Vol. 80 Monday, 

No. 80 April 27, 2015 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 412 

Medicare Program; Inpatient Rehabilitation Facility Prospective Payment 

System for Federal Fiscal Year 2016; Proposed Rule 

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23332 Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 

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. 

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-ServicePayment/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 laborrelated 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 

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Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 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 requirements .............. The total costs in FY 2016 for 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 HighCost Outliers under the IRF PPS 

A. Proposed Update to the Outlier 

Threshold Amount for FY 2016 

B. Proposed Update to the IRF Cost-toCharge 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 PostAcute 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 FacilityPatient Assessment Instrument 

IRF PPS Inpatient Rehabilitation Facility 

Prospective Payment System 

IRF QRP Inpatient Rehabilitation Facility 

Quality Reporting Program 

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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 LongTerm 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 casemix 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 budgetneutral 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-Feefor-Service-Payment/InpatientRehab

FacPPS/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, lowincome 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 longterm care hospitals (LTCHs) (hereafter 

referred to as the rehabilitation, 

psychiatric, and long-term care (RPL) 

market basket). Any reference to the FY 

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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 caselevel 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-ServicePayment/InpatientRehabFacPPS/DataFiles.html. 

In the FY 2009 IRF PPS final rule (73 

FR 46370), we updated the CMG relative 

weights, the average length of stay 

values, and the outlier threshold; 

clarified IRF wage index policies 

regarding the treatment of ‘‘New 

England deemed’’ counties and multicampus 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 selfimplementing 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 

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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-forService 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 

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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-ServicePayment/InpatientRehabFacPPS/

Software.html. 

Once a Medicare Fee-for-Service Part 

A patient is discharged, the IRF submits 

a Medicare claim as a Health Insurance 

Portability and Accountability Act of 

1996 (Pub. L. 104–191, enacted on 

August 21, 1996) (HIPAA) compliant 

electronic claim or, if the 

Administrative Simplification 

Compliance Act of 2002 (Pub. L. 107– 

105, enacted on December 27, 2002) 

(ASCA) permits, a paper claim (a UB– 

04 or a CMS–1450 as appropriate) using 

the five-character CMG number and 

sends it to the appropriate Medicare 

Administrative Contractor (MAC). In 

addition, once a Medicare Advantage 

patient is discharged, in accordance 

with the Medicare Claims Processing 

Manual, chapter 3, section 20.3 (Pub. 

100–04), hospitals (including IRFs) must 

submit an informational-only bill (TOB 

111), which includes Condition Code 04 

to their MAC. This will ensure that the 

Medicare Advantage days are included 

in the hospital’s Supplemental Security 

Income (SSI) ratio (used in calculating 

the IRF low-income percentage 

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 lowincome patients, rural location, and 

outlier payments. For discharges 

occurring on or after October 1, 2005, 

the IRF PPS payment also reflects the 

teaching status adjustment that became 

effective as of FY 2006, as discussed in 

the FY 2006 IRF PPS final rule (70 FR 

47880). 

II. Summary of Provisions of the 

Proposed Rule 

In 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 § 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 

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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 hospitalspecific 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 CaseMix 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

CMG CMG description (M=motor, 

C=cognitive, A=age) 

Relative weight Average length of stay 

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 M<51.05 and 

C>18.5.

1.0213 0.8946 0.8329 0.7968 11 10 10 10 

0103 ............. Stroke, M>44.45 and M<51.05 and 

C<18.5.

1.1406 0.9991 0.9302 0.8899 12 13 12 11 

0104 ............. Stroke, M>38.85 and M<44.45 .............. 1.2382 1.0846 1.0098 0.9661 13 13 12 12 

0105 ............. Stroke, M>34.25 and M<38.85 .............. 1.4520 1.2718 1.1841 1.1329 14 15 14 14 

0106 ............. Stroke, M>30.05 and M<34.25 .............. 1.6190 1.4181 1.3204 1.2632 16 16 15 15 

0107 ............. Stroke, M>26.15 and M<30.05 .............. 1.8114 1.5867 1.4773 1.4133 18 17 17 17 

0108 ............. Stroke, M<26.15 and A>84.5 ................ 2.2985 2.0133 1.8745 1.7933 24 23 21 21 

0109 ............. Stroke, M>22.35 and M<26.15 and 

A<84.5.

2.0987 1.8383 1.7115 1.6374 21 20 19 19 

0110 ............. Stroke, M<22.35 and A<84.5 ................ 2.7572 2.4151 2.2486 2.1512 27 27 24 24 

0201 ............. Traumatic brain injury, M>53.35 and 

C>23.5.

0.8167 0.6711 0.6056 0.5721 10 9 8 8 

0202 ............. Traumatic brain injury, M>44.25 and 

M<53.35 and C>23.5.

1.0578 0.8692 0.7844 0.7410 11 11 10 9 

0203 ............. Traumatic brain injury, M>44.25 and 

C<23.5.

1.2056 0.9906 0.8939 0.8445 11 12 10 11 

0204 ............. Traumatic brain injury, M>40.65 and 

M<44.25.

1.3276 1.0909 0.9844 0.9300 13 12 11 11 

0205 ............. Traumatic brain injury, M>28.75 and 

M<40.65.

1.5856 1.3028 1.1757 1.1107 15 15 14 13 

0206 ............. Traumatic brain injury, M>22.05 and 

M<28.75.

1.8996 1.5609 1.4086 1.3306 17 18 17 15 

0207 ............. Traumatic brain injury, M<22.05 ............ 2.5249 2.0746 1.8722 1.7687 30 24 20 19 

0301 ............. Non-traumatic brain injury, M>41.05 ..... 1.1140 0.9299 0.8528 0.7958 10 11 10 10 

0302 ............. Non-traumatic brain injury, M>35.05 

and M<41.05.

1.3920 1.1620 1.0656 0.9943 13 13 12 12 

0303 ............. Non-traumatic brain injury, M>26.15 

and M<35.05.

1.6177 1.3504 1.2384 1.1556 16 15 14 14 

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TABLE 1—RELATIVE WEIGHTS AND AVERAGE LENGTH OF STAY VALUES FOR CASE-MIX GROUPS—Continued 

CMG CMG description (M=motor, 

C=cognitive, A=age) 

Relative weight Average length of stay 

Tier 1 Tier 2 Tier 3 None Tier 1 Tier 2 Tier 3 None 

0304 ............. Non-traumatic brain injury, M<26.15 ..... 2.1480 1.7930 1.6443 1.5344 22 20 18 17 

0401 ............. Traumatic spinal cord injury, M>48.45 .. 0.9962 0.8479 0.7764 0.7177 10 10 9 10 

0402 ............. Traumatic spinal cord injury, M>30.35 

and M<48.45.

1.4305 1.2175 1.1149 1.0306 14 14 14 13 

0403 ............. Traumatic spinal cord injury, M>16.05 

and M<30.35.

2.2868 1.9463 1.7823 1.6475 27 22 19 20 

0404 ............. Traumatic spinal cord injury, M<16.05 

and A>63.5.

3.8616 3.2865 3.0096 2.7820 44 36 32 33 

0405 ............. Traumatic spinal cord injury, M<16.05 

and A<63.5.

3.4241 2.9142 2.6687 2.4668 41 34 29 28 

0501 ............. Non-traumatic spinal cord injury, 

M>51.35.

0.8671 0.6910 0.6416 0.5890 9 7 8 8 

0502 ............. Non-traumatic spinal cord injury, 

M>40.15 and M<51.35.

1.1417 0.9098 0.8448 0.7754 12 11 10 10 

0503 ............. Non-traumatic spinal cord injury, 

M>31.25 and M<40.15.

1.4429 1.1499 1.0676 0.9800 14 13 13 12 

0504 ............. Non-traumatic spinal cord injury, 

M>29.25 and M<31.25.

1.6605 1.3232 1.2286 1.1278 16 16 14 13 

0505 ............. Non-traumatic spinal cord injury, 

M>23.75 and M<29.25.

1.9434 1.5487 1.4379 1.3200 19 17 16 16 

0506 ............. Non-traumatic spinal cord injury, 

M<23.75.

2.7170 2.1652 2.0104 1.8454 27 24 22 21 

0601 ............. Neurological, M>47.75 ........................... 1.0388 0.8197 0.7649 0.6911 10 10 9 9 

0602 ............. Neurological, M>37.35 and M<47.75 .... 1.3344 1.0529 0.9825 0.8878 12 12 11 11 

0603 ............. Neurological, M>25.85 and M<37.35 .... 1.6570 1.3074 1.2201 1.1024 15 14 13 13 

0604 ............. Neurological, M<25.85 ........................... 2.1771 1.7178 1.6031 1.4485 20 18 17 16 

0701 ............. Fracture of lower extremity, M>42.15 ... 0.9663 0.8091 0.7663 0.6961 11 9 9 9 

0702 ............. Fracture of lower extremity, M>34.15 

and M<42.15.

1.2542 1.0502 0.9947 0.9035 13 12 12 11 

0703 ............. Fracture of lower extremity, M>28.15 

and M<34.15.

1.5016 1.2574 1.1909 1.0817 14 14 14 13 

0704 ............. Fracture of lower extremity, M<28.15 ... 1.9536 1.6359 1.5494 1.4073 18 18 17 16 

0801 ............. Replacement of lower extremity joint, 

M>49.55.

0.8023 0.6319 0.5733 0.5295 8 8 7 7 

0802 ............. Replacement of lower extremity joint, 

M>37.05 and M<49.55.

1.0579 0.8332 0.7560 0.6981 10 10 9 9 

0803 ............. Replacement of lower extremity joint, 

M>28.65 and M<37.05 and A>83.5.

1.4254 1.1227 1.0186 0.9407 13 12 12 11 

0804 ............. Replacement of lower extremity joint, 

M>28.65 and M<37.05 and A<83.5.

1.2747 1.0040 0.9109 0.8412 12 11 11 10 

0805 ............. Replacement of lower extremity joint, 

M>22.05 and M<28.65.

1.5372 1.2107 1.0985 1.0145 15 14 12 12 

0806 ............. Replacement of lower extremity joint, 

M<22.05.

1.9126 1.5064 1.3668 1.2622 17 17 15 14 

0901 ............. Other orthopedic, M>44.75 .................... 0.9548 0.7679 0.7038 0.6416 10 9 9 8 

0902 ............. Other orthopedic, M>34.35 and 

M<44.75.

1.2720 1.0231 0.9377 0.8547 13 12 11 11 

0903 ............. Other orthopedic, M>24.15 and 

M<34.35.

1.5872 1.2767 1.1701 1.0666 14 14 13 13 

0904 ............. Other orthopedic, M<24.15 .................... 2.0061 1.6136 1.4789 1.3481 19 18 16 16 

1001 ............. Amputation, lower extremity, M>47.65 .. 1.0786 0.9456 0.8420 0.7598 11 11 10 10 

1002 ............. Amputation, lower extremity, M>36.25 

and M<47.65.

1.3378 1.1728 1.0443 0.9423 13 12 12 11 

1003 ............. Amputation, lower extremity, M<36.25 .. 1.9202 1.6835 1.4990 1.3526 18 19 17 16 

1101 ............. Amputation, non-lower extremity, 

M>36.35.

1.3537 1.3537 1.0753 1.0104 13 13 12 11 

1102 ............. Amputation, non-lower extremity, 

M<36.35.

1.7741 1.7741 1.4093 1.3242 16 19 15 16 

1201 ............. Osteoarthritis, M>37.65 ......................... 0.9828 0.9542 0.8689 0.8106 9 11 10 10 

1202 ............. Osteoarthritis, M>30.75 and M<37.65 ... 1.1972 1.1624 1.0585 0.9875 11 14 13 12 

1203 ............. Osteoarthritis, M<30.75 ......................... 1.4863 1.4431 1.3140 1.2259 14 16 15 14 

1301 ............. Rheumatoid, other arthritis, M>36.35 .... 1.1640 0.9591 0.9044 0.8258 9 11 10 10 

1302 ............. Rheumatoid, other arthritis, M>26.15 

and M<36.35.

1.4812 1.2205 1.1509 1.0509 15 13 13 13 

1303 ............. Rheumatoid, other arthritis, M<26.15 .... 1.9711 1.6241 1.5314 1.3984 21 18 17 16 

1401 ............. Cardiac, M>48.85 .................................. 0.9070 0.7454 0.6741 0.6066 9 9 8 8 

1402 ............. Cardiac, M>38.55 and M<48.85 ............ 1.2037 0.9893 0.8946 0.8050 11 11 11 10 

1403 ............. Cardiac, M>31.15 and M<38.55 ............ 1.4509 1.1924 1.0783 0.9703 13 13 12 12 

1404 ............. Cardiac, M<31.15 .................................. 1.8350 1.5081 1.3637 1.2271 17 16 15 14 

1501 ............. Pulmonary, M>49.25 ............................. 1.0508 0.8465 0.7794 0.7499 11 10 9 9 

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TABLE 1—RELATIVE WEIGHTS AND AVERAGE LENGTH OF STAY VALUES FOR CASE-MIX GROUPS—Continued 

CMG CMG description (M=motor, 

C=cognitive, A=age) 

Relative weight Average length of stay 

Tier 1 Tier 2 Tier 3 None Tier 1 Tier 2 Tier 3 None 

1502 ............. Pulmonary, M>39.05 and M<49.25 ....... 1.3338 1.0745 0.9893 0.9519 12 12 11 11 

1503 ............. Pulmonary, M>29.15 and M<39.05 ....... 1.6182 1.3036 1.2002 1.1549 15 13 13 13 

1504 ............. Pulmonary, M<29.15 ............................. 2.0127 1.6215 1.4928 1.4364 21 17 15 15 

1601 ............. Pain syndrome, M>37.15 ...................... 1.1408 0.8388 0.8240 0.7577 11 10 10 9 

1602 ............. Pain syndrome, M>26.75 and M<37.15 1.4837 1.0909 1.0718 0.9854 14 12 12 12 

1603 ............. Pain syndrome, M<26.75 ...................... 1.9166 1.4093 1.3845 1.2730 15 15 15 15 

1701 ............. Major multiple trauma without brain or 

spinal cord injury, M>39.25.

1.0739 0.9109 0.8312 0.7736 10 10 11 9 

1702 ............. Major multiple trauma without brain or 

spinal cord injury, M>31.05 and 

M<39.25.

1.3886 1.1779 1.0748 1.0002 13 14 12 12 

1703 ............. Major multiple trauma without brain or 

spinal cord injury, M>25.55 and 

M<31.05.

1.5890 1.3479 1.2299 1.1446 19 15 14 14 

1704 ............. Major multiple trauma without brain or 

spinal cord injury, M<25.55.

2.0894 1.7724 1.6172 1.5051 21 20 18 17 

1801 ............. Major multiple trauma with brain or spinal cord injury, M>40.85.1.2728 0.9643 0.8811 0.7840 14 12 11 10 

1802 ............. Major multiple trauma with brain or spinal cord injury, M>23.05 and 

M<40.85.

1.8675 1.4148 1.2928 1.1503 19 17 15 14 

1803 ............. Major multiple trauma with brain or spinal cord injury, M<23.05.3.0253 2.2920 2.0942 1.8635 31 26 21 21 

1901 ............. Guillain Barre, M>35.95 ......................... 1.1501 0.9999 0.9724 0.8501 15 11 11 11 

1902 ............. Guillain Barre, M>18.05 and M<35.95 .. 2.2469 1.9534 1.8997 1.6609 25 22 21 20 

1903 ............. Guillain Barre, M<18.05 ......................... 3.6057 3.1347 3.0485 2.6652 48 31 28 30 

2001 ............. Miscellaneous, M>49.15 ........................ 0.9280 0.7626 0.7034 0.6367 9 9 9 8 

2002 ............. Miscellaneous, M>38.75 and M<49.15 1.2002 0.9863 0.9097 0.8235 11 11 10 10 

2003 ............. Miscellaneous, M>27.85 and M<38.75 1.4940 1.2277 1.1324 1.0250 14 14 13 12 

2004 ............. Miscellaneous, M<27.85 ........................ 1.9243 1.5813 1.4586 1.3203 18 17 16 15 

2101 ............. Burns, M>0 ............................................ 1.6922 1.6922 1.3135 1.2742 18 19 15 15 

5001 ............. Short-stay cases, length of stay is 3 

days or fewer.

.............. .............. .............. 0.1562 .............. .............. .............. 2 

5101 ............. Expired, orthopedic, length of stay is 13 

days or fewer.

.............. .............. .............. 0.7204 .............. .............. .............. 8 

5102 ............. Expired, orthopedic, length of stay is 14 

days or more.

.............. .............. .............. 1.6962 .............. .............. .............. 18 

5103 ............. Expired, not orthopedic, length of stay 

is 15 days or fewer.

.............. .............. .............. 0.7928 .............. .............. .............. 9 

5104 ............. Expired, not orthopedic, length of stay 

is 16 days or more.

.............. .............. .............. 1.9018 .............. .............. .............. 20 

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] 

Percentage change Number of cases 

affected 

Percentage of cases 

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 

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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 FacilityLevel 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 

§ 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 

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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 hospitalbased 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 hospitalbased 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 

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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 hospitalbased 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 Medicarecovered 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 hospitalbased 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 hospitalbased 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 hospitalbased 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 hospitalbased 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 

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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 hospitalbased 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 hospitalbased 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 hospitalbased 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 hospitalbased), 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 hospitalbased), 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 nonsalary 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 nonsalary 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 hospitalbased 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)). 

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(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 selfinsurance 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 hospitalbased 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

Major cost categories 

2012-based 

IRF 

(percent) 

2008-based 

RPL 

(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 (Malpractice) ......................................................................................................... 0.9 0.8 

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. 

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1http://www.bea.gov/papers/pdf/IOmanual_

092906.pdf 

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). 

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 hospitalbased 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 hospitalbased 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, 

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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) Forprofit. 

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

Cost shares 

obtained from 

medicare cost 

reports 

(percent) 

Proposed detailed 

capital cost 

shares after 

allocation of 

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 

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Table 6- Proposed 2012-based IRF Cost Weights Compared to 2008-based RPL Cost Weights 

•· .... . ·.·• · .. ·· ·.· .Proposed .· .. 

20Il'"> 

•..•. 2008,. 

cpst caiegbry · b~sed .. based . ru>ttost 

.... ··. IRFCost; ·<.weight· ·· .. ... . .. .. . . ...•.• .. ' . . Weight · .. 

Total 100.0 100.0 

Compensation 57.0 62.3 

Wages and Salaries 46.1 49.4 

Employee Benefits 10.9 12.8 

Utilities 2.3 1.6 

Electricity 1.0 1.1 

Fuel, Oil, and Gasoline 1.1 0.4 

Water & Sewerage 0.1 0.1 

Professional Liability Insurance 0.9 0.8 

All Other Products and Services 31.2 27.0 

All Other Products 14.0 15.6 

Pharmaceuticals 5.1 6.5 

Food: Direct Purchases 1.8 3.0 

Food: Contract Services 1.1 0.4 

Chemicals 0.7 1.1 

Medical Instruments 2.5 1.8 

Rubber & Plastics 0.6 1.1 

Paper and Printing Products 1.2 1.0 

Apparel - 0.2 

Machinery and Equipment - 0.1 

Miscellaneous Products 0.9 0.3 

All Other Services 17.2 11.4 

Labor-Related Services 8.8 4.7 

Professional Fees: Labor-related 3.8 2.1 

Administrative and Facilities Support Services 0.9 0.4 

Installation, Maintenance, and Repair 2.1 -

All Other: Labor-related Services 2.0 2.1 

N onlabor-Related Services 8.5 6.7 

Professional Fees: Nonlabor-related 3.4 4.2 

Financial services 3.0 0.9 

Telephone Services 0.7 0.4 

Postage - 0.6 

All Other: Nonlabor-related Services 1.4 0.6 
Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 23349 

* 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-todate, 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). 


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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

Name 

Proposed 

2012-based 

IRF weights 

(percent) 

2008-based 

RPL weights 

(percent) 

NAICS 

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). 

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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 capitalrelated 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 Forprofit 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 longterm 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 nonvintage 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 capitalrelated component of the proposed 

2012-based IRF market basket reflects 

the underlying stability of the capitalrelated 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 

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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 capitalrelated 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 straightline 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 capitalrelated 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 capitalrelated 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

Year 

Building and fixed equipment Movable equipment Interest 

2012-based 

23 years 

2008-based 

26 years 

2012-based 

11 years 

2008-based 

11 years 

2012-based 

23 years 

2008-based 

26 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 

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TABLE 8—2008-BASED RPL MARKET BASKET AND PROPOSED 2012-BASED IRF MARKET BASKET VINTAGE WEIGHTS FOR

CAPITAL-RELATED PRICE PROXIES—Continued 

Year 

Building and fixed equipment Movable equipment Interest 

2012-based 

23 years 

2008-based 

26 years 

2012-based 

11 years 

2008-based 

11 years 

2012-based 

23 years 

2008-based 

26 years 

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 vintageweighted 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-Dataand-Systems/Statistics-Trends-andReports/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 

BILLING CODE 4120–01–P 

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~ 

Table 9: Price Proxies for the Proposed 2012-based IRF Market Basket 

r;;s'~,'''::~ 

Total- IRF12 100.0% 

Compensation 57.0% 

Wages and Salaries ECI for Wages and Salaries for All Civilian workers in Hospitals 46.1% 

Employee Benefits ECI for Total Benefits for All Civilian workers in Hospitals 10.9% 

Utilities 2.3% 

Electricity PPI for Commercial Electric Power 1.0% 

Fuel, Oil, and Gasoline Blend of the PPI for Petroleum Refineries and PPI for Natural Gas 1.1% 

Water & Sewage CPI-U for Water and Sewerage Maintenance 0.1% 

Professional Liability Insurance 0.9% 

Malpractice CMS Hospital Professional Liability Insurance Premium Index 0.9% 

All Other Products and Services 31.2% 

All Other Products 14.0% 

Pharmaceuticals PPI for Pharmaceuticals for human use, prescription 5.1% 

Food: Direct Purchases PPI for Processed Foods and Feeds 1.8% 

Food: Contract Services CPI-U for Food Away From Home 1.1% 

Chemicals Blend of Chemical PPis 0.7% 

Blend of the PPI for Surgical and medical instruments and PPI for Medical 

Medical Instruments and surgical appliances and supplies 2.5% 

Rubber & Plastics PPI for Rubber and Plastic Products 0.6% 

Paper and Printing Products PPI for Converted Paper and Paperboard Products 1.2% 

Miscellaneous Products PPI for Finished Goods Less Food and Energy 0.9% 

All Other Services 17.2% 

Labor-Related Services 8.8% 

ECI for Total compensation for Private industry workers in Professional and 

Professional Fees: Labor-related related 3.8% 

Administrative and Facilities ECI for Total compensation for Private industry workers in Office and 

Support Services administrative support 0.9% 

ECI for Total compensation for Civilian workers in Installation, maintenance, 

Installation, Maintenance & Repair and repair 2.1% 

ECI for Total compensation for Private industry workers in Service 

All Other: Labor-related Services occupations 2.0% 

Nonlabor-Related Services 8.5% 

ECI for Total compensation for Private industry workers in Professional and 

Professional Fees: Nonlabor-related related 3.4% 

Financial services ECI for Total compensation for Private industry workers in Financial activities 3.0% 

Telephone Services CPI-U for Telephone Services 0.7% 

All Other: Nonlabor-related Services CPI-U for All Items Less Food and Energy 1.4% 

Capital-Related Costs 8.6% 

Depreciation 6.4% 

BEA chained price index for nonresidential construction for hospitals and 

Fixed Assets special care facilities - vintage weighted (23 years) 4.1% 

Movable Equipment PPI for machinery and equipment- vintage weighted (11 years) 2.3% 

Interest Costs 1.4% 
Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 23355 

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 

Fiscal year (FY) 

Proposed 

2012-based 

IRF market 

basket index 

percent 

change 

2008-based 

RPL market 

basket index 

percent 

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 


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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/ResearchStatistics-Data-and-Systems/StatisticsTrends-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: Laborrelated Services, and a portion of the 

Capital Costs from the 2008-based RPL 

market basket. 

Based on our definition of the laborrelated 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: LaborRelated, 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 laborrelated 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: 

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• 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: Laborrelated 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 hospitalbased 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: Nonlaborrelated 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: Laborrelated 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 

laborrelated 

share 1

FY 2015 

final laborrelated 

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 Services ....................................................................................................... 0.9 0.415 

Installation, Maintenance, and Repair ..................................................................................................................... 2.1 ........................

All Other: Labor-related Services ............................................................................................................................ 1.9 2.061 

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TABLE 11—PROPOSED IRF LABOR-RELATED SHARE—Continued 

FY 2016 

proposed 

laborrelated 

share 1

FY 2015 

final laborrelated 

share 2

Subtotal ............................................................................................................................................................. 65.7 65.741 

Labor-related portion of capital (46%) ..................................................................................................................... 3.9 3.553 

Total Labor-Related Share ........................................................................................................................ 69.6 69.294 

1Based on the 2012-based IRF Market Basket, IHS Global Insight, Inc. 1st quarter 2015 forecast. 

2Federal 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 prereclassification 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 CoreBased 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-IndexReform.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 

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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 yearto-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

County State Previous 

CBSA 

Previous urban area 

(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. 

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TABLE 12—COUNTIES THAT WOULD TRANSITION FROM URBAN TO RURAL STATUS—Continued 

County State Previous 

CBSA 

Previous urban area 

(constituent counties) 

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

County State New 

CBSA Urban area (constituent 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. 

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TABLE 13—COUNTIES THAT WOULD TRANSITION FROM RURAL TO URBAN STATUS—Continued 

County State New 

CBSA Urban area (constituent counties) 

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. 

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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 Municipio ............................................................................................... PR 

21940 .................................................... 41980 Luquillo Municipio ............................................................................................... PR 

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 County ........................................................................................... NY 

37380 .................................................... 19660 Flagler County .................................................................................................... FL 

37700 .................................................... 25060 Jackson County .................................................................................................. MS 

37964 .................................................... 33874 Bucks County ..................................................................................................... PA 

37964 .................................................... 33874 Chester County .................................................................................................. PA 

37964 .................................................... 33874 Montgomery County ........................................................................................... PA 

39100 .................................................... 20524 Dutchess County ................................................................................................ NY 

39100 .................................................... 35614 Orange County ................................................................................................... NY 

41884 .................................................... 42034 Marin County ...................................................................................................... CA 

41980 .................................................... 11640 Arecibo Municipio ............................................................................................... PR 

41980 .................................................... 11640 Camuy Municipio ................................................................................................ PR 

41980 .................................................... 11640 Hatillo Municipio ................................................................................................. PR 

41980 .................................................... 11640 Quebradillas Municipio ....................................................................................... PR 

48900 .................................................... 34820 Brunswick County ............................................................................................... NC 

49500 .................................................... 38660 Gua ́nica Municipio .............................................................................................. PR 

49500 .................................................... 38660 Guayanilla Municipio .......................................................................................... PR 

49500 .................................................... 38660 Pen ̃uelas Municipio ............................................................................................ PR 

49500 .................................................... 38660 Yauco Municipio ................................................................................................. PR 

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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 phaseout 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 

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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 threeyear 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 oneyear 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 threeyear 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 

§ 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 laborrelated 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 laborrelated 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 budgetneutral 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 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 ............................................................................................................................................... × 1.019 

Budget Neutrality Factor for the Wage Index and Labor-Related Share .................................................................................... × 1.0027 

Budget Neutrality Factor for the Revisions to the CMG Relative Weights ................................................................................. × 1.0000 

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 

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prospective payment rates for FY 2016 

are shown in Table 16. 

TABLE 16—PROPOSED FY 2016 PAYMENT RATES

CMG Payment rate tier 

1 

Payment rate tier 

2 

Payment rate tier 

3 

Payment rate no 

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 

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TABLE 16—PROPOSED FY 2016 PAYMENT RATES—Continued 

CMG Payment rate tier 

1 

Payment rate tier 

2 

Payment rate tier 

3 

Payment rate no 

comorbidity 

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 nonlabor 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 wageadjusted 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/MedicareFee-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 wageadjusted and rural-adjusted amount (if 

applicable). Finally, we add the 

additional teaching status payments (if 

applicable) to the wage, rural, and LIPadjusted 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

Steps Rural Facility A 

(Spencer Co., IN) 

Urban Facility B 

(Harrison Co., IN) 

1 ............... Unadjusted Federal Prospective Payment ......................................................... $33,405.98 $33,405.98 

2 ............... Labor Share ........................................................................................................ × 0.696 × 0.696 

3 ............... Labor Portion of Federal Payment ..................................................................... = $23,250.56 = $23,250.56 

4 ............... CBSA-Based Wage Index (shown in the Addendum, Tables 1 and 2) ............ × 0.8416 × 0.8599 

5 ............... Wage-Adjusted Amount ..................................................................................... = $19,567.67 = $19,993.16 

6 ............... Non-Labor Amount ............................................................................................. + $ 10,155.42 + $10,155.42 

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TABLE 17—EXAMPLE OF COMPUTING THE IRF FY 2016 FEDERAL PROSPECTIVE PAYMENT—Continued 

Steps Rural Facility A 

(Spencer Co., IN) 

Urban Facility B 

(Harrison Co., IN) 

7 ............... Wage-Adjusted Federal Payment ...................................................................... = $29,723.09 = $30,148.58 

8 ............... Rural Adjustment ................................................................................................ × 1.149 × 1.000 

9 ............... Wage- and Rural-Adjusted Federal Payment .................................................... = $34,151.83 = $30,148.58 

10 ............. LIP Adjustment ................................................................................................... × 1.0156 × 1.0454 

11 ............. FY 2016 Wage-, Rural- and LIP-Adjusted Federal Prospective Payment Rate = $34,684.60 = $31,517.33 

12 ............. FY 2016 Wage- and Rural-Adjusted Federal Prospective Payment ................. $34,151.83 $30,148.58 

13 ............. Teaching Status Adjustment .............................................................................. × 0 × 0.0784 

14 ............. Teaching Status Adjustment Amount ................................................................. = $0.00 = $2,363.65 

15 ............. FY 2016 Wage-, Rural-, and LIP-Adjusted Federal Prospective Payment Rate + $34,684.60 + $31,517.33 

16 ............. Total FY 2016 Adjusted Federal Prospective Payment ..................................... = $34,684.60 = $33,880.97

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-toCharge 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 

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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 

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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 prerulemaking 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, 

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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 prerulemaking input on each measure, as 

required by section 1890A of the Act. 

This process is based on a privatepublic partnership, and it occurs via the 

MAP. The MAP is composed of multistakeholder 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, PACQuality

Initiative@cms.hhs.gov, which is listed 

on our post-acute care quality initiatives 

Web site at http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/Post-AcuteCare-Quality-Initiatives/IMPACT-Act-of2014-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/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/IMPACT-Act-of-2014-andCross-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. 

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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 RiskStandardized 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 PostDischarge 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 shortstay acute care hospital or LTCH, within 

30 days of an IRF discharge. We noted 

that this is a claims-based measure that 

will not require reporting of new data by 

IRFs and thus will not be used to 

determine IRF reporting compliance for 

the IRF QRP. 

c. Percent of Residents or Patients Who 

Were Assessed and Appropriately Given 

the Seasonal Influenza Vaccine (ShortStay) (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 (ShortStay) (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. 

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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 HospitalOnset 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 hospitalonset 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 HospitalOnset CDI Outcome Measure (NQF 

#1717) can be found at http:/ 

www.qualityforum.org/QPS/1717 and 

http://www.cdc.gov/nhsn/inpatientrehab/mdro-cdi/index.html. 

TABLE 18—QUALITY MEASURES PREVIOUSLY FINALIZED FOR AND CURRENTLY USED IN THE IRF QUALITY REPORTING

PROGRAM

NQF Measure ID Quality measure title Data submission 

mechanism 

NQF #0138 ............. National Health Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure.CDC NHSN. 

NQF #0431 ............. Influenza Vaccination Coverage among Healthcare Personnel ........................................................... CDC NHSN. 

NQF #0680 ............. Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay).IRF–PAI. 

NQF #0678 ............. Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) ..... IRF–PAI. 

NQF #2502 ............. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Inpatient Rehabilitation Facilities*.Claims-based. 

NQF #1716 ............. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.CDC NHSN. 

NQF #1717 ............. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium 

difficile Infection (CDI) Outcome Measure..

CDC NHSN. 

* 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 PostDischarge from IRFs (NQF #2502); (5) 

Influenza Vaccination Coverage among 

Healthcare Personnel (NQF #0431); (6) 

NHSN Facility-Wide Inpatient HospitalOnset MRSA Bacteremia Outcome 

Measure (NQF #1716), (7) and NHSN 

Facility-Wide Inpatient Hospital-Onset 

CDI Outcome Measure (NQF #1717) 

quality measures. 

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2National 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.> 

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 PostDischarge 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) claimsbased 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 riskstandardized 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-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html). The additional postacute 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 

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3Schwartz, 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-AssessmentInstruments/Post-Acute-Care-Quality-Initiatives/ 

Downloads/Development-of-a-Cross-SettingQuality-Measure-for-Pressure-Ulcers-InformationGathering-Final-Report.pdf. 

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. 

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 crosssetting 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/QualityInitiatives-Patient-AssessmentInstruments/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®

Item 39I (Transfers: Bed, Chair, and 

Wheelchair), FIM® 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-ServicePayment/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-ServicePayment/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 

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4Schwartz, 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/QualityInitiatives-Patient-Assessment-Instruments/PostAcute-Care-Quality-Initiatives/Downloads/ 

Development-of-a-Cross-Setting-Pressure-UlcerQuality-Measure-Summary-Report-on-November15–2013-Technical-Expert-Pa.pdf. 

5Schwartz, 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-AssessmentInstruments/Post-Acute-Care-Quality-Initiatives/ 

Downloads/Development-of-a-Cross-SettingQuality-Measure-for-Pressure-Ulcers-InformationGathering-Final-Report.pdf. 

6Currie LM. Fall and injury prevention. Annu 

Rev Nurs Res. 2006;24:39–74. 

7Fuller GF. Falls in the elderly. Am Fam 

Physician. Apr 1 2000;61(7):2159–2168, 2173–2154. 

8Premier 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. 

10Frisina 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. 

11Rabadi 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. 

12Tinetti 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. 

13Sorensen 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. 

14Quigley 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. 

15Morse, J. M. (2002) Enhancing the safety of 

hospitalization by reducing patient falls. Am J 

Infect Control 2002; 30(6): 376–80. 

16Rothschild JM, Bates DW, Leape LL. 

Preventable medical injuries in older patients. Arch 

Intern Med. 2000 Oct 9; 160(18):2717–28. 

17Morris JN, Moore T, Jones R, et al. Validation 

of long-term and post-acute care quality indicators. 

Continued 

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. 

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

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 fallrelated injuries (intracranial bleed, hip 

fracture, other fracture) found an 

average cost of $23,723.14

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 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

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CMS Contract No: 500–95–0062/T.O. #4. 

Cambridge, MA: Abt Associates, Inc., June 2003. 

18Avidan 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. 

19Fonad 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. 

20Currie LM. Fall and injury prevention. Annu 

Rev Nurs Res. 2006;24:39–74. 

21Ellis 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. 

22Chen 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. 

23Frisina 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. 

24Lee JE, Stokic DS. Risk factors for falls during 

inpatient rehabilitant Am J Phys Med Rehabil. 2008 

May;87(5):341–50; quiz 351, 422. 

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). 

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 crosssetting 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.quality

forum.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation.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/QualityInitiatives-Patient-Assessment

Instruments/NursingHomeQualityInits/

NHQIMDS30Technical

Information.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-PatientAssessment-Instruments/IRF-QualityReporting/IRF-Quality-ReportingProgram-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 

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25Subcommittee on Health National Committee 

on Vital and Health Statistics, ‘‘Classifying and 

Reporting Functional Status’’ (2001). 

26Reistetter 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. 

27Miller 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. 

30Stineman, 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. 

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. 

32Ellenbecker 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. 

34Barbara 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). 

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

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. 

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 PostAcute 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 

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23378 Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 

35 Ibid. 

36 Ibid. 

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-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/CARE-Item-Set-and-BCARE.html. 

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 selfcare 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.quality

forum.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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-AssessmentInstruments/NursingHomeQualityInits/

NHQIMDS30Technical

Information.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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 

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37Reistetter TA, Karmarkar AM, Graham JE, et al. 

Regional variation in stroke rehabilitation 

outcomes. Arch Phys Med Rehabil.95(1):29–38, Jan. 

2014. 

38O’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. 

39O’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. 

40Barbara 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). 

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-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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 PostAcute 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/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/CARE-Item-Set-and-BCARE.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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.quality

forum.org/qps/2633. Detailed 

specifications for this quality measure 

can be accessed at: http://www.quality

forum.org/ProjectTemplate

Download.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. 

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. 

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. 

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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 ́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®* 

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.quality

forum.org/qps/2633. The detailed 

measure specifications are available for 

review at the NQF Web site: http://

www.qualityforum.org/ProjectTemplate

Download.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: PostAcute/Long-Term Care, which is 

available at http://www.quality

forum.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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/QualityInitiatives-Patient-AssessmentInstruments/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 

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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.quality

forum.org/qps/2634. More detailed 

specifications for this quality measure 

can be accessed at: http://www.quality

forum.org/ProjectTemplate

Download.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.quality

forum.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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-PatientAssessment-Instruments/IRF-QualityReporting/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/ProjectTemplate

Download.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/

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23382 Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 

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.quality

forum.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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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-PatientAssessment-Instruments/IRF-QualityReporting/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/Project

TemplateDownload.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/Project

TemplateDownload.aspx?Submission

ID=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.quality

forum.org/Setting_Priorities/ 

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Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 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-PatientAssessment-Instruments/IRF-QualityReporting/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 * ∧

• 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 * ∧

• 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) ∧∧

• 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) ** ∧∧∧

• 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) *** ∧∧∧

• 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) *** ∧∧∧

• 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) *** ∧∧∧

• 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) *** ∧∧∧

• 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) *** ∧∧∧

+ Using CDC/NHSN. 

∧ Medicare Fee-for-Service claims data. 

∧∧ IRF–PAI items would be modified. ∧∧∧ 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. 

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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

Quarter (calendar year) Data collection time frame Deadline submission of 

IRF–PAI corrections 

Annual 

increase 

factor 

affected 

Quarter 4 (CY 2016) .................. October 1, 2016—December 31, 2016 ........................................ May 15, 2017 ............................ FY 2018 

* includes data required for the 3 cross-setting IMPACT Act measures. 


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

Quarter (calendar year) Data collection time frame Deadline submission of 

IRF–PAI corrections 

Annual 

increase 

factor 

affected 

Quarter 1 (CY 2017) .................. January 1, 2017—March 31, 2017 ............................................... August 15, 2017 ........................ FY 2019 

Quarter 2 (CY 2017) .................. April 1, 2017—June 30, 2017 ....................................................... November 15, 2017 .................. FY 2019 

Quarter 3 (CY 2017) .................. July 1, 2017—September 30, 2017 .............................................. February 15, 2018 .................... FY 2019 

Quarter 4 (CY 2017) .................. October 1, 2017—December 31, 2017 ........................................ May 15, 2018 ............................ FY 2019 

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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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 

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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 § 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-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Reconsideration-andException-and-Extension.html. 

We propose to add the IRF QRP 

Submission Exception and Extension 

Requirements at § 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 

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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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Reconsideration-andException-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 noncompliant 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-PatientAssessment-Instruments/IRF-QualityReporting/Reconsideration-andDisaster-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/QualityInitiatives-Patient-AssessmentInstruments/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 § 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 

§ 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 

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23388 Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 

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 patientlevel covariate risk adjustment is 

performed. Resident- or patient-level 

covariates are used in a logistic 

regression model to calculate a residentor 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%22Tab

Type%22%3A1,%22Tab

ContentType%22%3A2,%22ItemsTo

Compare%22%3A%5B%5D,

%22StandardID%22%3A213,%22Entity

TypeID%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/QualityInitiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/IRFQuality-Reporting-Program-MeasuresInformation-.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 

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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/QualityInitiatives-Patient-AssessmentInstruments/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, reportingbased 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 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 .................................................................................................................................................................. × 0.9990 

Budget Neutrality Factor for the Wage Index and Labor-Related Share .................................................................................... × 1.0027 

Budget Neutrality Factor for the Revisions to the CMG Relative Weights ................................................................................. × 1.0000 

Final Adjusted FY 2016 Standard Payment Conversion Factor ................................................................................................. = 15,224 

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 NQFendorsed 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 

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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 crosssetting 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 

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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 noncompliance 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 multifactor 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 

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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. 

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• 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 budgetneutral 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 forprofit 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 budgetneutral 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 budgetneutral 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. 

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TABLE 24—IRF IMPACT TABLE FOR FY 2016 (COLUMNS 4 THROUGH 10 IN PERCENTAGE) 

Facility Classification Number of 

IRFs 

Number of 

cases Outlier IRF market basket 1

Wage 

index CBSA 

Change in 

rural 

adjustment 2

CMG 

weights 

Total 

percent 

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 <5% .................... 186 68,487 ¥0.2 1.9 0.0 0.4 0.0 0.0 2.0 

DSH PP 5%–10% ............. 317 130,224 ¥0.2 1.9 ¥0.1 ¥0.1 0.0 0.0 1.5 

DSH PP 10%–20% ........... 356 121,758 ¥0.2 1.9 0.2 ¥0.1 0.0 0.0 1.8 

DSH PP greater than 20% 227 58,519 ¥0.3 1.9 0.1 ¥0.1 0.0 0.0 1.6 

1This column reflects the impact of the IRF market basket increase factor for FY 2016 (2.7 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. 2Providers changing from urban to rural status will receive a 14.9 percent rural adjustment, and providers changing from rural to urban status 

will receive 2/3 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 

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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 budgetneutral 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 laborrelated 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 laborrelated share are applied in a budgetneutral 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 phaseout 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 budgetneutral 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 

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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 crosssetting 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 crosssetting 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. 

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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 threeyear 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 oneyear 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. 

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23398 Federal Register / Vol. 80, No. 80 / Monday, April 27, 2015 / Proposed Rules 

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 Quality Reporting Program ............................................. $24,042,291.01. 

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 

■ 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. 

■ 2. Section 412.634 is added to read as 

follows: 

§ 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 noncompliance 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 noncompliance. 

(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. 

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

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