    Tier 2    Tier 3     None     Tier 1    Tier 2    Tier 3     None
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101................................  Stroke, M>51.05...................    0.8074    0.7072    0.6585    0.6300        10         9         9         8
0102................................  Stroke, M>44.45 and M18.5.
0103................................  Stroke, M>44.45 and M38.85 and M34.25 and M30.05 and M26.15 and M84.5........    2.2985    2.0133    1.8745    1.7933        24        23        21        21
0109................................  Stroke, M>22.35 and M53.35       0.8167    0.6711    0.6056    0.5721        10         9         8         8
                                       and C>23.5.
0202................................  Traumatic brain injury, M>44.25       1.0578    0.8692    0.7844    0.7410        11        11        10         9
                                       and M23.5.
0203................................  Traumatic brain injury, M>44.25       1.2056    0.9906    0.8939    0.8445        11        12        10        11
                                       and C40.65       1.3276    1.0909    0.9844    0.9300        13        12        11        11
                                       and M28.75       1.5856    1.3028    1.1757    1.1107        15        15        14        13
                                       and M22.05       1.8996    1.5609    1.4086    1.3306        17        18        17        15
                                       and M41.05.
0302................................  Non-traumatic brain injury,           1.3920    1.1620    1.0656    0.9943        13        13        12        12
                                       M>35.05 and M26.15 and M48.45.
0402................................  Traumatic spinal cord injury,         1.4305    1.2175    1.1149    1.0306        14        14        14        13
                                       M>30.35 and M16.05 and M63.5.
0405................................  Traumatic spinal cord injury,         3.4241    2.9142    2.6687    2.4668        41        34        29        28
                                       M51.35.
0502................................  Non-traumatic spinal cord injury,     1.1417    0.9098    0.8448    0.7754        12        11        10        10
                                       M>40.15 and M31.25 and M29.25 and M23.75 and M47.75.............    1.0388    0.8197    0.7649    0.6911        10        10         9         9
0602................................  Neurological, M>37.35 and M25.85 and M42.15.
0702................................  Fracture of lower extremity,          1.2542    1.0502    0.9947    0.9035        13        12        12        11
                                       M>34.15 and M28.15 and M49.55.
0802................................  Replacement of lower extremity        1.0579    0.8332    0.7560    0.6981        10        10         9         9
                                       joint, M>37.05 and M28.65 and M83.5.
0804................................  Replacement of lower extremity        1.2747    1.0040    0.9109    0.8412        12        11        11        10
                                       joint, M>28.65 and M22.05 and M44.75.........    0.9548    0.7679    0.7038    0.6416        10         9         9         8
0902................................  Other orthopedic, M>34.35 and         1.2720    1.0231    0.9377    0.8547        13        12        11        11
                                       M24.15 and         1.5872    1.2767    1.1701    1.0666        14        14        13        13
                                       M47.65.
1002................................  Amputation, lower extremity,          1.3378    1.1728    1.0443    0.9423        13        12        12        11
                                       M>36.25 and M36.35.
1102................................  Amputation, non-lower extremity,      1.7741    1.7741    1.4093    1.3242        16        19        15        16
                                       M37.65...........    0.9828    0.9542    0.8689    0.8106         9        11        10        10
1202................................  Osteoarthritis, M>30.75 and           1.1972    1.1624    1.0585    0.9875        11        14        13        12
                                       M36.35.
1302................................  Rheumatoid, other arthritis,          1.4812    1.2205    1.1509    1.0509        15        13        13        13
                                       M>26.15 and M48.85..................    0.9070    0.7454    0.6741    0.6066         9         9         8         8
1402................................  Cardiac, M>38.55 and M31.15 and M49.25................    1.0508    0.8465    0.7794    0.7499        11        10         9         9

[[Page 23340]]

 
1502................................  Pulmonary, M>39.05 and M29.15 and M37.15............    1.1408    0.8388    0.8240    0.7577        11        10        10         9
1602................................  Pain syndrome, M>26.75 and M39.25.
1702................................  Major multiple trauma without         1.3886    1.1779    1.0748    1.0002        13        14        12        12
                                       brain or spinal cord injury,
                                       M>31.05 and M25.55 and M40.85.
1802................................  Major multiple trauma with brain      1.8675    1.4148    1.2928    1.1503        19        17        15        14
                                       or spinal cord injury, M>23.05
                                       and M35.95...........    1.1501    0.9999    0.9724    0.8501        15        11        11        11
1902................................  Guillain Barre, M>18.05 and           2.2469    1.9534    1.8997    1.6609        25        22        21        20
                                       M49.15............    0.9280    0.7626    0.7034    0.6367         9         9         9         8
2002................................  Miscellaneous, M>38.75 and M27.85 and M0........................    1.6922    1.6922    1.3135    1.2742        18        19        15        15
5001................................  Short-stay cases, length of stay    ........  ........  ........    0.1562  ........  ........  ........         2
                                       is 3 days or fewer.
5101................................  Expired, orthopedic, length of      ........  ........  ........    0.7204  ........  ........  ........         8
                                       stay is 13 days or fewer.
5102................................  Expired, orthopedic, length of      ........  ........  ........    1.6962  ........  ........  ........        18
                                       stay is 14 days or more.
5103................................  Expired, not orthopedic, length of  ........  ........  ........    0.7928  ........  ........  ........         9
                                       stay is 15 days or fewer.
5104................................  Expired, not orthopedic, length of  ........  ........  ........    1.9018  ........  ........  ........        20
                                       stay is 16 days or more.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 2016 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 previously described), 
total estimated aggregate payments to IRFs for FY 2016 would not be 
affected as a result of the proposed CMG relative weight revisions. 
However, the proposed revisions would affect the distribution of 
payments within CMGs and tiers.

                   Table 2--Distributional Effects of the Changes to the CMG Relative Weights
                                  [FY 2015 values compared with FY 2016 values]
----------------------------------------------------------------------------------------------------------------
                                                                    Number of cases        Percentage of cases
                       Percentage change                                affected                 affected
----------------------------------------------------------------------------------------------------------------
Increased by 15% or more......................................                      157                      0.0
Increased by between 5% and 15%...............................                    2,292                      0.6
Changed by less than 5%.......................................                  353,020                     99.0
Decreased by between 5% and 15%...............................                    1,195                      0.3
Decreased by 15% or more......................................                       63                      0.0
----------------------------------------------------------------------------------------------------------------

    As Table 2 shows, 99 percent of all IRF cases are in CMGs and tiers 
that would experience less than a 5 percent change (either increase or 
decrease) in the CMG relative weight value as a result of the proposed 
revisions for FY 2016. The largest estimated increase in the proposed 
CMG relative weight values that affects the largest number of

[[Page 23341]]

IRF discharges would be a 0.2 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 2014 
claims data, 17,812 IRF discharges (5.0 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 would be 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 2014 IRF claims 
data, this change would have affected 8,544 cases (2.4 percent of all 
IRF cases).
    The proposed changes in the average length of stay values for FY 
2016, compared with the FY 2015 average length of stay values, are 
small and do not show any particular trends in IRF length of stay 
patterns.
    We invite public comment on our proposed update to the CMG relative 
weights and average length of stay values for FY 2016.

IV. Continued Use of FY 2014 Facility-Level Adjustment Factors

    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.'' Under this authority, we currently 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 Sec.  
412.624(e).
    Based on the substantive changes to the facility-level adjustment 
factors that were adopted in the FY 2014 final rule (79 FR 45872, 45882 
through 45883), we froze the facility-level adjustment factors at the 
FY 2014 levels for FY 2015 and all subsequent years. For FY 2016, we 
will continue to hold the adjustment factors at the FY 2014 levels as 
we continue to monitor the most current IRF claims data available and 
continue to evaluate and monitor the effects of the FY 2014 changes.

V. Proposed FY 2016 IRF PPS Payment Update

A. Background

    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 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. Section 1886(j)(3)(C)(ii)(I) of the Act requires the 
application of a productivity adjustment, as described below. In 
addition, sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the 
Act require the application of a 0.2 percentage point reduction to the 
market basket increase factor for FY 2016. Thus, in this proposed rule, 
we propose to update the IRF PPS payments for FY 2016 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, 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.
    We have utilized various market baskets through the years in the 
IRF PPS program. When we implemented the IRF PPS in January 2002, it 
used the Excluded Hospital with Capital market basket (which was based 
on 1992 Medicare cost reports for Medicare participating IRFs, IPFs, 
LTCHs, cancer hospitals, and children's hospitals) as an ``input price 
index'' (66 FR 41427 through 41430). Although ``market basket'' 
technically describes the mix of goods and services used in providing 
health care at a given point in time, this term is also commonly used 
to denote the input price index (that is, cost category weights and 
price proxies) derived from that market basket. Accordingly, the term 
``market basket,'' as used in this document, refers to an input price 
index.
    Beginning with the FY 2006 IRF PPS final rule (70 FR 47908), we 
adopted a 2002-based RPL market basket for the IRF PPS. This market 
basket reflected the operating and capital cost structures for 
freestanding IRFs, freestanding IPFs, and LTCHs. Cancer and children's 
hospitals were excluded from the RPL market basket because their 
payments are based entirely on reasonable costs subject to rate-of-
increase limits established under the authority of section 1886(b) of 
the Act and not through a PPS. Also, the 2002 cost structures for 
cancer and children's hospitals were noticeably different than the cost 
structures of freestanding IRFs, freestanding IPFs, and LTCHs. See the 
FY 2006 IRF PPS final rule (70 FR 47908) for a complete discussion of 
the 2002-based RPL market basket.
    In the FY 2010 IRF proposed rule (74 FR 21062), we expressed an 
interest in exploring the feasibility of creating a stand-alone IRF, or 
IRF-specific, market basket that reflects the cost structures of only 
IRF providers. But, as we noted in that discussion, Medicare cost 
report data revealed differences between cost levels and cost 
structures for freestanding and hospital-based IRF facilities. As we 
were unable at that time to fully understand these differences even 
after reviewing explanatory variables such as geographic variation, 
case mix, urban/rural status, share of low income patients, teaching 
status, and outliers (short stay and high-cost), we noted that we would 
continue to research ways to reconcile the differences and solicited 
public comment for additional information that might help us to better 
understand the reasons for the observed variations (74 FR 21062). We 
summarized the public comments we received and our responses in the FY 
2010 IRF PPS final rule (74 FR 39762, 39776 through 39778). Despite 
receiving comments from the public on this issue, however, we were 
still unable to sufficiently reconcile the observed variations, and, 
therefore, were unable to establish a stand-alone IRF market basket at 
that time.
    Beginning with the FY 2012 IRF PPS, payments were updated using a 
2008-based RPL market basket reflecting the operating and capital cost 
structures for freestanding IRFs, freestanding IPFs, and LTCHs (76 FR 
47849 through 47860). In doing so, we also used a more specific 
composite chemical price proxy; broke the professional fees cost 
category into two separate categories (Labor-related and Nonlabor-
related); and added two additional cost categories (Administrative and 
Business Support Services and Financial Services), which were 
previously included in the residual All Other cost category. The FY 
2012 IRF PPS proposed rule (76 FR 24229 through 24241) and FY 2012 IRF 
PPS final rule (76 FR 47849 through 47860) contain a complete 
discussion of the development of the 2008-based RPL market basket.
    We have continued to work on addressing our concerns regarding the 
development of a stand-alone IRF market basket since our FY 2010 
rulemaking cycle and, for the reasons described below, we believe using 
data from hospital-based and freestanding providers to derive the 
market basket cost weights despite their differences in cost levels and 
cost structures. Therefore, for FY 2016, we are proposing to create and 
adopt a 2012-based IRF market basket, using Medicare cost report data 
for both freestanding and hospital-based IRFs. In

[[Page 23342]]

the following discussion, we provide an overview of the proposed market 
basket and describe the methodologies used to determine the operating 
and capital portions of the proposed 2012-based IRF market basket.

B. Overview of the Proposed 2012-Based IRF Market Basket

    The proposed 2012-based IRF market basket is a fixed-weight, 
Laspeyres-type price index. A Laspeyres price index measures the change 
in price, over time, of the same mix of goods and services purchased in 
the base period. Any changes in the quantity or mix of goods and 
services (that is, intensity) purchased over time relative to a base 
period are not measured.
    The index itself is constructed in 3 steps. First, a base period is 
selected (in this proposed rule the base period is FY 2012), total base 
period costs are estimated for a set of mutually exclusive and 
exhaustive cost categories, and the proportion of total costs that each 
cost category represents is calculated. These proportions are called 
cost weights. Second, each cost category is matched to an appropriate 
price or wage variable, referred to as a price proxy. In nearly every 
instance where we have selected price proxies for the various market 
baskets, these price proxies are derived from publicly available 
statistical series that are published on a consistent schedule 
(preferably at least on a quarterly basis). In cases where a publicly 
available price series is not available (for example, a price index for 
malpractice insurance), we have collected price data from other sources 
and subsequently developed our own index to capture changes in prices 
for these types of costs. Finally, the cost weight for each cost 
category is multiplied by the established price proxy. The sum of these 
products (that is, the cost weights multiplied by their price levels) 
for all cost categories yields the composite index level of the market 
basket for the given time period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing the 
composite index level of one period by the composite index level for an 
earlier period produces a rate of growth in the input price index over 
that timeframe.
    As previously noted, the market basket is described as a fixed-
weight index because it represents the change in price over time of a 
constant mix (quantity and intensity) of goods and services needed to 
furnish IRF services. The effects on total costs resulting from changes 
in the mix of goods and services purchased subsequent to the base 
period are not measured. For example, an IRF hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the IRF, but would not be factored into the 
price change measured by a fixed-weight IRF market basket. Only when 
the index is rebased would changes in the quantity and intensity be 
captured, with those changes being reflected in the cost weights. 
Therefore, we rebase the market basket periodically so that the cost 
weights reflect recent changes in the mix of goods and services that 
IRFs purchase (hospital inputs) to furnish inpatient care between base 
periods.

C. Creating an IRF-Specific Market Basket

    As discussed in section V.A of this proposed rule, we have been 
exploring the possibility of creating a stand-alone, or IRF-specific, 
market basket that reflects the cost structures of only IRF providers. 
The major cost weights for the 2008-based RPL market basket were 
calculated using Medicare cost report data for those providers that 
complete a stand-alone Medicare cost report. We define a ``major cost 
weight'' as one for which we are able to obtain data from the Medicare 
cost report for that particular cost category (for example, Wages and 
Salaries). However, the Medicare cost report data does not collect 
detailed input cost data for the more detailed cost categories for 
which we would like to capture input price pressures (for example, 
Chemicals). Therefore, a public data source is used to identify the 
costs associated with these more detailed cost categories. For the 
2008-based RPL market basket, we used only data from stand-alone 
Medicare cost reports due to concerns regarding our ability to 
incorporate Medicare cost report data for hospital-based providers. In 
the FY 2015 IRF PPS final rule (79 FR 45884 through 45886), we 
presented several of these concerns (as restated below) but explained 
that we would continue to research the possibility of creating an IRF-
specific market basket to update IRF PPS payments.
    Since the FY 2015 IRF PPS final rule, we have performed additional 
research on the Medicare cost report data available for hospital-based 
IRFs and evaluated these concerns. We subsequently concluded from this 
research that Medicare cost report data for both hospital-based IRFs 
and freestanding IRFs can be used to calculate the major market basket 
cost weights for a stand-alone IRF market basket. We have developed a 
detailed methodology to derive market basket cost weights that are 
representative of the universe of IRF providers. We believe the use of 
this proposed 2012-based IRF market basket is a technical improvement 
over the RPL market basket that is currently used to update IRF PPS 
payments. As a result, in this FY 2016 IRF PPS proposed rule, we are 
proposing to adopt a 2012-based IRF market basket that reflects data 
for both freestanding and hospital-based IRFs. Below we discuss our 
prior concerns and provide reasons for why we believe it is technically 
feasible to create a stand-alone IRF market basket using Medicare cost 
report data for both hospital-based and freestanding IRFs.
    One concern discussed in the FY 2015 IRF PPS final rule (79 FR 
45884) was that the cost level differences for hospital-based IRFs 
relative to freestanding IRFs were not readily explained by the 
specific characteristics of the individual providers and/or the 
patients that they served (for example, characteristics related to case 
mix, urban/rural status, or teaching status). To address this concern, 
we used regression analysis to evaluate the effect of including 
hospital-based IRF Medicare cost report data in the calculation of cost 
distributions (which refers to how costs for certain categories relate 
to total costs for a particular provider). A more detailed description 
of these regression models can be found in the FY 2015 IRF final rule 
(79 FR 45884 through 45885). Based on this analysis, we concluded that 
the inclusion of those IRF providers with unexplained variability in 
costs would not significantly impact the cost weights and, therefore, 
should not be a major cause of concern.
    Another concern regarding the incorporation of hospital-based IRF 
data into the calculation of the market basket cost weights was 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 
for such facilities. However, Medicare 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. To use 
Medicare cost report data from these providers, we needed to determine 
the appropriate adjustments to apply to the data to ensure that the 
cost weights we use would represent only the hospital-based IRF (not 
the hospital as a whole). Over the past year, we worked to develop 
detailed methodologies to calculate the major cost weights for both 
freestanding and

[[Page 23343]]

hospital-based IRFs. We believe that our proposed methodologies and the 
resulting cost weights, described in section V.C.1 of this proposed 
rule, are reasonable and appropriate, but, as noted in that section, we 
welcome public comments on these proposals.
    We also evaluated the differences in cost weights for hospital-
based and freestanding IRFs and found the most significant differences 
occurred for salary and pharmaceutical costs. Specifically, the 
hospital-based IRF salary cost shares tend to be lower than those of 
freestanding IRFs while hospital-based IRF pharmaceutical cost shares 
tend to be higher than those of freestanding IRFs. Our proposed 
methodology for deriving costs for each of these categories can be 
found in section V.C.1 of this proposed rule. We will continue to 
research and monitor these cost shares to ensure these differences are 
explainable.
    In summary, our research over the past year allowed us to evaluate 
the appropriateness of including hospital-based IRF data in the 
calculation of the major cost weights for an IRF market basket. We 
believe that the proposed methodologies described below give us the 
ability to create a stand-alone IRF market basket that reflects the 
cost structure of the universe of IRF providers. Therefore, we believe 
that the use of this proposed 2012-based IRF market basket to update 
IRF PPS payments is a technical improvement over the current 2008-based 
RPL market basket, as the major cost weights are based on Medicare cost 
report data from both freestanding and hospital-based IRFs and do not 
include costs from either IPF or LTCH providers, which could have a 
different cost structure than IRFs.
1. Development of Cost Categories and Weights for the Proposed 2012-
Based IRF Market Basket
a. Use of Medicare Cost Report Data
    The proposed 2012-based IRF market basket consists of seven major 
cost categories derived from the FY 2012 Medicare cost reports (CMS 
Form 2552-10) for freestanding and hospital-based IRFs, consisting of 
Wages and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals, 
Professional Liability Insurance (PLI), Capital, and a residual 
category. The residual category reflects all remaining costs that are 
not captured in the other six cost categories. The FY 2012 cost reports 
include providers whose cost reporting period began on or after October 
1, 2011, and prior to September 30, 2012. We selected FY 2012 as the 
base year because the Medicare cost reports for that year were the most 
recent, complete set of Medicare cost report data available for IRFs at 
the time of development of the proposed IRF market basket.
    Since our goal was to establish cost weights that were reflective 
of case mix and practice patterns associated with the services IRFs 
provide to Medicare beneficiaries, we limited the cost reports used to 
establish the 2012-based IRF market basket to those from facilities 
that had a Medicare average length of stay (LOS) that was relatively 
similar to their facility average LOS. We believe that this trim 
eliminates statistical outliers and ensures a more accurate market 
basket that reflects the costs generally incurred during a Medicare-
covered stay. We defined the Medicare average LOS for freestanding IRFs 
based on what the IRFs reported on line 14 of Worksheet S-3, Part I. We 
defined the Medicare average LOS for hospital-based IRFs based on what 
was reported on line 17 of Worksheet S-3, Part I. We then used the cost 
reports from IRFs with a Medicare average LOS within 15 percent (that 
is, 15 percent higher or lower) than the facility average LOS for IRFs 
to establish the 2012-based IRF market basket. We apply this LOS edit 
to the data for IRFs to exclude providers that serve a population whose 
LOS would indicate that the patients served are not consistent with a 
LOS of a typical Medicare patient. This process resulted in the 
exclusion of about eight percent of the freestanding and hospital-based 
IRF Medicare cost reports. Of those excluded, about 18 percent were 
freestanding IRFs and 82 percent were hospital-based IRFs. This ratio 
is relatively consistent with the ratio of the universe of freestanding 
to hospital-based IRF providers. In the FY 2012 IRF PPS final rule (76 
FR 47850), the same process was used to derive the 2008-based RPL 
market basket.
    We then used the cost reports for IRFs that were not excluded 
through this process to calculate the costs for six of the seven major 
cost categories (Wages and Salaries, Employee Benefits, Contract Labor, 
Professional Liability Insurance, Pharmaceuticals, and Capital) for the 
market basket.
    Similar to the 2008-based RPL market basket major cost weights, the 
resulting 2012-based IRF market basket cost weights reflect Medicare 
allowable costs (routine, ancillary and capital)--costs that are 
eligible for reimbursement through the IRF PPS. We propose to define 
Medicare allowable costs for freestanding facilities as cost centers 
(CMS Form 2552-10): 30 through 35, 50 through 76 (excluding 52 and 75), 
90 through 91 and 93. We propose to define Medicare allowable costs for 
hospital-based facilities as cost centers (CMS Form 2552-10): 40, 50 
through 76 (excluding 52 and 75), 90 through 91 and 93.
    For freestanding IRFs, total Medicare allowable costs would be 
equal to the total costs as reported on Worksheet B, part I, column 26. 
For hospital-based IRFs, total Medicare allowable costs would be equal 
to total costs for the IRF inpatient unit after the allocation of 
overhead costs (Worksheet B, part I, column 26, line 41) and a 
proportion of total ancillary costs. We calculated the portion of 
ancillary costs attributable to the hospital-based IRF for a given 
ancillary cost center by multiplying total facility ancillary costs for 
the specific cost center (as reported on Worksheet B, Part I, column 
26) by the ratio of IRF Medicare ancillary costs for the cost center 
(as reported on Worksheet D-3, column 3 for hospital-based IRFs) to 
total Medicare ancillary costs for the cost center (equal to the sum of 
Worksheet D-3, column 3 for all relevant PPS (that is, IPPS, IRF, IPF 
and SNF)). We propose to use these methods to derive levels of total 
costs for IRF providers. With this work complete, we then set about 
deriving cost levels for six of the seven major cost categories.
(i) Wages and Salaries Costs
    For freestanding IRFs, Wages and Salaries costs are derived as the 
sum of inpatient salaries, ancillary salaries and a proportion of 
overhead (or general service cost center) salaries as reported on 
Worksheet A, column 1. Since overhead salary costs are attributable to 
the entire IRF, we only include the proportion attributable to the 
Medicare allowable cost centers. We estimate the proportion of overhead 
salaries that are attributed to Medicare allowable costs centers by 
multiplying the ratio of Medicare allowable area salaries to total 
salaries (Worksheet A, column 1, line 200) times total overhead 
salaries. In the FY 2012 IRF PPS final rule (76 FR 47850), a similar 
methodology was used to derive Wages and Salaries costs in the 2008-
based RPL market basket.
    For hospital-based IRFs, Wages and Salaries costs are derived as 
the sum of inpatient unit wages and salaries (Worksheet A, column 1, 
line 41) and a portion of salary costs attributable to total facility 
ancillary and overhead cost centers as these cost centers are shared 
with the entire facility. We calculate the portion of ancillary 
salaries attributable to the hospital-based IRF for a given ancillary 
cost center by multiplying total facility ancillary salary costs for 
the specific cost center (as reported on Worksheet A, column 1) by the 
ratio of

[[Page 23344]]

IRF Medicare ancillary costs for the cost center (as reported on 
Worksheet D-3, column 3 for hospital-based IRFs) to total Medicare 
ancillary costs for the cost center (equal to the sum of Worksheet D-3, 
column 3 for all relevant PPS units [that is, IPPS, IRF, IPF and SNF]). 
For example, if hospital-based IRF Medicare physical therapy costs 
represent 30 percent of the total Medicare physical therapy costs for 
the entire facility, then 30 percent of total facility physical therapy 
salaries (as reported in Worksheet A, column 1, line 66) would be 
attributable to the hospital-based IRF. We believe it is appropriate to 
use only a portion of the ancillary costs in the market basket cost 
weight calculations since the hospital-based IRF only utilizes a 
portion of the facility's ancillary services. We believe the ratio of 
reported IRF Medicare costs to reported total Medicare costs provides a 
reasonable estimate of the ancillary services utilized, and costs 
incurred, by the hospital-based IRF.
    We calculate the portion of overhead salary costs attributable to 
hospital-based IRFs by multiplying the total overhead costs 
attributable to the hospital-based IRF (sum of columns 4-18 on 
Worksheet B, part I, line 41) by the ratio of total facility overhead 
salaries (as reported on Worksheet A, column 1, lines 4-18) to total 
facility overhead costs (as reported on Worksheet A, column 7, lines 4-
18). This methodology assumes the proportion of total costs related to 
salaries for the overhead cost center is similar for all inpatient 
units (that is, acute inpatient or inpatient rehabilitation). Since the 
2008-based RPL market basket did not include hospital-based providers, 
this proposed methodology cannot be compared to the derivation of Wages 
and Salaries costs in the RPL market basket.
(ii) Employee Benefits Costs
    Effective with our implementation of CMS Form 2552-10, we began 
collecting Employee Benefits and Contract Labor data on Worksheet S-3, 
Part V. Previously, with CMS Form 2540-96, Employee Benefits and 
Contract Labor data were reported on Worksheet S-3, part II, which was 
applicable to only IPPS providers and, therefore, these data were not 
available for the derivation of the RPL market basket. Due to the lack 
of such data, the Employee Benefits cost weight for the 2008-based RPL 
market basket was derived by multiplying the 2008-based RPL market 
basket Wages and Salaries cost weight by the ratio of the IPPS hospital 
market basket Employee Benefits cost weight to the IPPS hospital market 
basket Wages and Salaries cost weight. Similarly, the Contract Labor 
cost weight for the 2008-based RPL market basket was derived by 
multiplying the 2008-based RPL market basket Wages and Salaries cost 
weight by the ratio of the IPPS hospital market basket Contract Labor 
cost weight to the IPPS hospital market basket Wages and Salaries cost 
weight (see FY 2012 IRF PPS final rule (76 FR 47850 through 47851)).
    For FY 2012 Medicare cost report data, while there were providers 
that did report data on Worksheet S-3, part V, many providers did not 
complete this worksheet. However, our analysis indicates that we had a 
large enough sample to enable us to produce a reasonable Employee 
Benefits cost weight. Specifically, we found that when we recalculated 
the cost weight after weighting to reflect the characteristics of the 
universe of IRF providers (freestanding and hospital-based), it did not 
have a material effect on the resulting cost weight. We continue to 
encourage all providers to report these data on the Medicare cost 
report.
    For freestanding IRFs, Employee Benefits costs are equal to the 
data reported on Worksheet S-3, Part V, line 2, column 2.
    For hospital-based IRFs, we calculate total benefits as the sum of 
benefit costs reported on Worksheet S-3 Part V, line 4, column 2, and a 
portion of ancillary benefits and overhead benefits for the total 
facility. Ancillary benefits attributable to the hospital-based IRF are 
calculated by multiplying ancillary salaries for the hospital-based IRF 
as determined in the derivation of Wages and Salaries for the hospital-
based IRF by the ratio of total facility benefits to total facility 
salaries. Similarly, overhead benefits attributable to the hospital-
based IRF are calculated by multiplying overhead salaries for the 
hospital-based IRF as determined in the derivation of Wages and 
Salaries for the hospital-based IRF by the ratio of total facility 
benefits to total facility salaries.
(iii) Contract Labor Costs
    Similar to the RPL and IPPS market baskets, Contract Labor costs 
are primarily associated with direct patient care services. Contract 
labor costs for services such as accounting, billing, and legal are 
estimated using other government data sources. As previously discussed 
in the Employee Benefits section, we now have data reported on 
Worksheet S-3, Part V that we can use to derive the Contract Labor cost 
weight for the 2012-based IRF market basket. As previously noted, for 
FY 2012 Medicare cost report data, while there were providers that did 
report data on Worksheet S-3, part V, many providers did not complete 
this worksheet. However, our analysis indicates that we had a large 
enough sample to enable us to produce a reasonable Contract Labor cost 
weight. Specifically, we found that when we recalculated the cost 
weight after weighting to reflect the characteristics of the universe 
of IRF providers (freestanding and hospital-based), it did not have a 
material effect on the resulting cost weight. We continue to encourage 
all providers to report these data on the Medicare cost report.
    For freestanding IRFs, Contract Labor costs are based on data 
reported on Worksheet S-3, part V, column 1, line 2, and for hospital-
based IRFs, Contract Labor costs are based on line 4 of this same 
worksheet.
(iv) Pharmaceuticals Costs
    For freestanding IRFs, pharmaceuticals costs are based on non-
salary costs reported on Worksheet A, column 7, less Worksheet A, 
column 1, for the pharmacy cost center (line 15) and drugs charged to 
patients cost center (line 73).
    For hospital-based IRFs, pharmaceuticals costs are based on a 
portion of the non-salary pharmacy costs and a portion of the non-
salary drugs charged to patient costs reported for the total facility. 
Non-salary pharmacy costs attributable to the hospital-based IRF are 
calculated by multiplying total pharmacy costs attributable to the 
hospital-based IRF (as reported on Worksheet B, column 15, line 41) by 
the ratio of total non-salary pharmacy costs (Worksheet A, column 2, 
line 15) to total pharmacy costs (sum of Worksheet A, column 1 and 2 
for line 15) for the total facility. Non-salary drugs charged to 
patient costs attributable to the hospital-based IRF are calculated by 
multiplying total non-salary drugs charged to patient costs (Worksheet 
B, part I, column 0, line 73, plus Worksheet B, part I, column 15, line 
73, less Worksheet A, column 1, line 73) for the total facility by the 
ratio of Medicare drugs charged to patient ancillary costs for the IRF 
unit (as reported on Worksheet D-3 for hospital-based IRFs, line 73, 
column 3) to total Medicare drugs charged to patient ancillary costs 
for the total facility (equal to the sum of Worksheet D-3, line 73, 
column 3, for all relevant PPS (that is, IPPS, IRF, IPF and SNF)).

[[Page 23345]]

(v) Professional Liability Insurance Costs
    For freestanding IRFs, Professional Liability Insurance (PLI) costs 
(often referred to as malpractice costs) are equal to premiums, paid 
losses and self-insurance costs reported on Worksheet S-2, line 118, 
columns 1 through 3. For hospital-based IRFs, we assume that the PLI 
weight for the total facility is similar to the hospital-based IRF unit 
since the only data reported on this worksheet is for the entire 
facility, as we currently have no means to identify the proportion of 
total PLI costs that are only attributable to the hospital-based IRF. 
Therefore, hospital-based IRF PLI costs are equal to total facility PLI 
(as reported on Worksheet S-2, line 118, columns 1 through 3) divided 
by total facility costs (as reported on Worksheet A, line 200) times 
hospital-based IRF Medicare allowable total costs. We welcome comments 
on this proposed method of deriving the PLI costs for hospital-based 
IRFs.
(vi) Capital Costs
    For freestanding IRFs, capital costs are equal to Medicare 
allowable capital costs as reported on Worksheet B, Part II, column 26.
    For hospital-based IRFs, capital costs are equal to IRF inpatient 
capital costs (as reported on Worksheet B, part II, column 26, line 41) 
and a portion of IRF ancillary capital costs. We calculate the portion 
of ancillary capital costs attributable to the hospital-based IRF for a 
given cost center by multiplying total facility ancillary capital costs 
for the specific ancillary cost center (as reported on Worksheet B, 
Part II, column 26) by the ratio of IRF Medicare ancillary costs for 
the cost center (as reported on Worksheet D-3, column 3 for hospital-
based IRFs) to total Medicare ancillary costs for the cost center 
(equal to the sum of Worksheet D-3, column 3 for all relevant PPS (that 
is, IPPS, IRF, IPF and SNF). For example, if hospital-based IRF 
Medicare physical therapy costs represent 30 percent of the total 
Medicare physical therapy costs for the entire facility, then 30 
percent of total facility physical therapy capital costs (as reported 
in Worksheet B, part II, column 26, line 66) would be attributable to 
the hospital-based IRF.
b. Final Major Cost Category Computation
    After we derived costs for the six major cost categories for each 
provider using the Medicare cost report data as previously described, 
we address data outliers using the following steps. First, we divide 
the costs for each of the six categories by total Medicare allowable 
costs calculated for the provider to obtain cost weights for the 
universe of IRF providers. We then remove those providers whose derived 
cost weights fall in the top and bottom five percent of provider 
specific derived cost weights to ensure the removal of outliers. After 
the outliers have been removed, we sum the costs for each category 
across all remaining providers. We then divide this by the sum of total 
Medicare allowable costs across all remaining providers to obtain a 
cost weight for the proposed 2012-based IRF market basket for the given 
category. Finally, we calculate the residual ``All Other'' cost weight 
that reflects all remaining costs that are not captured in the six cost 
categories listed. See Table 3 for the resulting cost weights for these 
major cost categories that we obtain from the Medicare cost reports.

  Table 3--Major Cost Categories as Derived From Medicare Cost Reports
------------------------------------------------------------------------
                                          2012-based IRF  2008-based RPL
          Major cost categories              (percent)       (percent)
------------------------------------------------------------------------
Wages and Salaries......................            45.5            47.4
Employee Benefits \1\...................            10.7            12.3
Contract Labor \1\......................             0.8             2.6
Professional Liability Insurance                     0.9             0.8
 (Malpractice)..........................
Pharmaceuticals.........................             5.1             6.5
Capital.................................             8.6             8.4
All Other...............................            28.4            22.0
------------------------------------------------------------------------
* Total may not sum to 100 due to rounding.
\1\ Due to the lack of Medicare cost report data, the Employee Benefits
  and Contract Labor cost weights in the 2008-based RPL market basket
  were based on the IPPS market basket.

    The Wages and Salaries cost weight obtained directly from the 
Medicare cost reports for the proposed 2012-based IRF market basket is 
approximately 2 percentage points lower than the Wages and Salaries 
cost weight for the 2008-based RPL market basket. This is primarily a 
result of the inclusion of hospital-based IRF data into the 2012-based 
IRF market basket. The lower Employee Benefits and Contract Labor cost 
weights in the 2012-based IRF market basket relative to the 2008-based 
RPL market basket are due to the incorporation of freestanding and 
hospital-based IRF specific data. The predecessor 2008-based RPL market 
basket used the IPPS market basket to derive the Employee Benefits and 
Contract Labor cost weights due to the lack of data on the Medicare 
cost reports. The lower pharmaceutical cost weight in the proposed 
2012-based IRF market basket relative to the 2008-based RPL market 
basket is mostly due to freestanding IRFs; the hospital-based IRFs 
pharmaceuticals cost weight is almost twice as large as the 
freestanding IRF pharmaceuticals cost weight.
    As we did for the 2008-based RPL market basket, we propose to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that contract labor costs are comprised of both 
wages and salaries and employee benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 81 percent; therefore, we propose to allocate 81 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 19 
percent to the Employee Benefits cost weight. Table 4 shows the Wages 
and Salaries and Employee Benefit cost weights after Contract Labor 
cost weight allocation for both the proposed 2012-based IRF market 
basket and 2008-based RPL market basket.

[[Page 23346]]

  Table 4--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
          Major cost categories           2012-based IRF  2008-based RPL
------------------------------------------------------------------------
Wages and Salaries......................            46.1            49.4
Employee Benefits.......................            10.9            12.8
------------------------------------------------------------------------

c. Derivation of the Detailed Operating Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the FY 2012 Medicare cost report data into more detailed cost 
categories, we propose to use the 2007 Benchmark Input-Output (I-O) 
``Use Tables/Before Redefinitions/Purchaser Value'' for NAICS 622000, 
Hospitals, published by the Bureau of Economic Analysis (BEA). This 
data is publicly available at the following Web site: http://www.bea.gov/industry/io_annual.htm
    The BEA Benchmark I-O data are scheduled for publication every five 
years with the most recent data available for 2007. The 2007 Benchmark 
I-O data are derived from the 2007 Economic Census and are the building 
blocks for BEA's economic accounts. Thus, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\1\ BEA also 
produces Annual I-O estimates; however, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we inflate the 2007 Benchmark I-O data forward to 2012 by applying the 
annual price changes from the respective price proxies to the 
appropriate market basket cost categories that are obtained from the 
2007 Benchmark I-O data. We repeat this practice for each year. We then 
calculate the cost shares that each cost category represents of the 
inflated 2012 data. These resulting 2012 cost shares are applied to the 
All Other residual cost weight to obtain the detailed cost weights for 
the proposed 2012-based IRF market basket. For example, the cost for 
Food: Direct Purchases represents 6.5 percent of the sum of the ``All 
Other'' 2007 Benchmark I-O Hospital Expenditures inflated to 2012; 
therefore, the Food: Direct Purchases cost weight represents 6.5 
percent of the 2012-based IRF market basket's ``All Other'' cost 
category (28.4 percent), yielding a ``final'' Food: Direct Purchases 
cost weight of 1.8 percent in the proposed 2012-based IRF market basket 
(0.065 * 28.4 percent = 1.8 percent).
---------------------------------------------------------------------------

    \1\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf
---------------------------------------------------------------------------

    Using this methodology, we derive eighteen detailed IRF market 
basket cost category weights from the proposed 2012-based IRF market 
basket residual cost weight (28.4 percent). These categories are: (1) 
Electricity, (2) Fuel, Oil, and Gasoline (3) Water & Sewerage (4) Food: 
Direct Purchases, (5) Food: Contract Services, (6) Chemicals, (7) 
Medical Instruments, (8) Rubber & Plastics, (9) Paper and Printing 
Products, (10) Miscellaneous Products, (11) Professional Fees: Labor-
related, (12) Administrative and Facilities Support Services, (13) 
Installation, Maintenance, and Repair, (14) All Other Labor-related 
Services, (15) Professional Fees: Nonlabor-related, (16) Financial 
Services, (17) Telephone Services, and (18) All Other Nonlabor-related 
Services.
d. Derivation of the Detailed Capital Cost Weights
    As described in section V.C.1.a.6 of this proposed rule, we are 
proposing a Capital-Related cost weight of 8.6 percent as obtained from 
the FY 2012 Medicare cost reports for freestanding and hospital-based 
IRF providers. We are proposing to then separate this total Capital-
Related cost weight into more detailed cost categories.
    Using FY 2012 Medicare cost reports, we are able to group Capital-
Related costs into the following categories: Depreciation, Interest, 
Lease, and Other Capital-Related costs. For each of these categories, 
we are proposing to determine separately for hospital-based IRFs and 
freestanding IRFs what proportion of total capital-related costs the 
category represents.
    For freestanding IRFs, we are proposing to derive the proportions 
for Depreciation, Interest, Lease, and Other Capital-related costs 
using the data reported by the IRF on Worksheet A-7, which is similar 
to the methodology used for the 2008-based RPL market basket.
    For hospital-based IRFs, data for these four categories are not 
reported separately for the hospital-based IRF; therefore, we are 
proposing to derive these proportions using data reported on Worksheet 
A-7 for the total facility. We are assuming the cost shares for the 
overall hospital are representative for the hospital-based IRF unit. 
For example, if depreciation costs make up 60 percent of total capital 
costs for the entire facility, we believe it is reasonable to assume 
that the hospital-based IRF would also have a 60 percent proportion 
because it is a unit contained within the total facility.
    To combine each detailed capital cost weight for freestanding and 
hospital-based IRFs into a single capital cost weight for the proposed 
2012-based IRF market basket, we are proposing to weight together the 
shares for each of the categories (Depreciation, Interest, Lease, and 
Other Capital-related costs) based on the share of total capital costs 
each provider type represents of the total capital costs for all IRFs 
for 2012. Applying this methodology, results in proportions of total 
capital-related costs for Depreciation, Interest, Lease and Other 
Capital-related costs that are representative of the universe of IRF 
providers.
    We are also proposing to allocate lease costs across each of the 
remaining detailed capital-related cost categories as was done in the 
2008-based RPL market basket. This would result in three primary 
capital-related cost categories in the proposed 2012-based IRF market 
basket: Depreciation, Interest, and Other Capital-Related costs. Lease 
costs are unique in that they are not broken out as a separate cost 
category in the proposed 2012-based IRF market basket. Rather, we are 
proposing to proportionally distribute these costs among the cost 
categories of Depreciation, Interest, and Other Capital-Related, 
reflecting the assumption that the underlying cost structure of leases 
is similar to that of capital-related costs in general. As was done 
under the 2008-based RPL market basket, we are proposing to assume that 
10 percent of the lease costs as a proportion of total capital-related 
costs represents overhead and assign those costs to the Other Capital-
Related cost category accordingly. We propose to distribute the 
remaining lease costs proportionally across the three cost categories 
(Depreciation, Interest, and Other Capital-Related) based on the 
proportion that these categories comprise of the sum of the 
Depreciation,

[[Page 23347]]

Interest, and Other Capital-related cost categories (excluding lease 
expenses). This is the same methodology used for the 2008-based RPL 
market basket. The allocation of these lease expenses are shown in 
Table 5.
    Finally, we are proposing to further divide the Depreciation and 
Interest cost categories. We are proposing to separate Depreciation 
into the following two categories: (1) Building and Fixed Equipment and 
(2) Movable Equipment; and proposing to separate Interest into the 
following two categories: (1) Government/Nonprofit and (2) For-profit.
    To disaggregate the Depreciation cost weight, we need to determine 
the percent of total Depreciation costs for IRFs that is attributable 
to Building and Fixed Equipment, which we hereafter refer to as the 
``fixed percentage.'' For the proposed 2012-based IRF market basket, we 
are proposing to use slightly different methods to obtain the fixed 
percentages for hospital-based IRFs compared to freestanding IRFs.
    For freestanding IRFs, we are proposing to use depreciation data 
from Worksheet A-7 of the FY 2012 Medicare cost reports, similar to the 
methodology used for the 2008-based RPL market basket. However, for 
hospital-based IRFs, we determined that the fixed percentage for the 
entire facility may not be representative of the hospital-based IRF 
unit due to the entire facility likely employing more sophisticated 
movable assets that are not utilized by the hospital-based IRF. 
Therefore, for hospital-based IRFs, we are proposing to calculate a 
fixed percentage using: (1) Building and fixture capital costs 
allocated to the hospital-based IRF unit as reported on Worksheet B, 
part I line 41 and (2) building and fixture capital costs for the top 
five ancillary cost centers utilized by hospital-based IRFs. We propose 
to weight these two fixed percentages (inpatient and ancillary) using 
the proportion that each capital cost type represents of total capital 
costs in the proposed 2012-based IRF market basket. We are proposing to 
then weight the fixed percentages for hospital-based and freestanding 
IRFs together using the proportion of total capital costs each provider 
type represents.
    To disaggregate the Interest cost weight, we need to determine the 
percent of total interest costs for IRFs that are attributable to 
government and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' as price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. For the IRF market basket, we are proposing to use interest 
costs data from Worksheet A-7 of the FY 2012 Medicare cost reports for 
both freestanding and hospital-based IRFs, similar to the methodology 
used for the 2008-based RPL market basket. We are proposing to 
determine the percent of total interest costs that are attributed to 
government and nonprofit IRFs separately for hospital-based and 
freestanding IRFs. We then are proposing to weight the nonprofit 
percentages for hospital-based and freestanding IRFs together using the 
proportion of total capital costs that each provider type represents.
    Table 5 provides the detailed capital cost shares obtained from the 
Medicare cost reports. Ultimately, these detailed capital cost shares 
are applied to the total Capital-Related cost weight determined in 
section V.C.1.a.6 of this proposed rule to split out the total weight 
of 8.6 percent into more detailed cost categories and weights.

 Table 5--Detailed Capital Cost Weights for the Proposed 2012-Based IRF
                              Market Basket
------------------------------------------------------------------------
                                                       Proposed detailed
                                       Cost shares        capital cost
                                      obtained from       shares after
                                      medicare cost      allocation of
                                    reports (percent)    lease expenses
                                                           (percent)
------------------------------------------------------------------------
Depreciation......................                 61                 74
Building and Fixed Equipment......                 39                 48
Movable Equipment.................                 22                 26
Interest..........................                 13                 16
Government/Nonprofit..............                  8                 10
For Profit........................                  5                  6
Lease.............................                 20                n/a
Other.............................                  6                 10
------------------------------------------------------------------------

e. Proposed 2012-Based IRF Market Basket Cost Categories and Weights
    Table 6 shows the cost categories and weights for the proposed 
2012-based IRF market basket compared to the 2008-based RPL market 
basket.
BILLING CODE 4120-01-P

[[Page 23348]]

[GRAPHIC] [TIFF OMITTED] TP27AP15.000

[[Page 23349]]

[GRAPHIC] [TIFF OMITTED] TP27AP15.001

                               * Detail may not add to total due to
                                rounding.
 

BILLING CODE 4120-01-C
    The proposed 2012-based IRF market basket does not include separate 
cost categories for Apparel, Machinery & Equipment, and Postage. Due to 
the small weights associated with these detailed categories and 
relatively stable price growth in the applicable price proxy, we are 
proposing to include Apparel and Machinery & Equipment in the 
Miscellaneous Products cost category and Postage in the All-Other 
Nonlabor-related Services. We note that these Machinery & Equipment 
expenses are for equipment that is paid for in a given year and not 
depreciated over the asset's useful life. Depreciation expenses for 
movable equipment are reflected in the Capital-related costs of the 
proposed 2012-based IRF market basket. For the proposed 2012-based IRF 
market basket, we are also proposing to include a separate cost 
category for Installation, Maintenance, and Repair.
2. Selection of Price Proxies
    After developing the cost weights for the proposed 2012-based IRF 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of price change for each 
expenditure category. For the majority of the cost weights, we base the 
price proxies on U.S. Bureau of Labor Statistics (BLS) data and group 
them into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the North American Industry 
Classification System (NAICS), and the occupational ECIs are based on 
the Standard Occupational Classification System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPIs are available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied. 
The CPIs, PPIs, and Employment Cost Index (ECIs) that we have selected 
to propose in this regulation meet these criteria. Therefore, we 
believe that they continue to be the best measure of price changes for 
the cost categories to which they would be applied.
    Table 6 lists all price proxies for the proposed 2012-based IRF 
market basket. Below is a detailed explanation of the price proxies we 
are proposing for each cost category weight. We note that many of the 
proxies for the 2012-based IRF market basket are the same as those used 
for the FY 2008-based RPL market basket. For further discussion on the 
FY 2008-based RPL market basket, see the FY 2012 IRF final rule (76 FR 
47852 through 47860).

[[Page 23350]]

a. Price Proxies for the Operating Portion of the Proposed 2012-Based 
IRF Market Basket
1. Wages and Salaries
    We are proposing to continue to use the ECI for Wages and Salaries 
for All Civilian workers in Hospitals (BLS series code 
#CIU1026220000000I) to measure the wage rate growth of this cost 
category. This is the same price proxy used in the 2008-based RPL 
market basket.
2. Benefits
    We are proposing to continue to use the ECI for Total Benefits for 
All Civilian workers in Hospitals to measure price growth of this 
category. This ECI is calculated using the ECI for Total Compensation 
for All Civilian workers in Hospitals (BLS series code # 
CIU1016220000000I) and the relative importance of wages and salaries 
within total compensation. This is the same price proxy used in the 
2008-based RPL market basket.
3. Electricity
    We are proposing to continue to use the PPI for Commercial Electric 
Power (BLS series code #WPU0542) to measure the price growth of this 
cost category. This is the same price proxy used in the 2008-based RPL 
market basket.
4. Fuel, Oil, and Gasoline
    We are proposing to change the proxy used for the Fuel, Oil, and 
Gasoline cost category. The 2008-based RPL market basket uses the PPI 
for Petroleum Refineries (BLS series code #PCU32411-32411) to proxy 
these expenses.
    For the proposed 2012-based IRF market basket, we are proposing to 
use a blend of the PPI for Petroleum Refineries and the PPI Commodity 
for Natural Gas (BLS series code #WPU0531). Our analysis of the Bureau 
of Economic Analysis' 2007 Benchmark Input-Output data (use table 
before redefinitions, purchaser's value for NAICS 622000 [Hospitals]), 
shows that Petroleum Refineries expenses accounts for approximately 70 
percent and Natural Gas accounts for approximately 30 percent of the 
Fuel, Oil, and Gasoline expenses. Therefore, we propose a blend using 
of 70 percent of the PPI for Petroleum Refineries (BLS series code 
#PCU32411-32411) and 30 percent of the PPI Commodity for Natural Gas 
(BLS series code #WPU0531). We believe that these 2 price proxies are 
the most technically appropriate indices available to measure the price 
growth of the Fuel, Oil, and Gasoline cost category in the proposed 
2012-based IRF market basket.
5. Water and Sewerage
    We are proposing to continue to use the CPI for Water and Sewerage 
Maintenance (BLS series code #CUUR0000SEHG01) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
6. Professional Liability Insurance
    We are proposing to continue to use the CMS Hospital Professional 
Liability Index to measure changes in PLI premiums. To generate this 
index, we collect commercial insurance premiums for a fixed level of 
coverage while holding non-price factors constant (such as a change in 
the level of coverage). This is the same proxy used in the 2008-based 
RPL market basket.
7. Pharmaceuticals
    We are proposing to continue to use the PPI for Pharmaceuticals for 
Human Use, Prescription (BLS series code #WPUSI07003) to measure the 
price growth of this cost category. This is the same proxy used in the 
2008-based RPL market basket.
8. Food: Direct Purchases
    We are proposing to continue to use the PPI for Processed Foods and 
Feeds (BLS series code #WPU02) to measure the price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
9. Food: Contract Purchases
    We are proposing to continue to use the CPI for Food Away From Home 
(BLS series code #CUUR0000SEFV) to measure the price growth of this 
cost category. This is the same proxy used in the 2008-based RPL market 
basket.
10. Chemicals
    We are proposing to continue to use a four part blended PPI 
composed of the PPI for Industrial Gas Manufacturing (BLS series code 
PCU325120325120P), the PPI for Other Basic Inorganic Chemical 
Manufacturing (BLS series code #PCU32518-32518), the PPI for Other 
Basic Organic Chemical Manufacturing (BLS series code #PCU32519-32519), 
and the PPI for Soap and Cleaning Compound Manufacturing (BLS series 
code #PCU32561-32561). We propose updating the blend weights using 2007 
Benchmark I-O data, which compared to 2002 Benchmark I-O data is 
weighted more toward organic chemical products and weighted less toward 
inorganic chemical products.
    Table 7 shows the proposed weights for each of the four PPIs used 
to create the blended PPI. These are the same four proxies used in the 
2008-based RPL market basket; however, the blended PPI weights in the 
2008-based RPL market baskets were based on 2002 Benchmark I-O data.

                                      Table 7--Blended Chemical PPI Weights
----------------------------------------------------------------------------------------------------------------
                                                                  Proposed 2012-
                                                                    based  IRF      2008-based
                              Name                                    weights       RPL weights        NAICS
                                                                     (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................              32              35          325120
PPI for Other Basic Inorganic Chemical Manufacturing............              17              25          325180
PPI for Other Basic Organic Chemical Manufacturing..............              45              30          325190
PPI for Soap and Cleaning Compound Manufacturing................               6              10          325610
----------------------------------------------------------------------------------------------------------------

11. Medical Instruments
    We are proposing to use a blend for the Medical Instruments cost 
category. The 2007 Benchmark Input-Output data shows an approximate 50/
50 split between Surgical and Medical Instruments and Medical and 
Surgical Appliances and Supplies for this cost category. Therefore, we 
propose a blend composed of 50 percent of the commodity-based PPI for 
Surgical and Medical Instruments (BLS code #WPU1562) and 50 percent of 
the commodity-based PPI for Medical and Surgical Appliances and 
Supplies (BLS code #WPU1563). The 2008-based RPL market basket uses the 
single, higher level PPI for Medical, Surgical, and Personal Aid 
Devices (BLS series code #WPU156).

[[Page 23351]]

12. Rubber and Plastics
    We are proposing to continue to use the PPI for Rubber and Plastic 
Products (BLS series code #WPU07) to measure price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
13. Paper and Printing Products
    We are proposing to continue to use the PPI for Converted Paper and 
Paperboard Products (BLS series code #WPU0915) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
14. Miscellaneous Products
    We are proposing to continue to use the PPI for Finished Goods Less 
Food and Energy (BLS series code #WPUSOP3500) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
15. Professional Fees: Labor-Related
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Professional and Related (BLS series 
code #CIU2010000120000I) to measure the price growth of this category. 
This is the same proxy used in the 2008-based RPL market basket.
16. Administrative and Facilities Support Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Office and Administrative Support (BLS 
series code #CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2008-based RPL market 
basket.
17. Installation, Maintenance, and Repair
    We are proposing to use the ECI for Total Compensation for Civilian 
workers in Installation, Maintenance, and Repair (BLS series code 
#CIU1010000430000I) to measure the price growth of this new cost 
category. Previously these costs were included in the All Other: Labor-
related Services category and were proxied by the ECI for Total 
Compensation for Private Industry workers in Service Occupations (BLS 
series code #CIU2010000300000I). We believe that this index better 
reflects the price changes of labor associated with maintenance-related 
services and its incorporation represents a technical improvement to 
the market basket.
18. All Other: Labor-Related Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Service Occupations (BLS series code 
#CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
19. Professional Fees: Nonlabor-Related
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Professional and Related (BLS series 
code #CIU2010000120000I) to measure the price growth of this category. 
This is the same proxy used in the 2008-based RPL market basket.
20. Financial Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Financial Activities (BLS series code 
#CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
21. Telephone Services
    We are proposing to continue to use the CPI for Telephone Services 
(BLS series code #CUUR0000SEED) to measure the price growth of this 
cost category. This is the same proxy used in the 2008-based RPL market 
basket.
22. All Other: Nonlabor-Related Services
    We are proposing to continue to use the CPI for All Items Less Food 
and Energy (BLS series code #CUUR0000SA0L1E) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
b. Price Proxies for the Capital Portion of the Proposed 2012-Based IRF 
Market Basket
1. Capital Price Proxies Prior to Vintage Weighting
    We are proposing to apply the same price proxies to the detailed 
capital-related cost categories as were applied in the 2008-based RPL 
market basket, which are provided in Table 7 and described below. We 
are also proposing to continue to vintage weight the capital price 
proxies for Depreciation and Interest to capture the long-term 
consumption of capital. This vintage weighting method is similar to the 
method used for the 2008-based RPL market basket and is described in 
section V.C.2.b.2 of this proposed rule.
    We are proposing to proxy the Depreciation: Building and Fixed 
Equipment cost category by BEA's Chained Price Index for Nonresidential 
Construction for Hospitals and Special Care Facilities (BEA Table 
5.4.4. Price Indexes for Private Fixed Investment in Structures by 
Type), the Depreciation: Movable Equipment cost category by the PPI for 
Machinery and Equipment (BLS series code #WPU11), the Nonprofit 
Interest cost category by the average yield on domestic municipal bonds 
(Bond Buyer 20-bond index), the For-profit Interest cost category by 
the average yield on Moody's Aaa bonds (Federal Reserve), and the Other 
Capital-Related cost category by the CPI-U for Rent of Primary 
Residence (BLS series code #CUUS0000SEHA). We believe these are the 
most appropriate proxies for IRF capital-related costs that meet our 
selection criteria of relevance, timeliness, availability, and 
reliability.
2. Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2012-based IRF market basket is 
intended to capture the long-term consumption of capital, using vintage 
weights for depreciation (physical capital) and interest (financial 
capital). These vintage weights reflect the proportion of capital-
related purchases attributable to each year of the expected life of 
building and fixed equipment, movable equipment, and interest. We are 
proposing to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual non-vintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for IRF capital-related costs. 
The capital-related component of the proposed 2012-based IRF market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    To calculate the vintage weights for depreciation and interest 
expenses, we first need a time series of capital-related purchases for 
building and fixed

[[Page 23352]]

equipment and movable equipment. We found no single source that 
provides an appropriate time series of capital-related purchases by 
hospitals for all of the above components of capital purchases. The 
early Medicare cost reports did not have sufficient capital-related 
data to meet this need. Data we obtained from the American Hospital 
Association (AHA) do not include annual capital-related purchases. 
However, we are able to obtain data on total expenses back to 1963 from 
the AHA. Consequently, we are proposing to use data from the AHA Panel 
Survey and the AHA Annual Survey to obtain a time series of total 
expenses for hospitals. We are then proposing to use data from the AHA 
Panel Survey supplemented with the ratio of depreciation to total 
hospital expenses obtained from the Medicare cost reports to derive a 
trend of annual depreciation expenses for 1963 through 2012. We propose 
to separate these depreciation expenses into annual amounts of building 
and fixed equipment depreciation and movable equipment depreciation as 
determined earlier. From these annual depreciation amounts we derive 
annual end-of-year book values for building and fixed equipment and 
movable equipment using the expected life for each type of asset 
category. While data is not available that is specific to IRFs, we 
believe this information for all hospitals serves as a reasonable 
alternative for the pattern of depreciation for IRFs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also need to account for the expected lives for 
Building and Fixed Equipment, Movable Equipment, and Interest for the 
proposed 2012-based IRF market basket. We are proposing to calculate 
the expected lives using Medicare cost report data from freestanding 
and hospital-based IRFs. The expected life of any asset can be 
determined by dividing the value of the asset (excluding fully 
depreciated assets) by its current year depreciation amount. This 
calculation yields the estimated expected life of an asset if the rates 
of depreciation were to continue at current year levels, assuming 
straight-line depreciation. We are proposing to determine the expected 
life of building and fixed equipment separately for hospital-based IRFs 
and freestanding IRFs, and then weight these expected lives using the 
percent of total capital costs each provider type represents. We are 
proposing to apply a similar method for movable equipment. Using these 
proposed methods, we determined the average expected life of building 
and fixed equipment to be equal to 23 years, and the average expected 
life of movable equipment to be equal to 11 years. For the expected 
life of interest, we believe vintage weights for interest should 
represent the average expected life of building and fixed equipment 
because, based on previous research described in the FY 1997 IPPS final 
rule (61 FR 46198), the expected life of hospital debt instruments and 
the expected life of buildings and fixed equipment are similar. We note 
that for the 2008-based RPL market basket, we used FY 2008 Medicare 
cost reports for IPPS hospitals to determine the expected life of 
building and fixed equipment and movable equipment (76 FR 51763). The 
2008-based RPL market basket was based on an expected average life of 
building and fixed equipment of 26 years and an expected average life 
of movable equipment of 11 years, which were both calculated using data 
for IPPS hospitals.
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. We then calculate a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we are proposing to use the real annual capital-related 
purchase amounts for each asset type to capture the actual amount of 
the physical acquisition, net of the effect of price inflation. These 
real annual capital-related purchase amounts are produced by deflating 
the nominal annual purchase amount by the associated price proxy as 
provided earlier in this proposed rule. For the interest vintage 
weights, we are proposing to use the total nominal annual capital-
related purchase amounts to capture the value of the debt instrument 
(including, but not limited to, mortgages and bonds). Using these 
capital-related purchase time series specific to each asset type, we 
are proposing to calculate the vintage weights for building and fixed 
equipment, for movable equipment, and for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 23 years, and in the 
case of movable equipment, 11 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2012 back to 1964. These data allow us to derive twenty-seven 23-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and thirty-nine 11-year periods of capital-related 
purchases for movable equipment. For each 23-year period for building 
and fixed equipment and interest, or 11-year period for movable 
equipment, we calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 23-year or 11-year period. This calculation 
is done for each year in the 23-year or 11-year period and for each of 
the periods for which we have data. We then calculate the average 
vintage weight for a given year of the expected life by taking the 
average of these vintage weights across the multiple periods of data. 
The vintage weights for the capital-related portion of the 2008-based 
RPL market basket and the proposed 2012-based IRF market basket are 
presented in Table 8.

            Table 8--2008-Based RPL Market Basket and Proposed 2012-Based IRF Market Basket Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Building and fixed equipment          Movable equipment                   Interest
                                                         -----------------------------------------------------------------------------------------------
                          Year                             2012-based 23   2008-based 26   2012-based 11   2008-based 11   2012-based 23   2008-based 26
                                                               years           years           years           years           years           years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           0.029           0.021           0.069           0.071           0.017           0.010
2.......................................................           0.031           0.023           0.073           0.075           0.019           0.012
3.......................................................           0.034           0.025           0.077           0.080           0.022           0.014
4.......................................................           0.036           0.027           0.083           0.083           0.024           0.016
5.......................................................           0.037           0.028           0.087           0.085           0.026           0.018
6.......................................................           0.039           0.030           0.091           0.089           0.028           0.020
7.......................................................           0.040           0.031           0.096           0.092           0.030           0.021

[[Page 23353]]

 
8.......................................................           0.041           0.033           0.100           0.098           0.032           0.024
9.......................................................           0.042           0.035           0.103           0.103           0.035           0.026
10......................................................           0.044           0.037           0.107           0.109           0.038           0.029
11......................................................           0.045           0.039           0.114           0.116           0.040           0.033
12......................................................           0.045           0.041  ..............  ..............           0.042           0.035
13......................................................           0.045           0.042  ..............  ..............           0.044           0.038
14......................................................           0.046           0.043  ..............  ..............           0.046           0.041
15......................................................           0.046           0.044  ..............  ..............           0.048           0.043
16......................................................           0.048           0.045  ..............  ..............           0.053           0.046
17......................................................           0.049           0.046  ..............  ..............           0.057           0.049
18......................................................           0.050           0.047  ..............  ..............           0.060           0.052
19......................................................           0.051           0.047  ..............  ..............           0.063           0.053
20......................................................           0.051           0.045  ..............  ..............           0.066           0.053
21......................................................           0.051           0.045  ..............  ..............           0.067           0.055
22......................................................           0.050           0.045  ..............  ..............           0.069           0.056
23......................................................           0.052           0.046  ..............  ..............           0.073           0.060
24......................................................  ..............           0.046  ..............  ..............  ..............           0.063
25......................................................  ..............           0.045  ..............  ..............  ..............           0.064
26......................................................  ..............           0.046  ..............  ..............  ..............           0.068
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................           1.000           1.000           1.000           1.000           1.000           1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table 8 is applied to the most recent data 
point. We have provided on the CMS Web site an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the IPPS FY 2010 Proposed Rule.''
c. Summary of Price Proxies of the Proposed 2012-Based IRF Market 
Basket
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BILLING CODE 4120-01-P

D. Proposed FY 2016 Market Basket Update and Productivity Adjustment

1. Proposed FY 2016 Market Basket Update
    For FY 2016, we are proposing to use the proposed 2012-based IRF 
market basket increase factor described in section V.C. of this 
proposed rule to update the IRF PPS base payment rate. Consistent with 
historical practice, we estimate the market basket update for the IRF 
PPS based on IHS Global Insight's forecast using the most recent 
available data. IHS Global Insight (IGI), Inc. is a nationally 
recognized economic and financial forecasting firm with which CMS 
contracts to forecast the components of the market baskets and 
multifactor productivity (MFP).
    Based on IGI's first quarter 2015 forecast with historical data 
through the fourth quarter of 2014, the projected proposed 2012-based 
IRF market basket increase factor for FY 2016 would be 2.7 percent. 
Therefore, consistent with our historical practice of estimating market 
basket increases based on the best available data, we are proposing a 
market basket increase factor of 2.7 percent for FY 2016. We are also 
proposing that if more recent data are subsequently available (for 
example, a more recent estimate of the market basket) we would use such 
data, to determine the FY 2016 update in the final rule.
    For comparison, the 2008-based RPL market basket is projected to be 
2.8 percent in FY 2016; this estimate is based on IGI's first quarter 
2015 forecast (with historical data through the fourth quarter of 
2014). Table 10 compares the proposed 2012-based IRF market basket and 
the 2008-based RPL market basket percent changes.

   Table 10--Proposed 2012-Based IRF Market Basket and 2008-Based RPL
         Market Basket Percent Changes, FY 2010 Through FY 2018
------------------------------------------------------------------------
                                          Proposed  2012-   2008-based
                                            based  IRF      RPL market
            Fiscal year (FY)              market  basket   basket index
                                          index  percent      percent
                                               change         change
------------------------------------------------------------------------
Historical data:
    FY 2010.............................             2.1             2.2
    FY 2011.............................             2.3             2.5
    FY 2012.............................             1.8             2.2
    FY 2013.............................             2.0             2.1
    FY 2014.............................             1.8             1.8
    Average 2010-2014...................             2.0             2.2
Forecast:
    FY 2015.............................             1.8             2.2
    FY 2016.............................             2.7             2.8
    FY 2017.............................             3.0             3.0
    FY 2018.............................             3.1             3.1
    Average 2015-2018...................             2.7             2.8
------------------------------------------------------------------------
Note that these market basket percent changes do not include any further
  adjustments as may be statutorily required.
Source: IHS Global Insight, Inc. 1st quarter 2015 forecast.

    For FY 2016, the proposed 2012-based IRF market basket update (2.7 
percent) is a tenth of a percentage point lower than the 2008-based RPL 
market basket (2.8 percent). The 0.1 percentage point difference stems 
from the lower Compensation cost weight in the proposed 2012-based IRF 
market basket (57.0 percent) compared to the 2008-based RPL market 
basket (62.3 percent) and the lower Pharmaceuticals cost weight in the 
proposed 2012-based IRF market basket (5.1 percent) compared to the 
2008-based RPL market basket (6.5 percent). The downward pressure on 
the proposed 2012-based IRF market basket update from these two 
categories is partially offset by the higher All Other Services cost 
weight in the proposed 2012-based IRF market basket (17.2 percent) 
compared to the 2008-based RPL market basket (11.4 percent).
2. Proposed Productivity Adjustment
    According to Section 1886(j)(3)(C)(i) of the Act, the Secretary 
shall establish an increase factor based on an appropriate percentage 
increase in a market basket of goods and services. As described in 
section V.C and V.D.1. of this proposed rule, we are proposing to 
estimate the IRF PPS increase factor for FY 2016 based on the proposed 
2012-based IRF market basket. Section 1886(j)(3)(C)(ii) of the Act then 
requires that, after establishing the increase factor for a FY, the 
Secretary shall reduce such increase factor for FY 2012 and each 
subsequent FY, by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the 
Act sets forth the definition of this productivity adjustment. The 
statute defines the productivity adjustment to be equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business MFP (as projected by the Secretary for the 10-year period 
ending with the applicable FY, year, cost reporting period, or other

[[Page 23356]]

annual period) (the ``MFP adjustment''). The BLS publishes the official 
measure of private nonfarm business MFP. Please see http://www.bls.gov/mfp for the BLS historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
input growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market basket and MFP. As described in the FY 2012 IRF PPS final 
rule (76 FR 47836, 47858 through 47859), to generate a forecast of MFP, 
IGI replicated the MFP measure calculated by the BLS using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. In the FY 
2012 IRF PPS final rule, we identified each of the major MFP component 
series employed by the BLS to measure MFP as well as provided the 
corresponding concepts determined to be the best available proxies for 
the BLS series. Beginning with the FY 2016 rulemaking cycle, the MFP 
adjustment is calculated using a revised series developed by IGI to 
proxy the aggregate capital inputs. Specifically, IGI has replaced the 
Real Effective Capital Stock used for Full Employment GDP with a 
forecast of BLS aggregate capital inputs recently developed by IGI 
using a regression model. This series provides a better fit to the BLS 
capital inputs, as measured by the differences between the actual BLS 
capital input growth rates and the estimated model growth rates over 
the historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the FY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although 
we discuss the IGI changes to the MFP proxy series in this proposed 
rule, in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
    Using IGI's first quarter 2015 forecast, the MFP adjustment for FY 
2016 (the 10-year moving average of MFP for the period ending FY 2016) 
is projected to be 0.6 percent. Thus, in accordance with section 
1886(j)(3)(C) of the Act, we propose to base the FY 2016 market basket 
update, which is used to determine the applicable percentage increase 
for the IRF payments, on the most recent estimate of the proposed 2012-
based IRF market basket (currently estimated to be 2.7 percent based on 
IGI's first quarter 2015 forecast). We propose to then reduce this 
percentage increase by the current estimate of the MFP adjustment for 
FY 2016 of 0.6 percentage point (the 10-year moving average of MFP for 
the period ending FY 2016 based on IGI's first quarter 2015 forecast). 
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 2016 IRF update is 1.9 percent (2.7 percent 
market basket update, less 0.6 percentage point MFP adjustment, less 
0.2 percentage point legislative adjustment). Furthermore, we note that 
if more recent data are subsequently available (for example, a more 
recent estimate of the market basket and MFP adjustment), we would use 
such data to determine the FY 2016 market basket update and MFP 
adjustment in the final rule.
    For FY 2016, the Medicare Payment Advisory Commission (MedPAC) 
recommends that a 0 percent update be applied to IRF PPS payment rates. 
As discussed, 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 1.9 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 2016.
    We invite public comment on these proposals.

E. Proposed Labor-Related Share for FY 2016

    Section 1886(j)(6) of the Act specifies that the Secretary is to 
adjust the proportion (as estimated by the Secretary from time to time) 
of rehabilitation facilities' costs which are attributable to wages and 
wage-related costs, of the prospective payment rates computed under 
section 1886(j)(3) for area differences in wage levels 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 such facilities. The labor-related 
share is determined by identifying the national average proportion of 
total costs that are related to, influenced by, or vary with the local 
labor market. We continue to classify a cost category as labor-related 
if the costs are labor-intensive and vary with the local labor market. 
As stated in the FY 2015 IRF PPS final rule (79 FR 45886), the labor-
related share for FY 2015 was defined as the sum of the FY 2015 
relative importance of Wages and Salaries, Employee Benefits, 
Professional Fees: Labor- Related Services, Administrative and Business 
Support Services, All Other: Labor-related Services, and a portion of 
the Capital Costs from the 2008-based RPL market basket.
    Based on our definition of the labor-related share and the cost 
categories in the proposed 2012-based IRF market basket, we are 
proposing to include in the labor-related share for FY 2016 the sum of 
the FY 2016 relative importance of Wages and Salaries, Employee 
Benefits, Professional Fees: Labor- Related, Administrative and 
Facilities Support Services, Installation, Maintenance, and Repair, All 
Other: Labor-related Services, and a portion of the Capital-Related 
cost weight from the proposed 2012-based IRF market basket. As noted in 
Section V.C.2.a of this proposed rule, for the proposed 2012-based IRF 
market basket, we have created a separate cost category for 
Installation, Maintenance, and Repair services. These expenses were 
previously included in the ``All Other'' Labor-related Services cost 
category in the 2008-based RPL market basket, along with other 
services, including, but not limited to, janitorial, waste management, 
security, and dry cleaning/laundry services. Because these services 
tend to be labor-intensive and are mostly performed at the facility 
(and, therefore, unlikely to be purchased in the national market), we 
continue to believe that they meet our definition of labor-related 
services.
    Similar to the 2008-based RPL market basket, the proposed 2012-
based IRF market basket includes two cost categories for nonmedical 
Professional fees (including, but not limited to, expenses for legal, 
accounting, and engineering services). These are Professional Fees: 
Labor-related and Professional Fees: Nonlabor-related. For the proposed 
2012-based IRF market basket, we propose to estimate the labor-related 
percentage of non-medical professional fees (and assign these expenses 
to the Professional Fees: Labor-related services cost category) based 
on the same method that was used to determine the labor-related 
percentage of professional fees in the 2008-based RPL market basket.
    To summarize, the professional services survey found that hospitals 
purchase the following proportion of these four services outside of 
their local labor market:

[[Page 23357]]

     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    We applied each of these percentages to the respective Benchmark I-
O cost category underlying the professional fees cost category to 
determine the Professional Fees: Nonlabor-related costs. The 
Professional Fees: Labor-related costs were determined to be the 
difference between the total costs for each Benchmark I-O category and 
the Professional Fees: Nonlabor-related costs. This is the same 
methodology that we used to separate the 2008-based RPL market basket 
professional fees category into Professional Fees: Labor-related and 
Professional Fees: Nonlabor-related cost categories. For more detail 
regarding this methodology, see the FY 2012 IRF final rule (76 FR 
47861).
    In addition to the professional services listed, we also classified 
expenses under NAICS 55, Management of Companies and Enterprises, into 
the Professional Fees cost category as was done in the 2008-based RPL 
market basket. The NAICS 55 data are mostly comprised of corporate, 
subsidiary, and regional managing offices, or otherwise referred to as 
home offices. Since many facilities are not located in the same 
geographic area as their home office, we analyzed data from a variety 
of sources to determine what proportion of these costs should be 
appropriately included in the labor-related share. For the 2012-based 
IRF market basket, we are proposing to derive the home office 
percentages using data for both freestanding IRF providers and 
hospital-based IRF providers. In the 2008-based RPL market basket, we 
used the home office percentages based on the data reported by 
freestanding IRFs, IPFs, and LTCHs.
    Using data primarily from the Medicare cost reports and the Home 
Office Medicare Records (HOMER) database that provides the address 
(including city and state) for home offices, we were able to determine 
that 38 percent of the total number of freestanding and hospital-based 
IRFs that had home offices had those home offices located in their 
respective local labor markets--defined as being in the same 
Metropolitan Statistical Area (MSA).
    The Medicare cost report requires hospitals to report their home 
office provider numbers. Using the HOMER database to determine the home 
office location for each home office provider number, we compared the 
location of the provider with the location of the hospital's home 
office. We then placed providers into one of the following two groups:
     Group 1--Provider and home office are located in different 
MSAs.
     Group 2--Provider and home office are located in the same 
MSA.
    We found that 62 percent of the providers with home offices were 
classified into Group 1 (that is, different MSAs) and, thus, these 
providers were determined to not be located in the same local labor 
market as their home office. We found that 38 percent of all providers 
with home offices were classified into Group 2 (that is, the same MSA). 
Given these results, we are proposing to classify 38 percent of the 
Professional Fees costs into the Professional Fees: Labor-related cost 
category and the remaining 62 percent into the Professional Fees: 
Nonlabor-related Services cost category. This methodology for 
apportioning the Professional Fee expenses between Labor-related and 
Nonlabor-related categories was similar to the method used in the 2008-
based RPL market basket. For more details regarding this methodology, 
see the FY 2012 IRF final rule (76 FR 47860 through 47863).
    Using this proposed method and the IHS Global Insight, Inc. first 
quarter 2015 forecast for the proposed 2012-based IRF market basket, 
the proposed IRF labor-related share for FY 2016 is the sum of the FY 
2016 relative importance of each labor-related cost category. The 
relative importance reflects the different rates of price change for 
these cost categories between the base year (FY 2012) and FY 2016. 
Table 11 compares the proposed FY 2016 labor-related share using the 
proposed 2012-based IRF market basket relative importance with the FY 
2015 labor-related share using the 2008-based RPL market basket.
    The sum of the relative importance for FY 2016 operating costs 
(Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services) 
is 65.7 percent, as shown in Table 11. We are proposing to specify the 
labor-related share to one decimal place, which is consistent with the 
IPPS labor-related share (79 FR 49990) (currently the labor-related 
share from the RPL market basket is specified to three decimal places).
    We are proposing that the portion of Capital that is influenced by 
the local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2008-based RPL market basket. Since the 
relative importance for Capital-Related Costs is 8.4 percent of the 
proposed 2012-based IRF market basket in FY 2016, we are proposing to 
take 46 percent of 8.4 percent to determine the proposed labor-related 
share of Capital for 2016. The result would be 3.9 percent, which we 
propose to add to 65.7 percent for the operating cost amount to 
determine the total proposed labor-related share for FY 2016. Thus, the 
labor-related share that we propose to use for IRF PPS in FY 2016 would 
be 69.6 percent. This proposed labor-related share is determined using 
the same methodology as employed in calculating all previous IRF labor-
related shares (see 76 FR 47862). By comparison, the FY 2015 labor-
related share under the 2008-based RPL market basket was 69.294 
percent. Therefore, the change from the RPL market basket to the IRF 
market basket has only a minimal impact on the labor-related share for 
IRF providers.

               Table 11--Proposed IRF Labor-Related Share
------------------------------------------------------------------------
                                              FY 2016
                                             proposed     FY 2015  final
                                          labor- related  labor- related
                                             share \1\       share \2\
------------------------------------------------------------------------
Wages and Salaries......................            46.0          48.271
Employee Benefits.......................            11.0          12.936
Professional Fees: Labor-related........             3.8           2.058
Administrative and Facilities Support                0.9           0.415
 Services...............................
Installation, Maintenance, and Repair...             2.1  ..............
All Other: Labor-related Services.......             1.9           2.061
                                         -------------------------------

[[Page 23358]]

 
    Subtotal............................            65.7          65.741
Labor-related portion of capital (46%)..             3.9           3.553
                                         -------------------------------
        Total Labor-Related Share.......            69.6          69.294
------------------------------------------------------------------------
\1\ Based on the 2012-based IRF Market Basket, IHS Global Insight, Inc.
  1st quarter 2015 forecast.
\2\ Federal Register 79 FR 45886.

F. Proposed Wage Adjustment

1. Background
    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 2016, we propose to maintain the policies and methodologies 
described in the FY 2012 IRF PPS final rule (76 FR 47836, 47863 through 
47865) related to the labor market area definitions and the wage index 
methodology for areas with wage data. Thus, we propose to use the CBSA 
labor market area definitions and the FY 2015 pre-reclassification and 
pre-floor hospital wage index data. In accordance with section 
1886(d)(3)(E) of the Act, the FY 2015 pre-reclassification and pre-
floor hospital wage index is based on data submitted for hospital cost 
reporting periods beginning on or after October 1, 2010, and before 
October 1, 2011 (that is, FY 2011 cost report data).
    The labor market designations made by the OMB include some 
geographic areas where there are no hospitals and, thus, no hospital 
wage index data on which to base the calculation of the IRF PPS wage 
index. We propose to 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 2016 IRF 
PPS wage index.
2. Update
    The wage index used for the IRF PPS is calculated using the pre-
reclassification and pre-floor acute care hospital wage index data and 
is assigned to the IRF on the basis of the labor market area in which 
the IRF is geographically located. IRF labor market areas are 
delineated based on the Core-Based Statistical Areas (CBSAs) 
established by the Office of Management and Budget (OMB). The current 
CBSA labor market definitions used in FY 2015 are based on OMB 
standards published on December 27, 2000 (65 FR 82228). As stated in 
the FY 2015 IRF PPS proposed rule (79 FR 26308) and final rule (79 FR 
45871), we intend to consider the inclusion of the 2010 Census-based 
CBSA changes in the IRF PPS wage index for FY 2016.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 
established revised delineations for Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas, and 
provided guidance on the use of the delineations of these statistical 
areas. A copy of this bulletin is available online at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. 
The OMB bulletin provides the delineations of all Metropolitan 
Statistical Areas, Metropolitan Divisions, Micropolitan Statistical 
Areas, Combined Statistical Areas, and New England City and Town Areas 
in the United States and Puerto Rico based on the standards published 
on June 28, 2010, in the Federal Register (75 FR 37246 through 37252) 
and Census Bureau data.
    While the revisions OMB published on February 28, 2013 are not as 
sweeping as the changes made when we adopted the CBSA geographic 
designations in the FY 2006 IRF PPS final rule, the February 28, 2013 
OMB bulletin does contain a number of significant changes. For example, 
there are new CBSAs, urban counties that become rural, rural counties 
that become urban, and existing CBSAs that are being split apart. 
However, because the bulletin was not issued until February 28, 2013, 
with supporting data not available until later, and because the changes 
made by the bulletin and their ramifications needed to be extensively 
reviewed and verified, these changes were not incorporated into the 
hospital wage index until FY 2015. In the FY 2015 IRF PPS final rule 
(79 FR 45886), we stated that we intended to consider changes to the 
wage index based on the most current OMB delineations in this FY 2016 
IRF PPS proposed rule. As discussed below, we are proposing to 
implement the new OMB delineations as described in the February 28, 
2013 OMB Bulletin No. 13-01, for the IRF PPS wage index beginning in FY 
2016.
3. Proposed Implementation of New Labor Market Delineations
    As discussed in the FY 2015 IRF PPS proposed rule (79 FR 26308) and 
final rule (79 FR 45871), CMS delayed implementing the new OMB 
statistical area delineations to allow for sufficient time to assess 
the new changes. We believe it is important for the IRF PPS to use the 
latest OMB delineations available to maintain a more accurate and up-
to-date payment system that reflects the reality of population shifts 
and labor market conditions. While CMS and other stakeholders have 
explored potential alternatives to the current CBSA-based labor market 
system (we refer readers to the CMS Web site at www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus has been achieved regarding how best to 
implement a replacement system. As discussed in the FY 2005 IPPS final 
rule (69 FR 49027), while we recognize that MSAs are not designed 
specifically to define labor market areas, we believe they do represent 
a useful proxy for this purpose. We further believe that using the most 
current OMB delineations would increase the integrity of the IRF PPS 
wage index by creating a more

[[Page 23359]]

accurate representation of geographic variation in wage levels. We have 
reviewed our findings and impacts relating to the new OMB delineations, 
and have concluded that there is no compelling reason to further delay 
implementation. Because we believe that we have broad authority under 
section 1886(j)(6) of the Act to determine the labor market areas used 
for the IRF PPS wage index, and because we also believe that the most 
current OMB delineations accurately reflect the local economies and 
wage levels of the areas in which hospitals are currently located, we 
are proposing to implement the new OMB delineations as described in the 
February 28, 2013 OMB Bulletin No. 13-01, for the IRF PPS wage index 
effective beginning in FY 2016. As discussed below, we are proposing to 
implement a one-year transition with a blended wage index for all 
providers and a 3 year phase-out of the rural adjustment for a subset 
of providers in FY 2016 to assist providers in adapting to the new OMB 
delineations. We invite comments on this proposal. This proposed 
transition is discussed in more detail below.
a. Micropolitan Statistical Areas
    OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
associated with at least one urban cluster that has a population of at 
least 10,000, but less than 50,000 (75 FR 37252). We refer to these as 
Micropolitan Areas. After extensive impact analysis, consistent with 
the treatment of these areas under the IPPS as discussed in the FY 2005 
IPPS final rule (69 FR 49029 through 49032), CMS determined the best 
course of action would be to treat Micropolitan Areas as ``rural'' and 
include them in the calculation of each state's IRF PPS rural wage 
index. Thus, the IRF PPS statewide rural wage index is determined using 
IPPS hospital data from hospitals located in non-MSA areas, and the 
statewide rural wage index is assigned to IRFs located in those areas. 
Because Micropolitan Areas tend to encompass smaller population centers 
and contain fewer hospitals than MSAs, we determined that if 
Micropolitan Areas were to be treated as separate labor market areas, 
the IRF PPS wage index would have included significantly more single-
provider labor market areas. As we explained in the FY 2006 IRF PPS 
final rule (70 FR 47920 through 47921), recognizing Micropolitan Areas 
as independent labor markets would generally increase the potential for 
dramatic shifts in year-to-year wage index values because a single 
hospital (or group of hospitals) could have a disproportionate effect 
on the wage index of an area. Dramatic shifts in an area's wage index 
from year to year are problematic and create instability in the payment 
levels from year to year, which could make fiscal planning for IRFs 
difficult if we adopted this approach. For these reasons, we adopted a 
policy to include Micropolitan Areas in the state's rural wage area for 
purposes of the IRF PPS wage index, and have continued this policy 
through the present.
    Based upon the new 2010 Decennial Census data, a number of urban 
counties have switched status and have joined or became Micropolitan 
Areas, and some counties that once were part of a Micropolitan Area, 
have become urban. Overall, there are fewer Micropolitan Areas (541) 
under the new OMB delineations based on the 2010 Census than existed 
under the latest data from the 2000 Census (581). We believe that the 
best course of action would be to continue the policy established in 
the FY 2006 IRF PPS final rule (70 FR 47880) and include Micropolitan 
Areas in each state's rural wage index. These areas continue to be 
defined as having relatively small urban cores (populations of 10,000 
to 49,999). We do not believe it would be appropriate to calculate a 
separate wage index for areas that typically may include only a few 
hospitals for the reasons discussed in the FY 2006 IRF PPS final rule 
(70 FR 47880), and as previously discussed. Therefore, in conjunction 
with our proposal to implement the new OMB labor market delineations 
beginning in FY 2016 and consistent with the treatment of Micropolitan 
Areas under the IPPS, we are proposing to continue to treat 
Micropolitan Areas as ``rural'' and to include Micropolitan Areas in 
the calculation of the state's rural wage index.
b. Urban Counties Becoming Rural
    As previously discussed, we are proposing to implement the new OMB 
statistical area delineations (based upon the 2010 decennial Census 
data) beginning in FY 2016 for the IRF PPS wage index. Our analysis 
shows that a total of 37 counties (and county equivalents) that are 
currently considered part of an urban CBSA would be considered located 
in a rural area, for IRF PPS payment beginning in FY 2016, if we adopt 
the new OMB delineations. Table 12 lists the 37 urban counties that 
would be rural if we finalize our proposal to implement the new OMB 
delineations.

                       TABLE 12--Counties That Would Transition From Urban to Rural Status
----------------------------------------------------------------------------------------------------------------
                                                                     Previous          Previous urban area
                  County                            State              CBSA          (constituent counties)
----------------------------------------------------------------------------------------------------------------
Greene County............................  IN                            14020  Bloomington, IN.
Anson County.............................  NC                            16740  Charlotte-Gastonia-Rock Hill, NC-
                                                                                 SC.
Franklin County..........................  IN                            17140  Cincinnati-Middletown, OH-KY-IN.
Stewart County...........................  TN                            17300  Clarksville, TN-KY.
Howard County............................  MO                            17860  Columbia, MO.
Delta County.............................  TX                            19124  Dallas-Fort Worth-Arlington, TX.
Pittsylvania County......................  VA                            19260  Danville, VA.
Danville City............................  VA                            19260  Danville, VA.
Preble County............................  OH                            19380  Dayton, OH.
Gibson County............................  IN                            21780  Evansville, IN-KY.
Webster County...........................  KY                            21780  Evansville, IN-KY.
Franklin County..........................  AR                            22900  Fort Smith, AR-OK.
Ionia County.............................  MI                            24340  Grand Rapids-Wyoming, MI.
Newaygo County...........................  MI                            24340  Grand Rapids-Wyoming, MI.
Greene County............................  NC                            24780  Greenville, NC.
Stone County.............................  MS                            25060  Gulfport-Biloxi, MS.
Morgan County............................  WV                            25180  Hagerstown-Martinsburg, MD-WV.
San Jacinto County.......................  TX                            26420  Houston-Sugar Land-Baytown, TX.
Franklin County..........................  KS                            28140  Kansas City, MO-KS.
Tipton County............................  IN                            29020  Kokomo, IN.

[[Page 23360]]

 
Nelson County............................  KY                            31140  Louisville/Jefferson County, KY-
                                                                                 IN.
Geary County.............................  KS                            31740  Manhattan, KS.
Washington County........................  OH                            37620  Parkersburg-Marietta-Vienna, WV-
                                                                                 OH.
Pleasants County.........................  WV                            37620  Parkersburg-Marietta-Vienna, WV-
                                                                                 OH.
George County............................  MS                            37700  Pascagoula, MS.
Power County.............................  ID                            38540  Pocatello, ID.
Cumberland County........................  VA                            40060  Richmond, VA.
King and Queen County....................  VA                            40060  Richmond, VA.
Louisa County............................  VA                            40060  Richmond, VA.
Washington County........................  MO                            41180  St. Louis, MO-IL.
Summit County............................  UT                            41620  Salt Lake City, UT.
Erie County..............................  OH                            41780  Sandusky, OH.
Franklin County..........................  MA                            44140  Springfield, MA.
Ottawa County............................  OH                            45780  Toledo, OH.
Greene County............................  AL                            46220  Tuscaloosa, AL.
Calhoun County...........................  TX                            47020  Victoria, TX.
Surry County.............................  VA                            47260  Virginia Beach-Norfolk-Newport
                                                                                 News, VA-NC.
----------------------------------------------------------------------------------------------------------------

    We are proposing that the wage data for all hospitals located in 
the counties listed in Table 12 now be considered rural when their 
respective state's rural wage index value is calculated. This rural 
wage index value would be used under the IRF PPS.
c. Rural Counties Becoming Urban
    Analysis of the new OMB delineations (based upon the 2010 decennial 
Census data) shows that a total of 105 counties (and county 
equivalents) that are currently located in rural areas would be located 
in urban areas, if we finalize our proposal to implement the new OMB 
delineations. Table 13 below lists the 105 rural counties that would be 
urban if we finalize this proposal.

                       TABLE 13--Counties That Would Transition From Rural to Urban Status
----------------------------------------------------------------------------------------------------------------
                                                                                     Urban area (constituent
                  County                            State           New  CBSA               counties)
----------------------------------------------------------------------------------------------------------------
Utuado Municipio.........................  PR                            10380  Aguadilla-Isabela, PR.
Linn County..............................  OR                            10540  Albany, OR.
Oldham County............................  TX                            11100  Amarillo, TX.
Morgan County............................  GA                            12060  Atlanta-Sandy Springs-Roswell,
                                                                                 GA.
Lincoln County...........................  GA                            12260  Augusta-Richmond County, GA-SC.
Newton County............................  TX                            13140  Beaumont-Port Arthur, TX.
Fayette County...........................  WV                            13220  Beckley, WV.
Raleigh County...........................  WV                            13220  Beckley, WV.
Golden Valley County.....................  MT                            13740  Billings, MT.
Oliver County............................  ND                            13900  Bismarck, ND.
Sioux County.............................  ND                            13900  Bismarck, ND.
Floyd County.............................  VI                            13980  Blacksburg-Christiansburg-
                                                                                 Radford, VA.
De Witt County...........................  IL                            14010  Bloomington, IL.
Columbia County..........................  PA                            14100  Bloomsburg-Berwick, PA.
Montour County...........................  PA                            14100  Bloomsburg-Berwick, PA.
Allen County.............................  KY                            14540  Bowling Green, KY.
Butler County............................  KY                            14540  Bowling Green, KY.
St. Mary's County........................  MD                            15680  California-Lexington Park, MD.
Jackson County...........................  IL                            16060  Carbondale-Marion, IL.
Williamson County........................  IL                            16060  Carbondale-Marion, IL.
Franklin County..........................  PA                            16540  Chambersburg-Waynesboro, PA.
Iredell County...........................  NC                            16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Lincoln County...........................  NC                            16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Rowan County.............................  NC                            16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Chester County...........................  SC                            16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Lancaster County.........................  SC                            16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Buckingham County........................  VA                            16820  Charlottesville, VA.
Union County.............................  IN                            17140  Cincinnati, OH-KY-IN.
Hocking County...........................  OH                            18140  Columbus, OH.
Perry County.............................  OH                            18140  Columbus, OH.
Walton County............................  FL                            18880  Crestview-Fort Walton Beach-
                                                                                 Destin, FL.
Hood County..............................  TX                            23104  Dallas-Fort Worth-Arlington, TX.
Somervell County.........................  TX                            23104  Dallas-Fort Worth-Arlington, TX.
Baldwin County...........................  AL                            19300  Daphne-Fairhope-Foley, AL.
Monroe County............................  PA                            20700  East Stroudsburg, PA.
Hudspeth County..........................  TX                            21340  El Paso, TX.
Adams County.............................  PA                            23900  Gettysburg, PA.
Hall County..............................  NE                            24260  Grand Island, NE.

[[Page 23361]]

 
Hamilton County..........................  NE                            24260  Grand Island, NE.
Howard County............................  NE                            24260  Grand Island, NE.
Merrick County...........................  NE                            24260  Grand Island, NE.
Montcalm County..........................  MI                            24340  Grand Rapids-Wyoming, MI.
Josephine County.........................  OR                            24420  Grants Pass, OR.
Tangipahoa Parish........................  LA                            25220  Hammond, LA.
Beaufort County..........................  SC                            25940  Hilton Head Island-Bluffton-
                                                                                 Beaufort, SC.
Jasper County............................  SC                            25940  Hilton Head Island-Bluffton-
                                                                                 Beaufort, SC.
Citrus County............................  FL                            26140  Homosassa Springs, FL.
Butte County.............................  ID                            26820  Idaho Falls, ID.
Yazoo County.............................  MS                            27140  Jackson, MS.
Crockett County..........................  TN                            27180  Jackson, TN.
Kalawao County...........................  HI                            27980  Kahului-Wailuku-Lahaina, HI.
Maui County..............................  HI                            27980  Kahului-Wailuku-Lahaina, HI.
Campbell County..........................  TN                            28940  Knoxville, TN.
Morgan County............................  TN                            28940  Knoxville, TN.
Roane County.............................  TN                            28940  Knoxville, TN.
Acadia Parish............................  LA                            29180  Lafayette, LA.
Iberia Parish............................  LA                            29180  Lafayette, LA.
Vermilion Parish.........................  LA                            29180  Lafayette, LA.
Cotton County............................  OK                            30020  Lawton, OK.
Scott County.............................  IN                            31140  Louisville/Jefferson County, KY-
                                                                                 IN.
Lynn County..............................  TX                            31180  Lubbock, TX.
Green County.............................  WI                            31540  Madison, WI.
Benton County............................  MS                            32820  Memphis, TN-MS-AR.
Midland County...........................  MI                            33220  Midland, MI.
Martin County............................  TX                            33260  Midland, TX.
Le Sueur County..........................  MN                            33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Mille Lacs County........................  MN                            33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Sibley County............................  MN                            33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Maury County.............................  TN                            34980  Nashville-Davidson-Murfreesboro-
                                                                                 Franklin, TN.
Craven County............................  NC                            35100  New Bern, NC.
Jones County.............................  NC                            35100  New Bern, NC.
Pamlico County...........................  NC                            35100  New Bern, NC.
St. James Parish.........................  LA                            35380  New Orleans-Metairie, LA.
Box Elder County.........................  UT                            36260  Ogden-Clearfield, UT.
Gulf County..............................  FL                            37460  Panama City, FL.
Custer County............................  SD                            39660  Rapid City, SD.
Fillmore County..........................  MN                            40340  Rochester, MN.
Yates County.............................  NY                            40380  Rochester, NY.
Sussex County............................  DE                            41540  Salisbury, MD-DE.
Worcester County.........................  MA                            41540  Salisbury, MD-DE.
Highlands County.........................  FL                            42700  Sebring, FL.
Webster Parish...........................  LA                            43340  Shreveport-Bossier City, LA.
Cochise County...........................  AZ                            43420  Sierra Vista-Douglas, AZ.
Plymouth County..........................  IA                            43580  Sioux City, IA-NE-SD.
Union County.............................  SC                            43900  Spartanburg, SC.
Pend Oreille County......................  WA                            44060  Spokane-Spokane Valley, WA.
Stevens County...........................  WA                            44060  Spokane-Spokane Valley, WA.
Augusta County...........................  VA                            44420  Staunton-Waynesboro, VA.
Staunton City............................  VA                            44420  Staunton-Waynesboro, VA.
Waynesboro City..........................  VA                            44420  Staunton-Waynesboro, VA.
Little River County......................  AR                            45500  Texarkana, TX-AR.
Sumter County............................  FL                            45540  The Villages, FL.
Pickens County...........................  AL                            46220  Tuscaloosa, AL.
Gates County.............................  NC                            47260  Virginia Beach-Norfolk-Newport
                                                                                 News, VA-NC.
Falls County.............................  TX                            47380  Waco, TX.
Columbia County..........................  WA                            47460  Walla Walla, WA.
Walla Walla County.......................  WA                            47460  Walla Walla, WA.
Peach County.............................  GA                            47580  Warner Robins, GA.
Pulaski County...........................  GA                            47580  Warner Robins, GA.
Culpeper County..........................  VA                            47894  Washington-Arlington-Alexandria,
                                                                                 DC-VA-MD-WV.
Rappahannock County......................  VA                            47894  Washington-Arlington-Alexandria,
                                                                                 DC-VA-MD-WV.
Jefferson County.........................  NY                            48060  Watertown-Fort Drum, NY.
Kingman County...........................  KS                            48620  Wichita, KS.
Davidson County..........................  NC                            49180  Winston-Salem, NC.
Windham County...........................  CT                            49340  Worcester, MA-CT.
----------------------------------------------------------------------------------------------------------------

[[Page 23362]]

    We are proposing that when calculating the area wage index, the 
wage data for hospitals located in these counties would be included in 
their new respective urban CBSAs.
d. Urban Counties Moving to a Different Urban CBSA
    In addition to rural counties becoming urban and urban counties 
becoming rural, several urban counties would shift from one urban CBSA 
to another urban CBSA under our proposal to adopt the new OMB 
delineations. In other cases, applying the new OMB delineations would 
involve a change only in CBSA name or number, while the CBSA continues 
to encompass the same constituent counties. For example, CBSA 29140 
(Lafayette, IN), would experience both a change to its number and its 
name, and would become CBSA 29200 (Lafayette-West Lafayette, IN), while 
all of its three constituent counties would remain the same. We are not 
discussing these proposed changes in this section because they are 
inconsequential changes to the IRF PPS wage index. However, in other 
cases, if we adopt the new OMB delineations, counties would shift 
between existing and new CBSAs, changing the constituent makeup of the 
CBSAs.
    In one type of change, an entire CBSA would be subsumed by another 
CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single 
county (Flagler, FL) CBSA. Flagler County would be a part of CBSA 19660 
(Deltona-Daytona Beach-Ormond Beach, FL) under the new OMB 
delineations.
    In another type of change, some CBSAs have counties that would 
split off to become part of, or to form, entirely new labor market 
areas. For example, CBSA 37964 (Philadelphia Metropolitan Division of 
MSA 37980) currently is comprised of five Pennsylvania counties (Bucks, 
Chester, Delaware, Montgomery, and Philadelphia). Under the new OMB 
delineations, Montgomery, Bucks, and Chester counties would split off 
and form the new CBSA 33874 (Montgomery County-Bucks County-Chester 
County, PA Metropolitan Division of MSA 37980), while Delaware and 
Philadelphia counties would remain in CBSA 37964.
    Finally, in some cases, a CBSA would lose counties to another 
existing CBSA if we adopt the new OMB delineations. For example, 
Lincoln County and Putnam County, WV, would move from CBSA 16620 
(Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV-KY-OH). CBSA 
16620 would still exist in the new labor market delineations with fewer 
constituent counties. Table 14 lists the urban counties that would move 
from one urban CBSA to another urban CBSA under the new OMB 
delineations.

        TABLE 14--Counties That Would Change to a Different CBSA
------------------------------------------------------------------------
          Prior CBSA             New CBSA        County          State
------------------------------------------------------------------------
11300........................        26900  Madison County..  IN
11340........................        24860  Anderson County.  SC
14060........................        14010  McLean County...  IL
37764........................        15764  Essex County....  MA
16620........................        26580  Lincoln County..  WV
16620........................        26580  Putnam County...  WV
16974........................        20994  DeKalb County...  IL
16974........................        20994  Kane County.....  IL
21940........................        41980  Ceiba Municipio.  PR
21940........................        41980  Fajardo           PR
                                             Municipio.
21940........................        41980  Luquillo          PR
                                             Municipio.
26100........................        24340  Ottawa County...  MI
31140........................        21060  Meade County....  KY
34100........................        28940  Grainger County.  TN
35644........................        35614  Bergen County...  NJ
35644........................        35614  Hudson County...  NJ
20764........................        35614  Middlesex County  NJ
20764........................        35614  Monmouth County.  NJ
20764........................        35614  Ocean County....  NJ
35644........................        35614  Passaic County..  NJ
20764........................        35084  Somerset County.  NJ
35644........................        35614  Bronx County....  NY
35644........................        35614  Kings County....  NY
35644........................        35614  New York County.  NY
35644........................        20524  Putnam County...  NY
35644........................        35614  Queens County...  NY
35644........................        35614  Richmond County.  NY
35644........................        35614  Rockland County.  NY
35644........................        35614  Westchester       NY
                                             County.
37380........................        19660  Flagler County..  FL
37700........................        25060  Jackson County..  MS
37964........................        33874  Bucks County....  PA
37964........................        33874  Chester County..  PA
37964........................        33874  Montgomery        PA
                                             County.
39100........................        20524  Dutchess County.  NY
39100........................        35614  Orange County...  NY
41884........................        42034  Marin County....  CA
41980........................        11640  Arecibo           PR
                                             Municipio.
41980........................        11640  Camuy Municipio.  PR
41980........................        11640  Hatillo           PR
                                             Municipio.
41980........................        11640  Quebradillas      PR
                                             Municipio.
48900........................        34820  Brunswick County  NC
49500........................        38660  Gu[aacute]nica    PR
                                             Municipio.
49500........................        38660  Guayanilla        PR
                                             Municipio.
49500........................        38660  Pe[ntilde]uelas   PR
                                             Municipio.
49500........................        38660  Yauco Municipio.  PR
------------------------------------------------------------------------

[[Page 23363]]

    If providers located in these counties move from one CBSA to 
another under the new OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. As 
discussed below, we propose to implement a transition wage index to 
adjust for these possible impacts.
4. Transition Period
    Overall, we believe implementing the new OMB delineations would 
result in wage index values being more representative of the actual 
costs of labor in a given area. Further, we recognize that some 
providers (10 percent) would have a higher wage index due to our 
proposed implementation of the new labor market area delineations. 
However, we also recognize that more providers (16 percent) would 
experience decreases in wage index values as a result of our proposed 
implementation of the new labor market area delineations. In prior 
years, we have provided for transition periods when adopting changes 
that have significant payment implications, particularly large negative 
impacts. As discussed in the FY 2006 IRF PPS final rule (70 FR 47921 
through 47926), we evaluated several options to ease the transition to 
the new CBSA system.
    In implementing the new CBSA delineations for FY 2016, we continue 
to have similar concerns as those expressed in the FY 2006 IRF PPS 
final rule. While we believe that implementing the latest OMB labor 
market area delineations would create a more accurate wage index 
system, we recognize that IRFs may experience decreases in their wage 
index as a result of the labor market area changes. Our analysis for 
the FY 2016 IRF PPS proposed rule indicates that a majority of IRFs 
either expect no change in the wage index or an increase in the wage 
index based on the new CBSA delineations. However, we found that 188 
facilities will experience a decline in their wage index with 29 
facilities experiencing a decline of 5 percent or more based on the 
CBSA changes. Therefore, we believe it would be appropriate to 
consider, as we did in FY 2006, whether or not a transition period 
should be used to implement these proposed changes to the wage index.
    We considered having no transition period and fully implementing 
the proposed new OMB delineations beginning in FY 2016. This would mean 
that we would adopt the revised OMB delineations for all IRF providers 
on October 1, 2015. However, this would not provide any time for IRF 
providers to adapt to the new OMB delineations. As previously 
discussed, more IRFs would experience a decrease in wage index due to 
implementation of the proposed new OMB delineations than would 
experience an increase. Thus, we believe that it would be appropriate 
to provide for a transition period to mitigate the resulting short-term 
instability and negative impacts on these IRF providers, and to provide 
time for these IRFs to adjust to their new labor market area 
delineations.
    Furthermore, in light of the comments received during the FY 2006 
rulemaking cycle on our proposal in the FY 2006 IRF PPS proposed rule 
(70 FR 30238 through 30240) to adopt the new CBSA definitions without a 
transition period, we continue to believe that a transition period is 
appropriate. Therefore, we propose a similar transition methodology to 
that used in FY 2006. Specifically, for the FY 2016 IRF PPS, we are 
proposing to implement a budget-neutral one-year transition policy. We 
are proposing that all IRF providers would receive a one-year blended 
wage index using 50 percent of their FY 2016 wage index based on the 
proposed new OMB delineations and 50 percent of their FY 2016 wage 
index based on the OMB delineations used in FY 2015. We are proposing 
to apply this one-year blended wage index in FY 2016 for all geographic 
areas to assist providers in adapting to these proposed changes. We 
believe a one-year, 50/50 blend would mitigate the short-term 
instability and negative payment impacts due to the proposed 
implementation of the new OMB delineations. This transition policy 
would be for a one-year period, going into effect October 1, 2016, and 
continuing through September 30, 2017.
    For FY 2006 it was determined that the transition to the current 
wage index system would have significant negative impacts upon IRFs 
that were originally considered rural, but would be considered urban 
under the new definitions. To alleviate the potentially decreased 
payments associated with switching from rural status to urban status in 
calculating the IRF area wage index for FY 2006, we implemented a 3-
year budget-neutral phase-out of the rural adjustment for FY 2005 rural 
IRFs that became urban IRFs in FY 2006 and that experienced a loss in 
payment because of this redesignation. The 3-year transition period was 
afforded to these facilities because, as a group, they experienced a 
significant reduction in payments due to the labor market revisions and 
the loss of the rural adjustment. This adjustment was in addition to a 
one-year blended wage index (comprised of a 50/50 blend of the FY 2006 
MSA-based wage index and the FY 2006 CBSA-based wage index) for all 
IRFs.
    Our analysis for the FY 2016 proposed rule indicates that 22 IRFs 
will experience a change in either rural or urban designations. Of 
these, 19 facilities designated as rural in FY 2015 would be designated 
as urban in FY 2016. While 16 of these rural IRFs that would be 
designated as urban under the new CBSA delineations will experience an 
increase in their wage index, these IRFs will lose the 14.9 percent 
rural adjustment. In many cases, this loss exceeds the urban CBSA based 
increase in the wage index. Consistent with the transition policy 
adopted in FY 2006 (70 FR 47923 through 47927), we considered the 
appropriateness of applying a 3-year phase-out of the rural adjustment 
for IRFs located in rural counties that would become urban under the 
new OMB delineations, given the potentially significant payment impacts 
for these facilities. We continue to believe, as discussed in the FY 
2006 IRF final rule (70 FR 47880), that the phase-out of the rural 
adjustment transition period for these facilities specifically is 
appropriate because, as a group, we expect these IRFs would experience 
a steeper and more abrupt reduction in their payments compared to other 
IRFs.
    Therefore, in addition to the 1-year transition policy noted, we 
are proposing a budget-neutral three-year phase-out of the rural 
adjustment for existing FY 2015 rural IRFs that will become urban in FY 
2016 and that experience a loss in payments due to changes from the new 
CBSA delineations. Accordingly, the incremental steps needed to reduce 
the impact of the loss of the FY 2015 rural adjustment of 14.9 percent 
will be phased out over FYs 2016, 2017 and 2018. This policy will allow 
rural IRFs which would be classified as urban in FY 2016 to receive 
two-thirds of the 2015 rural adjustment for FY 2016, as well as the 
blended wage index. For FY 2017, these IRFs will receive the full FY 
2017 wage index and one-third of the FY 2015 rural adjustment. For FY 
2018, these IRFs will receive the full FY 2018 wage index without a 
rural adjustment. We believe a three-year budget-neutral phase-out of 
the rural adjustment for IRFs that transition from rural to urban 
status under the new CBSA delineations would best accomplish the goals 
of mitigating the loss of the rural adjustment for existing FY 2015 
rural IRFs. The purpose of the gradual phase-out of the rural 
adjustment for these facilities is to alleviate the significant payment 
implications for existing rural IRFs that may need time to adjust to 
the

[[Page 23364]]

loss of their FY 2015 rural payment adjustment or that experience a 
reduction in payments solely because of this redesignation. As stated, 
this policy is specifically for rural IRFs that become urban in FY 2016 
and that experience a loss in payments due to changes from the new CBSA 
delineations. Thus we are not implementing a transition policy for 
urban facilities that become rural in FY 2016 because these IRFs will 
receive the full rural adjustment of 14.9 percent beginning October 1, 
2015.
    For the reasons discussed and based on similar concerns to those we 
expressed during the FY 2006 rulemaking cycle to the proposed adoption 
of the new CBSA definitions, we are proposing to implement a three-year 
budget-neutral phase-out of the rural adjustment for the group of IRFs 
that during FY 2015 were designated as rural and for FY 2016 are 
designated as urban under the new CBSA system. This is in addition to 
implementing a one-year blended wage index for all IRFs. We considered 
having no transition, but found that a multi-year transition policy 
would best provide a sufficient buffer for rural IRFs that may 
experience a reduction in payments due to being designated as urban. We 
believe that the incremental reduction of the FY 2015 rural adjustment 
is appropriate to mitigate a significant reduction in per case-payment. 
Alternative timeframes we considered for phasing out the rural 
adjustment for IRFs which would transition from rural to urban status 
in FY 2016, but we believe that a three-year budget-neutral phase-out 
of the rural adjustment would appropriately mitigate the adverse 
payment impacts for these IRFs while also ensuring that payment rates 
for these facilities are set accurately and appropriately. We invite 
public comment on the proposed policies to adopt the new OMB 
delineations.
    The proposed wage index applicable to FY 2016 is set forth in Table 
A available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. 
Table A provides a crosswalk between the FY 2015 wage index for a 
provider using the current OMB delineations in effect in FY 2015 and 
the FY 2016 wage index using the proposed revised OMB delineations, as 
well as the proposed transition wage index values for FY 2016.
    To calculate the wage-adjusted facility payment for the payment 
rates set forth in this proposed rule, we multiply the unadjusted 
federal payment rate for IRFs by the FY 2016 labor-related share based 
on the proposed 2012-based IRF market basket (69.6 percent) to 
determine the labor-related portion of the standard payment amount. We 
then multiply the labor-related portion by the applicable IRF wage 
index from the tables in the addendum to this proposed rule. This table 
is available through the Internet on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.
    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 Sec.  
412.624(e)(1), as described in the steps below. We use the listed steps 
to ensure that the FY 2016 IRF standard payment conversion factor 
reflects the update to the wage indexes (based on the FY 2011 hospital 
cost report data) and the labor-related share in a budget-neutral 
manner:
    Step 1. Determine the total amount of the estimated FY 2015 IRF PPS 
rates, using the FY 2015 standard payment conversion factor and the 
labor-related share and the wage indexes from FY 2015 (as published in 
the FY 2015 IRF PPS final rule (79 FR 45871)).
    Step 2. Calculate the total amount of estimated IRF PPS payments 
using the FY 2016 standard payment conversion factor and the FY 2016 
proposed 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 2016 budget-
neutral wage adjustment factor of 1.0027.
    Step 4. Apply the FY 2016 budget-neutral wage adjustment factor 
from step 3 to the FY 2015 IRF PPS standard payment conversion factor 
after the application of the adjusted proposed market basket update to 
determine the FY 2016 standard payment conversion factor.
    We discuss the calculation of the standard payment conversion 
factor for FY 2016 in section V.G of this proposed rule.
    We invite public comment on the proposed IRF wage adjustment for FY 
2016.

G. Description of the Proposed IRF Standard Payment Conversion Factor 
and Payment Rates for FY 2016

    To calculate the proposed standard payment conversion factor for FY 
2016, as illustrated in Table 15, we begin by applying the proposed 
adjusted market basket increase factor for FY 2016 that was adjusted in 
accordance with sections 1886(j)(3)(C) and (D) of the Act, to the 
standard payment conversion factor for FY 2015 ($15,198). Applying the 
proposed 1.9 percent adjusted market basket increase for FY 2016 to the 
standard payment conversion factor for FY 2015 of $15,198 yields a 
standard payment amount of $15,487. Then, we apply the proposed budget 
neutrality factor for the FY 2016 wage index and labor-related share of 
1.0027, which results in a proposed standard payment amount of $15,529. 
We next apply the proposed budget neutrality factors for the revised 
CMG relative weights of 1.0000, which results in the proposed standard 
payment conversion factor of $15,529 for FY 2016.

    Table 15--Calculations To Determine the Proposed FY 2016 Standard
                        Payment Conversion Factor
------------------------------------------------------------------------
             Explanation for adjustment                    Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2015......  ..         $15,198
Market Basket Increase Factor for FY 2016 (2.7         x           1.019
 percent), reduced by 0.6 percentage point for the
 productivity adjustment as required by section
 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2
 percentage point in accordance with paragraphs
 1886(j)(3)(C) and (D) of the Act...................
Budget Neutrality Factor for the Wage Index and        x          1.0027
 Labor-Related Share................................
Budget Neutrality Factor for the Revisions to the      x          1.0000
 CMG Relative Weights...............................
Proposed FY 2016 Standard Payment Conversion Factor.   =          15,529
------------------------------------------------------------------------

    We invite public comment on the proposed FY 2016 standard payment 
conversion factor.
    After the application of the proposed CMG relative weights 
described in section III of this proposed rule, to the proposed FY 2016 
standard payment conversion factor ($15,529), the resulting proposed 
unadjusted IRF

[[Page 23365]]

prospective payment rates for FY 2016 are shown in Table 16.

                                    Table 16--Proposed FY 2016 Payment Rates
----------------------------------------------------------------------------------------------------------------
                                      Payment rate tier  Payment rate tier  Payment rate tier   Payment rate no
                 CMG                          1                  2                  3             comorbidity
----------------------------------------------------------------------------------------------------------------
0101................................         $12,538.11         $10,982.11         $10,225.85          $9,783.27
0102................................          15,859.77          13,892.24          12,934.10          12,373.51
0103................................          17,712.38          15,515.02          14,445.08          13,819.26
0104................................          19,228.01          16,842.75          15,681.18          15,002.57
0105................................          22,548.11          19,749.78          18,387.89          17,592.80
0106................................          25,141.45          22,021.67          20,504.49          19,616.23
0107................................          28,129.23          24,639.86          22,940.99          21,947.14
0108................................          35,693.41          31,264.54          29,109.11          27,848.16
0109................................          32,590.71          28,546.96          26,577.88          25,427.18
0110................................          42,816.56          37,504.09          34,918.51          33,405.98
0201................................          12,682.53          10,421.51           9,404.36           8,884.14
0202................................          16,426.58          13,497.81          12,180.95          11,506.99
0203................................          18,721.76          15,383.03          13,881.37          13,114.24
0204................................          20,616.30          16,940.59          15,286.75          14,441.97
0205................................          24,622.78          20,231.18          18,257.45          17,248.06
0206................................          29,498.89          24,239.22          21,874.15          20,662.89
0207................................          39,209.17          32,216.46          29,073.39          27,466.14
0301................................          17,299.31          14,440.42          13,243.13          12,357.98
0302................................          21,616.37          18,044.70          16,547.70          15,440.48
0303................................          25,121.26          20,970.36          19,231.11          17,945.31
0304................................          33,356.29          27,843.50          25,534.33          23,827.70
0401................................          15,469.99          13,167.04          12,056.72          11,145.16
0402................................          22,214.23          18,906.56          17,313.28          16,004.19
0403................................          35,511.72          30,224.09          27,677.34          25,584.03
0404................................          59,966.79          51,036.06          46,736.08          43,201.68
0405................................          53,172.85          45,254.61          41,442.24          38,306.94
0501................................          13,465.20          10,730.54           9,963.41           9,146.58
0502................................          17,729.46          14,128.28          13,118.90          12,041.19
0503................................          22,406.79          17,856.80          16,578.76          15,218.42
0504................................          25,785.90          20,547.97          19,078.93          17,513.61
0505................................          30,179.06          24,049.76          22,329.15          20,498.28
0506................................          42,192.29          33,623.39          31,219.50          28,657.22
0601................................          16,131.53          12,729.12          11,878.13          10,732.09
0602................................          20,721.90          16,350.48          15,257.24          13,786.65
0603................................          25,731.55          20,302.61          18,946.93          17,119.17
0604................................          33,808.19          26,675.72          24,894.54          22,493.76
0701................................          15,005.67          12,564.51          11,899.87          10,809.74
0702................................          19,476.47          16,308.56          15,446.70          14,030.45
0703................................          23,318.35          19,526.16          18,493.49          16,797.72
0704................................          30,337.45          25,403.89          24,060.63          21,853.96
0801................................          12,458.92           9,812.78           8,902.78           8,222.61
0802................................          16,428.13          12,938.76          11,739.92          10,840.79
0803................................          22,135.04          17,434.41          15,817.84          14,608.13
0804................................          19,794.82          15,591.12          14,145.37          13,062.99
0805................................          23,871.18          18,800.96          17,058.61          15,754.17
0806................................          29,700.77          23,392.89          21,225.04          19,600.70
0901................................          14,827.09          11,924.72          10,929.31           9,963.41
0902................................          19,752.89          15,887.72          14,561.54          13,272.64
0903................................          24,647.63          19,825.87          18,170.48          16,563.23
0904................................          31,152.73          25,057.59          22,965.84          20,934.64
1001................................          16,749.58          14,684.22          13,075.42          11,798.93
1002................................          20,774.70          18,212.41          16,216.93          14,632.98
1003................................          29,818.79          26,143.07          23,277.97          21,004.53
1101................................          21,021.61          21,021.61          16,698.33          15,690.50
1102................................          27,550.00          27,550.00          21,885.02          20,563.50
1201................................          15,261.90          14,817.77          13,493.15          12,587.81
1202................................          18,591.32          18,050.91          16,437.45          15,334.89
1203................................          23,080.75          22,409.90          20,405.11          19,037.00
1301................................          18,075.76          14,893.86          14,044.43          12,823.85
1302................................          23,001.55          18,953.14          17,872.33          16,319.43
1303................................          30,609.21          25,220.65          23,781.11          21,715.75
1401................................          14,084.80          11,575.32          10,468.10           9,419.89
1402................................          18,692.26          15,362.84          13,892.24          12,500.85
1403................................          22,531.03          18,516.78          16,744.92          15,067.79
1404................................          28,495.72          23,419.28          21,176.90          19,055.64
1501................................          16,317.87          13,145.30          12,103.30          11,645.20
1502................................          20,712.58          16,685.91          15,362.84          14,782.06
1503................................          25,129.03          20,243.60          18,637.91          17,934.44

[[Page 23366]]

 
1504................................          31,255.22          25,180.27          23,181.69          22,305.86
1601................................          17,715.48          13,025.73          12,795.90          11,766.32
1602................................          23,040.38          16,940.59          16,643.98          15,302.28
1603................................          29,762.88          21,885.02          21,499.90          19,768.42
1701................................          16,676.59          14,145.37          12,907.70          12,013.23
1702................................          21,563.57          18,291.61          16,690.57          15,532.11
1703................................          24,675.58          20,931.54          19,099.12          17,774.49
1704................................          32,446.29          27,523.60          25,113.50          23,372.70
1801................................          19,765.31          14,974.61          13,682.60          12,174.74
1802................................          29,000.41          21,970.43          20,075.89          17,863.01
1803................................          46,979.88          35,592.47          32,520.83          28,938.29
1901................................          17,859.90          15,527.45          15,100.40          13,201.20
1902................................          34,892.11          30,334.35          29,500.44          25,792.12
1903................................          55,992.92          48,678.76          47,340.16          41,387.89
2001................................          14,410.91          11,842.42          10,923.10           9,887.31
2002................................          18,637.91          15,316.25          14,126.73          12,788.13
2003................................          23,200.33          19,064.95          17,585.04          15,917.23
2004................................          29,882.45          24,556.01          22,650.60          20,502.94
2101................................          26,278.17          26,278.17          20,397.34          19,787.05
5001................................  .................  .................  .................           2,425.63
5101................................  .................  .................  .................          11,187.09
5102................................  .................  .................  .................          26,340.29
5103................................  .................  .................  .................          12,311.39
5104................................  .................  .................  .................          29,533.05
----------------------------------------------------------------------------------------------------------------

H. Example of the Methodology for Adjusting the Proposed Federal 
Prospective Payment Rates

    Table 17 illustrates the methodology for adjusting the proposed 
federal prospective payments (as described in sections V.A. through 
V.F. of this proposed rule). The following examples are based on two 
hypothetical Medicare beneficiaries, both classified into CMG 0110 
(without comorbidities). The proposed unadjusted federal prospective 
payment rate for CMG 0110 (without comorbidities) appears in Table 16.
    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 0.8416, 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 0.8599, 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 16. Then, we multiply the labor-related share for FY 2016 (69.6 
percent) described in section V.D. of this proposed rule by the 
proposed unadjusted federal prospective payment rate. To determine the 
non-labor portion of the proposed federal prospective payment rate, we 
subtract the labor portion of the proposed federal payment from the 
proposed unadjusted federal prospective payment.
    To compute the proposed wage-adjusted federal prospective payment, 
we multiply the labor portion of the proposed federal payment by the 
appropriate proposed transition wage index, which may be found in Table 
A. This table is available through the Internet on the CMS Web site 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 proposed wage-adjusted federal payment by 
adding the wage-adjusted labor amount to the non-labor portion.
    Adjusting the proposed 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 17 illustrates the 
components of the adjusted payment calculation.

                   Table 17--Example of Computing the IRF FY 2016 Federal Prospective Payment
----------------------------------------------------------------------------------------------------------------
                                                                       Rural Facility A        Urban Facility B
           Steps                                                       (Spencer Co., IN)      (Harrison Co., IN)
----------------------------------------------------------------------------------------------------------------
1.........................  Unadjusted Federal Prospective        ..          $33,405.98  ..          $33,405.98
                             Payment.
2.........................  Labor Share.........................   x               0.696   x               0.696
3.........................  Labor Portion of Federal Payment....   =          $23,250.56   =          $23,250.56
4.........................  CBSA-Based Wage Index (shown in the    x              0.8416   x              0.8599
                             Addendum, Tables 1 and 2).
5.........................  Wage-Adjusted Amount................   =          $19,567.67   =          $19,993.16
6.........................  Non-Labor Amount....................   +         $ 10,155.42   +          $10,155.42

[[Page 23367]]

 
7.........................  Wage-Adjusted Federal Payment.......   =          $29,723.09   =          $30,148.58
8.........................  Rural Adjustment....................   x               1.149   x               1.000
9.........................  Wage- and Rural-Adjusted Federal       =          $34,151.83   =          $30,148.58
                             Payment.
10........................  LIP Adjustment......................   x              1.0156   x              1.0454
11........................  FY 2016 Wage-, Rural- and LIP-         =          $34,684.60   =          $31,517.33
                             Adjusted Federal Prospective
                             Payment Rate.
12........................  FY 2016 Wage- and Rural-Adjusted      ..          $34,151.83  ..          $30,148.58
                             Federal Prospective Payment.
13........................  Teaching Status Adjustment..........   x                   0   x              0.0784
14........................  Teaching Status Adjustment Amount...   =               $0.00   =           $2,363.65
15........................  FY 2016 Wage-, Rural-, and LIP-        +          $34,684.60   +          $31,517.33
                             Adjusted Federal Prospective
                             Payment Rate.
16........................  Total FY 2016 Adjusted Federal         =          $34,684.60   =          $33,880.97
                             Prospective Payment.
----------------------------------------------------------------------------------------------------------------

    Thus, the proposed adjusted payment for Facility A would be 
$34,684.60, and the proposed adjusted payment for Facility B would be 
$33,880.97.

VI. Proposed Update to Payments for High-Cost Outliers Under the IRF 
PPS

A. Proposed Update to the Outlier Threshold Amount for FY 2016

    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 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 2015 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, 79 FR 45872, 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 2016, we propose 
to use FY 2014 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 2015. Based on an analysis of this updated data, we 
estimate that IRF outlier payments as a percentage of total estimated 
payments are approximately 3.2 percent in FY 2015. Therefore, we 
propose to update the outlier threshold amount to $9,698 to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2016.
    We invite public comment on the proposed update to the FY 2016 
outlier threshold amount to maintain estimated outlier payments at 
approximately 3 percent of total estimated IRF payments.

B. Proposed 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 
propose to update the national urban and rural CCRs for IRFs, as well 
as the national CCR ceiling for FY 2016, 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 2016, as discussed below.
     Other IRFs for which accurate data to calculate an overall 
CCR are not available.
    Specifically, for FY 2016, we propose to 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 propose to estimate a 
national average CCR of 0.437 for 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 proposed rule, we have used the most 
recent available cost report data (FY 2013). This includes all IRFs 
whose cost reporting periods begin on or after October 1, 2012, and 
before October 1, 2013. If, for any IRF, the FY 2013 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 2012) 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 propose to set the national 
CCR ceiling at 3 standard deviations above the mean CCR. Using this 
method, the proposed national CCR ceiling would be 1.36 for

[[Page 23368]]

FY 2016. This means that, if an individual IRF's CCR exceeds this 
proposed ceiling of 1.36 for FY 2016, we would replace the IRF's CCR 
with the appropriate proposed national average CCR (either rural or 
urban, depending on the geographic location of the IRF). We calculated 
the proposed national CCR ceiling by:
    Step 1. Taking the national average CCR (weighted by each IRF's 
total costs, as previously discussed) 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 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.
    The proposed national average rural and urban CCRs and the proposed 
national CCR ceiling in this section will be updated in the final rule 
if more recent data becomes available to use in these analyses.
    We invite public comment on the proposed update to the IRF CCR 
ceiling and the urban/rural averages for FY 2016.

VII. ICD-10-CM Implementation for IRF PPS

    In the FY 2015 IRF PPS final rule (79 FR 45872), we finalized 
conversions from the International Classification of Diseases, 9th 
Revision, Clinical Modification (ICD-9-CM) to the ICD-10-CM for the IRF 
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. We remind providers of IRF services that the 
implementation date for ICD-10-CM is October 1, 2015. The ICD-10-CM 
lists are available for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.

VIII. Revisions and Updates to the IRF QRP

A. Background and Statutory Authority

    Section 3004(b) of the Affordable Care Act amended section 
1886(j)(7) of the Act, requiring the Secretary to establish the IRF 
QRP. This program applies to freestanding IRFs, as well as IRF units 
affiliated with either acute care facilities or critical access 
hospitals (CAHs). Beginning with the FY 2014 payment determination and 
subsequent years, the Secretary is required to reduce any annual update 
to the standard federal rate for discharges occurring during such 
fiscal year by 2 percentage points for any IRF that does not comply 
with the requirements established by the Secretary.
    The Act requires that for the FY 2014 payment determination and 
subsequent years, each IRF submit data on quality measures specified by 
the Secretary in a form and manner, and at a time, specified by the 
Secretary. The Secretary is required to specify quality measures that 
are endorsed by the entity that holds the contract with the Secretary 
under section 1890(a) of the Act. This entity is currently the NQF. 
Information regarding the NQF is available at: http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. 
The Act authorizes an exception under which the Secretary may specify 
non-endorsed quality measures for specified areas or medical topics 
determined appropriate by the Secretary for which a feasible or 
practical measure has not been endorsed by the NQF, as long as due 
consideration is given to NQF-endorsed measures or measures adopted by 
a consensus organization identified by the Secretary.
    Additionally, section 2(a) of the Improving Medicare Post-Acute 
Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185, enacted 
on Oct. 6, 2014), amended title XVIII of the Act by adding section 
1899B, titled Standardized Post-Acute Care (PAC) Assessment Data for 
Quality, Payment and Discharge Planning. Section 1899B(c)(1) requires 
that the Secretary specify not later than the applicable specified 
application date, as defined in section 1899B(a)(2)(E), quality 
measures on which IRF providers are required to submit standardized 
patient assessment data described in section 1899B(b)(1) and other 
necessary data specified by the Secretary. Section 1899B(c)(2)(A) 
requires, to the extent possible, the submission of the such quality 
measure data through the use of a PAC assessment instrument and the 
modification of such instrument as necessary to enable such use; for 
IRFs, this requirement refers to the IRF-PAI. In addition, section 
1899B(d)(1) requires that the Secretary specify not later than the 
applicable specified application date, resource use and other measures 
on which IRF providers are required to submit any necessary data 
specified by the Secretary, which may include standardized assessment 
data in addition to claims data. Furthermore, section 2(c)(2) of the 
IMPACT Act amended section 1886(j)(7) of the Act by adding section 
1886(j)(7)(F)(i), which requires IRF providers to submit to the 
Secretary data on the quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act. 
Additionally, section 1886(j)(7)(F)(ii) requires that, beginning in FY 
2019 and for each subsequent year, providers submit standardized 
patient assessment data required under section 1899B(b)(1). Under 
section 1886(j)(7)(F)(iii), the required data must be submitted in the 
form and manner, and at the time, specified by the Secretary.
    Section 1899B(c)(1) and (d)(1) of the Act direct CMS to specify 
measures that relate to at least five stated quality domains and three 
stated resource use and other measure domains. The quality measures 
specified under section 1899B(c)(1) must be with respect to at least 
the following domains:
     Functional status, cognitive function, and changes in 
function and cognitive function;
     Skin integrity and changes in skin integrity;
     Medication reconciliation;
     Incidence of major falls; and
     Accurately communicating the existence of and providing 
for the transfer of health information and care preferences of an 
individual to the individual, family caregiver of the individual, and 
providers of services furnishing items and services to the individual 
when the individual transitions (1) from a hospital or CAH to another 
applicable setting, including a PAC provider or the home of the 
individual, or (2) from a PAC provider to another applicable setting, 
including a different PAC provider, hospital, CAH, or the home of the 
individual.
    The resource use and other measures specified under section 
1899B(d)(1) must be with respect to at least the following domains:
     Resource use measures, including total estimated Medicare 
spending per beneficiary;
     Discharge to community; and
     Measures to reflect all-condition risk-adjusted 
potentially preventable hospital readmissions rates.
    Sections 1899B(c) and (d) of the Act indicate that data satisfying 
the eight measure domains in the IMPACT Act is the minimum data 
reporting requirement. Therefore, we may specify additional measures 
and additional domains.
    Section 1899B(e)(2)(A) of the Act requires that each measure 
specified by the Secretary under that section be

[[Page 23369]]

endorsed by the entity that holds the contract with the Secretary under 
section 1890(a) of the Act. This entity is currently the NQF. 
Information regarding the NQF is available at: http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. 
However, under section 1899B(e)(2)(B), the Secretary may specify a 
measure that has not been so endorsed in the case of a specified area 
of medical topic determined appropriate by the Secretary for which a 
feasible or practical measure has not been 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 1899B(e)(3) of the Act mandates the use of the pre-
rulemaking process of section 1890A with respect to the measures 
specified under sections 1899B(c) and (d) and provides that the 
Secretary may use expedited procedures, such as ad-hoc reviews, as 
necessary in the case of a measure required with respect to data 
submissions during the 1-year period before the applicable specified 
application date. In addition, section 1899B(e)(3)(B)(ii) gives the 
Secretary the option to waive the pre-rulemaking process for a measure 
if the pre-rulemaking process (including through the use of expedited 
procedures) would result in the inability of the Secretary to satisfy 
any deadline specified in section 1899B with respect to the measure.
    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, and section 1899B(g) requires public reporting 
of the performance of individual providers on the quality, resource 
use, and other measures beginning not later than 2 years after the 
applicable specified application date. The Secretary must ensure, 
including through a process consistent with the provisions of section 
1886(b)(3)(B)(viii)(VII), that each IRF is given the opportunity to 
review the data and information that is to be made public and to submit 
corrections prior to the publication or posting of this data. Public 
reporting of data and information under subsection (g)(1) must be 
consistent with the provisions of section 1886(j)(7)(E). In addition, 
section 1899B(f)(1), as added by the IMPACT Act, requires the Secretary 
to make confidential feedback reports available to post-acute providers 
on their performance on the measures required under section 1899B(c)(1) 
and (d)(1), beginning 1 year after the applicable specified application 
date.
    For more information on the statutory history of the IRF QRP, 
please refer to the FY 2015 IRF PPS final rule (79 FR 45908). More 
information on the IMPACT Act is available at https://www.govtrack.us/congress/bills/113/hr4994.
    As previously stated, the IMPACT Act adds a new section 1899B to 
the Act that imposes new data reporting requirements for certain post-
acute care (PAC) providers, including IRFs. Sections 1899B(c)(1) and 
1899B(d)(1) of the Act collectively require that the Secretary specify 
quality measures and resource use and other measures with respect to 
certain domains not later than the specified application date that 
applies to each measure domain and PAC provider setting. Section 
1899B(a)(2)(E) of the Act delineates the specified application dates 
for each measure domain and PAC provider. The IMPACT Act also amends 
various sections of the Act, including section 1886(j)(7), to require 
the Secretary to reduce the otherwise applicable PPS payment to a PAC 
provider that does not report the new data in a form and manner, and at 
a time, specified by the Secretary. For IRFs, amended section 
1886(j)(7)(A)(i) would require the Secretary to reduce the payment 
update for any IRF that does not satisfactorily submit the new required 
data.
    Under the current IRF QRP, the general timeline and sequencing of 
measure implementation occurs as follows: specification of measures; 
proposal and finalization of measures through notice-and-comment 
rulemaking; IRF submission of data on the adopted measures; analysis 
and processing of the submitted data; notification to IRFs regarding 
their quality reporting compliance with respect to a particular FY; 
consideration of any reconsideration requests; and imposition of a 
payment reduction in a particular FY for failure to satisfactorily 
submit data with respect to that FY. Any payment reductions that are 
taken with respect to a FY begin approximately one year after the end 
of the data submission period for that fiscal year and approximately 2 
years after we first adopt the measure.
    To the extent that the IMPACT Act could be interpreted to shorten 
this timeline so as to require us to reduce an IRF's PPS payment for 
failure to satisfactorily submit data on a measure specified under 
section 1899B(c)(1) or (d)(1) of the Act beginning with the same FY as 
the specified application date for that measure, such a timeline would 
not be feasible. The current timeline discussed above reflects 
operational and other practical constraints, including the time needed 
to specify and adopt valid and reliable measures, collect the data, and 
determine whether an IRF has complied with our quality reporting 
requirements. It also takes into consideration our desire to give IRFs 
enough notice of new data reporting obligations so that they are 
prepared to timely start reporting the data. Therefore, we intend to 
follow the same timing and sequence of events for measures specified 
under section 1899B(c)(1) and (d)(1) of the Act that we currently 
follow for other measures specified under the IRF QRP. We intend to 
specify each of these measures no later than the specified application 
dates set forth in section 1899B(a)(2)(E) of the Act and propose to 
adopt them consistent with the requirements in the Act and 
Administrative Procedure Act. To the extent that we finalize a proposal 
to adopt a measure for the IRF QRP that satisfies an IMPACT Act measure 
domain, we intend to require IRFs to report data on the measure for the 
fiscal year that begins 2 years after the specified application date 
for that measure. Likewise, we intend to require IRFs to begin 
reporting any other data specifically required under the IMPACT Act for 
the FY that begins 2 years after we adopt requirements that would 
govern the submission of that data.

B. General Considerations Used for Selection of Quality, Resource Use, 
and Other Measures for the IRF QRP

    We refer readers to the FY 2015 IRF PPS final rule (79 FR 45911) 
for a detailed discussion of the considerations we use for the 
selection of IRF QRP quality measures. In this proposed rule, we apply 
the same considerations to the selection of quality, resource use, and 
other measures required under section 1899B for the IRF QRP, in 
addition to the considerations discussed below.
    The quality measures we are proposing address the measure domains 
that the Secretary is required to specify under sections 1899B(c)(1) 
and (d)(1) of the Act. The totality of the measures considered to meet 
the requirements of the IMPACT Act will evolve, and additional measures 
will be proposed over time as they become available.
    To meet the first specified application date applicable to IRFs 
under section 1899B(a)(2)(E) of the Act, which is October 1, 2016, we 
have focused on measures that:
     Correspond to a measure domain in sections 1899B(c)(1) or 
(d)(1) of the Act and are setting-agnostic: for example,

[[Page 23370]]

falls with major injury and the incidence of pressure ulcers;
     Are currently adopted for 1 or more of our PAC quality 
reporting programs, are already either NQF-endorsed and in use or 
finalized for use, or already previewed by the Measure Applications 
Partnership (MAP) with support;
     Minimize added burden on IRFs;
     Minimize or avoid, to the extent feasible, revisions to 
the existing items in assessment tools currently in use (for example, 
the IRF-PAI); and
     Where possible, the avoidance duplication of existing 
assessment items.
    In our selection and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act. This 
process is based on a private-public partnership, and it occurs via the 
MAP. The MAP is composed of multi-stakeholder groups convened by the 
NQF, our current contractor under section 1890 of the Act, to provide 
input on the selection of quality and efficiency measures described in 
section 1890(b)(7)(B). The NQF must convene these stakeholders and 
provide us with the stakeholders' input on the selection of such 
measures. We, in turn, must take this input into consideration in 
selecting such measures. In addition, the Secretary must make available 
to the public by December 1 of each year a list of such measures that 
the Secretary is considering under Title XVIII of the Act.
    As discussed in section VIII.A. of this proposed rule 1899B(e)(3) 
provides that the pre-rulemaking process required by section 1890A of 
the Act applies to the measures required under section 1899B, subject 
to certain exceptions for expedited procedures or, alternatively, 
waiver of section 1890A.
    We initiated an ad hoc MAP process for the review of the quality 
measures under consideration for proposal, in preparation for adoption 
of those quality measures into the IRF QRP that are required by the 
IMPACT Act, and that must be implemented by October 1, 2016. The List 
of Measures under Consideration (MUC List) under the IMPACT Act was 
made public on February 5, 2015. Under the IMPACT Act, these measures 
must be standardized so they can be applied across PAC settings and 
must correspond to measure domains specified in sections 1899B(c)(1) 
and (d)(1) of the IMPACT Act. The MAP reviewed each IMPACT Act-related 
quality measure proposed in this proposed rule for the IRF QRP, in 
light of its intended cross-setting use. We refer to sections VIII.F. 
and VIII.G. of this proposed rule for more information on the MAP's 
recommendations. The MAP's final report, MAP Off-Cycle Deliberations 
2015: Measures under Consideration to Implement Provisions of the 
IMPACT Act: Final Report, is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    As discussed in section VIII.A. of this proposed rule, section 
1899B(j) of the Act, requires that we allow for stakeholder input, such 
as through town halls, open door forums, and mailbox submissions, 
before the initial rulemaking process to implement section 1899B. To 
meet this requirement, we provided the following opportunities for 
stakeholder input: Our measure development contractor(s) convened a 
technical expert panel (TEP) that included stakeholder experts and 
patient representatives on February 3, 2015; we provided 2 separate 
listening sessions on February 10th and March 24, 2015; we sought 
public input during the February 9th 2015 ad hoc MAP process provided 
for the sole purpose of reviewing the measures we are proposing in 
response to the IMPACT Act. Additionally, we implemented a public mail 
box for the submission of comments in January, 2015, 
PACQualityInitiative@cms.hhs.gov, which is listed on our post-acute 
care quality initiatives Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, 
and held a National Stakeholder Special Open Door Forum to seek input 
on the measures on February 25, 2015. The slides from the Special Open 
Door Forum are available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    For measures that do not have NQF endorsement, or which are not 
fully supported by the MAP for the IRF QRP, we are proposing for the 
IRF QRP for the purposes of satisfying the measure domains required 
under the IMPACT Act that most closely align with the national 
priorities identified in the National Quality Strategy (http://www.ahrq.gov/workingforquality/) and for which the MAP supports the 
measure concept. Further discussion as to the importance and high-
priority status of these measures in the IRF setting is included under 
each quality measure proposal in this proposed rule. In addition, for 
measures not endorsed by the NQF, we have sought, to the extent 
practicable, to adopt measures that have been endorsed or adopted by a 
national consensus organization, recommended by multi-stakeholder 
organizations, and/or developed with the input of providers, 
purchasers/payers, and other stakeholders.

C. Policy for Retention of IRF QRP Measures Adopted for Previous 
Payment Determinations

    In the CY 2013 Hospital Outpatient Prospective Payment System/
Ambulatory Surgical Center (OPPS/ASC) Payment Systems and Quality 
Reporting Programs final rule (77 FR 68500 through 68507), we adopted 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. For the purpose of streamlining the rulemaking 
process, when we initially adopt a measure for the IRF QRP for a 
payment determination, this measure will also be adopted for all 
subsequent years or until we propose to remove, suspend, or replace the 
measure. For further information on how measures are considered for 
removal, suspension, or replacement, please refer to the CY 2013 OPPS/
ASC final rule (77 FR 68500 through 68507).
    We are not proposing any changes to this policy for retaining IRF 
QRP measures adopted for previous payment determinations.

D. Policy for Adopting Changes to IRF QRP Measures

    In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we 
adopted a subregulatory process to incorporate NQF updates to IRF 
quality measure specifications that do not substantively change the 
nature of the measure. Substantive changes will be proposed and 
finalized through rulemaking. Regarding what constitutes a substantive 
versus a nonsubstantive change, we expect to make this determination on 
a measure-by-measure basis. Examples of such nonsubstantive changes 
might include updated diagnosis or procedure codes; medication updates 
for categories of medications, broadening of age ranges, and changes to 
exclusions for a measure. The subregulatory process for nonsubstantive 
changes will include revision of the IRF PAI Manual and posting of 
updates on CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.

[[Page 23371]]

    Examples of changes that we might consider to be substantive would 
be those in which the changes are so significant that the measure is no 
longer the same measure, or when a standard of performance assessed by 
a measure becomes more stringent, such as changes in acceptable timing 
of medication, procedure/process, test administration, or expansion of 
the measure to a new setting.
    We are not proposing any changes to this policy for adopting 
changes to IRF QRP measures.

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

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 two 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 (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:
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 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)). Data submission for 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). 
Additional information about this measure can be found at http://www.qualityforum.org/QPS/0138. IRFs 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 Web site at http://www.cdc.gov/nhsn/inpatient-rehab/index.html.
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 non-risk-adjusted application of this measure.
3. Measures Finalized in the FY 2014 IRF/PPS Final Rule
    For the FY 2016 adjustments to the IRF PPS annual increase factor, 
we finalized the adoption of one additional 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 finalized the adoption of three 
additional 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 Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). In the FY 
2014 IRF PPS final rule (78 FR 47912 through 47916), we also adopted a 
revised version of the IRF-PAI (Version 1.2), which providers began 
using as of October 1, 2014, for the FY 2017 adjustments to the IRF PPS 
annual increase factor and subsequent year annual increase factors.
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 collected by 
the CDC via the NHSN. 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 becomes 
available) through March 31. We further finalized that IRFs submit 
their data for this measure to the NHSN (http://www.cdc.gov/nhsn/). 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 and at 
http://www.qualityforum.org/QPS/0431. 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. We finalized that the final deadline for data 
submission associated with this quality measure is May 15th of each 
year.
b. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
From Inpatient Rehabilitation Facilities (NQF #2502)
    In the FY 2014 IRF PPS final rule (78 FR 47906 through 47910), we 
adopted an All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from IRFs. 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 short-stay 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.
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 Vaccine (Short-Stay) (NQF 
#0680) measure for the IRF QRP.
    We added the data elements needed for this measure to the ``Quality 
Indicator'' section of the IRF-PAI Version 1.2, which became 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-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.

[[Page 23372]]

    For purposes of this quality measure, the influenza vaccination 
season is October 1 (or when the vaccine becomes available) through 
March 31 each year. We also finalized that for the FY 2017 adjustments 
to the IRF PPS annual increase factor, data collection covers the 
period from October 1, 2014 (or when the vaccine becomes available) 
through March 31, 2015.
    The measure specifications for this measure can be found on the CMS 
Web site at http://www.qualityforum.org/QPS/0680.
d. Percent of Residents or Patients With Pressure Ulcers That Are New 
or Worsened (Short-Stay) (NQF #0678)
    In the FY 2014 IRF PPS final rule (78 FR 47911 through 47912), we 
adopted the NQF-endorsed 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 
IRF-PAI Version 1.2, for quality reporting affecting the FY 2017 
adjustments to the IRF PPS annual increase factor and subsequent year 
annual increase factors. The measure specifications for this measure 
can be found on the CMS Web site at http://www.qualityforum.org/QPS/0678.
4. Measures Finalized in the FY 2015 IRF-PPS Final Rule
    In the FY 2015 IRF-PPS final rule, we adopted two additional 
quality measures:
a. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716)
    In the FY 2015 IRF PPS final rule (79 FR 45911 through 45913), we 
adopted the NHSN Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia 
Outcome Measure (NQF #1716), a measure of hospital-onset unique blood 
source MRSA laboratory-identified events among all patients in the 
inpatient rehabilitation facility. This measure was developed by the 
CDC and is NQF-endorsed. We finalized that data submission would start 
on January 1, 2015, and that adjustments to the IRF PPS annual increase 
factor would begin with FY 2017. Data are submitted via the CDC's NHSN. 
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 proposed NHSN 
Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure 
(NQF #1716) can be found at http://www.qualityforum.org/QPS/1716 and 
http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html.
b. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure 
(NQF #1717)
    In the FY 2015 IRF PPS final rule (79 FR 45913 through 45914), we 
adopted the NHSN Facility-Wide Inpatient Hospital-Onset CDI Outcome 
Measure (NQF #1717), a measure of hospital-onset CDI laboratory-
identified events among all inpatients in the facility. This measure 
was developed by the CDC and is NQF-endorsed. We finalized that data 
would be submitted starting January 1, 2015, and that adjustments to 
the IRF PPS annual increase factor would begin with FY 2017. Providers 
will use the CDC/NHSN data collection and submission framework for 
reporting of the proposed NHSN Facility-Wide Inpatient Hospital-Onset 
CDI Outcome Measure (NQF #1717). 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 proposed 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.

 Table 18--Quality Measures Previously Finalized for and Currently Used
                  in the IRF Quality Reporting Program
------------------------------------------------------------------------
                                                         Data submission
        NQF Measure ID           Quality measure title      mechanism
------------------------------------------------------------------------
NQF #0138....................  National Health Safety    CDC NHSN.
                                Network (NHSN) Catheter-
                                Associated Urinary
                                Tract Infection (CAUTI)
                                Outcome Measure.
NQF #0431....................  Influenza Vaccination     CDC NHSN.
                                Coverage among
                                Healthcare Personnel.
NQF #0680....................  Percent of Residents or   IRF-PAI.
                                Patients Who Were
                                Assessed and
                                Appropriately Given the
                                Seasonal Influenza
                                Vaccine (Short-Stay).
NQF #0678....................  Percent of Residents or   IRF-PAI.
                                Patients with Pressure
                                Ulcers That Are New or
                                Worsened (Short-Stay).
NQF #2502....................  All-Cause Unplanned       Claims-based.
                                Readmission Measure for
                                30 Days Post-Discharge
                                from Inpatient
                                Rehabilitation
                                Facilities*.
NQF #1716....................  National Healthcare       CDC NHSN.
                                Safety Network (NHSN)
                                Facility-Wide Inpatient
                                Hospital-Onset
                                Methicillin-Resistant
                                Staphylococcus aureus
                                (MRSA) Bacteremia
                                Outcome Measure.
NQF #1717....................  National Healthcare       CDC NHSN.
                                Safety Network (NHSN)
                                Facility-Wide Inpatient
                                Hospital-Onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure..
------------------------------------------------------------------------
* Claims-based measure; no additional data submission required by IRFs.

5. Continuation of Previously Adopted IRF QRP Quality Measures for the 
FY 2018 Payment Determination and Subsequent Years
    For the FY 2018 adjustments to the IRF PPS annual increase factor, 
we are retaining the previously discussed measures: (1) NHSN CAUTI 
Outcome Measure (NQF #0138); (2) Percent of Residents or Patients Who 
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(Short-Stay) (NQF #0680); (3) Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678); (4) 
All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 
IRFs (NQF #2502); (5) Influenza Vaccination Coverage among Healthcare 
Personnel (NQF #0431); (6) NHSN Facility-Wide Inpatient Hospital-Onset 
MRSA Bacteremia Outcome Measure (NQF #1716), (7) and NHSN Facility-Wide 
Inpatient Hospital-Onset CDI Outcome Measure (NQF #1717) quality 
measures.

[[Page 23373]]

F. Proposal of Previously Adopted IRF QRP Quality Measures for the FY 
2018 Payment Determination and Subsequent Years

    For the FY 2018 payment determination and subsequent years, we are 
proposing to adopt two quality measures to reflect NQF endorsement or 
to meet the requirements of the IMPACT Act: (1) All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502); 
and (2) an application of Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678). These quality 
measures are discussed in more detail below.
1. Proposing Quality Measure To Reflect NQF Endorsement: All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge From IRFs (NQF 
#2502)
    The All-Cause Unplanned Readmission Measure for 30 Days Post 
Discharge from IRFs (NQF #2502) measure was adopted for use in the IRF 
QRP in the FY 2014 IRF PPS final rule (78 FR 47906 through 47910). We 
are proposing to adopt this measure for the FY 2018 payment 
determination and subsequent years to reflect that it is NQF-endorsed 
for use in the IRF setting as of December 2014. For current 
specifications of this measure, please visit http://www.qualityforum.org/QPS/2502.
    As adopted through the FY 2014 IRF PPS final rule, All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) is a Medicare Fee-For-Service (FFS) claims-based measure. IRFs 
would not be required to report any additional data to CMS because we 
would calculate this measure based on claims data that are already 
reported to the Medicare program for payment purposes. We believe there 
would be no additional data collection burden on providers resulting 
from our implementation of All-Cause Unplanned Readmission Measure for 
30 Days Post Discharge from IRFs (NQF #2502) as part of the IRF QRP. In 
the FY 2014 IRF PPS final rule, we stated that we would provide initial 
feedback to providers, prior to public reporting of this measure, based 
on Medicare FFS claims data from CY 2013 and CY 2014.
    The description of this measure provided in the FY 2014 IRF PPS 
final rule (78 FR 47906 through 47910) noted this measure was the ratio 
of the number of risk-adjusted predicted unplanned readmissions for 
each individual IRF to the average number of risk-adjusted predicted 
unplanned readmissions for the same patients treated at the average 
IRF. This ratio is referred to as the standardized risk ratio (SRR). 
However, the measure specifications compute the risk-standardized 
readmission rate (RSRR) for this measure. The RSRR is the SRR 
multiplied by the overall national raw readmission rate for all IRF 
stays. The outcome is expressed as a percentage rate rather than a 
ratio.
    This measure, which harmonizes with the Hospital-Wide All-Cause 
Readmission Measure (NQF #1789) currently in use in the Inpatient 
Quality Reporting Program, continues to use the CMS Planned Readmission 
Algorithm as the main component for identifying planned readmissions. 
This algorithm was refined in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50211 through 50216). The All-Cause Unplanned Readmission Measure 
for 30 Days Post Discharge from IRFs (NQF #2502) measure for the IRF 
QRP will utilize the most recently updated version of the algorithm. A 
complete description of the CMS Planned Readmission Algorithm, which 
includes lists of planned diagnoses and procedures, can be found on CMS 
Web site (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). 
The additional post-acute care planned readmission procedures specified 
for All-Cause Unplanned Readmission Measure for 30 Days Post Discharge 
from IRFs (NQF #2502) remain the same as when first adopted through FY 
2014 IRF PPS final rule. Documentation on the additional post-acute 
care planned readmissions for this measure is available at http://www.qualityforum.org/QPS/2502. http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73619.
    We invite public comments in response to our proposal to adopt the 
NQF-endorsed version of All-Cause Unplanned Readmission Measure for 30 
Days Post Discharge from IRFs (NQF #2502) for the IRF QRP for the FY 
2018 payment determination and subsequent years.
2. Quality Measure Addressing the Domain of Skin Integrity and Changes 
in Skin Integrity: Percent of Residents or Patients With Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is skin integrity 
and changes in skin integrity. The specified application date by which 
the Secretary must specify quality measures to address this domain for 
IRFs, Skilled Nursing Facilities (SNFs), and LTCHs is October 1, 2016, 
and for HHAs is January 1, 2017. To satisfy these requirements, we are 
proposing to adopt the measure Percent of Residents or Patients with 
Pressure Ulcers that are New or Worsened (Short-Stay) (NQF #0678) that 
we have already adopted for the IRF QRP as a cross-setting quality 
measure that satisfies the domain of skin integrity and changes in skin 
integrity. The reporting of data for this measure would affect the 
payment determination for FY 2018 and subsequent years. For the IRF 
setting, the measure assesses the percent of patients with stage 2 
through stage 4 pressure ulcers that are new or worsened since 
admission.
    As described in the FY 2012 IRF PPS final rule (76 FR 47876 through 
47878), pressure ulcers are high-cost adverse events and are an 
important measure of quality. For information on the history and 
rationale for the relevance, importance, and applicability of this 
measure in the IRF QRP, we refer readers to the FY 2012 IRF PPS final 
rule and the FY 2014 IRF PPS final rule (78 FR 47911 through 47912). 
Details regarding the specifications for this measure are available on 
the NQF Web site at http://www.qualityforum.org/QPS/0678.
    The IMPACT Act requires the implementation of quality measures and 
resource use and other measures that are standardized and interoperable 
across PAC settings, as well as the reporting of standardized patient 
assessment data and other necessary data specified by the Secretary. 
This requirement is in line with the NQF Steering Committee report, 
which stated ``to understand the impact of pressure ulcers across 
providers, quality measures addressing prevention, incidence, and 
prevalence of pressure ulcers must be harmonized and aligned.'' \2\ 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) is NQF-endorsed for the IRF setting 
and has been successfully implemented using a harmonized set of data 
elements in three PAC settings (IRF, LTCH and SNF). As discussed in 
section VIII.E. of this proposed rule, an

[[Page 23374]]

application of this measure was adopted for the IRF QRP in the FY 2012 
IRF PPS final rule (76 FR 47876 through 47878) for the FY 2014 payment 
determination and subsequent years, and the current NQF-endorsed 
version of the measure was finalized in the FY 2014 IRF PPS final rule 
(78 FR 47911 through 47912) for the FY 2017 payment determination and 
subsequent years. The measure has been in use in the IRF QRP since 
October 1, 2012, and currently, IRFs are submitting data for this 
measure using the IRF-PAI.
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    \2\ National Quality Forum. National voluntary consensus 
standards for developing a framework for measuring quality for 
prevention and management of pressure ulcers. April 2008. Available 
from http://www.qualityforum.org/Projects/Pressure_Ulcers.aspx.>
---------------------------------------------------------------------------

    The Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678) measure was adopted for use in 
the LTCH QRP in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 
through 51756) for the FY 2014 payment determination and subsequent 
years, and has been successfully submitted by LTCHs using the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set since 
October 2012. It has also been implemented in CMS' Nursing Home Quality 
Initiative, using the MDS 3.0 since 2011, and is currently reported on 
CMS' Nursing Home Compare at http://www.medicare.gov/nursinghomecompare/search.html.
    A TEP convened by our measure development contractor in February 
2015 provided input on the measure specifications and the feasibility 
and clinical appropriateness of implementing the measure as a cross-
setting quality measure under the IMPACT Act of 2014, for use across 
PAC settings, including the IRF setting. The TEP supported the 
implementation of this measure across PAC providers and also supported 
our efforts to standardize this measure for cross-provider development. 
Additionally, the MAP, convened by the NQF, met on February 9, 2015 and 
provided input to CMS. The MAP supported the use of Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678) in the IRF QRP as a cross-setting quality 
measure to be specified in accordance with the IMPACT Act of 2014. MAP 
noted that this measure addresses one of its previously identified PAC/
LTC core concepts as well as an IMPACT Act domain. More information 
about the MAP's recommendations for this measure is available at: 
http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    We propose that that data collection for Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF #0678) continue to occur through the quality indicator section of 
the IRF-PAI submitted through the Quality Improvement Evaluation System 
(QIES) Assessment Submission and Processing (ASAP) system. IRFs have 
been submitting data on the Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) measure (NQF 
#0678) through the quality indicator section of the IRF-PAI since 
October 2012. For more information on IRF reporting using the QIES ASAP 
system refer to: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Technical-Information.html.
    In an effort to further harmonize the data elements across PAC 
providers, we propose an update to the IRF-PAI items used to calculate 
the Percent of Residents or Patients with Pressure Ulcers That Are New 
or Worsened (Short Stay) measure (NQF #0678) to align with the items 
included in the LTCH CARE Data Set and the MDS 3.0. The proposed 
modified IRF-PAI items used to identify new or worsened pressure ulcers 
consist of: M0800A: Worsening in Pressure Ulcer Status Since Admission, 
Stage 2; M0800B: Worsening in Pressure Ulcer Status Since Admission, 
Stage 3; and M0800C: Worsening in Pressure Ulcer Status Since 
Admission, Stage 4. We are not proposing a change to the IRF-PAI items 
used to risk adjust this quality measure. These items consist of: 
FIM[supreg] Item 39I (Transfers: Bed, Chair, and Wheelchair), 
FIM[supreg] Item 32 (Bowel Frequency of Accidents), I0900A (Peripheral 
Vascular Disease (PVD)), I0900B (Peripheral Arterial Disease (PAD)), 
I2900A (Diabetes Mellitus), 25A (Height), and 26A (Weight). More 
information about the IRF-PAI items is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html. For more information about the proposed changes to the 
IRF-PAI, see http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    The specifications and data elements for the Percent of Residents 
or Patients with Pressure Ulcers that are New or Worsened (Short Stay) 
(NQF #0678), are available in the IRF-PAI training manual at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    We invite public comment on our proposal to specify and adopt 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) for the IRF QRP for the FY 2018 
payment determination and subsequent years to fulfill the requirements 
in the IMPACT Act.
    Request for public comments regarding future measure development 
for Percent of Residents or Patients with Pressure Ulcers That Are New 
or Worsened (Short Stay) (NQF #0678)
    As part of our ongoing measure development efforts, we are 
considering a future update to the numerator of the quality measure 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678). This update would hold providers 
accountable for the development of unstageable pressure ulcers, 
including suspected deep tissue injuries (sDTIs). Under this possible 
future change, the numerator of the quality measure would be updated to 
include unstageable pressure ulcers, including sDTIs, that are new or 
developed in the facility, as well as Stage 1 or 2 pressure ulcers that 
become unstageable due to slough or eschar (indicating progression to a 
Stage 3 or 4 pressure ulcer) after admission. At this time, we are not 
proposing the implementation of this change (that is, including sDTIs 
and unstageable pressure ulcers in the numerator) in the IRF QRP, but 
are soliciting public comment on this potential area of measure 
development.
    Our measure development contractor convened a cross-setting 
pressure ulcer TEP that strongly recommended that we hold providers 
accountable for the development of new unstageable pressure ulcers by 
including these pressure ulcers in the numerator of the quality 
measure. Although the TEP acknowledged that unstageable pressure 
ulcers, including sDTIs, cannot and should not be assigned a numeric 
stage, panel members recommended that these be included in the 
numerator of Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678) as a new pressure ulcer if 
it developed in the facility. The TEP also recommended that a Stage 1 
or 2 pressure ulcer that becomes unstageable due to slough or eschar 
should be considered worsened, because the presence of slough or eschar 
indicates a full thickness (equivalent to Stage 3 or 4) 
wound.3 4 These

[[Page 23375]]

recommendations were supported by technical and clinical advisors and 
the National Pressure Ulcer Advisory Panel (NPUAP).\5\ Furthermore, 
exploratory data analysis conducted by our measure development 
contractor suggests that the addition of unstageable pressure ulcers, 
including sDTIs, would increase the observed incidence of new or 
worsened pressure ulcers at the facility level and may improve the 
ability of the quality measure to discriminate between poor- and high-
performing facilities.
---------------------------------------------------------------------------

    \3\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
    \4\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
    \5\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
---------------------------------------------------------------------------

    We invite public comment to inform our future measure development 
efforts to include unstageable pressure ulcers, including sDTIs, in the 
numerator of the quality measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678).

G. Proposed Additional IRF QRP Quality Measures for the FY 2018 Payment 
Determination and Subsequent Years

    We are proposing to adopt 6 additional quality measures beginning 
with the FY 2018 payment determination. These new proposed quality 
measures are: (1) An application of Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674); (2) an 
application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; under review); (3) IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients (NQF #2633; under 
review); (4) IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634; under review); (5) IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635; under review); and (6) IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; under review).
1. Quality Measure Addressing the Domain of the Incidence of Major 
Falls: An Application of Percent of Residents Experiencing One or More 
Falls With Major Injury (Long Stay) (NQF #0674)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is the incidence of 
major falls. The specified application date by which the Secretary must 
specify quality measures to address this domain for IRFs, SNFs, and 
LTCHs is October 1, 2016, and for HHAs is January 1, 2019. To satisfy 
these requirements, we are proposing to adopt an application of Percent 
of Residents Experiencing One of More Falls with Major Injury (Long 
Stay) (NQF #0674) in the IRF QRP as a cross-setting quality measure 
that addresses the domain of incidence of major falls. Data collection 
would start on October 1, 2016. The reporting of data for this measure 
would affect the payment determination for FY 2018 and subsequent 
years. As described in more detail in section VIII.I.2. of this 
proposed rule, the proposed first data collection period is 3 months 
(October 1, 2016 to December 31, 2016), and the proposed subsequent 
data collection periods are 12-months in length and follow the calendar 
year (that is, January 1 to December 31). For the IRF setting, this 
measure would report the percentage of patients who experienced one or 
more falls with major injury during the IRF stay. This measure was 
developed by CMS and is NQF-endorsed for long-stay residents of nursing 
facilities.
    Research indicates that fall-related injuries are the most common 
cause of accidental death in people aged 65 and older, responsible for 
approximately 41 percent of accidental deaths annually.\6\ Rates 
increase to 70 percent of accidental deaths among individuals aged 75 
and older.\7\ In addition to death, falls can lead to fracture, soft 
tissue or head injury, fear of falling, anxiety, and depression.\8\ It 
is estimated that 10 percent to 25 percent of nursing facility resident 
falls result in fractures and/or hospitalization.\9\ For IRFs, a study 
of 5,062 patients found 367 patients (7.25 percent) had 438 falls. 
Among these 438 falls, 129 (29.5 percent of the falls) resulted in an 
injury, of which 25 (19 percent of falls) were serious.\10\ A separate 
study of 754 stroke patients in an IRF reported 117 patients (15.5 
percent) experienced 159 falls. Among these 159 falls, 13 (8 percent of 
falls) resulted in a minor injury, and 3 (2 percent of falls) resulted 
in a serious injury.\11\
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    \6\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.
    \7\ Fuller GF. Falls in the elderly. Am Fam Physician. Apr 1 
2000;61(7):2159-2168, 2173-2154.
    \8\ Premier Inc. Causes of Falls. 2013. Available: https://www.premierinc.com/quality-safety/toolsservices/safety/topics/falls/causes_of_falls.jsp.
    \9\ Vu MQ, Weintraub N, Rubenstein LZ. Falls in the nursing 
home: are they preventable? J Am Med Dir Assoc. 2004 Nov-Dec; 
5(6):401-6. Review.
    \10\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehab 
Nurs. 2010; 35(4):141-146.
    \11\ Rabadi MH, Rabadi FM, Peterson M. An analysis of falls 
occurring in patients with stroke on an acute rehabilitation unit. 
Rehab Nurs. 2008; 33(3):104-109.
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    Falls also represent a significant cost burden to the entire health 
care system, with injurious falls accounting for 6 percent of medical 
expenses among those age 65 and older.\12\ In their 2006 work, Sorensen 
et al. estimate the costs associated with falls of varying severity 
among nursing home residents. Their work suggests that acute-care costs 
range from $979 for a typical case with a simple fracture to $14,716 
for a typical case with multiple injuries.\13\ A similar study of 
hospitalizations of nursing home residents due to serious fall-related 
injuries (intracranial bleed, hip fracture, other fracture) found an 
average cost of $23,723.\14\
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    \12\ Tinetti ME, Williams CS. The effect of falls and fall 
injuries on functioning in community-dwelling older persons. J 
Gerontol A Biol Sci Med Sci. 1998 Mar;53(2):M112-9.
    \13\ Sorensen SV, de Lissovoy G, Kunaprayoon D, Resnick B, 
Rupnow MF, Studenski S. A taxonomy and economic consequence of 
nursing home falls. Drugs Aging. 2006;23(3):251-62.
    \14\ Quigley PA, Campbell RR, Bulat T, Olney RL, Buerhaus P, 
Needleman J. Incidence and cost of serious fall-related injuries in 
nursing homes. Clin Nurs Res. Feb 2012;21(1):10-23.
---------------------------------------------------------------------------

    According to Morse,\15\ 78 percent of falls are anticipated 
physiological falls. Anticipated physiological falls are falls among 
individuals who scored high on a risk assessment scale, meaning their 
risk could have been identified in advance of the fall. To date, 
studies have identified a number of risk factors for 
falls.16 17 18 19 20 21 22 23 24 The

[[Page 23376]]

identification of such risk factors suggests the potential for health 
care facilities to reduce and prevent the incidence of falls with 
injuries for their patients. In light of the evidence previously 
discussed, we are proposing to adopt an application of the measure 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) (NQF #0674) for the IRF QRP, with data collection starting 
on October 1, 2016 and affecting the payment determination for FY 2018 
and subsequent years. As described in more detail in section VIII.I.2. 
of this proposed rule, the proposed first data collection period is 3 
months (October 1, 2016 to December 31, 2016), and the proposed 
subsequent data collection periods are 12-months in length and follow 
the calendar year (that is, January 1 to December 31).
---------------------------------------------------------------------------

    \15\ Morse, J. M. (2002) Enhancing the safety of hospitalization 
by reducing patient falls. Am J Infect Control 2002; 30(6): 376-80.
    \16\ Rothschild JM, Bates DW, Leape LL. Preventable medical 
injuries in older patients. Arch Intern Med. 2000 Oct 9; 
160(18):2717-28.
    \17\ Morris JN, Moore T, Jones R, et al. Validation of long-term 
and post-acute care quality indicators. CMS Contract No: 500-95-
0062/T.O. #4. Cambridge, MA: Abt Associates, Inc., June 2003.
    \18\ Avidan AY, Fries BE, James ML, Szafara KL, Wright GT, 
Chervin RD. Insomnia and hypnotic use, recorded in the minimum data 
set, as predictors of falls and hip fractures in Michigan nursing 
homes. J Am Geriatr Soc. 2005 Jun; 53(6):955-62.
    \19\ Fonad E, Wahlin TB, Winblad B, Emami A, Sandmark H. Falls 
and fall risk among nursing home residents. J Clin Nurs. 2008 Jan; 
17(1):126- 34.
    \20\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.
    \21\ Ellis AA, Trent RB. Do the risks and consequences of 
hospitalized fall injuries among older adults in California vary by 
type of fall? J Gerontol A Biol Sci Med Sci. Nov 2001;56(11):M686-
692.
    \22\ Chen XL, Liu YH, Chan DK, Shen Q, Van Nguyen H. Chin Med J 
(Engl). Characteristics associated with falls among the elderly 
within aged care wards in a tertiary hospital: a retrospective. 2010 
Jul;123(13):1668-72.
    \23\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehabil 
Nurs. 2010 JulAug;35(4):141-6, 166.
    \24\ Lee JE, Stokic DS. Risk factors for falls during inpatient 
rehabilitant Am J Phys Med Rehabil. 2008 May;87(5):341-50; quiz 351, 
422.
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    The IMPACT Act requires the specification of quality measures and 
resource use and other measures that are standardized and interoperable 
across PAC settings as well as the reporting of standardized patient 
assessment data and other necessary data specified by the Secretary. 
The Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure is NQF-endorsed for long-stay 
residents in nursing homes and has been successfully implemented in 
nursing facilities for long-stay residents. The NQF-endorsed measure 
has been in use as part of CMS' Nursing Home Quality Initiative since 
2011. In addition, the measure is currently reported on CMS' Nursing 
Home Compare Web site at http://www.medicare.gov/nursinghomecompare/search.html. Further, the measure was adopted for use in the LTCH QRP 
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 through 50877). In 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50290), we revised the data 
collection period for this measure with data collection to begin 
starting April 1, 2016.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
falls with a major injury. We are unaware of any other cross-setting 
quality measures for falls with major injury that have been endorsed or 
adopted by another consensus organization. Therefore, we are proposing 
an application of the measure, the Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674), under the 
Secretary's authority to select non-NQF-endorsed measures.
    A TEP convened by our measure development contractor provided input 
on the measure specifications, including the feasibility and clinical 
appropriateness of implementing the measure across PAC settings, 
including the IRF setting. The TEP supported the implementation of this 
measure across PAC settings, including the IRF setting, and also 
supported our efforts to standardize this measure for cross-setting 
development. Additionally, the NQF-convened MAP met on February 9, 2015 
and provided input to us on the measure. The MAP conditionally 
supported the use of an application of Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) in the IRF QRP as a cross-setting quality measure. More 
information about the MAP's recommendations for this measure is 
available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    More information on the Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay), visit the NQF Web site: 
http://www.qualityforum.org/QPS/0674. Details regarding the changes 
made to modify the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay), and updated specifications are located 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information.html.
    We propose that data for this quality measure would be collected 
using the IRF-PAI with submission through the QIES ASAP system. More 
information on IRF reporting using the QIES ASAP system is located at 
the Web site: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html.
    Data collected through a revised IRF-PAI would be used to calculate 
this quality measure. Consistent with the IRF-PAI reporting 
requirements, the application of the Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674), will apply 
to all Medicare patients discharged from IRFs. Data items in the 
revised IRF-PAI would include: J1800: Any Falls Since Admission, and 
J1900: Number of Falls Since Admission.
    The calculation of the proposed application of the measure would be 
based on item J1900C: Number of Falls with Major Injury since 
Admission. The specifications and data elements for the application of 
the Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674), are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. For more information on the proposed data collection 
and submission timeline for the proposed quality measure, refer to 
section VIII.I.2 of this proposed rule.
    We invite public comment on our proposal to adopt an application of 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) (NQF #0674), with data collection beginning on October 1, 
2016, for the IRF QRP for FY 2018 payment determination and subsequent 
years to fulfill the requirements in the IMPACT Act.
2. Quality Measure Addressing the Domain of Functional Status, 
Cognitive Function, and Changes in Function and Cognitive Function: 
Application of Percent of Long-Term Care Hospital Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; under review)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is functional 
status, cognitive function, and changes in function and cognitive 
function. To satisfy these requirements, we are proposing to specify 
and adopt an application of the quality measure

[[Page 23377]]

Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631; under 
review) in the IRF QRP as a cross-setting quality measure that 
addresses the domain of functional status, cognitive function, and 
changes in function and cognitive function. The reporting of data for 
this measure would affect the payment determination for FY 2018 and 
subsequent years. This quality measure reports the percent of patients 
with both an admission and a discharge functional assessment and a goal 
that addresses function.
    The National Committee on Vital and Health Statistics, Subcommittee 
on Health,\25\ noted: ``[i]information on functional status is becoming 
increasingly essential for fostering healthy people and a healthy 
population. Achieving optimal health and well-being for Americans 
requires an understanding across the life span of the effects of 
people's health conditions on their ability to do basic activities and 
participate in life situations, that is, their functional status.'' 
This statement is supported by research showing that patient 
functioning is associated with important patient outcomes such as 
discharge destination and length of stay in inpatient settings,\26\ as 
well as the risk of nursing home placement and hospitalization of older 
adults living the in community.\27\ Functioning is important to 
patients and their family members.28 29 30
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    \25\ Subcommittee on Health National Committee on Vital and 
Health Statistics, ``Classifying and Reporting Functional Status'' 
(2001).
    \26\ Reistetter TA, Graham JE, Granger CV, Deutsch A, 
Ottenbacher KJ. Utility of Functional Status for Classifying 
Community Versus Institutional Discharges after Inpatient 
Rehabilitation for Stroke. Archives of Physical Medicine and 
Rehabilitation, 2010; 91:345-350.
    \27\ Miller EA, Weissert WG. Predicting Elderly People's Risk 
for Nursing Home Placement, Hospitalization, Functional Impairment, 
and Mortality: A Synthesis. Medical Care Research and Review, 57; 3: 
259-297.
    \28\ Kurz, A. E., Saint-Louis, N., Burke, J. P., & Stineman, M. 
G. (2008). Exploring the personal reality of disability and 
recovery: a tool for empowering the rehabilitation process. Qual 
Health Res, 18(1), 90-105.
    \29\ Kramer, A. M. (1997). Rehabilitation care and outcomes from 
the patient's perspective. Med Care, 35(6 Suppl), JS48-57.
    \30\ Stineman, M. G., Rist, P. M., Kurichi, J. E., & Maislin, G. 
(2009). Disability meanings according to patients and clinicians: 
imagined recovery choice pathways. Quality of Life Research, 18(3), 
389-398.
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    The majority of patients and residents who receive PAC services, 
such as care provided by SNFs, HHAs, IRFs and LTCHs, have functional 
limitations, and many of these patients are at risk for further decline 
in function due to limited mobility and ambulation.\31\ The patient 
populations treated by SNFs, HHAs, IRFs and LTCHs vary in terms of 
their functional abilities at the time of the PAC admission and their 
goals of care. For IRF patients and many SNF residents, treatment goals 
may include fostering the patient's ability to manage his or her daily 
activities so that the patient can complete self-care and/or mobility 
activities as independently as possible, and if feasible, return to a 
safe, active, and productive life in a community-based setting. For HHA 
patients, achieving independence within the home environment and 
promoting community mobility may be the goal of care. For other HHA 
patients, the goal of care may be to slow the rate of functional 
decline to allow the person to remain at home and avoid 
institutionalization.\32\ Lastly, in addition to having complex medical 
care needs for an extended period of time, LTCH patients often have 
limitations in functioning because of the nature of their conditions, 
as well as deconditioning due to prolonged bed rest and treatment 
requirements (for example, ventilator use). The clinical practice 
guideline Assessment of Physical Function \33\ recommends that 
clinicians should document functional status at baseline and over time 
to validate capacity, decline, or progress. Therefore, assessment of 
functional status at admission and discharge and establishing a 
functional goal for discharge as part of the care plan (that is, 
treatment plan) is an important aspect of patient care in all of these 
PAC providers.
---------------------------------------------------------------------------

    \31\ Kortebein P, Ferrando A, Lombebeida J, Wolfe R, Evans WJ. 
Effect of 10 days of bed rest on skeletal muscle in health adults. 
JAMA; 297(16):1772-4.
    \32\ Ellenbecker CH, Samia L, Cushman MJ, Alster K. Patient 
safety and quality in home health care. Patient Safety and Quality: 
An Evidence-Based Handbook for Nurses. Vol 1.
    \33\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103.
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    Given the variation in patient and resident populations across the 
PAC providers, the functional activities that are typically assessed by 
clinicians for each type of PAC provider may vary. For example, the 
activity of rolling left and right in bed is an example of a functional 
activity that may be most relevant for low-functioning patients or 
residents who are chronically critically ill. However, certain 
functional activities, such as eating, oral hygiene, lying to sitting 
on the side of the bed, toilet transfers, and walking or wheelchair 
mobility, are important activities for patients and residents in each 
PAC provider.
    Although functional assessment data are currently collected in 
SNFs, HHAs, IRFs and LTCHs, this data collection has employed different 
assessment instruments, scales, and item definitions. The data 
collected cover similar topics, but are not standardized across PAC 
settings. Further, the different sets of functional assessment items 
are coupled with different rating scales, making communication about 
patient functioning challenging when patients transition from one type 
of provider to another. Collection of standardized functional 
assessment data across SNFs, HHAs, IRFs and LTCHs, using common data 
items, would establish a common language for patient functioning, which 
may facilitate communication and care coordination as patients 
transition from one type of provider to another. The collection of 
standardized functional status data may also help improve patient or 
resident functioning during an episode of care by ensuring that basic 
daily activities are assessed at the start and end of each episode of 
care with the aim of determining whether at least one functional goal 
is established.
    The functional assessment items included in the proposed functional 
status quality measure were originally developed and tested as part of 
the Post-Acute Care Payment Reform Demonstration version of the CARE 
Item Set, which was designed to standardize assessment of patients' 
status across acute and post-acute providers, including SNFs, HHAs, 
IRFs and LTCHs. The functional status items on the CARE Item Set are 
daily activities that clinicians typically assess at the time of 
admission and/or discharge to determine patients' or residents' needs, 
evaluate patient or resident progress and prepare patients or residents 
and families for a transition to home or to another provider.
    The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \34\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration, 
and we concluded that the functional status items have acceptable 
reliability and

[[Page 23378]]

validity. A description of the testing methodology and results are 
available in several reports, including the report entitled ``The 
Development and Testing of the Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 
2 of 3'' \35\ and the report entitled ``The Development and Testing of 
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final 
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 
3.'' \36\ The reports are available on CMS' Post-Acute Care Quality 
Initiatives Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

    \34\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \35\ Ibid.
    \36\ Ibid.
---------------------------------------------------------------------------

    The cross-setting function quality measure we are proposing to 
adopt for the FY 2018 payment determination and subsequent years is a 
process measure that is an application of the quality measure Percent 
of LTCH Patients with an Admission and Discharge Functional Assessment 
and a Care Plan that Addresses Function (NQF #2631; under review). This 
quality measure was developed by the CMS. It reports the percent of 
patients with both an admission and a discharge functional assessment 
and a treatment goal that addresses function. The treatment goal 
provides documentation that a care plan with a goal has been 
established for the patient.
    This process measure requires the collection of admission and 
discharge functional status data using standardized clinical assessment 
items, or data elements, that assess specific functional activities, 
that is, self-care, mobility activities. The self-care and mobility 
function activities are coded using a 6-level rating scale that 
indicates the patient's level of independence with the activity; higher 
scores indicate more independence. For this quality measure, 
documentation of a goal for one of the function items reflects that the 
patient's care plan addresses function. The function goal is recorded 
at admission for at least one of the standardized self-care or mobility 
function items using the 6-level rating scale.
    To the extent that a patient has an incomplete stay (for example, 
for the purpose of being admitted to an acute care facility), 
collection of discharge functional status data might not be feasible. 
Therefore, for patients with incomplete stays, admission functional 
status data and at least one treatment goal would be required, 
discharge functional status data would not be required to be reported.
    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, including the 
feasibility of implementing the measure across PAC settings, including 
the IRF setting. The TEP supported the implementation of this measure 
across PAC providers and also supported our efforts to standardize this 
measure for cross-setting use. Additionally, the MAP met on February 9, 
2015 and provided input to us on the measure. The MAP conditionally 
supported the specification of an application of Percent of LTCH 
Patients With an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; under review) for use in 
the IRF QRP as a cross-setting measure. MAP conditionally supported 
this measure pending NQF-endorsement and resolution of concerns about 
the use of two different functional status scales for quality reporting 
and payment purposes. MAP reiterated its support for adding measures 
addressing function, noting the group's special interest in this PAC/
LTC core concept. More information about the MAPs recommendations for 
this measure is available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    This quality measure was developed by CMS. The specifications are 
available for review at the IRF QRP Web site: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
assessment of function for PAC patients. We are also unaware of any 
other cross-setting quality measures for functional assessment that 
have been endorsed or adopted by another consensus organization. 
Therefore, we are proposing to specify and adopt this functional 
assessment measure for use in the IRF QRP for the FY 2018 payment 
determination and subsequent years under the Secretary's authority to 
select non-NQF-endorsed measures. As described in more detail in 
section VIII.I.2, of this proposed rule, the proposed first data 
collection period is 3 months (October 1, 2016 to December 31, 2016), 
and the proposed subsequent data collection periods are 12-months in 
length and follow the calendar year (that is, January 1 to December 
31).
    We are proposing that data for this proposed quality measure be 
collected using the IRF-PAI, with submission through the QIES ASAP 
system. For more information on IRF QRP reporting through the QIES ASAP 
system, we refer readers to the CMS Web site at:http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIMDS30TechnicalInformation.html.
    The measure calculation algorithm is: (1) For each IRF stay, the 
records of Medicare patients discharged during the 12-month target time 
period are identified and counted; this count is the denominator; (2) 
the records of Medicare patients with complete stays are identified, 
and the number of these patient stays with complete admission 
functional assessment data and at least one self-care or mobility 
activity goal and complete discharge functional assessment data is 
counted; (3) the records of Medicare patients with incomplete stays are 
identified, and the number of these patient records with complete 
admission functional status data and at least one self-care or mobility 
goal is counted; (4) the counts from step 2 (complete IRF stays) and 
step 3 (incomplete IRF stays) are summed; the sum is the numerator 
count; and (5) the numerator count is divided by the denominator count 
to calculate this quality measure.
    For purposes of assessment data collection, we propose to add a new 
section into the IRF-PAI. The new proposed section will include new 
functional status items that will be used to calculate the application 
of the Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631; under review) quality measure should this proposed measure be 
adopted. The items to be added to the IRF-PAI, which assess specific 
self-care and mobility activities, would be based on functional items 
included in the Post-Acute Care Payment Reform Demonstration version of 
the CARE Item Set.
    The specifications and data elements for the quality measure are 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    The proposed function items to be included within the IRF-PAI do 
not duplicate existing items currently used for data collection within 
the IRF-PAI. While many of the items to be included have labels that 
are similar to existing items on the IRF-PAI, there are several

[[Page 23379]]

key differences between the 2 assessment item sets that may result in 
variation in the patient assessment results. Key differences include: 
(1) The data collection and associated data collection instructions; 
(2) the rating scales used to score a patient's level of independence; 
and (3) the item definitions. A description of these differences is 
provided with the measure specifications on CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    This measure is calculated at two points in time, at admission and 
discharge (see Proposed Form, Manner, and Timing of Quality Data 
Submission section of the rule). The items would assess specific self-
care and mobility activities, and would be based on functional items 
included in the Post-Acute Care Payment Reform Demonstration version of 
the CARE Item Set. The items have been developed and tested for 
reliability and validity in SNFs, HHAs, IRFs, and LTCHs. More 
information pertaining to item testing is available on our Post-Acute 
Care Quality Initiatives Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    For more information on the proposed data collection and submission 
timeline for the proposed quality measure refer to section VIII.I.2, of 
this proposed rule. Additional information regarding the items to be 
added to the IRF-PAI may be found on CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    Lastly, in alignment with the requirements of the IMPACT Act to 
develop quality measures and standardize data for comparative purposes, 
we believe that evaluating outcomes across the post-acute settings 
using standardized data is an important priority. Therefore, in 
addition to proposing a process-based measure for the domain in the 
IMPACT Act of ``Functional status, cognitive function, and changes in 
function and cognitive function'', which is included in this year's 
proposed rule, we also intend to develop outcomes-based quality 
measures, including functional status and other quality outcome 
measures to further satisfy this domain. These measures will be 
proposed in future rulemaking to assess functional change for each care 
setting as well as across care settings.
    We invite public comments on our proposal to adopt the application 
of the quality measure Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan that Addresses Function 
(NQF #2631; under review) for the IRF QRP, with data collection 
starting on October 1, 2016, for the FY 2018 payment determination and 
subsequent years.
3. IRF Functional Outcome Measure: Change in Self-Care Score for 
Medical Rehabilitation Patients (NQF #2633; Under Review)
    The third quality measure that we are proposing for the FY 2018 
payment determination and subsequent years is an outcome measure 
entitled IRF Functional Outcome Measure: Change in Self-Care Score for 
Medical Rehabilitation Patients (NQF #2633, under review). This quality 
measure estimates the risk-adjusted mean change in self-care score 
between admission and discharge among IRF patients. This measure is 
being proposed under the authority of section 1886(j)(7)(C) of the Act, 
and is currently under review by the NQF. A summary of the measure 
specifications can be accessed on the NQF Web site: http://www.qualityforum.org/qps/2633. Detailed specifications for this quality 
measure can be accessed at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2633.
    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 status 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. 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. Therefore, we believe 
there is an opportunity for improvement in this area. For example, 
Reistetter \37\ 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, by 
insurance type, and race/ethnicity group after risk adjustment. O'Brien 
and colleagues \38\ 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 colleagues \39\ 
also 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.
---------------------------------------------------------------------------

    \37\ Reistetter TA, Karmarkar AM, Graham JE, et al. Regional 
variation in stroke rehabilitation outcomes. Arch Phys Med 
Rehabil.95(1):29-38, Jan. 2014.
    \38\ 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.
    \39\ 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.
---------------------------------------------------------------------------

    The functional assessment items included in this quality measure 
were originally developed and tested as part of the Post-Acute Care 
Payment Reform Demonstration version of the CARE Tool,\40\ which was 
designed to standardize assessment of patients' status across acute and 
post-acute providers, including IRFs, SNFs, HHAs and LTCHs. The 
functional status items on the CARE Tool are daily activities that 
clinicians typically assess at the time of admission and/or discharge 
to determine patients' needs, evaluate patient progress and prepare 
patients and families for a transition to home or to another provider.
---------------------------------------------------------------------------

    \40\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
---------------------------------------------------------------------------

    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional self-care activities (for example, eating, oral 
hygiene, toileting hygiene). The self-care function items are coded 
using a 6-level rating scale that indicates the patient's level of 
independence with the activity; higher scores indicate more 
independence. In addition, this measure requires the collection of risk 
factors data, such as patient functioning prior to the current reason 
for admission, bladder continence, communication ability and cognitive 
function, at the time of admission.

[[Page 23380]]

    This self-care quality measure will also standardize the collection 
of functional status data, which can improve communication when 
patients are transferred between providers. Most IRF patients receive 
care in an acute care hospital prior to the IRF stay, and many IRF 
patients receive care from another provider after the IRF stay. Use of 
standardized clinical data to describe a patient[acute]s status across 
providers can facilitate communication across providers. Rehabilitation 
programs have traditionally conceptualized functional status in terms 
of the need for assistance from another person. This is the conceptual 
basis for the IRF-PAI/FIM[supreg]* instrument (used in IRFs), the MDS 
function items (used in nursing homes), and the Outcome and Assessment 
Information Set (OASIS) function items (used in home health). However, 
the functional status items on the IRF-PAI, MDS and OASIS are 
different; the items, item definitions when items are similar and 
rating scales are different. In a patient-centered health care system, 
there is a need for standardized terminology and assessment items 
because patients often receive care from more than 1 provider. The use 
of standardized items and terminology facilitates clinicians speaking a 
common language that can be understood across clinical disciplines and 
practice settings.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 responses from stakeholders with comments and suggestions 
during the public comment period and have updated the specifications 
based on these comments and suggestions. This quality measure was 
submitted to NQF November 9, 2014 and is currently under review by NQF. 
A summary of the measure specifications can be accessed at http://www.qualityforum.org/qps/2633. The detailed measure specifications are 
available for review at the NQF Web site: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2633.
    Based on the evidence previously discussed, we are proposing to 
adopt the quality measure entitled IRF Functional Outcome Measure: 
Change in Self-care Score for Medical Rehabilitation Patients (NQF 
#2633; under review), for the IRF QRP for the FY 2018 payment 
determination and subsequent years. As described in more detail in 
section VIII.I.2. of this proposed rule, the proposed first data 
collection period is 3 months (October 1, 2016 to December 31, 2016) 
for the FY 2018 payment determination, and the proposed subsequent data 
collection periods are 12-months in length and follow the calendar year 
(that is, January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 12, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. The NQF provided the MAP's input to us as required under 
section 1890A(a)(3) of the Act in the final report, MAP 2015 
Considerations for Selection of Measures for Federal Programs: Post-
Acute/Long-Term Care, which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported this measure. 
Refer to section VIII.B. of this proposed rule for more information on 
the MAP.
    In section 1886(m)(5)(D)(ii) of the Act, the exception authority 
provides that in 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. We reviewed the NQF's consensus endorsed 
measures and were unable to identify any NQF-endorsed quality measures 
focused on assessment of functional status for patients in the IRF 
setting. There are related measures, but they are not endorsed for IRFs 
and several focus on 1 condition (for example, knee or shoulder 
impairment). We are not aware a of any other quality measures for 
functional assessment that have been endorsed or adopted by another 
consensus organization for the IRF setting. Therefore, we are proposing 
to adopt this measure, IRF Functional Outcome Measure: Change in Self-
Care Score for Medical Rehabilitation Patients (NQF #2633; under 
review), for use in the IRF QRP for the FY 2018 payment determination 
and subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. We are proposing that data for the 
proposed quality measure be collected using the IRF-PAI, with the 
submission through the QIES ASAP system. For more information on IRF 
QRP reporting through the QIES ASAP system, refer to CMS Web site at: 
http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We propose to revise the IRF-PAI to include new items that assess 
functional status and the risk factor items, should this proposed 
measure be adopted. The function items, which assess specific self-care 
functional activities, would be based on functional items included in 
the Post-Acute Care Payment Reform Demonstration version of the CARE 
Item Set.
    We invite public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Change in Self-care 
Score for Medical Rehabilitation Patients (NQF #2633, under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. Refer to section 
VIII.I.2. of this proposed rule for more information on the proposed 
data collection and submission timeline for this proposed quality 
measure.
4. IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; Under Review)
    The fourth quality measure we are proposing for the FY 2018 payment 
determination and subsequent years is an outcome quality measure 
entitled IRF Functional Outcome Measure: Change in Mobility Score for 
Medical Rehabilitation Patients (NQF #2634; under review). This quality 
measure estimates the risk-adjusted mean change in mobility score 
between admission and discharge among IRF patients. This measure is 
being proposed under the authority of section 1886(j)(7)(C) of the Act, 
and is currently under review by NQF. A summary of this quality measure 
can be accessed on the NQF Web site: http://www.qualityforum.org/qps/2634. More detailed specifications for this quality measure can be 
accessed at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (for example, toilet transfer

[[Page 23381]]

and walking). The mobility function items are coded using a 6-level 
rating scale that indicates the patient's level of independence with 
the activity; higher scores indicate more independence. In addition, 
this measure requires the collection of risk factors data, such as 
patient functioning prior to the current reason for admission, history 
of falls, bladder continence, communication ability and cognitive 
function, at the time of admission.
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 responses from stakeholders with comments and suggestions 
during the public comment period, and have updated the measures 
specifications based on these comments and suggestions. The quality 
measure was developed by CMS and was submitted for endorsement review 
to NQF in November 2014. A summary of the quality measure can be 
accessed on the NQF Web site: http://www.qualityforum.org/qps/2634. 
More detailed specifications for this quality measure can be accessed 
at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634
    Based on the evidence previously discussed, we are proposing to 
adopt for the IRF QRP for the FY 2018 payment determination and 
subsequent years the quality measure entitled IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634; under review). As described in more detail in section 
VIII.I.2. of this proposed rule, the proposed first data collection 
period is 3 months (October 1, 2016 to December 31, 2016), and the 
proposed subsequent data collection periods are 12-months in length and 
follow the calendar year (that is, January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section VIII.B. of this proposed rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures--for example, Improvement in ambulation/locomotion (NQF 
#0167), Improvement in bed transferring (NQF #0175), Functional status 
change for patients with Knee impairments (NQF #0422), Functional 
status change for patients with Hip impairments (NQF #423)--but they 
are not endorsed for IRFs, and several focus on 1 condition (for 
example, knee or hip impairment). We are not aware of any other quality 
measures for functional assessment that have been endorsed or adopted 
by another consensus organization for the IRF setting. Therefore, we 
are proposing to adopt this measure, IRF Functional Outcome Measure: 
Change in Mobility Score for Medical Rehabilitation Patients (NQF 
#2634; under review), for use in the IRF QRP for the FY 2018 payment 
determination and subsequent years under the Secretary's authority to 
select non-NQF-endorsed measures.
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We are proposing that data for the proposed quality measure be 
collected using the IRF-PAI, with submission through the QIES ASAP 
system. For more information on IRF QRP reporting through the QIES ASAP 
system, refer to CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We invite public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Change in Mobility 
Score for Medical Rehabilitation Patients (NQF #2634; under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. Refer to section 
VIII.I.2.of this proposed rule for more information on the proposed 
data collection and submission timeline for this proposed quality 
measure.
5. IRF Functional Outcome Measure: Discharge Self-Care Score for 
Medical Rehabilitation Patients (NQF #2635; Under Review)
    The fifth quality measure we are proposing for the FY 2018 payment 
determination and subsequent years is an outcome quality measure 
entitled: IRF Functional Outcome Measure: Discharge Self-Care Score for 
Medical Rehabilitation Patients (NQF #2635, under review). This quality 
measure estimates the percentage of IRF patients who meet or exceed an 
expected discharge self-care score. This measure is being proposed 
under the authority of section 1886(j)(7)(C) of the Act, and is 
currently under review by NQF. A summary of this quality measure can be 
accessed on the NQF Web site: http://www.qualityforum.org/qps/2635. 
More detailed specifications for the quality measure can be accessed 
at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2635.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (that is, eating, oral hygiene, 
and dressing). The self-care function items are coded using a 6-level 
rating scale that indicates the patient's level of independence with 
the activity; higher scores indicate more independence. In addition, 
this measure requires the collection of risk factors data, such as 
patient functioning prior to the current reason for admission, bladder 
continence, communication ability and cognitive function, at the time 
of admission. The data collection required for this measure is the same 
data required to the measure: IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients (NQF #2635; under 
review).
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 responses from stakeholders with comments and suggestions 
during the public comment period, and have updated all four IRF quality 
measures specifications based on these comments and suggestions. This 
quality measure was submitted to the NQF on November 9, 2014 and is 
currently under review by NQF. A summary of this quality measure can be 
accessed on the NQF Web site: http://www.qualityforum.org/

[[Page 23382]]

qps/2634. More detailed specifications for this quality measure can be 
accessed at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    Based on the evidence previously discussed, we are proposing to 
adopt for the IRF QRP for the FY 2018 payment determination and 
subsequent years the quality measure entitled IRF Functional Outcome 
Measure: Discharge Self-Care Score for Medical Rehabilitation Patients 
(NQF #2635; under review).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section VIII.B. of this proposed rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures, but they are not endorsed for IRFs and several focus on one 
condition (for example, knee or shoulder impairment). We are not aware 
of any other quality measures for functional outcomes that have been 
endorsed or adopted by another consensus organization for the IRF 
setting. Therefore, we are proposing to adopt this measure, IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635; under review), for use in the IRF 
QRP for the FY 2018 payment determination and subsequent years under 
the Secretary's authority to select non-NQF-endorsed measures. As 
described in more detail in section VIII.I.2 of this proposed rule, the 
proposed first data collection period is 3 months (October 1, 2016 to 
December 31, 2016), and the proposed subsequent data collection periods 
are 12-months in length and follow the calendar year (that is, January 
1 to December 31).
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We are proposing that data for the proposed quality measure be 
collected using the IRF-PAI, with submission through the QIES ASAP 
system. For more information on IRF QRP reporting through the QIES ASAP 
system, refer to CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We invite public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Discharge Self-Care 
Score for Medical Rehabilitation Patients (NQF #2635, under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. For more 
information on the proposed data collection and submission timeline for 
this proposed quality measure, refer to section VIII.I.2, of this 
proposed rule.
6. IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; Under Review)
    The sixth quality measure we are proposing for the FY 2016 
implementation and the FY 2018 payment determination and subsequent 
years is an outcome quality measure entitled: IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636; under review). This quality measure estimates the 
percentage of IRF patients who meet or exceed an expected discharge 
mobility score. This measure is being proposed under the authority of 
section 1886(j)(7)(C) of the Act, and is currently under review by NQF. 
A summary of this quality measure can be accessed on the NQF Web site: 
http://www.qualityforum.org/qps/2636. More detailed specifications for 
this quality measure can be accessed at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2636.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (that is, bed mobility and 
walking). The mobility function items are coded using a 6-level rating 
scale that indicates the patient's level of independence with the 
activity; higher scores indicate more independence. In addition, this 
measure requires the collection of risk factors data, such as patient 
functioning prior to the current reason for admission, history of 
falls, bladder continence, communication ability and cognitive 
function, at the time of admission. Note that the data collection 
required for this measure is the same data required to the measure: IRF 
Functional Outcome Measure: Mobility in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2634; under review).
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 responses from stakeholders with comments and suggestions 
during the public comment period, and have updated all 4 IRF quality 
measures specifications based on these comments and suggestions. This 
quality measure was submitted to the NQF on November 9, 2014 and is 
currently under review by NQF. A summary of this quality measure can be 
accessed on the NQF Web site: http://www.qualityforum.org/qps/2634. 
More detailed specifications for this quality measure can be accessed 
at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    Based on the evidence discussed earlier, we are proposing to adopt 
for the IRF QRP for the FY 2018 payment determination and subsequent 
years the quality measure entitled IRF Functional Outcome Measure: 
Discharge Mobility Score for Medical Rehabilitation Patients (NQF 
#2636; under review). As described in more detail in section VIII.I.2. 
of this proposed rule, the proposed first data collection period is 3 
months (October 1, 2016 to December 31, 2016), and the proposed 
subsequent data collection periods are 12-months in length and follow 
the calendar year (that is, January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/

[[Page 23383]]

Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section VIII.B. of this proposed rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures, but they are not endorsed for IRFs and several focus on one 
condition (for example, knee or shoulder impairment). We are not aware 
of any other quality measures for functional outcomes that have been 
endorsed or adopted by another consensus organization for the IRF 
setting. Therefore, we are proposing to adopt this measure, IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; under review), for use in the IRF 
QRP for the FY 2018 payment determination and subsequent years under 
the Secretary's authority to select non-NQF-endorsed measures.
    We are proposing that data for this quality measure be collected 
using the IRF-PAI, with submission through the QIES ASAP system. For 
more information on IRF QRP reporting through the QIES ASAP system, 
refer to CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We invite public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636; under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. Refer to section 
IX.C.9.c. of this proposed rule for more information on the proposed 
data collection and submission timeline for this quality measure.

 Table 19--Summary of IRF QRP Measures Affecting the FY 2017 and FY 2018
  Adjustments to the IRF PPS Annual Increase Factor and Subsequent Year
                            Increase Factors
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Continued IRF QRP Measures Affecting the FY 2017 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 \+\
     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 #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 \+\
     NQF #2502: All-Cause Unplanned Readmission Measure for 30
     Days Post-Discharge from IRFs * [supcaret]
     NQF #0678: Percent of Residents or Patients with Pressure
     Ulcers That Are New or Worsened (Short-Stay) *
------------------------------------------------------------------------
Proposed New and Re-Proposed IRF QRP Measures Affecting FY 2018
 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 IRFs * [supcaret]
     NQF #0678: Percent of Residents or Patients with Pressure
     Ulcers That Are New or Worsened (Short-Stay) * (data element
     source: Pressure ulcer items from the LTCH CARE Data Set)
     [supcaret][supcaret]
     NQF #0674: An application of Percent of Residents
     Experiencing One or More Falls with Major Injury (Long Stay) (data
     element source: Falls items from the Minimum Data Set 3.0) **
     [supcaret][supcaret][supcaret]
     NQF #2631; under review: An application of Percent of LTCH
     Patients with a an Admission and Discharge Functional Assessment
     and a Care Plan that Addressed Function (data element source:
     Selected function items from the CARE Tool used during the Post-
     Acute Care Payment Reform Demonstration) ***
     [supcaret][supcaret][supcaret]
     NQF #2633; under review: IRF Functional Outcome Measure:
     Change in Self-Care Score for Medical Rehabilitation Patients **
     (data element source: Selected function items from the CARE Tool
     used during the Post-Acute Care Payment Reform Demonstration) ***
     [supcaret][supcaret][supcaret]
     NQF #2634; under review: IRF Functional Outcome Measure:
     Change in Mobility Score for Medical Rehabilitation Patients (data
     element source: Selected function items from the CARE Tool used
     during the Post-Acute Care Payment Reform Demonstration) ***
     [supcaret][supcaret][supcaret]
     NQF #2635; under review: IRF Functional Outcome Measure:
     Discharge Self-Care Score for Medical Rehabilitation Patients (data
     element source: Selected function items from the CARE Tool used
     during the Post-Acute Care Payment Reform Demonstration) ***
     [supcaret][supcaret][supcaret]
     NQF #2636; under review: IRF Functional Outcome Measure:
     Discharge Mobility Score for Medical Rehabilitation Patients (data
     element source: Selected function items from the CARE Tool used
     during the Post-Acute Care Payment Reform Demonstration) ***
     [supcaret][supcaret][supcaret]
------------------------------------------------------------------------
\+\ Using CDC/NHSN.
[supcaret] Medicare Fee-for-Service claims data.
[supcaret][supcaret] IRF-PAI items would be modified.
[supcaret][supcaret][supcaret] New IRF-PAI items would be required.
* Re-proposed quality measure for FY 2018 and subsequent years.
** Not NQF-endorsed for the IRF setting.
*** Not NQF-endorsed, CMS submitted the measure for NQF review in
  November 2014.

H. IRF QRP Quality Measures and Measure Concepts Under Consideration 
for Future Years

    We are inviting public comments on relevance and applicability of 
each of the quality measures and quality measure concepts listed in 
Table 20 for future years in the IRF QRP. Specifically, we invite 
public comments regarding the clinical importance, the feasibility of 
data collection and implementation to inform and improve quality of 
care delivered to IRF patients.

[[Page 23384]]

[GRAPHIC] [TIFF OMITTED] TP27AP15.004

I. Proposed Form, Manner, and Timing of Quality Data Submission for the 
FY 2018 Payment Determination and Subsequent Years

1. Background
    Section 1886(j)(7)(C) of the Act requires that, for the FY 2014 
payment determination and subsequent years, each IRF submit to the 
Secretary data on quality measures specified by the Secretary. In 
addition, section 1886(j)(7)(F) of the Act, as added by the IMPACT Act, 
requires that, for the FY beginning on the specified application date, 
as defined in section 1899B(a)(2)(E) of the Act, and each subsequent 
year, each IRF submit to the Secretary data on measures specified by 
the Secretary under section 1899B. The data required under section 
1886(j)(7)(C) and (F) must be submitted in a form and manner, and at a 
time, specified by the Secretary. As required by section 
1886(j)(7)(A)(i) of the Act, for any IRF that does not submit data in 
accordance with section 1886(j)(7)(C) and (F) of the Act with respect 
to a given fiscal year, the annual increase factor for payments for 
discharges occurring during the fiscal year must be reduced by 2 
percentage points.
2. Proposed Timeline for Data Submission Under the IRF QRP for the FY 
2018 and FY 2019 Payment Determinations
    We propose the following data submission timeline for the quality 
measures that we have proposed for the FY 2018 adjustments to the IRF 
PPS annual increase factor. We propose that IRFs would be required to 
submit IRF-PAI data on discharges occurring between October 1, 2016 and 
December 31, 2016 (first quarter), for the FY 2018 adjustments to the 
IRF PPS annual increase factor. For FY 2019, we propose that IRFs would 
be required to submit data on discharges occurring between January 1, 
2017 and December 31, 2017 (1 year). We propose this time frame because 
we believe this will provide sufficient time for IRFs, and we can put 
processes and procedures in place to meet the additional quality 
reporting requirements. Given that these measures are collected via the 
IRF-PAI, and IRFs are already familiar with the QIES ASAP system, we 
believe this proposed timeframe will allow IRFs ample opportunity to 
begin reporting the newly proposed measures, should they be finalized. 
We also propose that the quarterly data submission deadlines (for 
submitting IRF-PAI corrections) for the FY 2018 adjustments to the IRF 
PPS annual increase factor occur approximately 135 days after the end 
of the quarter, as outlined in the Table 21. 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.
    We invite public comment on these proposed timelines for data 
submission for the proposed IRF QRP quality measures for the FY 2018 
and FY 2019 adjustments to the IRF PPS annual increase factor.

 Table 21--Data Collection Time Frame and Submission Deadlines for Proposed IRF QRP Quality Data for Measures *
          Using IRF-PAI as Data Collection Mechanism, FY 2018 Adjustments to the Annual Increase Factor
----------------------------------------------------------------------------------------------------------------
                                                                      Deadline submission of    Annual increase
       Quarter (calendar year)          Data collection time frame     IRF-PAI corrections     factor  affected
----------------------------------------------------------------------------------------------------------------
Quarter 4 (CY 2016)..................  October 1, 2016--December     May 15, 2017...........  FY 2018
                                        31, 2016.
----------------------------------------------------------------------------------------------------------------
* includes data required for the 3 cross-setting IMPACT Act measures.

[[Page 23385]]

  Table 22--Data Collection Time Frame and Submission Deadlines for Re-Proposed and Additional IRF QRP Quality
 Data for Measures Using IRF-PAI as Data Collection Mechanism, FY 2019 Adjustments to the Annual Increase Factor
----------------------------------------------------------------------------------------------------------------
                                                                      Deadline submission of    Annual increase
       Quarter (calendar year)          Data collection time frame     IRF-PAI corrections     factor  affected
----------------------------------------------------------------------------------------------------------------
Quarter 1 (CY 2017)..................  January 1, 2017--March 31,    August 15, 2017........  FY 2019
                                        2017.
Quarter 2 (CY 2017)..................  April 1, 2017--June 30, 2017  November 15, 2017......  FY 2019
Quarter 3 (CY 2017)..................  July 1, 2017--September 30,   February 15, 2018......  FY 2019
                                        2017.
Quarter 4 (CY 2017)..................  October 1, 2017--December     May 15, 2018...........  FY 2019
                                        31, 2017.
----------------------------------------------------------------------------------------------------------------

3. Proposed Revision to the Previously Adopted Data Collection 
Timelines and Submission Deadlines
    We are proposing that the quality measures in the IRF QRP have a 
data collection time frame based on the calendar year, unless there is 
a clinical reason for an alternative data collection time frame. For 
example, for Influenza Vaccination Coverage among Healthcare Personnel 
(NQF #0431) and Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 
#0680), the data collection period is tied to the influenza vaccination 
season. At this time, three of the quality measures submitted via CDC's 
NHSN (that is, the CAUTI measure [NQF #0138], the MRSA measure [NQF 
#1716], and the CDI measure [NQF #1717]) use a quarterly data 
collection time frame based on the calendar year. The pressure ulcer 
measure [NQF #0678], which is submitted using the IRF-PAI, follows a 
fiscal year data collection time frame due to the current fiscal-year-
based release schedule of the IRF-PAI. The two influenza vaccination 
quality measures (Percent of Residents or Patients Who Were Assessed 
and Appropriately Given the Seasonal Influenza Vaccine [NQF #0680], 
Influenza Vaccination Coverage among Healthcare Personnel [NQF #0431]) 
use a data collection time frame that is consistent with the influenza 
vaccination season (that is, October 1 [or when the vaccine becomes 
available] to March 31).
    We are proposing to revise the data collection time frame to follow 
the calendar year, unless there is a clinical reason for an alternative 
data collection time frame. We posit this change will simplify the data 
collection and submission timeframe under the IRF QRP for IRF 
providers. It would also eliminate the situation in which data 
collection during a quarter in the same calendar year can affect two 
different years of annual payment update determination (that is, 
October 1 to December 31 is first quarter of data collection for 
quality measures with fiscal year data collection time frame and the 
last quarter of data collection for quality measures with calendar data 
collection time frame). If this proposal was implemented, when 
additional quality measures that use IRF-PAI as the data collection 
mechanism are adopted for the IRF QRP, the first data collection time 
frame will be 3 months (October to December) and subsequent data 
collection timeframe would follow a calendar year data collection time 
frame.
    We invite public comments on our proposal to adopt calendar data 
collection timeframes, unless there is a clinical reason for an 
alternative data collection time frame.
4. Proposed Data Submission Mechanisms for the FY 2018 and Subsequent 
Years Payment Determination for Additional IRF QRP Quality Measures and 
for Revisions to Previously Adopted Quality Measures
    We are proposing that all IRFs would be required to collect data 
using a revised IRF-PAI Version 1.4 (IRF-PAI 1.4) for the proposed 
pressure ulcer measure and the additional six quality measures: (1) 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) ((NQF #0678); (2) an application of Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
(NQF #0674); (3) an application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; under review); (4) IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633; under review); (5) IRF Functional Outcome Measure: 
Change in Mobility Score for Medical Rehabilitation Patients (NQF 
#2634; under review); (6) IRF Functional Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients (NQF #2635; under 
review); and (7) IRF Functional Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636; under review). 
IRF-PAI Version 1.4 would have modified pressure ulcer items collected 
at admission and discharge, new fall items collected at discharge, new 
self-care and mobility functional status items collected at admission 
and discharge, and new risk factor items for the self-care and mobility 
measures collected at admission. The proposed IRF-PAI Version 1.4 is 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html
    The QIES ASAP system would remain the data submission mechanism for 
the IRF-PAI. We will release the technical data submission 
specifications and update the IRF-PAI Training Manual to include items 
related to the new and updated quality measures in CY 2015. Further 
information on data submission of the IRF-PAI for the IRF QRP using the 
QIES ASAP system is available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html. We invite 
public comments on these proposals.

J. Previously Adopted and Proposed Timing for New IRFs To Begin 
Submitting Quality Data Under the IRF QRP for the FY 2018 Payment 
Determination and Subsequent Years

    In the FY 2015 IRF PPS (79 FR 45918), we finalized that beginning 
with the FY 2017 payment determination and that of subsequent fiscal 
years, new IRFs are required to begin reporting data under the IRF QRP 
requirements no later than the first day of the calendar quarter 
subsequent to the quarter in which it was designated as operating in 
the Certification and Survey Provider Enhanced Reports (CASPER) system.
    To ensure that all IRFs have a minimum amount of time to prepare to 
submit quality data to CMS under the requirements of the IRF QRP, 
beginning

[[Page 23386]]

with the FY 2017 payment determination, we are proposing that a new IRF 
be required to begin reporting quality data under the IRF QRP by no 
later than the first day of the calendar quarter subsequent to 30 days 
after the date on its CMS Certification Number (CCN) notification 
letter. For example, if an IRF's CCN notification letter is dated March 
15th, then the IRF would be required to begin reporting quality data to 
CMS beginning on July 1st (March 15 + 30 days = April 14 (quarter 2). 
The IRF would be required to begin collecting quality data on the first 
day of the quarter subsequent to quarter 2, which is quarter 3, or July 
1st). The collection of quality data would begin on the first day of 
the calendar year quarter identified as the start date, and would 
include all IRF admissions and subsequent discharges beginning on, and 
subsequent to, that day; however, the actual submission of quality data 
would be required by previously finalized quarterly deadlines, which 
fall approximately 135 days post the end of each CY quarter. To 
determine which quality measure data an IRF would need to begin 
submitting, we refer you to section VIII.E of this proposed rule, as it 
will vary depending upon the timing of the CY quarter identified as a 
start date.
    We propose to add the IRF QRP participation requirements at Sec.  
412.634 and invite public comments on our proposal to the participation 
requirements for new IRFs.

K. IRF QRP Data Completion Thresholds for the FY 2016 Payment 
Determination and Subsequent Years

    In the FY 2015 IRF PPS final rule (79 FR 45921 through 45923), we 
finalized IRF QRP thresholds for completeness of IRF data submissions. 
To ensure that IRFs are meeting an acceptable standard for completeness 
of submitted data, we finalized the policy that, beginning with the FY 
2016 payment determination and for each subsequent year, IRFs must meet 
or exceed two separate data completeness thresholds: one threshold set 
at 95 percent for completion of quality measures data collected using 
the IRF-PAI submitted through the QIES and a second threshold set at 
100 percent for quality measures data collected and submitted using the 
CDC NHSN.
    Additionally, we stated that we will apply the same thresholds to 
all measures adopted as the IRF QRP expands and IRFs begin reporting 
data on previously finalized measure sets. That is, as we finalize new 
measures through the regulatory process, IRFs will be held accountable 
for meeting the previously finalized data completion threshold 
requirements for each measure until such time that updated threshold 
requirements are proposed and finalized through a subsequent regulatory 
cycle.
    Further, we finalized the requirement that an IRF must meet or 
exceed both thresholds to avoid receiving a 2 percentage point 
reduction to their annual payment update for a given fiscal year, 
beginning with FY 2016 and for all subsequent payment updates. We are 
not proposing any changes to these policies. Refer to the FY 2015 IRF 
PPS final rule (79 FR 45921 through 45923) for a detailed discussion of 
the finalized IRF QRP data completion requirements.

L. Proposed Suspension of the IRF QRP Data Validation Process for the 
FY 2016 Payment Determination and Subsequent Years

    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public as required by sections 
1886(j)(7)(E) and 1899B(g) of the Act. In the FY 2015 IRF PPS rule (79 
FR 45923), we finalized, for the FY 2016 adjustments to the IRF PPS 
annual increase factor and subsequent years, a process to validate the 
data submitted for quality purposes. At this time we are proposing to 
temporarily suspend the implementation of this policy. We are proposing 
that, through the suspension of this previously finalized policy, data 
accuracy validation will have no bearing on the applicable FY annual 
increase factor reduction for FY 2016 and subsequent years unless and 
until we propose to either reenact this policy, or propose to adopt a 
new validation policy through future notice-and-comment rulemaking. At 
this time, we are working to develop a more comprehensive data 
validation policy that is aligned across the PAC quality reporting 
programs, and believe that we can implement a policy that increases the 
efficiency with which data validation is performed. We are also 
considering ways to reduce the labor and cost burden on IRFs through 
the development of a new data accuracy validation policy.
    We invite comment on our proposal.

M. Previously Adopted and Proposed IRF QRP Submission Exception and 
Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years

    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 reporting requirements of the IRF QRP for one or 
more quarters, beginning with the FY 2015 payment determination and for 
subsequent years when there are extraordinary circumstances beyond the 
control of the provider. We also finalized a policy that allows us to 
grant exemptions or extensions to IRFs that did not request them when 
it is determined than an extraordinary circumstance affects an entire 
region or locale.
    In the FY 2015 IRF PPS final rule (79 FR 45920 through 45921), we 
adopted the policies and procedures previously finalized in the FY 2014 
IRF PPS final rule for the FY 2017 payment determination and that of 
subsequent years. We also finalized the policy that 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 an IRF 
to submit data.
    We are not proposing any changes to the previously finalized 
policies and procedures for the FY 2018 payment determination and 
beyond.
    In the FY 2014 IRF PPS final rule and the FY 2015 IRF PPS final 
rule, we stated that IRFs must submit request an exception or extension 
by submitting a written request along with all supporting documentation 
to CMS via email to the IRF QRP mailbox at 
IRFQRPReconsiderations@cms.hhs.gov. We further stated that exception or 
extension requests sent to us through any other channel would not be 
considered as a valid request for an exception or extension from the 
IRF QRP's reporting requirements for any payment determination. To be 
considered, a request for an exception or extension must contain all of 
the requirements as outlined on CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html.
    We propose to add the IRF QRP Submission Exception and Extension 
Requirements at Sec.  412.634. Refer to the FY 2014 IRF PPS final rule 
(78 FR 47920) and the FY 2015 IRF PPS final rule (79 FR 45920 through 
45921) for detailed discussions of the IRF QRP Submission Exception and 
Extension Requirements.

N. Previously Adopted and Proposed IRF QRP Reconsideration and Appeals 
Procedures for the FY 2017 Payment Determination and Subsequent Years

    At the conclusion of each FY reporting cycle, we review the data 
received from each IRF to determine if the IRF met the reporting 
requirements set forth for that reporting cycle. IRFs that are found to 
be non-compliant will

[[Page 23387]]

receive a reduction in the amount of 2 percentage points to their 
annual payment update for the applicable fiscal year. In the FY 2015 
IRF PPS final rule (79 FR 45919 through 45920), we described and 
adopted an updated process that enables an IRF to request a 
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.
    Any IRF that wishes to submit a reconsideration request must do so 
by submitting an email to CMS containing all of the requirements listed 
on the IRF program Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html. 
Email sent to IRFQRPReconsiderations@cms.hhs.gov is the only form of 
submission that will be accepted by us. Any reconsideration requests 
received through another channel, including U.S. postal service or 
phone, will not be considered as a valid reconsideration request.
    We propose to continue using the IRF QRP Reconsideration and 
Appeals Procedures that were adopted in the FY 2015 IRF PPS final rule 
(79 FR 45919 through 45920) for the FY 2017 payment determination and 
subsequent years with an exception regarding the way in which non-
compliant IRFs are notified of this determination.
    Currently only IRFs found to be non-compliant with the reporting 
requirements set forth for a given payment determination received a 
notification of this finding along with instructions for requesting 
reconsideration in the form of a certified United States Postal Service 
(USPS) letter. In an effort to communicate as quickly, efficiently, and 
broadly as possible with IRFs regarding annual compliance, we are 
proposing changes to our communications method regarding annual 
notification of reporting compliance in the IRF QRP. In addition to 
sending letters via regular USPS mail, beginning with the FY 2016 
payment determination and for subsequent fiscal years, we propose to 
use the QIES as a mechanism to communicate to IRFs regarding their 
compliance with the reporting requirements for the given reporting 
cycle.
    We propose that all Medicare-certified IRF compliance letters be 
uploaded into the QIES system for each IRF to access. Instructions to 
download files from QIES may be found at https://www.qtso.com/irfpai.html. We propose to disseminate communications regarding the 
availability of compliance reports in IRFs' QIES files through routine 
channels to IRFs and vendors, including, but not limited to, issuing 
memos, emails, Medicare Learning Network (MLN) announcements, and 
notices on http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    The purpose of the compliance letter is to notify an IRF that it 
has been identified as either being compliant or non-compliant with the 
IRF QRP reporting requirements for the given reporting cycle. If the 
IRF is determined to be non-compliant, then the notification would 
indicate that the IRF is scheduled to receive a 2 percentage point 
reduction to its upcoming annual payment update and that it may file a 
reconsideration request if it disagrees with this finding. IRFs may 
request a reconsideration of a non-compliance determination through the 
CMS reconsideration request process. We also propose that the 
notifications of our decision regarding all received reconsideration 
requests will be made available through the QIES system. We are not 
proposing to change the process or requirements for requesting 
reconsideration. Refer to the FY 2015 IRF PPS final rule (79 FR 45919 
through 45920) for a detailed discussion of the IRF QRP Reconsideration 
and Appeals Procedures.
    Below, we include a proposal to publish a list of IRFs who 
successfully meet the reporting requirements for the applicable payment 
determination on the IRF QRP Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/. As proposed below, we would also update the list of IRFs 
who successfully meet the reporting requirements after all 
reconsideration requests have been processed on an annual basis.
    We propose to add the IRF QRP Reconsideration and Appeal Procedures 
at Sec.  412.634.
    We invite comment on the proposals to change the communication 
mechanism to the QIES system for the dissemination of compliance 
notifications and reconsideration decisions and to add these processes 
at Sec.  412.634.

O. Proposed Public Display of Quality Measure Data for the IRF QRP

    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making the IRF QRP data available to the 
public. In so doing, the Secretary must ensure that IRFs have the 
opportunity to review any such data with respect to the IRF prior to 
its release to the public. Section 1899B(g) of the Act requires the 
Secretary to establish procedures for making available to the public 
information regarding the performance of individual PAC providers with 
respect to the measures required under section 1899B beginning not 
later than 2 years after the applicable specified application date. The 
procedures must ensure, including through a process consistent with the 
process applied under section 1886(b)(3)(B)(viii)(VII) for similar 
purposes, that each PAC provider has the opportunity to review and 
submit corrections to the data and information that are to be made 
public with respect to the PAC provider prior to such data being made 
public. We propose a policy to display performance information 
regarding the quality measures, as applicable, required by the IRF QRP 
by fall 2016 on a CMS Web site, such as the Hospital Compare Web site: 
http://www.hospitalcompare.hhs.gov, after a 30-day preview period. 
Additional information about preview report content and delivery will 
be announced on the IRF QRP Web site.
    The Hospital Compare Web site is an interactive web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. It further serves to 
encourage beneficiaries to work with their providers to discuss the 
quality of care provided to patients, thereby providing an additional 
incentive to providers to improve the quality of care that they 
furnish. As we have done on other CMS compare Web sites, we will, at 
some point in the future, report public data using a quality rating 
system that gives each IRF a rating between 1 and 5 stars. Initially, 
however, we will not use the 5-star methodology, until such time that 
we are publically reporting a sufficient number of quality metrics to 
allow for variation and the differentiation between IRFs using this 
methodology. Decisions regarding how the rating system will determine a 
providers star rating and methods used for calculations, as well as a 
proposed timeline for implementation will be announced via regular IRF 
QRP communication channels, including listening sessions, memos, email

[[Page 23388]]

notification, provider association calls, Open Door Forums, and Web 
postings. Providers would be notified via CMS listservs, CMS mass 
emails, and memorandums, IRF QPR Web site announcements and MLN 
announcements regarding the release of IRF Provider Preview Reports 
followed by the posting of data.
    The initial display of information would contain IRF provider 
performance on the following three quality measures:
     Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678)
     NHSN CAUTI Outcome Measure (NQF #0138)
     All-Cause Unplanned Readmission Measure for 30 Days Post 
Discharge From IRFs (NQF #2502)
    For the first 2 listed measures, Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) 
and NHSN CAUTI Outcome Measure (NQF #0138), we propose publicly 
reporting data beginning with data collected on these measures for 
discharges beginning January 1, 2015. Rates would be displayed based on 
4 rolling quarters of data and would initially be reported using 
discharges from January 1, 2015 through December 31, 2015, for 
calculation. As each quarter advances, we would add the subsequent 
calendar year quarter and remove the earliest calendar year quarter. 
For example, initially we would use data from discharges occurring from 
January 1, 2015 through December 31, 2015. The next quarter, we would 
display performance data using discharges that occurred between the 
dates of April 1, 2015 through March 31, 2016, etc.
    For the measure All-Cause Unplanned Readmission Measure for 30 Days 
Post Discharge From IRFs (NQF #2502), we propose to publicly report 
data beginning with data collected for discharges beginning January 1, 
2013. Rates would be displayed based on 2 consecutive years of data and 
would initially be reported using discharges from January 1, 2013 
through December 31, 2014. As each calendar year advances, we would add 
the subsequent calendar year quarter and remove the earliest calendar 
year quarter.
    Calculations for the CAUTI measure adjust for differences in the 
characteristics of hospitals and patients using a Standardized 
Infection Ratio (SIR). The SIR is a summary measure that takes into 
account differences in the types of patients a hospital treats. The SIR 
may take into account the type of patient care location, laboratory 
testing methods, hospital affiliation with a medical school, bed size 
of the hospital, and bed size of specific patient care locations. It 
compares the actual number of Healthcare Associated Infections (HAIs) 
in a facility or state to a national benchmark based on previous years 
of reported data and adjusts the data based on several risk factors. A 
confidence interval with a lower and upper limit is displayed around 
each SIR to indicate that there is a high degree of confidence that the 
true value of the SIR lies within that interval. An SIR with a lower 
limit that is greater than 1.0 means that there were more HAIs in a 
facility or state than were predicted, and the facility is classified 
as ``Worse than the U.S. National Benchmark''. If the SIR has an upper 
limit that is less than 1, then the facility had fewer HAIs than were 
predicted and is classified as ``Better than the U.S. National 
Benchmark''. If the confidence interval includes the value of 1, then 
there is no statistical difference between the actual number of HAIs 
and the number predicted, and the facility is classified as ``No 
Different than U.S. National Benchmark''. If the number of predicted 
infections is a specific value less than 1, the SIR and confidence 
interval cannot be calculated.
    Calculations for the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened measure application (NQF #0678) will be 
risk-adjusted. Resident- or patient-level covariate risk adjustment is 
performed. Resident- or patient-level covariates are used in a logistic 
regression model to calculate a resident- or patient-level expected 
quality measure (QM) score (the probability that the resident or 
patient will evidence the outcome, given the presence or absence of 
patient characteristics measured by the covariates). Then, an average 
of all resident- or patient-level expected QM scores for the facility 
is calculated to create a facility-level expected QM score. The final 
facility-level adjusted QM score is based on a calculation which 
combines the facility-level expected score and the facility level 
observed score. Additional information about the covariates can be 
found at: http://www.qualityforum.org/QPS/QPSTool.aspx?m=213&e=1#qpsPageState=%7B%22TabType%22%3A1,%22TabContentType%22%3A2,%22ItemsToCompare%22%3A%5B%5D,%22StandardID%22%3A213,%22EntityTypeID%22%3A1%7D.
    Finally, calculation for performance on the measure All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) will also be risk-adjusted. The risk adjustment methodology is 
available, along with the specifications for this measure, on our IRF 
Quality Reporting Measures Information Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We are currently developing reports that will allow providers to 
view the data that is submitted to CMS via the QIES ASAP system and the 
CDC's NHSN (Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678) and NHSN CAUTI Outcome 
Measure (NQF #0138), respectively). Although initial reports will not 
allow providers to view this data, subsequent iterations of these 
reports will also include provider performance on any currently 
reported quality measure that is calculated based on CMS claims data 
that we plan on publicly reporting (All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502)). Although 
real time results will not be available, the report will refresh all of 
the data submitted at least once a month. We propose a process to give 
providers an opportunity to review and correct data submitted to the 
QIES ASAP system or to the CDC's NHSN system by utilizing that report. 
Under this proposed process, providers would to have the opportunity to 
review and correct data they submit on all assessment-based measures. 
Providers can begin submitting data on the first discharge day of any 
reporting quarter. Providers are encouraged to submit data early in the 
submission schedule so that they can identify errors and resubmit data 
before the quarterly submission deadline. The data would be populated 
into reports that are updated at least once a month with all data that 
have been submitted. That report would contain the provider's 
performance on each measure calculated based on assessment submissions 
to the QIES ASAP or CDC NHSN system. We believe that the submission 
deadline timeframe, which is 4.5 months beyond the end of each calendar 
year quarter, is sufficient time for providers to be able to submit, 
review data, make corrections to the data, and view their data. We note 
that the quarterly data submission deadline/timeframe only applies to 
the quality indicator section of the IRF-PAI, and has no bearing on the 
current deadline of 27 days that is imposed for payment items. We 
propose that once the provider has an opportunity to review and correct 
quarterly data related to measures submitted via the QIES ASAP

[[Page 23389]]

or CDC NHSN system, we would consider the provider to have been given 
the opportunity to review and correct this data. We would not allow 
patient-level data correction after the submission deadline or for 
previous years. This is because we must set a deadline to ensure timely 
computation of measure rates and payment adjustment factors. Before we 
display this information, providers will be permitted 30 days to review 
their information as recorded in the QIES ASAP or CDC NHSN system.
    In addition to our proposal, we are proposing to publish a list of 
IRFs who successfully meet the reporting requirements for the 
applicable payment determination on the IRF QRP Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/. We propose updating the list after 
reconsideration requests are processed on an annual basis.
    We invite public comment on the listed proposals.

P. Proposed Method for Applying the Reduction to the FY 2016 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 2016 market basket increase factor (1.9 
percent) in calculating an adjusted FY 2016 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 23 
shows the calculation of the adjusted FY 2016 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, 2014, through December 31, 2014.

    Table 23--Calculations To Determine the Adjusted FY 2016 Standard
   Payment Conversion Factor for IRFs That Failed To Meet the Quality
                          Reporting Requirement
------------------------------------------------------------------------
             Explanation for adjustment                    Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2015......             $15,198
Market Basket Increase Factor for FY 2016 (2.7         x          0.9990
 percent), reduced by 0.6 percentage point 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..........
Budget Neutrality Factor for the Wage Index and        x          1.0027
 Labor-Related Share................................
Budget Neutrality Factor for the Revisions to the      x          1.0000
 CMG Relative Weights...............................
Final Adjusted FY 2016 Standard Payment Conversion     =          15,224
 Factor.............................................
------------------------------------------------------------------------

    We invite public comment on the proposed method for applying the 
reduction to the FY 2016 IRF increase factor for IRFs that fail to meet 
the quality reporting requirements.

IX. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60-day 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.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    This proposed rule makes reference to associated information 
collections that are not discussed in the regulation text contained in 
this document.

B. Collection of Information Requirements for Updates Related to the 
IRF QRP

    Failure to submit data required under section 1886(j)(7)(C) and (F) 
will result in the reduction of the annual update to the standard 
federal rate for discharges occurring during such fiscal year by 2 
percentage points for any IRF that does not comply with the 
requirements established by the Secretary. At the time that this 
analysis was prepared, 91, or approximately 8 percent, of the 1166 
active Medicare-certified IRFs did not receive the full annual 
percentage increase for the FY 2015 annual payment update 
determination. Information is not available to determine the precise 
number of IRFs that will not meet the requirements to receive the full 
annual percentage increase for the FY 2016 payment determination.
    We believe that the burden associated with the IRF QRP is the time 
and effort associated with data collection and reporting. As of April 
1, 2015, there are approximately 1132 IRFs currently reporting quality 
data to CMS. In this proposed rule, we are proposing 2 quality measures 
that have already been adopted for the IRF QRP: (1) All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502), 
to establish the newly NQF-endorsed status of this measures; and (2) 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (NQF #0678), to establish its use as a cross-setting measure 
that addresses the domain of skin integrity, as required by the IMPACT 
Act of 2014. The All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from IRFs is a Medicare claims-based measure; because 
claims-based measures can be calculated based on data that are already 
reported to the Medicare program for payment purposes, we believe there 
will be no additional impact. We also believe that there will be no 
additional burden

[[Page 23390]]

associated with our re-proposal of the measure Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (NQF #0678), as 
IRFs are already submitting quality data related to this measure.
    We are also proposing to adopt 6 additional quality measures. These 
6 new proposed quality measures are: (1) An application of Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
(NQF #0674); (2) an application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; under review); (3) IRF Functional 
Outcome Measure: Change in Self-Care Score for Medical Rehabilitation 
Patients (NQF #2633; under review); (4) IRF Functional Outcome Measure: 
Change in Mobility Score for Medical Rehabilitation Patients (NQF 
#2634; under review); (5) IRF Functional Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients (NQF #2635; under 
review); and (6) IRF Functional Outcome Measure: Discharge Mobility 
Score for Medical Rehabilitation Patients (NQF #2636; under review). 
Additionally we propose that data for these 6 new measures will be 
collected and reported using the IRF-PAI (version 1.4).
    Our burden calculations take into account all ``new'' items 
required on the IRF-PAI (version 1.4) to support data collection and 
reporting for these six proposed measures. New items will be included 
on the following assessment: IRF-PAI version 1.4 Admission and 
Discharge assessment. The addition of the new items required to collect 
the six newly proposed measures is for the purpose of achieving 
standardization of data elements.
    We estimate the additional elements for the six newly proposed 
measures will take 25.5 minutes of nursing/clinical staff time to 
report data on admission and 16.0 minutes of nursing/clinical staff 
time to report data on discharge, for a total of 41.5 minutes. We 
believe that the additional IRF-PAI items we are proposing will be 
completed by Registered Nurses (RN), Occupational Therapists (OT), 
Speech Language Pathologists (SLP) and/or Physical Therapists (PT), 
depending on the item. We identified the staff type per item based on 
past LTCH and IRF burden calculations in conjunction with expert 
opinion. Our assumptions for staff type were based on the categories 
generally necessary to perform assessment: RN, OT, SLP, and PT. 
Individual providers determine the staffing resources necessary; 
therefore, we averaged the national average for these labor types and 
established a composite cost estimate. This composite estimate was 
calculated by weighting each salary based on the following breakdown 
regarding provider types most likely to collect this data: RN 59 
percent; OT 11 percent; PT 20 percent; SLP 1 percent. In accordance 
with OMB control number 0938-0842, we estimate 390,748 discharges from 
all IRFs annually, with an additional burden of 41.5 minutes. This 
would equate to 270,267.37 total hours or 238.75 hours per IRF. We 
believe this work will be completed by RN, OT, PT, and SLP staff, 
depending on the item. We obtained mean hourly wages for these staff 
from the U.S. Bureau of Labor Statistics' May 2013 National 
Occupational Employment and Wage Estimates (http://www.bls.gov/oes/current/oes_nat.htm), to account for overhead and fringe benefits, we 
have doubled the mean hourly wage. Per the U.S. Bureau of Labor and 
Statistics, the mean hourly wage for a RN is $33.13. However, to 
account for overhead and fringe benefits, we have double the mean 
hourly wage, making it $66.26 for an RN. The mean hourly wage for an OT 
is $37.45, doubled to $74.90 to account for overhead and fringe 
benefits. The mean hourly wage for a PT is $39.51, doubled to $79.02 to 
account for overhead and fringe benefits. The mean hourly wage for a 
SLP is $35.56, doubled to $71.12 to account for overhead and fringe 
benefits. Given these wages and time estimates, the total cost related 
to the six newly proposed measures is estimated at $21,239.33 per IRF 
annually, or $22,529,560.74-$24,042,291.01 for all IRFs annually.
    For the discussion purposes, we provided a detailed description of 
the burden associated with the proposed requirements in section XI. of 
this proposed rule. However, the burden associated with the 
aforementioned requirements is exempt from the PRA under the IMPACT Act 
of 2014. Section 1899B(m) and the sections referenced in section 
1899B(a)(2)(B) of the Act exempt modifications that are intended to 
achieve the standardization of patient assessment data. The requirement 
and burden will, however, be submitted to OMB for review and approval 
when the quality measures and the PAC assessment instruments are no 
longer used to achieve the standardization of patient assessment data.
    In section VIII.F of this proposed rule, we are proposing 2 quality 
measures that have already been adopted for the IRF QRP: (1) All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502), to establish the newly NQF-endorsed status of this measures; 
and (2) Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (NQF #0678), to establish its use as a cross-setting 
measure that addresses the domain of skin integrity, as required by the 
IMPACT Act of 2014. The All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from IRFs is a Medicare claims-based measure; 
because claims-based measures can be calculated based on data that are 
already reported to the Medicare program for payment purposes, we 
believe there will be no additional impact as a result of this measure. 
We also believe that there will be no additional burden associated with 
our proposal of the measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678), as IRFs are 
already submitting quality data related to this measure.
    In section VIII.G of this proposed rule, we are also proposing to 
adopt six new quality measures. These 6 proposed quality measures are: 
(1) An application of Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674); (2) an application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; under 
review); (3) IRF Functional Outcome Measure: Change in Self-Care Score 
for Medical Rehabilitation Patients (NQF #2633; under review); (4) IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; under review); (5) IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635; under review); and (6) IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636; under review). Additionally, we propose that data for the 
six measures will be collected and reported using the IRF-PAI (version 
1.4). While the reporting of data on quality measures is an information 
collection, we believe that the burden associated with modifications to 
the IRF-PAI discussed in this proposed rule fall under the PRA 
exceptions provided in 1899B(m) of the Act because they are required to 
achieve the standardization of patient assessment data. Section 
1899B(m) of the Act provides that the PRA does not apply to section 
1899B and the sections referenced in section 1899B(a)(2)(B) of the Act 
that require modification to achieve the standardization of patient 
assessment data. The requirement and

[[Page 23391]]

burden will, however, be submitted to OMB for review and approval when 
the modifications to the IRF-PAI or other applicable PAC assessment 
instrument are not used to achieve the standardization of patient 
assessment data. Additionally, while quality measures 3, 4, 5, and 6 
listed are not specifically required by the IMPACT Act, the data 
elements used to inform those measures are part of larger set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized data elements 
under the domain of functional status, which is required by the IMPACT 
Act. These same data elements are used to inform different quality 
measures that we have proposed, each with a different outcome.
    With regard to quality reporting during extraordinary 
circumstances, section VIII.M of this proposed rule, proposes to add a 
previously finalized process that IRFs may request an exception or 
extension from the FY 2018 payment determination and that of subsequent 
payment determinations. The request must be submitted by email within 
90 days from the date that the extraordinary circumstances occurred.
    While the preparation and submission of the request is an 
information collection, unlike the aforementioned temporary exemption 
of the data collection requirements for the 6 new quality measures, and 
the 2 re-proposed quality measures, the request is not expected to be 
submitted to OMB for formal review and approval since we estimate less 
than 2 requests (total) per year. Since we estimate fewer than ten 
respondents annually, the information collection requirement and 
associated burden is not subject as stated in the implementing 
regulations of the PRA (5 CFR 1320.3(c)).
    As discussed in section VIII.N of this proposed rule, this rule 
proposes to add a previously finalized process that will enable IRFs to 
request reconsiderations of our initial non-compliance decision in the 
event that it believes that it was incorrectly identified as being 
subject to the 2-percentage point reduction to its annual increase 
factor due to non-compliance with the IRF QRP reporting requirements. 
We believe the reconsideration and appeals requirements and the 
associated burden would be incurred subsequent to an administrative 
action. In accordance with the implementing regulations for the PRA (5 
CFR 1320.4(a)(2) and (c)), the burden associated with any information 
collected subsequent to the administrative action is exempt from the 
requirements of the PRA.
    If you comment on these information collection and recordkeeping 
requirements, please submit your comments electronically as specified 
in the ADDRESSES section of this proposed rule.

X. Response to Public Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XI. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule updates the IRF prospective payment rates for FY 
2016 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 proposed 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 proposed rule also adopts some policy changes within the 
statutory discretion afforded to the Secretary under section 1886(j) of 
the Act. We propose to adopt an IRF-specific market basket, phase in 
the revised wage index changes, and update quality measures and 
reporting requirements under the IRF quality reporting program.

B. Overall Impacts

    We have examined the impacts of this proposed 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 rule with economically significant effects ($100 million or 
more in any 1 year). We estimate the total impact of the proposed 
policy updates described in this proposed rule by comparing the 
estimated payments in FY 2016 with those in FY 2015. This analysis 
results in an estimated $130 million increase for FY 2016 IRF PPS 
payments. As a result, this proposed 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 $7.5 million to $38.5 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 and updated on July 14, 2014.) 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

[[Page 23392]]

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 24, we estimate that the net revenue impact of this proposed 
rule on all IRFs is to increase estimated payments by approximately 1.7 
percent. However, we find that certain individual IRF providers would 
be expected to experience revenue impacts greater than 3 percent. We 
estimate that approximately 3 IRFs that would transition from urban to 
rural status as a result of the changes to the delineation of CBSAs 
issued in OMB Bulletin No. 13-01 would gain the 14.9 percent rural 
adjustment, and would therefore experience net increases in IRF PPS 
payments of 15.2 percent. As a result, we anticipate this proposed 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 603 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 proposed rule will not 
have a significant impact (not greater than 3 percent) on a substantial 
number of rural hospitals based on the data of the 145 rural units and 
12 rural hospitals in our database of 1,132 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 2015, that threshold level is approximately 
$144 million. This proposed rule will not mandate spending costs on 
state, local, or tribal governments, in the aggregate, or by the 
private sector, of greater than $144 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 governments, 
preempts state law, or otherwise has federalism implications. As 
stated, this proposed 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 proposed rule sets forth proposed policy changes and updates 
to the IRF PPS rates contained in the FY 2015 IRF PPS final rule (79 FR 
45872). Specifically, this proposed rule introduces an IRF-specific 
market basket. This proposed rule also updates the CMG relative weights 
and average length of stay values, the wage index, and the outlier 
threshold for high-cost cases. This proposed rule applies a MFP 
adjustment to the FY 2016 IRF 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 2016 IRF market basket increase 
factor in accordance with sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) 
of the Act. Further, this proposed rule proposes revisions to the IRF 
quality reporting requirements that are expected to result in some 
additional financial effects on IRFs. In addition, section IX 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 proposed changes and updates 
described in this proposed rule will be a net estimated increase of 
$130 million in payments to IRF providers. This estimate 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 reporting requirements (as discussed in section XI.C.9. of 
this proposed rule). The impact analysis in Table 24 of this proposed 
rule represents the projected effects of the updates to IRF PPS 
payments for FY 2016 compared with the estimated IRF PPS payments in FY 
2015. 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 2016, we are proposing standard annual 
revisions described in this proposed 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 2016 IRF 
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 2016 IRF 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 2016, relative to FY 2015, 
will be approximately $130 million.
    This estimate is derived from the application of the FY 2016 IRF 
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 $145 million. 
Furthermore, there is an additional estimated $15 million decrease in 
aggregate payments to IRFs due to the proposed update to the outlier 
threshold amount. Outlier payments are estimated to decrease under this 
proposal from approximately 3.2 percent in FY 2015 to 3.0 percent in FY 
2016. Therefore, summed together, we estimate that these updates will 
result in a net increase in estimated payments of $130 million from FY 
2015 to FY 2016.
    The effects of the proposed updates that impact IRF PPS payment 
rates are shown in Table 24. The following proposed updates that affect 
the IRF PPS payment rates are discussed separately below:
     The effects of the proposed update to the outlier 
threshold amount, from approximately 3.2 percent to 3.0 percent of 
total estimated payments for FY 2016, consistent with section 
1886(j)(4) of the Act.

[[Page 23393]]

     The effects of the proposed annual market basket update 
(using the IRF 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 proposed budget-neutral labor-
related share and wage index adjustment, as required under section 
1886(j)(6) of the Act.
     The effects of the proposed 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.
     The total change in estimated payments based on the 
proposed FY 2016 payment changes relative to the estimated FY 2015 
payments.
2. Description of Table 24
    Table 24 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 for-profit, non-profit, and government), by teaching status, and 
by disproportionate share patient percentage (DSH PP). The top row of 
Table 24 shows the overall impact on the 1,132 IRFs included in the 
analysis.
    The next 12 rows of Table 24 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 975 IRFs located in 
urban areas included in our analysis. Among these, there are 739 IRF 
units of hospitals located in urban areas and 236 freestanding IRF 
hospitals located in urban areas. There are 157 IRFs located in rural 
areas included in our analysis. Among these, there are 145 IRF units of 
hospitals located in rural areas and 12 freestanding IRF hospitals 
located in rural areas. There are 403 for-profit IRFs. Among these, 
there are 348 IRFs in urban areas and 55 IRFs in rural areas. There are 
658 non-profit IRFs. Among these, there are 566 urban IRFs and 92 rural 
IRFs. There are 71 government-owned IRFs. Among these, there are 61 
urban IRFs and 10 rural IRFs.
    The remaining four parts of Table 24 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 proposed 
rule to the facility categories listed are shown in the columns of 
Table 24. The description of each column is as follows:
     Column (1) shows the facility classification categories.
     Column (2) shows the number of IRFs in each category in 
our FY 2014 analysis file.
     Column (3) shows the number of cases in each category in 
our FY 2014 analysis file.
     Column (4) shows the estimated effect of the proposed 
adjustment to the outlier threshold amount.
     Column (5) shows the estimated effect of the proposed 
update to the IRF PPS payment rates, which includes 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.
     Column (6) shows the estimated effect of the proposed 
update to the IRF labor-related share and wage index, in a budget-
neutral manner. This represents the effect of using the most recent 
wage data available, without taking into account the revised OMB 
delineations. That is, the impact represented in this column is solely 
that of updating from the FY 2015 wage index to the FY 2016 wage index 
without any changes to the OMB delineations.
     Column (7) shows the estimated effect of adopting the 
updated OMB delineations for wage index purposes for FY 2016 with the 
proposed blended FY 2016 wage index.
     Column (8) shows the estimated effect of applying the 
adjustment factor to payments to IRFs in rural areas. It includes the 
proposed 3 year budget-neutral phase-out of the rural adjustment for 
rural IRFs that are becoming urban IRFs due to the revised OMB 
delineations.
     Column (9) shows the estimated effect of the proposed 
update to the CMG relative weights and average length of stay values, 
in a budget-neutral manner.
     Column (10) compares our estimates of the payments per 
discharge, incorporating all of the proposed policies reflected in this 
proposed rule for FY 2016 to our estimates of payments per discharge in 
FY 2015.
    The average estimated increase for all IRFs is approximately 1.7 
percent. This estimated net increase includes the effects of the 
proposed IRF market basket increase factor for FY 2016 of 2.7 percent, 
reduced by a productivity adjustment of 0.6 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 decrease in estimated IRF outlier 
payments from the proposed update to the outlier threshold amount. 
Since we are making the proposed 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.

[[Page 23394]]

                                       Table 24--IRF Impact Table for FY 2016 (Columns 4 through 10 in percentage)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Change in
                                                      Number of   Number of            IRF market    Wage                 rural        CMG       Total
              Facility Classification                   IRFs        cases     Outlier  basket \1\    index     CBSA     adjustment   weights    percent
                                                                                                                           \2\                   change
 (1)                                                        (2)         (3)       (4)         (5)       (6)       (7)          (8)        (9)       (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total..............................................       1,132     390,748      -0.2         1.9       0.0       0.0          0.0        0.0        1.7
Urban unit.........................................         739     179,466      -0.4         1.9       0.1       0.0          0.0        0.0        1.6
Rural unit.........................................         145      22,721      -0.3         1.9       0.3      -0.2          0.3        0.0        2.0
Urban hospital.....................................         236     184,416      -0.1         1.9      -0.1       0.1          0.0       -0.1        1.8
Rural hospital.....................................          12       4,145       0.0         1.9       0.2      -0.7          0.0       -0.1        1.3
Urban For-Profit...................................         348     174,797      -0.1         1.9       0.0       0.0          0.0        0.0        1.7
Rural For-Profit...................................          55       9,810      -0.2         1.9       0.1      -0.4          0.2        0.0        1.6
Urban Non-Profit...................................         566     170,965      -0.3         1.9       0.0       0.1          0.0        0.0        1.7
Rural Non-Profit...................................          92      15,588      -0.3         1.9       0.4      -0.3          0.3        0.1        2.1
Urban Government...................................          61      18,120      -0.4         1.9      -0.3       0.0         -0.1        0.1        1.2
Rural Government...................................          10       1,468      -0.3         1.9       0.3      -0.4          0.0        0.1        1.7
Urban..............................................         975     363,882      -0.2         1.9       0.0       0.0          0.0        0.0        1.7
Rural..............................................         157      26,866      -0.3         1.9       0.3      -0.3          0.3        0.0        1.9
CBSA Change
    Urban to Urban.................................         956     359,798      -0.2         1.9       0.0       0.0          0.0        0.0        1.7
    Rural to Rural.................................         154      26,278      -0.3         1.9       0.3      -0.3          0.0        0.0        1.6
    Urban to Rural.................................           3         588      -0.6         1.9       0.8       0.8         11.7        0.1       15.2
    Rural to Urban.................................          19       4,084      -0.3         1.9       0.7       1.3         -3.7        0.0       -0.2
Urban by region
    Urban New England..............................          31      16,767      -0.1         1.9       0.7      -0.2          0.0        0.0        2.3
    Urban Middle Atlantic..........................         143      57,893      -0.2         1.9       0.1       0.4          0.0        0.0        2.2
    Urban South Atlantic...........................         146      69,551      -0.2         1.9      -0.3      -0.1         -0.1        0.0        1.2
    Urban East North Central.......................         173      51,589      -0.3         1.9       0.2      -0.1          0.0        0.0        1.8
    Urban East South Central.......................          53      24,883      -0.1         1.9      -0.3      -0.1          0.0        0.0        1.4
    Urban West North Central.......................          73      18,970      -0.3         1.9       0.1       0.0          0.0        0.0        1.7
    Urban West South Central.......................         178      73,231      -0.2         1.9      -0.7       0.0          0.0        0.0        1.0
    Urban Mountain.................................          77      25,627      -0.2         1.9       0.7      -0.1          0.0        0.0        2.3
    Urban Pacific..................................         101      25,371      -0.4         1.9       0.8      -0.1          0.0        0.0        2.2
Rural by region
    Rural New England..............................           5       1,270      -0.2         1.9       0.9      -0.1          0.0        0.0        2.5
    Rural Middle Atlantic..........................          12       1,788      -0.2         1.9       2.0      -2.0          0.0        0.1        1.7
    Rural South Atlantic...........................          17       4,268      -0.2         1.9       0.2      -0.3          0.3        0.0        1.9
    Rural East North Central.......................          31       5,139      -0.3         1.9      -0.1       0.1          1.0        0.0        2.7
    Rural East South Central.......................          18       3,228      -0.2         1.9       0.0      -0.2          0.0        0.0        1.6
    Rural West North Central.......................          23       2,847      -0.4         1.9       0.4      -0.1          0.0        0.1        1.9
    Rural West South Central.......................          42       7,414      -0.2         1.9       0.3      -0.5          0.0        0.0        1.4
    Rural Mountain.................................           7         732      -1.0         1.9      -0.2      -0.1          0.0        0.0        0.7
    Rural Pacific..................................           2         180      -1.2         1.9       0.8       0.0          0.0       -0.1        1.4
Teaching status
    Non-teaching...................................       1,022     345,856      -0.2         1.9       0.0       0.0          0.0        0.0        1.7
    Resident to ADC less than 10%..................          63      30,362      -0.2         1.9       0.1      -0.2          0.0        0.1        1.7
    Resident to ADC 10%-19%........................          35      12,804      -0.5         1.9       0.2       0.3          0.0        0.0        1.9
    Resident to ADC greater than 19%...............          12       1,726      -0.1         1.9      -0.1      -0.3          0.0       -0.1        1.3
Disproportionate share patient percentage (DSH PP)
    DSH PP = 0%....................................          46      11,760      -0.4         1.9      -0.1      -0.1          0.0        0.0        1.4
    DSH PP 3 of the 14.9 percent rural adjustment in FY 2016. For those changing from urban to rural, the total impact shown is affected by the outlier
  threshold increasing, which results in smaller outlier payments as part of the total payments. For those changing from rural to urban status, the
  outlier threshold is being lowered by 2/3 of 14.9 percent, which results in more providers being eligible for outlier payments, increasing the outlier
  portion of their total payments.

3. Impact of the Proposed Update to the Outlier Threshold Amount
    The estimated effects of the proposed update to the outlier 
threshold adjustment are presented in column 4 of Table 24. In the FY 
2015 IRF PPS final rule (79 FR 45872), we used FY 2013 IRF claims data 
(the best, most complete data available at that time) to set the 
outlier threshold amount for FY 2015 so that estimated outlier payments 
would

[[Page 23395]]

equal 3 percent of total estimated payments for FY 2015.
    For this proposed rule, we are updating our analysis using FY 2014 
IRF claims data and, based on this updated analysis, we estimate that 
IRF outlier payments as a percentage of total estimated IRF payments 
are 3.2 percent in FY 2015. Thus, we propose to adjust the outlier 
threshold amount in this proposed rule to set total estimated outlier 
payments equal to 3 percent of total estimated payments in FY 2016. The 
estimated change in total IRF payments for FY 2016, therefore, includes 
an approximate 0.2 percent decrease in payments because the estimated 
outlier portion of total payments is estimated to decrease from 
approximately 3.2 percent to 3 percent.
    The impact of this proposed outlier adjustment update (as shown in 
column 4 of Table 24) is to decrease estimated overall payments to IRFs 
by about 0.2 percent. We estimate the largest decrease in payments from 
the update to the outlier threshold amount to be 1.2 percent for rural 
IRFs in the Pacific region.
4. Impact of the Proposed Market Basket Update to the IRF PPS Payment 
Rates
    The estimated effects of the proposed market basket update to the 
IRF PPS payment rates are presented in column 5 of Table 24. In the 
aggregate the proposed update would result in a net 1.9 percent 
increase in overall estimated payments to IRFs. This net increase 
reflects the estimated IRF market basket increase factor for FY 2016 of 
2.7 percent, reduced by a 0.6 percentage point productivity adjustment 
as required by section 1886(j)(3)(C)(ii)(I) of the Act, and further 
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. The market 
basket increase factor based on the IRF market basket (2.7 percent) is 
currently estimated to be 0.1 percentage point lower than the RPL 
market basket (2.8 percent). This lower update is primarily due to the 
lower cost weights for Compensation and Pharmaceuticals in the proposed 
IRF market basket.
5. Impact of the Proposed CBSA Wage Index and Labor-Related Share
    In column 6 of Table 24, we present the effects of the proposed 
budget-neutral update of the wage index and labor-related share without 
taking into account the revised OMB delineations, which are presented 
separately in the next column. The proposed 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 V.D. of this proposed rule, we 
propose to increase the labor-related share from 69.294 percent in FY 
2015 to 69.6 percent in FY 2016.
6. Impact of the Updated OMB Delineations
    In column 7 of Table 24, we present the effects of the revised OMB 
delineations, and the proposed transition to the new delineations using 
the blended wage index.
    In the aggregate, since these proposed 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 proposed updates will affect overall estimated payments to IRFs. 
However, we estimate that these proposed 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 0.4 percent for urban IRFs in the Middle Atlantic region. We 
estimate the largest decrease in payments from the proposed update to 
the CBSA wage index and labor-related share to be a 2.0 percent 
decrease for rural IRFs in the Middle Atlantic region.
7. Impact of the Phase-Out of the Rural Adjustment for IRFs 
Transitioning From Rural to Urban Designations
    In column 8 of Table 24, we present the effects 3-year phase-out of 
the rural adjustment for IRFs transitioning from rural to urban status 
under the new CBSA delineations. Under the IRF PPS, IRFs located in 
rural areas receive a 14.9 percent adjustment to their payment rates to 
account for the higher costs incurred in treating beneficiaries in 
rural areas. Under the new CBSA delineations, we estimate that 19 IRFs 
will transition from rural to urban status for purposes of the IRF PPS 
wage index adjustment in FY 2016. Without the proposed phase-out of the 
rural adjustment, these 19 IRFs would experience an automatic 14.9 
percent decrease in payments as a result of this change from rural to 
urban status in FY 2016. To mitigate the effects of this relatively 
large decrease in payments, we are proposing to phase-out the rural 
adjustment for these providers over a 3-year period, as discussed in 
more detail in section V. of this proposed rule. Thus, we are proposing 
that these IRF would receive 2/3 of the rural adjustment in FY 2016, 1/
3 of the rural adjustment in FY 2017, and none of the rural adjustment 
in FY 2018, thus giving these IRFs time to adjust to the reduced 
payments.
    Column 8 shows the effect on providers of this budget-neutral 
phase-out of the rural adjustment for IRFs transitioning from rural to 
urban status in FY 2016. Under the proposed policy, these providers 
would only experience a reduction in payments of 1/3 of the 14.9 
percent rural adjustment in FY 2016. As we propose to implement this 
phase-out in a budget-neutral manner, it does not affect aggregate 
payments to IRFs, but we estimate that this policy would have small 
effects on the distribution of payments to IRFs. The largest increase 
in payments to IRFs as a result of the interaction of the rural 
adjustment with the changes to the CBSA delineations is an 11.7 percent 
increase to 3 IRFs that transition from urban to rural status under the 
new CBSA delineations. These 3 IRFs will receive the full 14.9 percent 
rural adjustment for FY 2016. The largest decrease in payments to IRFs 
as a result of this proposed policy change is a 3.7 percent decrease in 
payments to IRFs that transition from rural to urban status under the 
new CBSA delineations. This is a result of these providers only 
receiving 2/3 of the 14.9 percent rural adjustment for FY 2016. We note 
that the decrease in payments to these providers is substantially 
lessened from what it otherwise would have been as a result of the 
proposed phase-out of the rural adjustment for these IRFs.
8. Impact of the Proposed Update to the CMG Relative Weights and 
Average Length of Stay Values
    In column 9 of Table 24, we present the effects of the proposed 
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 updates to have small distributional effects. The largest 
estimated increase in payments is a 0.1 percent increase for IRFs in 
the rural Middle Atlantic and rural West North Central regions. Rural 
IRFs in the Pacific region are estimated to experience a 0.1 percent 
decrease in payments due to the CMG relative weights change.
9. Effects of Proposed Requirements for the IRF QRP for FY 2018
    In accordance with section 1886(j)(7) of the Act, we will implement 
a 2 percentage point reduction in the FY 2016 increase factor for IRFs 
that have failed to report the required quality reporting data to us 
during the most

[[Page 23396]]

recent IRF quality reporting period. In section VIII.P.A of this 
proposed rule, we discuss the proposed method for applying the 2 
percentage point reduction to IRFs that fail to meet the IRF QRP 
requirements. At the time that this analysis was prepared, 91, or 
approximately 8 percent, of the 1166 active Medicare-certified IRFs did 
not receive the full annual percentage increase for the FY 2015 annual 
payment update determination. Information is not available to determine 
the precise number of IRFs that will not meet the requirements to 
receive the full annual percentage increase for the FY 2016 payment 
determination.
    In section VIII.L of this proposed rule, we discuss our proposal to 
suspend the previously finalized data accuracy validation policy for 
IRFs. While we cannot estimate the increase in the number of IRFs that 
will meet IRF QRP compliance standards at this time, we believe that 
this number will increase due to the temporary suspension of this 
policy. Thus, we estimate that the suspension of this policy will 
decrease impact on overall IRF payments, by increasing the rate of 
compliance, in addition to decreasing the cost of the IRF QRP to each 
IRF provider by approximately $47,320 per IRF, which was the estimated 
cost to each IRF provider to the implement the previously finalized 
policy.
    In section VIII.F of this proposed rule, we are proposing 2 quality 
measures that have already been adopted for the IRF QRP: (1) All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502), to establish the newly NQF-endorsed status of this measures; 
and (2) Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (NQF #0678), to establish its use as a cross-setting 
measure that addresses the domain of skin integrity, as required by the 
IMPACT Act of 2014. The All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from IRFs is a Medicare claims-based measure; 
because claims-based measures can be calculated based on data that are 
already reported to the Medicare program for payment purposes, we 
believe there will be no additional impact as a result of this measure. 
We also believe that there will be no additional burden associated with 
our proposal of the measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678), which was 
proposed to establish its use as a cross-setting measure that meets the 
IMPACT Act requirement of adding a quality measure that stratifies the 
domain of skin integrity, as IRFs are already submitting quality data 
related to this measure.
    In section VIII.G of this proposed rule, we are also proposing to 
adopt six new quality measures. The six proposed quality measures are: 
(1) An application of Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674); (2) an application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; under 
review); (3) IRF Functional Outcome Measure: Change in Self-Care Score 
for Medical Rehabilitation Patients (NQF #2633; under review); (4) IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; under review); (5) IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635; under review); and (6) IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636; under review). Additionally, we propose that data for these 
six measures will be collected and reported using the IRF-PAI (version 
1.4). The total cost related to the six proposed measures is estimated 
at $21,239.33 per IRF annually, or $24,042,291.01 for all IRFs 
annually. This is an average increase of 124 percent to all IRF 
providers over the burden discussed in the FY 2015 IRF PPS Final Rule, 
which included all quality measures that IRFs are required to report 
under the QRP with the exception of those new quality measures six 
proposed in this proposed rule.
    We intend to continue 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, IRF provider announcements, Web site postings, CMS 
Open Door Forums, and general and technical help desks.

D. Alternatives Considered

    The following is a discussion of the alternatives considered for 
the IRF PPS updates contained in this proposed 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. In recent years, IRF PPS payment 
rates have been updated by the RPL market basket. Thus, we did consider 
updating payments using the RPL market basket increase factor for FY 
2016. However, as stated in section V of this proposed rule, we believe 
the use of an IRF market basket that reflects the cost structure of the 
universe of IRF providers is a technical improvement over the use of 
the RPL market basket. The RPL market basket reflects the input costs 
of two additional provider types: Inpatient Psychiatric Facilities and 
Long-term Care Hospitals; and also only included data from freestanding 
providers. On the other hand, the IRF market basket reflects the input 
costs of only IRF providers and includes the costs from both 
freestanding and hospital-based IRF providers. We also had indicated 
our intention of proposing an IRF market basket in the FY 2015 IRF 
proposed and final rules and received support for moving from an RPL to 
an IRF market basket. Based on these reasons, we propose to update 
payments using the IRF market basket increase factor for FY 2016. In 
addition, as noted previously in this proposed 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 
2016, 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 2016. Thus, in accordance with 
section 1886(j)(3)(C) of the Act, we proposed to update the IRF federal 
prospective payments in this proposed rule by 1.9 percent (which equals 
the 2.7 percent estimated IRF market basket increase factor for FY 2016 
reduced by a 0.6 percentage point productivity adjustment as required 
by section 1886(j)(3)(C)(ii)(I) of the Act and further reduced by 0.2 
percentage point). If we instead proposed to use the RPL market basket, 
we would have proposed to update the IRF federal prospective payments 
by 2.0 percent (which equals the 2.8 percent estimated RPL market 
basket increase factor for FY 2016 reduced by a 0.6 percentage point 
productivity adjustment and further reduced by 0.2 percentage point).
    We considered maintaining the existing CMG relative weights and 
average length of stay values for FY 2016. 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 propose 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.

[[Page 23397]]

    We considered updating facility-level adjustment factors for FY 
2016. However, as discussed in more detail in the FY 2015 final rule 
(79 FR 45872), we believe that freezing the facility-level 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 the previous changes.
    We considered maintaining the existing outlier threshold amount for 
FY 2016. However, analysis of updated FY 2014 data indicates that 
estimated outlier payments would be higher than 3 percent of total 
estimated payments for FY 2016, by approximately 0.2 percent, unless we 
updated the outlier threshold amount. Consequently, we propose 
adjusting the outlier threshold amount in this proposed rule to reflect 
a 0.2 percent decrease thereby setting the total outlier payments equal 
to 3 percent, instead of 3.2 percent, of aggregate estimated payments 
in FY 2016.
    We considered a number of options for implementing the new CBSA 
designations. Overall, we believe implementing the new OMB delineations 
would result in wage index values being more representative of the 
actual costs of labor in a given area. Further, we recognize that some 
providers (10 percent) would have a higher wage index due to our 
proposed implementation of the new labor market area delineations. 
However, we also recognize that more providers (16 percent) would 
experience decreases in wage index values as a result of our proposed 
implementation of the new labor market area delineations. In prior 
years, we have provided for transition periods when adopting changes 
that have significant payment implications, particularly large negative 
impacts. As discussed in the FY 2006 IRF PPS final rule (70 FR 47921 
through 47926), we evaluated several options to ease the transition to 
the new CBSA system.
    In implementing the new CBSA delineations for FY 2016, we continue 
to have similar concerns as those expressed in the FY 2006 IRF PPS 
final rule. While we believe that implementing the latest OMB labor 
market area delineations would create a more accurate wage index 
system, we recognize that IRFs may experience decreases in their wage 
index as a result of the labor market area changes. Our analysis for 
the FY 2016 IRF PPS proposed rule indicates that a majority of IRFs 
either expect no change in the wage index or an increase in the wage 
index based on the new CBSA delineations. However, we found that 188 
facilities will experience a decline in their wage index with 29 
facilities experiencing a decline of 5 percent or more based on the 
CBSA changes. Therefore, we believe it would be appropriate to 
consider, as we did in FY 2006, whether or not a transition period 
should be used to implement these proposed changes to the wage index.
    We considered having no transition period and fully implementing 
the proposed new OMB delineations beginning in FY 2016. This would mean 
that we would adopt the revised OMB delineations for all IRF providers 
on October 1, 2015. However, this would not provide any time for IRF 
providers to adapt to the new OMB delineations. As previously 
discussed, more IRFs would experience a decrease in wage index due to 
implementation of the proposed new OMB delineations than would 
experience an increase. Thus, we believe that it would be appropriate 
to provide for a transition period to mitigate the resulting short-term 
instability and negative impacts on these IRF providers, and to provide 
time for these IRFs to adjust to their new labor market area 
delineations.
    Furthermore, in light of the comments received during the FY 2006 
rulemaking cycle on our proposal in the FY 2006 IRF PPS proposed rule 
(70 FR 30238 through 30240) to adopt the new CBSA definitions without a 
transition period, we continue to believe that a transition period is 
appropriate. Therefore, we propose a similar transition methodology to 
that used in FY 2006. Specifically, for the FY 2016 IRF PPS, we are 
proposing to implement a budget-neutral one-year transition policy. We 
are proposing that all IRF providers would receive a one-year blended 
wage index using 50 percent of their FY 2016 wage index based on the 
proposed new OMB delineations and 50 percent of their FY 2016 wage 
index based on the OMB delineations used in FY 2015. We are proposing 
to apply this one-year blended wage index in FY 2016 for all geographic 
areas to assist providers in adapting to these proposed changes. We 
believe a 1-year, 50/50 blend would mitigate the short-term instability 
and negative payment impacts due to the proposed implementation of the 
new OMB delineations. This transition policy would be for a one-year 
period, going into effect October 1, 2016, and continuing through 
September 30, 2017.
    For the reasons previously discussed and based on similar concerns 
to those we expressed during the FY 2006 rulemaking cycle to the 
proposed adoption of the new CBSA definitions, we are proposing to 
implement a three-year budget-neutral phase-out of the rural adjustment 
for the group of IRFs that during FY 2015 were designated as rural and 
for FY 2016 are designated as urban under the new CBSA system. This is 
in addition to implementing a one-year blended wage index for all IRFs. 
We considered having no transition, but found that a multi-year 
transition policy would best provide a sufficient buffer for rural IRFs 
that may experience a reduction in payments due to being designated as 
urban. We believe that the incremental reduction of the FY 2015 rural 
adjustment is appropriate to mitigate a significant reduction in per 
case payment. Alternative timeframes we considered for phasing out the 
rural adjustment for IRFs which would transition from rural to urban 
status in FY 2016, but believe that a three-year budget-neutral phase-
out of the rural adjustment would appropriately mitigate the adverse 
payment impacts for these IRFs while also ensuring that payment rates 
for these providers are set accurately and appropriately.

E. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in Table 25, we have prepared an accounting statement showing 
the classification of the expenditures associated with the provisions 
of this final rule. Table 25 provides our best estimate of the increase 
in Medicare payments under the IRF PPS as a result of the proposed 
updates presented in this proposed rule based on the data for 1,132 
IRFs in our database. In addition, Table 25 presents the costs 
associated with the proposed new IRF quality reporting program for FY 
2016.

[[Page 23398]]

                    Table 25--Accounting Statement: Classification of Estimated Expenditures
----------------------------------------------------------------------------------------------------------------
                Category                                                Transfers
----------------------------------------------------------------------------------------------------------------
                      Change in Estimated Transfers from FY 2015 IRF PPS to FY 2016 IRF PPS
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.........  $130 million.
From Whom to Whom?.....................  Federal Government to IRF Medicare Providers.
----------------------------------------------------------------------------------------------------------------
                Category                                                  Costs
----------------------------------------------------------------------------------------------------------------
                             FY 2016 Cost to Updating the Quality Reporting Program
----------------------------------------------------------------------------------------------------------------
Cost for IRFs to Submit Data for the     $24,042,291.01.
 Quality Reporting Program.
----------------------------------------------------------------------------------------------------------------

F. Conclusion

    Overall, the estimated payments per discharge for IRFs in FY 2016 
are projected to increase by 1.7 percent, compared with the estimated 
payments in FY 2015, as reflected in column 10 of Table 24. IRF 
payments per discharge are estimated to increase by 1.7 percent in 
urban areas and by 1.9 percent in rural areas, compared with estimated 
FY 2015 payments. Payments per discharge to rehabilitation units are 
estimated to increase 1.6 percent in urban areas and 2.0 in rural 
areas. Payments per discharge to freestanding rehabilitation hospitals 
are estimated to increase 1.8 percent in urban areas and 1.3 percent in 
rural areas.
    Overall, IRFs are estimated to experience a net increase in 
payments as a result of the proposed policies in proposed rule. The 
largest payment increase is estimated to be a 2.7 percent increase for 
rural IRFs located in the East North Central region.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Pub. L. 113-67, and sec. 112 of Pub. L. 
113-93.

0
2. Section 412.634 is added to read as follows:

Sec.  412.634  Requirements under the Inpatient Rehabilitation Facility 
(IRF) Quality Reporting Program (QRP).

    (a) Participation. (1) An IRF must begin reporting data under the 
IRF QRP requirements no later than the first day of the calendar 
quarter subsequent to 30 days after the date on its CMS Certification 
Number (CCN) notification letter, which designates the IRF as operating 
in the Certification and Survey Provider Enhanced Reports (CASPER) 
system.
    (2) [Reserved]
    (b) Submission requirements and payment impact. (1) IRFs must 
submit to CMS data on measures specified under sections 1886(j)(7)(D), 
1899B(c)(1), and 1899B(d)(1) of the Act, as applicable. Sections 
1886(j)(7)(C) and (j)(7)(F)(iii) of the Act require each IRF to submit 
data on the specified measures in the form and manner, and at a time, 
specified by the Secretary.
    (2) As required by section 1886(j)(7)(A)(i) of the Act, any IRF 
that does not submit data in accordance with section 1886(j)(7)(C) and 
(F) of the Act for a given fiscal year will have its annual update to 
the standard Federal rate for discharges for the IRF during the fiscal 
year reduced by two percentage points.
    (c) Exception and extension requirements. (1) An IRF may request 
and CMS may grant exceptions or extensions to the quality data 
reporting requirements, for one or more quarters, when there are 
certain extraordinary circumstances beyond the control of the IRF.
    (2) An IRF must request an exception or extension within 30 days of 
the date that the extraordinary circumstances occurred.
    (3) Exception and extension requests must be submitted to CMS from 
the IRF by sending an email to IRFQRPReconsiderations@cms.hhs.gov 
containing all of the following information:
    (i) IRF CMS Certification Number (CCN).
    (ii) IRF Business Name.
    (iii) IRF Business Address.
    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) IRF's reason for requesting the exception or extension.
    (vi) Evidence of the impact of extraordinary circumstances, 
including, but not limited to, photographs, newspaper, and other media 
articles.
    (vii) Date when the IRF believes it will be able to again submit 
IRF QRP data and a justification for the proposed date.
    (4) CMS may grant exceptions or extensions to IRFs without a 
request if it is determined that one or more of the following has 
occurred:
    (i) An extraordinary circumstance affects an entire region or 
locale.
    (ii) A systemic problem with one of CMS's data collection systems 
directly affected the ability of an IRF to submit data.
    (5) Email is the only form of submission that will be accepted. Any 
reconsideration requests received through another channel will not be 
considered as a valid exception or extension request.
    (d) Reconsideration. (1) IRFs found to be non-compliant with the 
quality reporting requirements for a particular fiscal year will 
receive a letter of non-compliance through the Quality Improvement and 
Evaluation System Assessment Submission and Processing (QIES-ASAP) 
system, as well as through the United States Postal Service. IRFs must 
submit reconsideration requests no later than 30 calendar days after 
the date identified on the letter of non-compliance.
    (2) Reconsideration requests must be submitted to CMS by sending an 
email to IRFQRPReconsiderations@cms.hhs.gov containing all of the 
following information:
    (i) IRF CCN.
    (ii) IRF Business Name.
    (iii) IRF Business Address.

[[Page 23399]]

    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) CMS identified reason(s) for non-compliance from the non-
compliance letter.
    (vi) Reason(s) for requesting reconsideration.
    (3) The request for reconsideration must be accompanied by 
supporting documentation demonstrating compliance. This documentation 
must be submitted electronically as an attachment to the 
reconsideration request email. Any request for reconsideration that 
does not contain sufficient evidence of compliance with the IRF QRP 
requirements will be denied.
    (4) Email is the only form of submission that will be accepted. Any 
reconsideration requests received through another channel will not be 
considered as a valid exception or extension request.
    (5) The QIES-ASAP system and the United States Postal Service will 
be the two mechanisms used to distribute each IRF's compliance letter, 
as well as our final decision regarding any reconsideration request 
received from the IRF.
    (e) Appeals. (1) An IRF may appeal the decision made by CMS on its 
reconsideration request by filing with the Provider Reimbursement 
Review Board (PRRB) under 42 CFR part 405, subpart R.

    Dated: April 13, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 21, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-09617 Filed 4-23-15; 4:15 pm]
 BILLING CODE 4120-01-P
```