```

[Federal Register Volume 79, Number 151 (Wednesday, August 6, 2014)]
[Rules and Regulations]
[Pages 45871-45936]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18447]

[[Page 45871]]

Vol. 79

Wednesday,

No. 151

August 6, 2014

Part II

Department of Health and Human Services

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Center for Medicare & Medicaid Services

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42 CFR Part 412

 Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2015; Final Rule

Federal Register / Vol. 79 , No. 151 / Wednesday, August 6, 2014 / 
Rules and Regulations

[[Page 45872]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1608-F]
RIN 0938-AS09

Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2015

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

ACTION: Final rule.

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SUMMARY: This final rule updates the prospective payment rates for 
inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 
2015 as required by the statute. This final rule finalizes a policy to 
collect data on the amount and mode (that is, Individual, Concurrent, 
Group, and Co-Treatment) of therapy provided in the IRF setting 
according to therapy discipline, revises the list of diagnosis and 
impairment group codes that presumptively meet the ``60 percent rule'' 
compliance criteria, provides a way for IRFs to indicate on the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-
PAI) form whether the prior treatment and severity requirements have 
been met for arthritis cases to presumptively meet the ``60 percent 
rule'' compliance criteria, and revises and updates quality measures 
and reporting requirements under the IRF quality reporting program 
(QRP). This rule also delays the effective date for the revisions to 
the list of diagnosis codes that are used to determine presumptive 
compliance under the ``60 percent rule'' that were finalized in FY 2014 
IRF PPS final rule and adopts the revisions to the list of diagnosis 
codes that are used to determine presumptive compliance under the ``60 
percent rule'' that are finalized in this rule. This final rule also 
addresses the implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF 
prospective payment system (PPS), which will be effective when ICD-10-
CM becomes the required medical data code set for use on Medicare 
claims and IRF-PAI submissions.

DATES: The updated IRF prospective payment rates are applicable for IRF 
discharges occurring on or after October 1, 2014, and on or before 
September 30, 2015 (FY 2015). In addition, the revisions to the list of 
diagnosis codes that are used to determine presumptive compliance under 
the ``60 percent rule'' that were finalized in FY 2014 IRF PPS final 
rule (78 FR 47860) and the revisions to the lists of diagnosis codes 
and impairment group codes finalized in this rule are applicable for 
compliance review periods beginning on or after October 1, 2015. The 
change to the Inpatient Rehabilitation Facility-Patient Assessment 
Instrument (IRF-PAI) form to indicate whether the prior treatment and 
severity requirements have been met for arthritis cases to 
presumptively meet the ``60 percent rule'' compliance criteria is 
applicable October 1, 2015. The implementation of the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM), for the IRF prospective payment system (PPS), is applicable 
when ICD-10-CM becomes the required medical data code set for use on 
Medicare claims and IRF-PAI submissions. The updated quality measures 
and reporting requirements under the IRF QRP are applicable for IRF 
discharges occurring on or after October 1, 2014. The two new IRF 
quality measures will require data submission beginning with admissions 
and discharges occurring on or after January 1, 2015: (1) National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF 1716); and (2) National Healthcare Safety Network 
(NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile 
Infection (CDI) Outcome Measure (NQF 1717).

FOR FURTHER INFORMATION CONTACT: Gwendolyn Johnson, (410) 786-6954, for 
general information.
    Charles Padgett, (410) 786-2811, for information about the quality 
reporting program.
    Kadie Thomas, (410) 786-0468, or Susanne Seagrave, (410) 786-0044, 
for information about the payment policies and the proposed payment 
rates.

SUPPLEMENTARY INFORMATION: The IRF PPS Addenda along with other 
supporting documents and tables referenced in this final rule are 
available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.

Executive Summary

A. Purpose

    This final rule updates the payment rates for IRFs for FY 2015 
(that is, for discharges occurring on or after October 1, 2014, and on 
or before September 30, 2015) as required under section 1886(j)(3)(C) 
of the Social Security Act (the Act). Section 1886(j)(5) of the Act 
requires the Secretary to publish in the Federal Register on or before 
the August 1 that precedes the start of each fiscal year, the 
classification and weighting factors for the IRF PPS's case-mix groups 
and a description of the methodology and data used in computing the 
prospective payment rates for that fiscal year. It also makes policy 
changes to programs associated with IRFs.

B. Summary of Major Provisions

    In this final rule, we use the methods described in the FY 2014 IRF 
PPS final rule (78 FR 47860) to update the federal prospective payment 
rates for FY 2015 using updated FY 2013 IRF claims and the most recent 
available IRF cost report data. We are also finalizing a policy to 
collect data on the amount and mode (that is, Individual, Concurrent, 
Group, and Co-Treatment) of therapy provided in the IRF setting 
according to therapy discipline, revising the list of impairment group 
codes that presumptively meet the ``60 percent rule'' compliance 
criteria, providing a way for IRFs to indicate on the Inpatient 
Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI) form 
whether the prior treatment and severity requirements have been met for 
arthritis cases to presumptively meet the ``60 percent rule'' 
compliance criteria, and revising and updating quality measures and 
reporting requirements under the IRF QRP. In this final rule, we also 
address the implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF 
prospective payment system (PPS), effective when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions.

C. Summary of Impacts

[[Page 45873]]

------------------------------------------------------------------------
       Provision description                      Transfers
------------------------------------------------------------------------
FY 2015 IRF PPS payment rate        The overall economic impact of this
 update.                             final rule is an estimated $180
                                     million in increased payments from
                                     the Federal government to IRFs
                                     during FY 2015.
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       Provision description                        Costs
------------------------------------------------------------------------
New quality reporting program       The total costs in FY 2015 for IRFs
 requirements.                       as a result of the new quality
                                     reporting requirements are
                                     estimated to be $852,238
New Individual, Concurrent, Group,  The total costs in FY 2016 for IRFs
 and Co-Treatment Therapy            as a result of the new Individual,
 reporting requirements.             Concurrent, Group, and Co-Treatment
                                     reporting requirements are
                                     estimated to be $1.2 million.
------------------------------------------------------------------------

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

Table of Contents

I. Background
    A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)
    B. Provisions of the Affordable Care Act Affecting the IRF PPS 
in FY 2012 and Beyond
    C. Operational Overview of the Current IRF PPS
II. Summary of Provisions of the Proposed Rule
III. Analysis and Responses to Public Comments
IV. Update to the Case-Mix Group (CMG) Relative Weights and Average 
Length of Stay Values for FY 2015
V. Freezing the Facility-Level Adjustment Factors at FY 2014 Levels
    A. Background on Facility-Level Adjustments
    B. Freezing the Facility-Level Adjustment Factors at FY 2014 
Levels
VI. FY 2015 IRF PPS Federal Prospective Payment Rates
    A. Market Basket Increase Factor, Productivity Adjustment, and 
Other Adjustment for FY 2015
    B. Development of an IRF-Specific Market Basket
    C. Secretary's Final Recommendation
    D. Labor-Related Share for FY 2015
    E. Wage Adjustment
    F. Description of the IRF Standard Conversion Factor and Payment 
Rates for FY 2015
    G. Example of the Methodology for Adjusting the Federal 
Prospective Payment Rates
VII. Update to Payments for High-Cost Outliers Under the IRF PPS
    A. Update to the Outlier Threshold Amount for FY 2015
    B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/
Rural Averages
VIII. Refinements to the Presumptive Compliance Methodology
    A. Background on the Compliance Percentage
    B. Changes to the Diagnosis Codes That Are Used To Determine 
Presumptive Compliance
    C. Changes to the Impairment Group Codes That Meet Presumptive 
Compliance Criteria
IX. Data Collection of the Amount and Mode (Individual, Concurrent, 
Group, and Co-Treatment) of Therapy Provided in IRFs According to 
Occupational, Speech, and Physical Therapy Disciplines
X. Revision to the IRF-PAI for Arthritis Conditions
XI. International Classification of Diseases, 10th Revision, 
Clinical Modification (ICD-10-CM), Conversion
    A. Background on the Use of Diagnosis Information in the IRF PPS
    B. Conversion of Diagnosis Information from ICD-9-CM to ICD-10-
CM for the IRF PPS
XII. Revisions and Updates to the Quality Reporting Program for IRFs
    A. Background and Statutory Authority
    B. Quality Measures Previously Finalized for and Currently Used 
in the IRF Quality Reporting Program
    C. New IRF QRP Quality Measures Affecting the FY 2017 
Adjustments to the IRF PPS Annual Increase Factor and Beyond
    D. IRF QRP Quality Measures and Concepts Under Consideration for 
Future Years
    E. Timeline for Data Submission for New IRF QRP Quality Measures 
Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase 
Factor
    F. Timing for New IRFs to Begin Reporting Quality Data under the 
IRF QRP Affecting the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor and Beyond
    G. IRF QRP Reconsideration and Appeals Procedures for the FY 
2016 Adjustments to the IRF PPS Annual Increase Factor and Beyond
    H. IRF QRP Data Submission Exception or Extension Requirements 
for the FY 2017 Adjustments to the IRF PPS Annual Increase Factor 
and Beyond
    I. Public Display of Quality Measure Data for the IRF QRP
    J. IRF QRP Data Completion Thresholds for the FY 2016 
Adjustments to the IRF PPS Annual Increase Factor and Beyond
    K. Data Validation Process for the FY 2017 Adjustments to the 
IRF PPS Annual Increase Factor and Beyond
    L. Electronic Health Record and Health Information Exchange
    M. Method for Applying the Reduction to the FY 2015 IRF Increase 
Factor for IRFs That Fail to Meet the Quality Reporting Requirements
XIII. Miscellaneous Comments
XIV. Provisions of the Final Regulations
XV. Collection of Information Requirements
    A. ICRs Regarding the IRF QRP
    B. ICRs Regarding Individual, Concurrent, Group, and Co-
Treatment Therapy Data on the IRF-PAI
XVI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impacts
    C. Detailed Economic Analysis
    D. Alternatives Considered
    E. Accounting Statement
    F. Conclusion

Acronyms, Abbreviations, and Short Forms

    Because of the many terms to which we refer by acronym, 
abbreviation, or short form in this final rule, we are listing the 
acronyms, abbreviation, and short forms used and their corresponding 
terms in alphabetical order below.

The Act The Social Security Act
ADC Average Daily Census
The Affordable Care Act Patient Protection and Affordable Care Act 
(Pub. L. 111-148, enacted on March 23, 2010)
AHIMA American Health Information Management Association
ASCA Administrative Simplification Compliance Act (Pub. L. 107-105, 
enacted on December 27, 2002)
BBA Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on August 
5, 1997)
BLS U.S. Bureau of Labor Statistics
CAH Critical Access Hospitals
CAUTI Catheter-Associated Urinary Tract Infection
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CDC The Centers for Disease Control and Prevention
CDI Clostridium difficile Infection
CFR Code of Federal Regulations
CMG Case-Mix Group
CMS Centers for Medicare & Medicaid Services
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171, enacted February 
8, 2006)
DSH Disproportionate Share Hospital
DSH PP Disproportionate Share Patient Percentage
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FR Federal Register
FY Federal Fiscal Year
GEMs General Equivalence Mappings
HAI Healthcare Associated Infection
HCP Health Care Personnel
HHS U.S. Department of Health & Human Services
HIE Health Information Exchange

[[Page 45874]]

HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191, enacted on August 21, 1996)
ICD-9-CM The International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM The International Classification of Diseases, 10th 
Revision, Clinical Modification
ICRs Information Collection Requirements
IGC Impairment Group Code
IGI IHS Global Insight
IPF Inpatient Psychiatric Facility
IPPS Inpatient Prospective Payment System
IQR Inpatient Quality Reporting Program
IRF Inpatient Rehabilitation Facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument
IRF PPS Inpatient Rehabilitation Facility Prospective Payment System
IRVEN Inpatient Rehabilitation Validation and Entry
LIP Low-Income Percentage
LPN Licensed Practical Nurse
LTCH Long-Term Care Hospital
MAC Medicare Administrative Contractor
MAP Measure Applications Partnership
MA (Medicare Part C) Medicare Advantage
MedPAC Medicare Payment Advisory Commission
MDS Minimum Data Set
MFP Multifactor Productivity
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173, enacted on December 29, 2007)
MRSA Methicillin-Resistant Staphylococcus aureus
MUC Measures under Consideration
NHSN National Healthcare Safety Network
NPP National Priorities Partnership
NQF National Quality Forum
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
PAI Patient Assessment Instrument
PPS Prospective Payment System
PRA Paperwork Reduction Act of 1995 (Pub. L. 104-13, enacted on May 
22, 1995)
PRRB Provider Reimbursement Review Board
QM Quality Measure
QRP Quality Reporting Program
RIA Regulatory Impact Analysis
RIC Rehabilitation Impairment Category
RFA Regulatory Flexibility Act (Pub. L. 96-354, enacted on September 
19, 1980)
RN Registered Nurse
RPL Rehabilitation, Psychiatric, and Long-Term Care market basket
SSI Supplemental Security Income

I. Background

A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)

    Section 1886(j) of the Act provides for the implementation of a 
per-discharge prospective payment system (PPS) for inpatient 
rehabilitation hospitals and inpatient rehabilitation units of a 
hospital (collectively, hereinafter referred to as IRFs). Payments 
under the IRF PPS encompass inpatient operating and capital costs of 
furnishing covered rehabilitation services (that is, routine, 
ancillary, and capital costs), but not direct graduate medical 
education costs, costs of approved nursing and allied health education 
activities, bad debts, and other services or items outside the scope of 
the IRF PPS. Although a complete discussion of the IRF PPS provisions 
appears in the original FY 2002 IRF PPS final rule (66 FR 41316) and 
the FY 2006 IRF PPS final rule (70 FR 47880), we are providing below a 
general description of the IRF PPS for fiscal years (FYs) 2002 through 
2013.
    Under the IRF PPS from FY 2002 through FY 2005, as described in the 
FY 2002 IRF PPS final rule (66 FR 41316), the federal prospective 
payment rates were computed across 100 distinct case-mix groups (CMGs). 
We constructed 95 CMGs using rehabilitation impairment categories 
(RICs), functional status (both motor and cognitive), and age (in some 
cases, cognitive status and age may not be a factor in defining a CMG). 
In addition, we constructed five special CMGs to account for very short 
stays and for patients who expire in the IRF.
    For each of the CMGs, we developed relative weighting factors to 
account for a patient's clinical characteristics and expected resource 
needs. Thus, the weighting factors accounted for the relative 
difference in resource use across all CMGs. Within each CMG, we created 
tiers based on the estimated effects that certain comorbidities would 
have on resource use.
    We established the federal PPS rates using a standardized payment 
conversion factor (formerly referred to as the budget-neutral 
conversion factor). For a detailed discussion of the budget-neutral 
conversion factor, please refer to our FY 2004 IRF PPS final rule (68 
FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 
47880), we discussed in detail the methodology for determining the 
standard payment conversion factor.
    We applied the relative weighting factors to the standard payment 
conversion factor to compute the unadjusted federal prospective payment 
rates under the IRF PPS from FYs 2002 through 2005. Within the 
structure of the payment system, we then made adjustments to account 
for interrupted stays, transfers, short stays, and deaths. Finally, we 
applied the applicable adjustments to account for geographic variations 
in wages (wage index), the percentage of low-income patients, location 
in a rural area (if applicable), and outlier payments (if applicable) 
to the IRFs' unadjusted federal prospective payment rates.
    For cost reporting periods that began on or after January 1, 2002, 
and before October 1, 2002, we determined the final prospective payment 
amounts using the transition methodology prescribed in section 
1886(j)(1) of the Act. Under this provision, IRFs transitioning into 
the PPS were paid a blend of the federal IRF PPS rate and the payment 
that the IRFs would have received had the IRF PPS not been implemented. 
This provision also allowed IRFs to elect to bypass this blended 
payment and immediately be paid 100 percent of the federal IRF PPS 
rate. The transition methodology expired as of cost reporting periods 
beginning on or after October 1, 2002 (FY 2003), and payments for all 
IRFs now consist of 100 percent of the federal IRF PPS rate.
    We established a CMS Web site as a primary information resource for 
the IRF PPS which is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/index.html. The Web site 
may be accessed to download or view publications, software, data 
specifications, educational materials, and other information pertinent 
to the IRF PPS.
    Section 1886(j) of the Act confers broad statutory authority upon 
the Secretary to propose refinements to the IRF PPS. In the FY 2006 IRF 
PPS final rule (70 FR 47880) and in correcting amendments to the FY 
2006 IRF PPS final rule (70 FR 57166) that we published on September 
30, 2005, we finalized a number of refinements to the IRF PPS case-mix 
classification system (the CMGs and the corresponding relative weights) 
and the case-level and facility-level adjustments. These refinements 
included the adoption of the Office of Management and Budget's (OMB) 
Core-Based Statistical Area (CBSA) market definitions, modifications to 
the CMGs, tier comorbidities, and CMG relative weights, implementation 
of a new teaching status adjustment for IRFs, revision and rebasing of 
the market basket index used to update IRF payments, and updates to the 
rural, low-income percentage (LIP), and high-cost outlier adjustments. 
Beginning with the FY 2006 IRF PPS final rule (70 FR 47908 through 
47917), the market basket index used to update IRF payments is a market 
basket reflecting the operating and capital cost structures for 
freestanding IRFs, freestanding inpatient psychiatric facilities 
(IPFs), and long-term care hospitals (LTCHs) (hereafter referred to as 
the rehabilitation, psychiatric, and long-term care (RPL) market 
basket). Any reference to the FY 2006 IRF PPS final rule in this final 
rule also includes the provisions effective in the correcting

[[Page 45875]]

amendments. For a detailed discussion of the final key policy changes 
for FY 2006, please refer to the FY 2006 IRF PPS final rule (70 FR 
47880 and 70 FR 57166).
    In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined 
the IRF PPS case-mix classification system (the CMG relative weights) 
and the case-level adjustments, to ensure that IRF PPS payments would 
continue to reflect as accurately as possible the costs of care. For a 
detailed discussion of the FY 2007 policy revisions, please refer to 
the FY 2007 IRF PPS final rule (71 FR 48354).
    In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the 
federal prospective payment rates and the outlier threshold, revised 
the IRF wage index policy, and clarified how we determine high-cost 
outlier payments for transfer cases. For more information on the policy 
changes implemented for FY 2008, please refer to the FY 2008 IRF PPS 
final rule (72 FR 44284), in which we published the final FY 2008 IRF 
federal prospective payment rates.
    After publication of the FY 2008 IRF PPS final rule (72 FR 44284), 
section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(Pub. L. 110-173, enacted on December 29, 2007) (MMSEA), amended 
section 1886(j)(3)(C) of the Act to apply a zero percent increase 
factor for FYs 2008 and 2009, effective for IRF discharges occurring on 
or after April 1, 2008. Section 1886(j)(3)(C) of the Act required the 
Secretary to develop an increase factor to update the IRF federal 
prospective payment rates for each FY. Based on the legislative change 
to the increase factor, we revised the FY 2008 federal prospective 
payment rates for IRF discharges occurring on or after April 1, 2008. 
Thus, the final FY 2008 IRF federal prospective payment rates that were 
published in the FY 2008 IRF PPS final rule (72 FR 44284) were 
effective for discharges occurring on or after October 1, 2007, and on 
or before March 31, 2008; and the revised FY 2008 IRF federal 
prospective payment rates were effective for discharges occurring on or 
after April 1, 2008, and on or before September 30, 2008. The revised 
FY 2008 federal prospective payment rates are available on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.
    In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG 
relative weights, the average length of stay values, and the outlier 
threshold; clarified IRF wage index policies regarding the treatment of 
``New England deemed'' counties and multi-campus hospitals; and revised 
the regulation text in response to section 115 of the MMSEA to set the 
IRF compliance percentage at 60 percent (the ``60 percent rule'') and 
continue the practice of including comorbidities in the calculation of 
compliance percentages. We also applied a zero percent market basket 
increase factor for FY 2009 in accordance with section 115 of the 
MMSEA. For more information on the policy changes implemented for FY 
2009, please refer to the FY 2009 IRF PPS final rule (73 FR 46370), in 
which we published the final FY 2009 IRF federal prospective payment 
rates.
    In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting 
amendments to the FY 2010 IRF PPS final rule (74 FR 50712) that we 
published on October 1, 2009, we updated the federal prospective 
payment rates, the CMG relative weights, the average length of stay 
values, the rural, LIP, teaching status adjustment factors, and the 
outlier threshold; implemented new IRF coverage requirements for 
determining whether an IRF claim is reasonable and necessary; and 
revised the regulation text to require IRFs to submit patient 
assessments on Medicare Advantage (MA) (Medicare Part C) patients for 
use in the 60 percent rule calculations. Any reference to the FY 2010 
IRF PPS final rule in this final rule also includes the provisions 
effective in the correcting amendments. For more information on the 
policy changes implemented for FY 2010, please refer to the FY 2010 IRF 
PPS final rule (74 FR 39762 and 74 FR 50712), in which we published the 
final FY 2010 IRF federal prospective payment rates.
    After publication of the FY 2010 IRF PPS final rule (74 FR 39762), 
section 3401(d) of the Patient Protection and Affordable Care Act (Pub. 
L. 111-148, enacted on March 23, 2010), as amended by section 10319 of 
the same Act and by section 1105 of the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010) 
(collectively, hereafter referred to as ``The Affordable Care Act''), 
amended section 1886(j)(3)(C) of the Act and added section 
1886(j)(3)(D) of the Act. Section 1886(j)(3)(C) of the Act requires the 
Secretary to estimate a multi-factor productivity adjustment to the 
market basket increase factor, and to apply other adjustments as 
defined by the Act. The productivity adjustment applies to FYs from 
2012 forward. The other adjustments apply to FYs 2010 to 2019.
    Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act 
defined the adjustments that were to be applied to the market basket 
increase factors in FYs 2010 and 2011. Under these provisions, the 
Secretary was required to reduce the market basket increase factor in 
FY 2010 by a 0.25 percentage point adjustment. Notwithstanding this 
provision, in accordance with section 3401(p) of the Affordable Care 
Act, the adjusted FY 2010 rate was only to be applied to discharges 
occurring on or after April 1, 2010. Based on the self-implementing 
legislative changes to section 1886(j)(3) of the Act, we adjusted the 
FY 2010 federal prospective payment rates as required, and applied 
these rates to IRF discharges occurring on or after April 1, 2010, and 
on or before September 30, 2010. Thus, the final FY 2010 IRF federal 
prospective payment rates that were published in the FY 2010 IRF PPS 
final rule (74 FR 39762) were used for discharges occurring on or after 
October 1, 2009, and on or before March 31, 2010, and the adjusted FY 
2010 IRF federal prospective payment rates applied to discharges 
occurring on or after April 1, 2010, and on or before September 30, 
2010. The adjusted FY 2010 federal prospective payment rates are 
available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.
    In addition, sections 1886(j)(3)(C) and (D) of the Act also 
affected the FY 2010 IRF outlier threshold amount because they required 
an adjustment to the FY 2010 RPL market basket increase factor, which 
changed the standard payment conversion factor for FY 2010. 
Specifically, the original FY 2010 IRF outlier threshold amount was 
determined based on the original estimated FY 2010 RPL market basket 
increase factor of 2.5 percent and the standard payment conversion 
factor of $13,661. However, as adjusted, the IRF prospective payments 
are based on the adjusted RPL market basket increase factor of 2.25 
percent and the revised standard payment conversion factor of $13,627. 
To maintain estimated outlier payments for FY 2010 equal to the 
established standard of 3 percent of total estimated IRF PPS payments 
for FY 2010, we revised the IRF outlier threshold amount for FY 2010 
for discharges occurring on or after April 1, 2010, and on or before 
September 30, 2010. The revised IRF outlier threshold amount for FY 
2010 was $10,721.
    Sections 1886(j)(3)(c)(ii)(II) and 1886(j)(3)(D)(i) of the Act also 
required the Secretary to reduce the market basket increase factor in 
FY 2011 by a 0.25 percentage point adjustment. The FY 2011 IRF PPS 
notice (75 FR 42836)

[[Page 45876]]

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.

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

    The Affordable Care Act included several provisions that affect the 
IRF PPS in FYs 2012 and beyond. In addition to what was discussed 
above, section 3401(d) of the Affordable Care Act also added section 
1886(j)(3)(C)(ii)(I) (providing for a ``productivity adjustment'' for 
fiscal year 2012 and each subsequent fiscal year). The productivity 
adjustment for FY 2015 is discussed in section VI.A. of this final 
rule. Section 3401(d) of the Affordable Care Act requires an additional 
0.2 percentage point adjustment to the IRF increase factor for FY 2015, 
as discussed in section VI.A. of this final rule. Section 
1886(j)(3)(C)(ii)(II) of the Act notes that the application of these 
adjustments to the market basket update may result in an update that is 
less than 0.0 for a fiscal year and in payment rates for a fiscal year 
being less than such payment rates for the preceding fiscal year.
    Section 3004(b) of the Affordable Care Act also addressed the IRF 
PPS program. It reassigned the previously designated section 1886(j)(7) 
of the Act to section 1886(j)(8) and inserted a new section 1886(j)(7), 
which contains requirements for the Secretary to establish a quality 
reporting program for IRFs. Under that program, data must be submitted 
in a form and manner and at a time specified by the Secretary. 
Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the 
application of a 2 percentage point reduction of the applicable market 
basket increase factor for IRFs that fail to comply with the quality 
data submission requirements. Application of the 2 percentage point 
reduction may result in an update that is less than 0.0 for a fiscal 
year and in payment rates for a fiscal year being less than such 
payment rates for the preceding fiscal year. Reporting-based reductions 
to the market basket increase factor will not be cumulative; they will 
only apply for the FY involved.
    Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary 
is generally required to select quality measures for the IRF quality 
reporting program from those that have been endorsed by the consensus-
based entity which holds a performance measurement contract under 
section 1890(a) of the Act. This contract is currently held by the 
National Quality Forum (NQF). So long as due consideration is given to 
measures that have been endorsed or adopted by a consensus-based 
organization, section 1886(j)(7)(D)(ii) of the Act authorizes the 
Secretary to select non-endorsed measures for specified areas or 
medical topics when there are no feasible or practical endorsed 
measure(s).
    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making the IRF PPS quality reporting data 
available to the public. In so doing, the Secretary must ensure that 
IRFs have the opportunity to review any such data prior to its release 
to the public. Future rulemaking will address these public reporting 
obligations.

C. Operational Overview of the Current IRF PPS

    As described in the FY 2002 IRF PPS final rule, upon the admission 
and discharge of a Medicare Part A Fee-for-Service patient, the IRF is 
required to complete the appropriate sections of a patient assessment 
instrument (PAI), designated as the IRF-PAI. In addition, beginning 
with IRF discharges occurring on or after October 1, 2009, the IRF is 
also required to complete the appropriate sections of the IRF-PAI upon 
the admission and discharge of each Medicare Part C (Medicare 
Advantage) patient, as described in the FY 2010 IRF PPS final rule. All 
required data must be electronically encoded into the IRF-PAI software 
product. Generally, the software product includes patient 
classification programming called the Grouper software. The Grouper 
software uses specific IRF-PAI data elements to classify (or group) 
patients into distinct CMGs and account for the existence of any 
relevant comorbidities.
    The Grouper software produces a 5-character CMG number. The first 
character is an alphabetic character that indicates the comorbidity 
tier. The last 4 characters are numeric characters that represent the 
distinct CMG number. Free downloads of the Inpatient Rehabilitation 
Validation and Entry (IRVEN) software product, including the Grouper 
software, are available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html.
    Once a Medicare Fee-for-Service Part A patient is discharged, the 
IRF submits a Medicare claim as a Health Insurance Portability and 
Accountability Act of

[[Page 45877]]

1996 (Pub. L. 104-191, enacted on August 21, 1996) (HIPAA) compliant 
electronic claim or, if the Administrative Simplification Compliance 
Act of 2002 (Pub. L. 107-105, enacted on December 27, 2002) (ASCA) 
permits, a paper claim (a UB-04 or a CMS-1450 as appropriate) using the 
five-character CMG number and sends it to the appropriate Medicare 
Administrative Contractor (MAC). In addition, once a Medicare Advantage 
patient is discharged, in accordance with the Medicare Claims 
Processing Manual, chapter 3, section 20.3 (Pub. 100-04), hospitals 
(including IRFs) must submit an informational-only bill (TOB 111), 
which includes Condition Code 04 to their MAC. This will ensure that 
the Medicare Advantage days are included in the hospital's Supplemental 
Security Income (SSI) ratio (used in calculating the IRF low-income 
percentage adjustment) for Fiscal Year 2007 and beyond. Claims 
submitted to Medicare must comply with both ASCA and HIPAA.
    Section 3 of the ASCA amends section 1862(a) of the Act by adding 
paragraph (22) which requires the Medicare program, subject to section 
1862(h) of the Act, to deny payment under Part A or Part B for any 
expenses for items or services ``for which a claim is submitted other 
than in an electronic form specified by the Secretary.'' Section 
1862(h) of the Act, in turn, provides that the Secretary shall waive 
such denial in situations in which there is no method available for the 
submission of claims in an electronic form or the entity submitting the 
claim is a small provider. In addition, the Secretary also has the 
authority to waive such denial ``in such unusual cases as the Secretary 
finds appropriate.'' For more information, see the ``Medicare Program; 
Electronic Submission of Medicare Claims'' final rule (70 FR 71008). 
Our instructions for the limited number of Medicare claims submitted on 
paper are available at http://www.cms.gov/manuals/downloads/clm104c25.pdf.
    Section 3 of the ASCA operates in the context of the administrative 
simplification provisions of HIPAA, which include, among others, the 
requirements for transaction standards and code sets codified in 45 
CFR, parts 160 and 162, subparts A and I through R (generally known as 
the Transactions Rule). The Transactions Rule requires covered 
entities, including covered health care providers, to conduct covered 
electronic transactions according to the applicable transaction 
standards. (See the CMS program claim memoranda at http://www.cms.gov/ElectronicBillingEDITrans/ and listed in the addenda to the Medicare 
Intermediary Manual, Part 3, section 3600).
    The MAC processes the claim through its software system. This 
software system includes pricing programming called the ``Pricer'' 
software. The Pricer software uses the CMG number, along with other 
specific claim data elements and provider-specific data, to adjust the 
IRF's prospective payment for interrupted stays, transfers, short 
stays, and deaths, and then applies the applicable adjustments to 
account for the IRF's wage index, percentage of low-income patients, 
rural location, and outlier payments. For discharges occurring on or 
after October 1, 2005, the IRF PPS payment also reflects the teaching 
status adjustment that became effective as of FY 2006, as discussed in 
the FY 2006 IRF PPS final rule (70 FR 47880).

II. Summary of Provisions of the Proposed Rule

    In the FY 2015 IRF PPS proposed rule (79 FR 26308), we proposed to 
update the IRF Federal prospective payment rates, to collect data on 
the amount and mode (that is, Individual, Group, and Co-Treatment) of 
therapies provided in the IRF setting according to therapy discipline, 
to revise the list of diagnosis and impairment group codes that 
presumptively meet the 60 percent rule compliance criteria, provide for 
a new item on the IRF-PAI form to indicate whether the prior treatment 
and severity requirements have been met for arthritis cases to 
presumptively meet the 60 percent rule compliance criteria, and to 
revise and update quality measures and reporting requirements under the 
IRF QRP. In the FY 2015 IRF PPS proposed rule (79 FR 26308), we also 
addressed the implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF 
prospective payment system (PPS), effective when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions.
    The proposed updates to the IRF federal prospective payment rates 
for FY 2015 were as follows:
     Update the FY 2015 IRF PPS relative weights and average 
length of stay values using the most current and complete Medicare 
claims and cost report data in a budget-neutral manner, as discussed in 
section III of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 
through 26318).
     Discuss our rationale for freezing the IRF facility-level 
adjustment factors at FY 2014 levels, as discussed in section IV of the 
FY 2015 IRF PPS proposed rule (79 FR 26308, 26318 through 26319).
     Update the FY 2015 IRF PPS payment rates by the proposed 
market basket increase factor, based upon the most current data 
available, with a 0.2 percentage point reduction as required by 
sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act and a 
proposed productivity adjustment required by section 
1886(j)(3)(C)(ii)(I) of the Act, as described in section V of the FY 
2015 IRF PPS proposed rule (79 FR 26308, 26319 through 26321).
     Discuss the Secretary's Proposed Recommendation for 
updating IRF PPS payments for FY 2015, in accordance with the statutory 
requirements, as described in section V of the FY 2015 IRF PPS proposed 
rule (79 FR 26308 at 26321).
     Update the FY 2015 IRF PPS payment rates by the FY 2015 
wage index and the labor-related share in a budget-neutral manner, as 
discussed in section V of the FY 2015 IRF PPS proposed rule (79 FR 
26308, 26321 through 26322).
     Describe the calculation of the IRF Standard Payment 
Conversion Factor for FY 2015, as discussed in section V of the FY 2015 
IRF PPS proposed rule (79 FR 26308 at 26322).
     Update the outlier threshold amount for FY 2015, as 
discussed in section VI of the FY 2015 IRF PPS proposed rule (79 FR 
26308, 26324 through 26325).
     Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2015, as discussed in section VI of the FY 
2015 IRF PPS proposed rule (79 FR 26308 at 26325).
     Describe proposed revisions to the list of eligible 
diagnosis codes that are used to determine presumptive compliance under 
the 60 percent rule in section VII of the FY 2015 IRF PPS proposed rule 
(79 FR 26308 at 26327).
     Describe proposed revisions to the list of eligible 
impairment group codes that presumptively meet the 60 percent rule 
compliance criteria in section VII of the FY 2015 IRF PPS proposed rule 
(79 FR 26308, 26328 through 26329).
     Describe proposed data collection of the amount and mode 
(that is, of Individual, Group, and Co-Treatment) of therapies provided 
in IRFs according to occupational, speech, and physical therapy 
disciplines via the IRF-PAI in section VIII of the FY 2015 IRF PPS 
proposed rule (79 FR 26308, 26329 through 26330).
     Describe a proposed revision to the IRF-PAI to add a new 
data item for arthritis conditions in section IX of the

[[Page 45878]]

FY 2015 IRF PPS proposed rule (79 FR 26308, 26330 through 26331).
     Describe the conversion of the IRF PPS to ICD-10-CM, 
effective when ICD-10-CM becomes the required medical data code set for 
use on Medicare claims and IRF-PAI submissions, in section X of the FY 
2015 IRF PPS proposed rule (79 FR 26308, 26331 through 26333).
     Describe proposed revisions and updates to quality 
measures and reporting requirements under the quality reporting program 
for IRFs in accordance with section 1886(j)(7) of the Act, as discussed 
in section XI of the FY 2015 IRF PPS proposed rule (79 FR 26308, 26333 
through 26345).

III. Analysis and Responses to Public Comments

    We received 66 timely responses from the public, many of which 
contained multiple comments on the FY 2015 IRF PPS proposed rule (79 FR 
26308). We received comments from various trade associations, inpatient 
rehabilitation facilities, individual physicians, therapists, 
clinicians, health care industry organizations, law firms and health 
care consulting firms. The following sections, arranged by subject 
area, include a summary of the public comments that we received, and 
our responses.

IV. Update to the Case-Mix Group (CMG) Relative Weights and Average 
Length of Stay Values for FY 2015

    As specified in Sec.  412.620(b)(1), we calculate a relative weight 
for each CMG that is proportional to the resources needed by an average 
inpatient rehabilitation case in that CMG. For example, cases in a CMG 
with a relative weight of 2, on average, will cost twice as much as 
cases in a CMG with a relative weight of 1. Relative weights account 
for the variance in cost per discharge due to the variance in resource 
utilization among the payment groups, and their use helps to ensure 
that IRF PPS payments support beneficiary access to care, as well as 
provider efficiency.
    In the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 through 
26318), we proposed to update the CMG relative weights and average 
length of stay values for FY 2015. As required by statute, we always 
use the most recent available data to update the CMG relative weights 
and average lengths of stay. For FY 2015, we proposed to use the FY 
2013 IRF claims and FY 2012 IRF cost report data. These data are the 
most current and complete data available at this time. Currently, only 
a small portion of the FY 2013 IRF cost report data are available for 
analysis, but the majority of the FY 2013 IRF claims data are available 
for analysis.
    In the FY 2015 IRF PPS proposed rule (79 FR 26308, 26314 through 
26318), we proposed to apply these data using the same methodologies 
that we have used to update the CMG relative weights and average length 
of stay values each fiscal year since we implemented an update to the 
methodology to use the more detailed cost-to-charge ratio (CCRs) data 
from the cost reports of IRF subprovider units of primary acute care 
hospitals, instead of CCR data from the associated primary care 
hospitals, to calculate IRFs' average costs per case, as discussed in 
the FY 2009 IRF PPS final rule (73 FR 46372). In calculating the CMG 
relative weights, we use a hospital-specific relative value method to 
estimate operating (routine and ancillary services) and capital costs 
of IRFs. The process used to calculate the CMG relative weights for 
this proposed rule is as follows:
    Step 1. We estimate the effects that comorbidities have on costs.
    Step 2. We adjust the cost of each Medicare discharge (case) to 
reflect the effects found in the first step.
    Step 3. We use the adjusted costs from the second step to calculate 
CMG relative weights, using the hospital-specific relative value 
method.
    Step 4. We normalize the FY 2015 CMG relative weights to the same 
average CMG relative weight from the CMG relative weights implemented 
in the FY 2014 IRF PPS final rule (78 FR 47860).
    Consistent with the methodology that we have used to update the IRF 
classification system in each instance in the past, we proposed to 
update the CMG relative weights for FY 2015 in such a way that total 
estimated aggregate payments to IRFs for FY 2015 are the same with or 
without the changes (that is, in a budget-neutral manner) by applying a 
budget neutrality factor to the standard payment amount. To calculate 
the appropriate budget neutrality factor for use in updating the FY 
2015 CMG relative weights, we use the following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2015 (with no changes to the CMG relative weights).
    Step 2. Calculate the estimated total amount of IRF PPS payments 
for FY 2015 by applying the changes to the CMG relative weights (as 
discussed above).
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2 to determine the budget neutrality factor (1.0000) 
that would maintain the same total estimated aggregate payments in FY 
2015 with and without the changes to the CMG relative weights.
    Step 4. Apply the budget neutrality factor (1.0000) to the FY 2014 
IRF PPS standard payment amount after the application of the budget-
neutral wage adjustment factor.
    In section VI.F. of this final rule, we discuss the use of the 
existing methodology to calculate the standard payment conversion 
factor for FY 2015.
    Table 1, ``Relative Weights and Average Length of Stay Values for 
Case-Mix Groups,'' presents the CMGs, the comorbidity tiers, the 
corresponding relative weights, and the average length of stay values 
for each CMG and tier for FY 2015. The average length of stay for each 
CMG is used to determine when an IRF discharge meets the definition of 
a short-stay transfer, which results in a per diem case level 
adjustment.

                                     Table 1--Relative Weights and Average Length of Stay Values for Case-Mix Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Relative weight                         Average length of stay
               CMG                  CMG description  (M=motor,   ---------------------------------------------------------------------------------------
                                        C=cognitive, A=age)         Tier 1     Tier 2     Tier 3      None      Tier 1     Tier 2     Tier 3      None
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101............................  Stroke M>51.05................     0.7853     0.7150     0.6512     0.6248          9         10          8          8
0102............................  Stroke M>44.45 and M18.5.
0103............................  Stroke M>44.45 and M38.85 and M34.25 and M30.05 and M26.15 and M84.5.....     2.2467     2.0456     1.8629     1.7876         22         24         21         21
0109............................  Stroke M>22.35 and M53.35     0.8145     0.6636     0.5954     0.5680         10          9          8          8
                                   and C>23.5.
0202............................  Traumatic brain injury M>44.25     1.0591     0.8629     0.7741     0.7385         12         10          9         10
                                   and M23.5.
0203............................  Traumatic brain injury M>44.25     1.2162     0.9909     0.8890     0.8481         13         12         12         11
                                   and C40.65     1.3397     1.0915     0.9793     0.9342         12         13         12         12
                                   and M28.75     1.5924     1.2974     1.1640     1.1104         14         15         14         14
                                   and M22.05     1.9327     1.5747     1.4127     1.3477         19         18         16         16
                                   and M41.05.
0302............................  Non-traumatic brain injury         1.3799     1.1673     1.0582     0.9762         13         13         12         12
                                   M>35.05 and M26.15 and M48.45.
0402............................  Traumatic spinal cord injury       1.4108     1.2081     1.1176     0.9966         15         14         14         13
                                   M>30.35 and M16.05 and M63.5.
0405............................  Traumatic spinal cord injury       3.3355     2.8564     2.6425     2.3563         26         34         29         27
                                   M51.35.
0502............................  Non-traumatic spinal cord          1.1580     0.9359     0.8579     0.7763         11         12         10         10
                                   injury M>40.15 and M31.25 and M29.25 and M23.75 and M47.75..........     1.0293     0.8149     0.7526     0.6862          9         10          9          9
0602............................  Neurological M>37.35 and           1.3283     1.0516     0.9713     0.8856         12         12         11         11
                                   M25.85 and           1.6727     1.3243     1.2231     1.1152         15         15         13         13
                                   M42.15.
0702............................  Fracture of lower extremity        1.2429     1.0327     0.9901     0.9016         13         12         12         11
                                   M>34.15 and M28.15 and M49.55.
0802............................  Replacement of lower extremity     0.9891     0.8109     0.7495     0.6912         10         10          9          9
                                   joint M>37.05 and M28.65 and M83.5.
0804............................  Replacement of lower extremity     1.1821     0.9690     0.8956     0.8260         12         12         11         10
                                   joint M>28.65 and M22.05 and M44.75......     0.9386     0.7581     0.7069     0.6392         10          9          9          8
0902............................  Other orthopedic M>34.35 and       1.2382     1.0000     0.9325     0.8432         12         12         11         10
                                   M24.15 and       1.5552     1.2561     1.1713     1.0591         15         15         14         13
                                   M47.65.
1002............................  Amputation, lower extremity        1.3168     1.1978     1.0374     0.9485         14         14         12         11
                                   M>36.25 and M36.35.
1102............................  Amputation, non-lower              1.8936     1.5192     1.5052     1.2835         17         19         16         15
                                   extremity M37.65........     1.0034     0.9522     0.8881     0.8256         10         11         11         10
1202............................  Osteoarthritis M>30.75 and         1.1916     1.1308     1.0547     0.9805         11         12         12         12
                                   M36.35.
1302............................  Rheumatoid, other arthritis        1.5913     1.2874     1.1299     1.0653         17         14         13         13
                                   M>26.15 and M48.85...............     0.9032     0.7324     0.6671     0.6051          9         10          8          8
1402............................  Cardiac M>38.55 and M31.15 and M49.25.............     0.9998     0.8150     0.7537     0.7283         10         10          9          8
1502............................  Pulmonary M>39.05 and M29.15 and M37.15.........     0.9445     0.8763     0.8085     0.7620         10         10          9         10
1602............................  Pain syndrome M>26.75 and          1.2509     1.1606     1.0708     1.0092         13         13         13         12
                                   M39.25.
1702............................  Major multiple trauma without      1.3109     1.1674     1.0764     0.9903         13         14         12         12
                                   brain or spinal cord injury
                                   M>31.05 and M25.55 and M40.85.

[[Page 45881]]

 
1802............................  Major multiple trauma with         1.6884     1.4945     1.2798     1.1451         17         16         15         14
                                   brain or spinal cord injury
                                   M>23.05 and M35.95........     1.0421     0.9341     0.9263     0.8837         15         10         13         11
1902............................  Guillain Barre M>18.05 and         1.8757     1.6814     1.6672     1.5905         25         19         18         19
                                   M49.15.........     0.8827     0.7250     0.6681     0.6098          9          8          8          8
2002............................  Miscellaneous M>38.75 and          1.1872     0.9751     0.8986     0.8201         12         11         11         10
                                   M27.85 and          1.5061     1.2370     1.1400     1.0405         15         14         13         12
                                   M0.....................     1.8405     1.6766     1.5548     1.3534         27         18         17         16
5001............................  Short-stay cases, length of     .........  .........  .........     0.1549  .........  .........  .........          2
                                   stay is 3 days or fewer.
5101............................  Expired, orthopedic, length of  .........  .........  .........     0.6791  .........  .........  .........          7
                                   stay is 13 days or fewer.
5102............................  Expired, orthopedic, length of  .........  .........  .........     1.5539  .........  .........  .........         16
                                   stay is 14 days or more.
5103............................  Expired, not orthopedic,        .........  .........  .........     0.7274  .........  .........  .........          8
                                   length of stay is 15 days or
                                   fewer.
5104............................  Expired, not orthopedic,        .........  .........  .........     1.9477  .........  .........  .........         21
                                   length of stay is 16 days or
                                   more.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Generally, updates to the CMG relative weights result in some 
increases and some decreases to the CMG relative weight values. Table 2 
shows how we estimate that the application of the proposed revisions 
for FY 2015 would affect particular CMG relative weight values, which 
would affect the overall distribution of payments within CMGs and 
tiers. Note that, because we propose to implement the CMG relative 
weight revisions in a budget-neutral manner (as described above), total 
estimated aggregate payments to IRFs for FY 2015 would not be affected 
as a result of the proposed CMG relative weight revisions. However, the 
revisions will affect the distribution of payments within CMGs and 
tiers.

   Table 2--Distributional Effects of the Changes to the CMG Relative
                                 Weights
              [FY 2014 values compared with FY 2015 values]
------------------------------------------------------------------------
                                             Number of     Percentage of
            Percentage change                  cases           cases
                                             affected        affected
------------------------------------------------------------------------
Increased by 15% or more................               0             0.0
Increased by between 5% and 15%.........           1,023             0.3
Changed by less than 5%.................         382,960            99.4
Decreased by between 5% and 15%.........           1,288             0.3
Decreased by 15% or more................              25             0.0
------------------------------------------------------------------------

    As Table 2 shows, more than 99 percent of all IRF cases are in CMGs 
and tiers that will experience less than a 5 percent change (either 
increase or decrease) in the CMG relative weight value as a result of 
the revisions for FY 2015. The largest estimated increase in the 
proposed CMG relative weight values that affects the largest number of 
IRF discharges is a 1.2 percent increase in the CMG relative weight 
value for CMG 0704--Fracture of lower extremity, with a motor score 
less than 28.15-in the ``no comorbidity'' tier. In the FY 2013 claims 
data, 20,017 IRF discharges (5.2 percent of all IRF discharges) were 
classified into this CMG and tier.
    The largest decrease in a CMG relative weight value affecting the 
largest number of IRF cases is a 0.8 percent decrease in the CMG 
relative weight for CMG 0604--Neurological, with a motor score less 
than 25.85-in the ``no comorbidity'' tier. In the FY 2013 IRF claims 
data, this change would have affected 8,766 cases (2.3 percent of all 
IRF cases).
    The changes in the average length of stay values for FY 2015, 
compared with the FY 2014 average length of stay values, are small and 
do not show any particular trends in IRF length of stay patterns.
    We received 1 comment on the proposed update to the CMG relative 
weights and average length of stay values for FY 2015, which is 
summarized below.

[[Page 45882]]

    Comment: The commenter requested that we provide more detail about 
the use of the CCR data in the CMG relative weight calculations. 
Additionally, the commenter requested that we outline the methodology 
used to calculate the average length of stay values in the IRF PPS 
rule.
    Response: A key variable used to calculate the CMG relative weights 
is a facility's average cost per case, which is obtained by averaging 
the estimated cost per case for every patient discharged from the 
facility in a given fiscal year. To obtain the estimated cost per case 
for a given IRF patient, we start by pulling the appropriate charges 
from the Medicare claim for that patient. Then, we calculate the 
appropriate CCRs from the Medicare cost report submitted by the 
facility. The CCRs are then multiplied by the charges from the Medicare 
claim to obtain the estimated IRF cost for the case. This variable is 
used as the dependent variable in the regression analysis to estimate 
the CMG relative weights.
    In conjunction with the publication of the IRF PPS FY 2014 final 
rule, we posted our methodology for calculating the average length of 
stay values on the IRF PPS Web site at http://www.cms.gov/medicare/medicare-fee-for-service-payment/inpatientrehabfacpps/research.html.
    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to update the CMG relative weight and 
average length of stay values for FY 2015. These updates are effective 
October 1, 2014.

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

A. Background on Facility-Level Adjustments

    Section 1886(j)(3)(A)(v) of the Act confers broad authority upon 
the Secretary to adjust the per unit payment rate ``by such . . . 
factors as the Secretary determines are necessary to properly reflect 
variations in necessary costs of treatment among rehabilitation 
facilities.'' For example, we adjust the federal prospective payment 
amount associated with a CMG to account for facility-level 
characteristics such as an IRF's LIP, teaching status, and location in 
a rural area, if applicable, as described in Sec.  412.624(e).
    In the FY 2010 IRF PPS final rule (74 FR 39762), we updated the 
adjustment factors for calculating the rural, LIP, and teaching status 
adjustments based on the most recent three consecutive years' worth of 
IRF claims data (at that time, FY 2006, FY 2007, and FY 2008) and the 
most recent available corresponding IRF cost report data. As discussed 
in the FY 2010 IRF PPS proposed rule (74 FR 21060 through 21061), we 
observed relatively large year-to-year fluctuations in the underlying 
data used to compute the adjustment factors, especially the teaching 
status adjustment factor. Therefore, we implemented a 3-year moving 
average approach to updating the facility-level adjustment factors in 
the FY 2010 IRF PPS final rule (74 FR 39762) to provide greater 
stability and predictability of Medicare payments for IRFs.
    Each year, we review the major components of the IRF PPS to 
maintain and enhance the accuracy of the payment system. For FY 2010, 
we implemented a change to our methodology that was designed to 
decrease the IRF PPS volatility by using a 3-year moving average to 
calculate the facility-level adjustment factors. For FY 2011, we issued 
a notice to update the payment rates, which did not include any policy 
changes or changes to the IRF facility-level adjustments. As we found 
that the implementation of the 3-year moving average did not fully 
address year-to-year fluctuations, in the FY 2012 IRF PPS proposed rule 
(76 FR 24214, 24225 through 24226), we analyzed the effects of having 
used a weighting methodology. The methodology assigned greater weight 
to some facilities than to others in the regression analysis used to 
estimate the facility-level adjustment factors. As we found that this 
weighting methodology inappropriately exaggerated the cost differences 
among different types of IRF facilities, we proposed to remove the 
weighting factor from our analysis and update the IRF facility-level 
adjustment factors for FY 2012 using an unweighted regression analysis. 
However, after carefully considering all of the comments that we 
received on the proposed FY 2012 updates to the facility-level 
adjustment factors, we decided to hold the facility-level adjustment 
factors at FY 2011 levels for FY 2012 to conduct further research on 
the underlying data and the best methodology for calculating the 
facility-level adjustment factors. We based this decision, in part, on 
comments we received about the financial hardships that the proposed 
updates would create for facilities with teaching programs and a higher 
disproportionate share of low-income patients.

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

    Since the FY 2012 final rule (76 FR 47836), we have conducted 
further research into the best methodology to use to estimate the IRF 
facility-level adjustment factors, to ensure that the adjustment 
factors reflect as accurately as possible the costs of providing IRF 
care across the full spectrum of IRF providers. Our recent research 
efforts reflect the significant differences that exist between the cost 
structures of freestanding IRFs and the cost structures of IRF units of 
acute care hospitals (and critical access hospitals, otherwise known as 
``CAHs''). We have found that these cost structure differences 
substantially influence the estimates of the adjustment factors. 
Therefore, we believe that it is important to control for these cost 
structure differences between hospital-based and freestanding IRFs in 
our regression analysis, so that these differences do not 
inappropriately influence the adjustment factor estimates. In 
Medicare's payment system for the treatment of end-stage renal disease 
(ESRD), we already control for the cost structure differences between 
hospital-based and freestanding facilities in the regression analyses 
that are used to set payment rates. Also, we received comments from an 
IRF industry association on the FY 2012 IRF PPS proposed rule 
suggesting that the addition of this particular control variable to the 
model could improve the methodology for estimating the IRF facility-
level adjustment factors.
    Thus, in the FY 2014 IRF PPS proposed rule, we proposed to add an 
indicator variable to our 3-year moving average methodology for 
updating the IRF facility-level adjustments that would have an assigned 
value of ``1'' if the facility is a freestanding IRF hospital or would 
have an assigned value of ``0'' if the facility is an IRF unit of an 
acute care hospital (or CAH). Adding this variable to the regression 
analysis enables us to control for the differences in costs that are 
primarily due to the differences in cost structures between 
freestanding and hospital-based IRFs, so that those differences do not 
become inappropriately intertwined with our estimates of the 
differences in costs between rural and urban facilities, high-LIP 
percentage and low-LIP percentage facilities, and teaching and non-
teaching facilities. Further, by including this variable in the 
regression analysis, we greatly improve our ability to predict an IRF's 
average cost per case (that is, the R-squared of the regression model 
increases from about 11 percent to about 41 percent). In this way, it 
enhances the precision with which we can estimate the IRF facility-
level adjustments.
    In the FY 2014 IRF PPS final rule (78 FR 47860), we finalized our 
decision to add an indicator variable for a facility's freestanding/
hospital-based status to the payment regression, and, with that

[[Page 45883]]

change, to update the IRF facility-level adjustment factors for FY 2014 
using the same methodology, with the exception of adding the indicator 
variable, that we used in updating the FY 2010 IRF facility-level 
adjustment factors, including the 3-year moving average approach. Thus, 
in the FY 2014 IRF PPS final rule, we finalized a rural adjustment of 
14.9 percent, a LIP adjustment factor of 0.3177, and a teaching status 
adjustment factor of 1.0163 for FY 2014.
    Based on the substantive changes to the facility-level adjustment 
factors that were adopted in the FY 2014 final rule, we are freezing 
the facility-level adjustment factors for FY 2015 and all subsequent 
years at the FY 2014 levels while we continue to monitor the most 
current IRF claims data available and evaluate the effects of the FY 
2014 changes. Additionally, we want to allow providers time to 
acclimate to the FY 2014 changes. At such future time as our data 
analysis may indicate the need for further updates to the facility-
level adjustment factors, we would propose to update the adjustment 
factors through notice and comment rulemaking.
    We received 4 comments on our proposal to freeze the facility-level 
adjustment factors at FY 2014 levels for FY 2015 and all subsequent 
years (unless and until we propose to update them again through future 
notice and comment rulemaking), which are summarized below.
    Comment: The majority of commenters support our proposal to freeze 
the facility-level adjustment factors. However, those same commenters 
encourage CMS to continue to analyze changes to the facility-level 
adjustments and adjust all three factors at a minimum of every three 
years. Additionally, commenters recommended that CMS make the 
methodology and findings available to the public.
    Response: We appreciate the commenters' support with our decision 
to freeze the facility-level adjustment factors. As discussed in the 
proposed rule, we believe that it is appropriate to freeze the 
facility-level adjustment factors at FY 2014 levels while we continue 
to monitor the most current IRF claims data available and evaluate the 
effects of the FY 2014 changes. Additionally, this will allow providers 
time to acclimate to the FY 2014 changes that were implemented. We will 
continue to monitor the data and periodically update the adjustment 
factors, as needed, to ensure the accuracy of IRF PPS payment rates. 
Rather than specify an exact period, such as every 3 years, for 
updating the adjustment factors, we believe that it is better for the 
overall efficiency of the IRF PPS payment system to update the 
adjustment factors whenever it appears that the benefits of updating 
(in terms of improved accuracy of payment rates) outweigh the costs (in 
terms of less stability in the annual payment rates). At such time as 
we determine that the data support updating the adjustment factors or 
changes in the methodology, we will make our findings available through 
the rulemaking process.
    Comment: One commenter suggested that CMS be more transparent about 
the criteria the agency is using to determine when changes to the 
facility-level adjustments occur. For example, the commenter suggested 
CMS adopt a minimum threshold of annual change for the adjustment 
factors, such as 5 to 10 percent and examine unfreezing the adjustment 
factors and issuing an update if analysis finds that any of the factors 
meet or exceed the suggested threshold.
    Response: While we agree with transparency during this process, we 
do not believe that setting a minimum threshold of annual change would 
be beneficial to the industry or to the Medicare program. As stated in 
our previous response, we believe that monitoring the data and making 
periodic changes when the benefits of such changes outweigh the costs 
is the most appropriate way to enhance both the accuracy and the 
stability of the IRF PPS payment system. In addition, we disagree with 
the suggestion that we should publicize the interim results that we use 
in making these determinations each time. We believe that this would 
only serve to confuse the industry, as the adjustment factors tend to 
fluctuate significantly from one period to the next and providers would 
potentially be confused about which adjustment factors were being 
proposed for implementation and which ones were not.
    Comment: One commenter suggested that depending on the magnitude of 
any change in facility level adjustments, CMS should also propose a 
transition to phase in the implementation.
    Response: Thank you for your comment. We will certainly take this 
recommendation into consideration for the future.
    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to freeze the facility-level adjustment 
factors for FY 2015 and all subsequent years (unless and until we 
propose to update them again through future notice and comment 
rulemaking).

VI. FY 2015 IRF PPS Federal Prospective Payment Rates

A. Market Basket Increase Factor, Productivity Adjustment, and Other 
Adjustment for FY 2015

    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor that reflects changes over time in the 
prices of an appropriate mix of goods and services included in the 
covered IRF services, which is referred to as a market basket index. 
According to section 1886(j)(3)(A)(i) of the Act, the increase factor 
shall be used to update the IRF federal prospective payment rates for 
each FY. Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the 
Act required the application of a 0.2 percentage point reduction to the 
market basket increase factor for FY 2015. In addition, section 
1886(j)(3)(C)(ii)(I) of the Act requires the application of a 
productivity adjustment, as described below. Thus, in the FY 2015 IRF 
PPS proposed rule, we proposed to update the IRF PPS payments for FY 
2015 by a market basket increase factor based upon the most current 
data available, with a productivity adjustment as required by section 
1886(j)(3)(C)(ii)(I) of the Act, as described below and a 0.2 
percentage point reduction as required by sections 
1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act.
    For this final rule, we use the same methodology described in the 
FY 2012 IRF PPS final rule (76 FR 47836 at 47848 through 47863) to 
compute the FY 2015 market basket increase factor and labor-related 
share. In that final rule, we described the market basket (referred to 
as the RPL market basket) as reflecting a FY 2008 base year. Based on 
IHS Global Insight's second quarter 2014 forecast, the most recent 
estimate of the 2008-based RPL market basket increase factor for FY 
2015 is 2.9 percent. IHS Global Insight (IGI) is an economic and 
financial forecasting firm that contracts with CMS to forecast the 
components of providers' market baskets.
    In accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and 
using the methodology described in the FY 2012 IRF PPS final rule (76 
FR 47836, 47858 through 47859), we apply a productivity adjustment to 
the FY 2015 RPL market basket increase factor. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable FY cost reporting period, or other

[[Page 45884]]

annual period) (the ``MFP adjustment''). The Bureau of Labor Statistics 
(BLS) is the agency that publishes the official measure of private 
nonfarm business MFP. We refer readers to the BLS Web site at http://www.bls.gov/mfp to obtain the historical BLS-published MFP data. The 
projection of MFP is currently produced by IGI, using the methodology 
described in the FY 2012 IRF PPS final rule (76 FR 47836, 47859). The 
most recent estimate of the MFP adjustment for FY 2015 (the 10-year 
moving average of MFP for the period ending FY 2015) is 0.5 percent, 
which was calculated using the methodology described in the FY 2012 IRF 
PPS final rule (76 FR 47836, 47858 through 47859) and is based on IGI's 
second quarter 2014 forecast.
    Thus, in accordance with section 1886(j)(3)(C) of the Act, we base 
the FY 2015 market basket update, which is used to determine the 
applicable percentage increase for the IRF payments, on the most recent 
estimate of the FY 2008-based RPL market basket (currently estimated to 
be 2.9 percent based on IGI's second quarter 2014 forecast). We then 
reduce this percentage increase by the current estimate of the MFP 
adjustment for FY 2015 of 0.5 percentage point (the 10-year moving 
average of MFP for the period ending FY 2015 based on IGI's second 
quarter 2014 forecast), which was calculated as described in the FY 
2012 IRF PPS final rule (76 FR 47836, 47859). Following application of 
the MFP, we further reduce the applicable percentage increase by 0.2 
percentage point, as required by sections 1886(j)(3)(C)(ii)(II) and 
1886(j)(3)(D)(iv) of the Act. Therefore, the current estimate of the FY 
2015 IRF update is 2.2 percent (2.9 percent market basket update, less 
0.5 percentage point MFP adjustment, less 0.2 percentage point 
legislative adjustment).
    We received 5 comments on the proposed market basket increase 
factor, which are summarized below.
    Comment: While several commenters supported the update to IRF 
payment rates for FY 2015, one commenter stated that the update to the 
IRF payment rates is not warranted based on the review of many 
factors--including indicators of beneficiary access to rehabilitative 
services, the supply of providers, and Medicare margins. The commenter 
said that Medicare's current payment rates for IRFs appear to be 
adequate and, therefore, recommended no update to IRF payment rates for 
FY 2015.
    Response: We are finalizing the IRF PPS payment update for FY 2015 
of 2.2 percent (2.9 percent market basket update, less 0.5 percentage 
point MFP adjustment, less 0.2 percentage point legislative 
adjustment), as section 1886(j)(3)(C) of the Act does not provide the 
Secretary with the authority to apply a different update factor to IRF 
PPS payment rates for FY 2015.
    Comment: Several commenters expressed concern about the 
applicability of the productivity adjustment to the IRF setting. One 
commenter suggested that we take into consideration the unique needs of 
rehabilitation patients and the highly skilled professional teams who 
provide their care. This commenter also stated that CMS should be 
mindful that increasing reimbursement financial pressures without 
allowing IRFs to improve their efficiency in ways that best serve 
patients may result in barriers to access for the most complex and 
needy Medicare beneficiaries. Another commenter noted that while CMS is 
bound by the Affordable Care Act to apply specific market basket 
reductions to the full market basket update in FY 2015 and subsequent 
years, they believe it is unlikely that productivity improvements will 
be generated by rehabilitation hospitals at a pace matching the 
productivity of the economy at large on an ongoing, consistent basis. 
The commenter also noted that services provided in rehabilitation 
hospitals are very labor intensive through the provision of hands-on 
care by physical therapists, occupational therapists, speech therapists 
and rehabilitation nursing staff, and that many of the treatment plans 
do not lend themselves to continual productivity improvements. The 
commenter said that we should carefully monitor the impact that the 
productivity adjustments have on IRFs and provide feedback to Congress 
as appropriate.
    Response: Section 1886(j)(3)(C)(ii)(I) of the Act requires the 
application of a productivity adjustment that must be applied to the 
IRF PPS market basket update. We will continue to monitor the impact of 
the payment updates, including the effects of the productivity 
adjustment, on IRF provider margins as well as beneficiary access to 
care.
    Final Decision: Based on careful consideration of the comments, we 
are finalizing the FY 2015 market basket update for IRF payments of 2.2 
percent, which is the most recent estimate of the FY 2008-based RPL 
market basket adjusted for productivity and the FY15 legislative 
reduction. Therefore, the current estimate of the FY 2015 IRF update is 
2.2 percent (2.9 percent market basket update, less 0.5 percentage 
point MFP adjustment, less 0.2 percentage point legislative 
adjustment).

B. Development of an IRF-Specific Market Basket

    In the FY 2010 IRF PPS proposed rule (74 FR 21062), we expressed 
our interest in exploring the possibility of creating a stand-alone, or 
IRF-specific, market basket that reflects the cost structures of only 
IRF providers. We noted that, of the available options, one would be to 
join the Medicare cost report data from freestanding IRF providers with 
data from hospital-based IRF providers. We indicated that an 
examination of the Medicare cost report data comparing freestanding and 
hospital-based IRFs revealed considerable differences between the two 
for cost levels and cost structures. At that time, we stated that we 
were unable to fully explain the differences in costs between 
freestanding and hospital-based IRFs and solicited comments regarding 
our findings. We summarized and responded to several public comments we 
received on the potential creation of a stand-alone IRF market basket 
in the FY 2010 IRF final rule (74 FR 39776 through 39778). At that 
time, we stated the need for further research regarding the differences 
in cost levels and cost structures between freestanding IRFs and 
hospital-based IRFs.
    Since the FY 2010 IRF PPS final rule was published, we have made 
significant progress on the development of a stand-alone, or IRF-
specific, market basket. Our research has focused on addressing several 
concerns regarding the use of the hospital-based IRF Medicare cost 
report data in the calculation of the major market basket cost weights. 
As discussed above, one concern is the cost level differences for 
hospital-based IRFs relative to freestanding IRFs that were not readily 
explained by the specific characteristics of the individual providers 
and the patients that they serve (for example, characteristics related 
to case mix, urban/rural status, teaching status). Furthermore, we are 
concerned about the variability in the cost report data among these 
hospital-based IRF providers and the potential impact on the market 
basket cost weights. These concerns led us to consider whether it is 
appropriate to use the universe of IRF providers to derive an IRF-
specific market basket.
    Recently, we have investigated the use of regression analysis to 
evaluate the effect of including hospital-based IRF Medicare cost 
report data in the calculation of cost distributions. We created 
preliminary regression models to try to explain variations in costs per

[[Page 45885]]

discharge across both freestanding and hospital-based IRFs. These 
models were intended to capture the effects of facility-level and 
patient-level characteristics (for example, wage index, urban/rural 
status, ownership status, length-of-stay, occupancy rate, case mix, and 
Medicare utilization) on IRF costs per discharge. Using the results 
from the preliminary regression analyses, we identified smaller subsets 
of hospital-based and freestanding IRF providers where the predicted 
costs per discharge using the regression model closely matched the 
actual costs per discharge for each IRF. We then derived different sets 
of cost distributions using (1) these subsets of IRF providers and (2) 
the entire universe of freestanding and hospital-based IRF providers 
(including those IRFs for which the variability in cost levels remains 
unexplained). After comparing these sets of cost distributions, the 
differences were not substantial enough for us to conclude that the 
inclusion of those IRF providers with unexplained variability in costs 
in the calculation of the cost distributions is a major cause of 
concern.
    Another concern with incorporating the hospital-based IRF data in 
the derivation of an IRF-specific market basket is the complexity of 
the Medicare cost report data for these providers. The freestanding 
IRFs independently submit a Medicare cost report for their facilities, 
making it relatively straightforward to obtain the cost categories 
necessary to determine the major market basket cost weights. However, 
cost report data submitted for a hospital-based IRF are embedded in the 
Medicare cost report submitted for the entire hospital facility in 
which the IRF is located. Therefore, adjustments would have to be made 
to obtain cost weights that represent just the hospital-based IRF (as 
opposed to the hospital as a whole). For example, ancillary costs for 
services such as therapy, radiology, and laboratory services for the 
entire hospital would need to be appropriately converted to a value 
that only represents the hospital-based IRF unit's costs. The 
preliminary method we have developed to allocate these costs is complex 
and still needs to be fully evaluated before we are ready to propose an 
IRF-specific market basket that would reflect both hospital-based and 
freestanding IRF data.
    In our ongoing research, we are also evaluating the differences in 
salary costs as a percent of total costs for both hospital-based and 
freestanding IRFs. Salary costs are historically the largest component 
of the market baskets. Based on our review of the data reported on the 
applicable Medicare cost reports, our initial findings (using the 
preliminary allocation method as discussed above) have shown that the 
hospital-based IRF salary costs as a percent of total costs tend to be 
lower than those of freestanding IRFs. We are still evaluating the 
method for deriving salary costs as a percent of total costs, and one 
of the main issues is to further investigate the percentage of 
ancillary costs that should be appropriately allocated to the IRF 
salary costs for the hospital-based IRF, as discussed above.
    Also, as stated in the FY 2012 IRF PPS final rule (76 FR 47836, 
47851), effective for cost reports beginning on or after May 1, 2010, 
we finalized a revised Hospital and Hospital Health Care Complex Cost 
Report, Form CMS 2552-10 (74 FR 31738). The report is available for 
download from the CMS Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/Hospital-2010-form.html. The revised Hospital and Hospital Health Care Complex Cost 
Report includes a new worksheet (Worksheet S-3, part V) that identifies 
the contract labor costs and benefit costs for the hospital/hospital 
care complex, is applicable to sub-providers and units. As we gain 
access to the data reported by IRFs on this new form, we plan to 
evaluate the appropriateness of using these data to derive benefits and 
contract labor cost weights for the market basket instead of the data 
and methods currently used for the RPL market basket. This includes 
comparing these data with costs submitted on the other forms composing 
the Medicare cost report.
    For the reasons discussed above, while we believe we have made 
significant progress on the development of an IRF-specific market 
basket, we believe that further research is required at this time. As a 
result, we did not propose an IRF-specific market basket for FY 2015. 
We plan to complete our research during the remainder of this year and, 
provided that we are prepared to draw conclusions from our research, 
may propose an IRF-specific market basket for the FY 2016 rulemaking 
cycle.
    We received 4 comments on the development of an IRF-specific market 
basket, which are summarized below.
    Comment: One commenter agreed with the continued use of the RPL 
market basket instead of changing to a rehabilitation-specific market 
basket. The commenter noted that CMS has utilized the RPL Market Basket 
for several years and that CMS has not been able to reconcile the cost 
structure issues between freestanding and hospital-based rehabilitation 
facilities. The commenter stated that CMS's description of attempts to 
adjust and convert costs and data from the hospital cost report for the 
hospital-based rehabilitation units will not ultimately reflect the 
true cost of that hospital-based unit, as it will be artificially 
derived based on assumptions and comparisons to freestanding 
rehabilitation facilities. Further, the commenter stated, the hospital-
based rehabilitation unit is part of a higher cost structure facility, 
and any future rehabilitation market basket should reflect that.
    Response: We have made significant progress in addressing our 
initial concerns of the research that showed substantial cost 
differences between hospital-based and freestanding IRF providers. 
Nonetheless, we concur with the commenter's concerns about the 
difficulty of disentangling cost of hospital-based IRFs from the 
overall hospital. We note that our regression analysis, detailed above, 
provides a start at addressing these issues. However, we disagree with 
the commenter's claim that data from hospital-based providers will not 
reflect the true cost of the hospital-based unit. We believe that the 
approach described above, while more complicated than only using 
freestanding facility cost report data, would directly reflect the 
costs of the hospital-based unit and be a technical improvement. As 
noted above, we will continue to research and analyze the development 
of an IRF-specific market basket that uses the most appropriate and 
reliable data sources and methods and provide detailed explanations of 
the proposed methodology most likely in the FY 2016 proposed rule.
    Comment: Several commenters supported the proposal to have a stand-
alone IRF market basket, but urged CMS to share findings and materials 
in a transparent manner in order to allow the IRF community to validate 
and analyze these research activities.
    Response: As the commenters suggested, we will continue to research 
and analyze the development of an IRF-specific market basket that uses 
the most appropriate and reliable data sources and methods. We 
anticipate proposing to use an IRF-specific market basket in the FY 
2016 IRF proposed rule, and the public will have the opportunity to 
comment on our market basket methodology and data sources during the 
60-day comment period following the publication of the proposed rule.
    Final Decision: After careful consideration of the comments, we 
will continue to research the possibility of creating and proposing an 
IRF-specific

[[Page 45886]]

market basket based on data from both freestanding and hospital-based 
IRF facilities in the future.

C. Secretary's Final Recommendation

    For FY 2015, the Medicare Payment Advisory Commission (MedPAC) 
recommends that a 0.0 percent update be applied to IRF PPS payment 
rates. As discussed above, and in accordance with sections 
1886(j)(3)(C) and 1886(j)(3)(D) of the Act, the Secretary proposes to 
update IRF PPS payment rates for FY 2015 by an adjusted market basket 
increase factor of 2.2 percent, as section 1886(j)(3)(C) of the Act 
does not provide the Secretary with the authority to apply a different 
update factor to IRF PPS payment rates for FY 2015.
    We did not receive any public comments on the Secretary's 
recommendation.

D. Labor-Related Share for FY 2015

    The labor-related share for FY 2015 is updated using the 
methodology described in the FY 2012 IRF PPS final rule (76 FR 47836, 
47860 through 47863). Using this method and IGI's second quarter 2014 
forecast of the 2008-based RPL market basket, the proposed IRF labor-
related share for FY 2015 is the sum of the FY 2015 relative importance 
of each labor-related cost category. This figure reflects the different 
rates of price change for these cost categories between the base year 
(FY 2008) and FY 2015. As shown in Table 3, the FY 2015 labor-related 
share is 69.294 percent.

    Table 3--FY 2015 IRF RPL Labor-Related Share Relative Importance
------------------------------------------------------------------------
                                                              FY 2015
                                                             Relative
                                                            importance
                                                          labor- related
                                                               share
------------------------------------------------------------------------
Wages and Salaries......................................          48.271
Employee Benefits.......................................          12.963
Professional Fees: Labor-...............................           2.058
Related.................................................
Administrative and Business.............................           0.415
Support Services........................................
All Other: Labor-Related Services.......................           2.061
Subtotal................................................          65.741
Labor-Related Portion of Capital Costs (.46)............           3.553
    Total Labor-Related Share...........................          69.294
------------------------------------------------------------------------
Source: IHS Global Insight, Inc. Second quarter 2014 forecast;
  Historical Data through 1st quarter 2014.

    We received one comment on the proposed IRF labor-related share for 
FY 2015, which is summarized below.
    Comment: One commenter supported using the latest available data to 
update the IRF PPS and noted that the current methodology relies upon 
acute care hospital data for certain items (that is, employee benefits, 
contract labor) that were not collected in RPL settings. The commenter 
also noted that changes to the Medicare cost report (Form 2552-10) were 
implemented to gather additional information on labor costs. The 
commenter requested that CMS continue to review the available data and, 
if appropriate, implement changes to allow the use of IRF-specific data 
for all cost categories, weights and price proxies.
    Response: We appreciate the commenter's concerns with respect to 
the data for the benefits and contract labor categories. We have been 
monitoring and analyzing the data that is being reported based on the 
revised cost report and instructions. We hope to use this data in the 
future if it is statistically representative and we have a reliable 
response rate for these data.
    Final Decision: After careful consideration of the comments, we are 
finalizing the FY 2015 labor-related share of 69.294 percent.

E. Wage Adjustment

    Section 1886(j)(6) of the Act requires the Secretary to adjust the 
proportion of rehabilitation facilities' costs attributable to wages 
and wage-related costs (as estimated by the Secretary from time to 
time) by a factor (established by the Secretary) reflecting the 
relative hospital wage level in the geographic area of the 
rehabilitation facility compared to the national average wage level for 
those facilities. The Secretary is required to update the IRF PPS wage 
index on the basis of information available to the Secretary on the 
wages and wage-related costs to furnish rehabilitation services. Any 
adjustment or updates made under section 1886(j)(6) of the Act for a FY 
are made in a budget-neutral manner.
    For FY 2015, we are maintaining the policies and methodologies 
described in the FY 2012 IRF PPS final rule (76 FR 47836, at 47863 
through 47865) related to the labor market area definitions and the 
wage index methodology for areas with wage data. Thus, we are using the 
CBSA labor market area definitions and the FY 2014 pre-reclassification 
and pre-floor hospital wage index data. In accordance with section 
1886(d)(3)(E) of the Act, the FY 2014 pre-reclassification and pre-
floor hospital wage index is based on data submitted for hospital cost 
reporting periods beginning on or after October 1, 2009, and before 
October 1, 2010 (that is, FY 2010 cost report data).
    The labor market designations made by the OMB include some 
geographic areas where there are no hospitals and, thus, no hospital 
wage index data on which to base the calculation of the IRF PPS wage 
index. We will continue to use the same methodology discussed in the FY 
2008 IRF PPS final rule (72 FR 44299) to address those geographic areas 
where there are no hospitals and, thus, no hospital wage index data on 
which to base the calculation for the FY 2015 IRF PPS wage index.
    In accordance with our established methodology, we have 
historically adopted any CBSA changes that are published in the OMB 
bulletin that corresponds with the hospital wage data used to determine 
the IRF PPS wage index. The OMB bulletins are available at http://www.whitehouse.gov/omb/bulletins/index.html.
    In keeping with the established IRF PPS wage index policy; we will 
use the prior year's (FY 2014) pre-floor, pre-reclassified hospital 
wage index data to derive the FY 2015 applicable IRF PPS wage index. We 
anticipate using the FY 2014 pre-floor, pre-reclassified hospital wage 
index data to derive the applicable IRF PPS wage index for FY 2015. We 
note, however, that the FY 2014 pre-floor, pre-reclassified hospital 
wage index does not use OMB's new 2010 Census-based area delineations, 
which were outlined in the February 28, 2013, OMB Bulletin 13-01, as we 
did not receive these changes in time to incorporate them into the FY 
2014 hospital wage index. We therefore intend to consider the 
incorporation of these CBSA changes during the development of the FY 
2015 hospital wage index. Assuming that we would continue to follow our 
established methodology for the IRF PPS wage index, this means that the 
2010 Census-based CBSA changes would not be considered for inclusion in 
the IRF PPS wage index until FY 2016.
    To calculate the wage-adjusted facility payment for the payment 
rates set forth in this final rule, we multiply the unadjusted Federal 
payment rate for IRFs by the FY 2015 labor-related share based on the 
FY 2008-based RPL market basket (69.294 percent) to determine the 
labor-related portion of the standard payment amount. We then multiply 
the labor-related portion by the applicable IRF wage index from the 
tables in the addendum to this final rule. These tables are available 
through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. Table 
A is for

[[Page 45887]]

urban areas, and Table B is for rural areas.
    Adjustments or updates to the IRF wage index made under section 
1886(j)(6) of the Act must be made in a budget-neutral manner. We 
calculate a budget-neutral wage adjustment factor as established in the 
FY 2004 IRF PPS final rule (68 FR 45689), codified at Sec.  
412.624(e)(1), as described in the steps below. We use the listed steps 
to ensure that the FY 2015 IRF standard payment conversion factor 
reflects the update to the wage indexes (based on the FY 2010 hospital 
cost report data) and the labor-related share in a budget-neutral 
manner:
    Step 1. Determine the total amount of the estimated FY 2014 IRF PPS 
rates, using the FY 2014 standard payment conversion factor and the 
labor-related share and the wage indexes from FY 2014 (as published in 
the FY 2014 IRF PPS final rule (78 FR 47860)).
    Step 2. Calculate the total amount of estimated IRF PPS payments 
using the FY 2015 standard payment conversion factor and the FY 2015 
labor-related share and CBSA urban and rural wage indexes.
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the FY 2015 budget-
neutral wage adjustment factor of 1.0017.
    Step 4. Apply the FY 2015 budget-neutral wage adjustment factor 
from step 3 to the FY 2014 IRF PPS standard payment conversion factor 
after the application of the adjusted market basket update to determine 
the FY 2015 standard payment conversion factor.
    We discuss the calculation of the standard payment conversion 
factor for FY 2015 in section VI.F. of this final rule.
    We received 4 comments on the proposed IRF wage adjustment for FY 
2015, which are summarized below.
    Comment: Several commenters expressed concern regarding the 
possible incorporation of the 2010 Census-based CBSA changes in the 
calculation of the wage index and the time frame over which the changes 
would be implemented. More specifically, these commenters urged CMS to 
establish a two-year or four-year phase-in for the wage index changes, 
particularly for providers most adversely affected by the new CBSA 
delineations.
    Response: We appreciate all of the comments on this topic and 
support for the proposed FY 2015 wage index methodology. We will take 
these comments into consideration during the development of the FY 2016 
IRF PPS wage index.
    Comment: Commenters recommended that we develop a new methodology 
for area wage adjustment that eliminates hospital wage index 
reclassifications for all hospitals and reduces the problems associated 
with annual fluctuations in wage indices and across geographic 
boundaries. These commenters also recommended that we consider wage 
index policies under the current IPPS because IRFs compete in a similar 
labor pool as acute care hospitals. The commenters suggested that the 
IPPS wage index policies would allow IRFs to benefit from the IPPS 
reclassification and/or floor policies. One commenter further 
recommended that until a new wage index system is implemented, we 
institute a ``smoothing'' variable to the current process to reduce the 
fluctuations IRFs annually experience.
    Response: Consistent with our previous responses to these comments 
(most recently published in our FY 2014 IRF PPS final rule (78 FR 
47874)), we note that the IRF PPS does not account for geographic 
reclassification under sections 1886(d)(8) and (d)(10) of the Act, and 
does not apply the ``rural floor'' under section 4410 of the BBA. 
Furthermore, as we do not have an IRF-specific wage index, we are 
unable to determine at this time the degree, if any, to which a 
geographic reclassification adjustment or a ``rural floor'' policy 
under the IRF PPS would be appropriate. The rationale for our current 
wage index policies is fully described in the FY 2006 IRF PPS final 
rule (70 FR 47880, 47926 through 47928).
    Additionally, while some commenters recommended that we adopt IPPS 
reclassification and/or floor policies, we note the Medicare Payment 
Advisory Commission (MedPAC's) June 2007 report to the Congress, titled 
``Report to Congress: Promoting Greater Efficiency in Medicare,'' 
(available at http://www.medpac.gov/documents/Jun07_EntireReport.pdf) 
recommends that Congress ``repeal the existing hospital wage index 
statute, including reclassification and exceptions, and give the 
Secretary authority to establish new wage index systems.'' We continue 
to believe it would not be prudent at this time to adopt the IPPS wage 
index policies, such as reclassification and/or floor policies, and 
will, therefore, continue to use the CBSA labor market area definitions 
and the pre-reclassification and pre-floor hospital wage index data 
based on 2010 cost report data in this final rule.
    With regard to issues mentioned about ensuring that the wage index 
minimizes fluctuations, matches the costs of labor in the market, and 
provides for a single wage index policy, section 3137(b) of the 
Affordable Care Act required us to submit a report to the Congress by 
December 31, 2011 that includes a plan to reform the hospital wage 
index system. The report that we submitted is available online at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html.
    However, we will continue to monitor the IPPS wage index to 
identify any policy changes that may be appropriate for IRFs. This is 
consistent with our previous responses to these recurring comments.
    Final Decision: After careful consideration of the comments, we are 
finalizing use of the FY 2014 pre-floor, pre-reclassified hospital wage 
index data to derive the applicable IRF PPS wage index for FY 2015.

F. Description of the IRF Standard Conversion Factor and Payment Rates 
for FY 2015

    To calculate the standard payment conversion factor for FY 2015, as 
illustrated in Table 4, we begin by applying the adjusted market basket 
increase factor for FY 2015 that was adjusted in accordance with 
sections 1886(j)(3)(C) and (D) of the Act, to the standard payment 
conversion factor for FY 2014 ($14,846). Applying the 2.2 percent 
adjusted market basket increase factor for FY 2015 to the standard 
payment conversion factor for FY 2014 of $14,846 yields a standard 
payment amount of $15,173. Then, we apply the budget neutrality factor 
for the FY 2015 wage index and labor-related share of 1.0017, which 
results in a standard payment amount of $15,198. We next apply the 
budget neutrality factors for the revised CMG relative weights of 
1.0000, which results in the proposed standard payment conversion 
factor of $15,198 for FY 2015.

     Table 4--Calculations To Determine the FY 2015 Standard Payment
                            Conversion Factor
------------------------------------------------------------------------
               Explanation for adjustment                  Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2014..........         $14,846
Market Basket Increase Factor for FY 2015 (2.9 percent),        x 1.0220
 reduced by a 0.5 percentage point reduction for the
 productivity adjustment as required by section
 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2
 percentage points in accordance with paragraphs
 1886(j)(3)(C) and (D) of the Act.......................

[[Page 45888]]

 
Budget Neutrality Factor for the Wage Index and Labor-          x 1.0017
 Related Share..........................................
Budget Neutrality Factor for the Revisions to the CMG           x 1.0000
 Relative Weights.......................................
FY 2015 Standard Payment Conversion Factor..............       = $15,198
------------------------------------------------------------------------

    We did not receive any comments on the proposed FY 2015 standard 
payment conversion factor.
    Final Decision: As we did not receive any comments on the proposed 
FY 2015 standard payment conversion factor, we are finalizing the IRF 
standard payment conversion factor at $15,198 for FY 2015.
    After the application of the CMG relative weights described in 
section IV of this final rule, to the FY 2015 standard payment 
conversion factor ($15,198), the resulting unadjusted IRF prospective 
payment rates for FY 2015 are shown in Table 5.

                                         Table 5--FY 2015 Payment Rates
----------------------------------------------------------------------------------------------------------------
                                                   Payment rate    Payment rate    Payment rate    Payment rate
                       CMG                            Tier 1          Tier 2          Tier 3      no comorbidity
----------------------------------------------------------------------------------------------------------------
0101............................................      $11,934.99      $10,866.57       $9,896.94       $9,495.71
0102............................................       14,948.75       13,609.81       12,393.97       11,893.95
0103............................................       17,684.39       16,100.76       14,663.03       14,070.31
0104............................................       18,421.50       16,772.51       15,273.99       14,656.95
0105............................................       21,512.77       19,587.18       17,837.89       17,115.99
0106............................................       24,521.97       22,327.38       20,333.40       19,511.19
0107............................................       27,395.91       24,942.96       22,714.93       21,796.97
0108............................................       34,145.35       31,089.03       28,312.35       27,167.94
0109............................................       31,262.29       28,462.81       25,920.19       24,873.05
0110............................................       40,925.17       37,262.46       33,934.09       32,561.72
0201............................................       12,378.77       10,085.39        9,048.89        8,632.46
0202............................................       16,096.20       13,114.35       11,764.77       11,223.72
0203............................................       18,483.81       15,059.70       13,511.02       12,889.42
0204............................................       20,360.76       16,588.62       14,883.40       14,197.97
0205............................................       24,201.30       19,717.89       17,690.47       16,875.86
0206............................................       29,373.17       23,932.29       21,470.21       20,482.34
0207............................................       38,967.67       31,748.62       28,482.57       27,174.02
0301............................................       16,751.24       14,170.62       12,846.87       11,851.40
0302............................................       20,971.72       17,740.63       16,082.52       14,836.29
0303............................................       24,880.65       21,047.71       19,081.09       17,603.84
0304............................................       32,738.01       27,693.80       25,107.10       23,161.75
0401............................................       15,599.23       13,359.04       12,357.49       11,020.07
0402............................................       21,441.34       18,360.70       16,985.28       15,146.33
0403............................................       35,045.07       30,011.49       27,763.71       24,756.02
0404............................................       62,056.47       53,142.85       49,162.49       43,838.63
0405............................................       50,692.93       43,411.57       40,160.72       35,811.05
0501............................................       12,793.68       10,340.72        9,478.99        8,576.23
0502............................................       17,599.28       14,223.81       13,038.36       11,798.21
0503............................................       21,844.09       17,654.00       16,182.83       14,643.27
0504............................................       25,737.81       20,801.50       19,067.41       17,252.77
0505............................................       29,430.93       23,786.39       21,803.05       19,728.52
0506............................................       41,134.91       33,245.63       30,475.03       27,575.25
0601............................................       15,643.30       12,384.85       11,438.01       10,428.87
0602............................................       20,187.50       15,982.22       14,761.82       13,459.35
0603............................................       25,421.69       20,126.71       18,588.67       16,948.81
0604............................................       33,295.78       26,360.93       24,347.20       22,199.72
0701............................................       14,742.06       12,249.59       11,743.49       10,693.31
0702............................................       18,889.59       15,694.97       15,047.54       13,702.52
0703............................................       22,882.11       19,014.22       18,228.48       16,599.26
0704............................................       29,421.81       24,447.50       23,436.84       21,344.07
0801............................................       11,249.56        9,222.15        8,523.04        7,860.41
0802............................................       15,032.34       12,324.06       11,390.90       10,504.86
0803............................................       20,325.81       16,661.57       15,400.13       14,202.53
0804............................................       17,965.56       14,726.86       13,611.33       12,553.55
0805............................................       22,344.10       18,318.15       16,930.57       15,614.43
0806............................................       26,844.23       22,005.18       20,339.48       18,757.37
0901............................................       14,264.84       11,521.60       10,743.47        9,714.56
0902............................................       18,818.16       15,198.00       14,172.14       12,814.95
0903............................................       23,635.93       19,090.21       17,801.42       16,096.20
0904............................................       30,049.49       24,268.17       22,629.82       20,462.59
1001............................................       15,538.44       14,134.14       12,241.99       11,193.33
1002............................................       20,012.73       18,204.16       15,766.41       14,415.30
1003............................................       28,538.80       25,959.70       22,483.92       20,558.33
1101............................................       19,214.83       15,415.33       15,273.99       13,023.17
1102............................................       28,778.93       23,088.80       22,876.03       19,506.63
1201............................................       15,249.67       14,471.54       13,497.34       12,547.47

[[Page 45889]]

 
1202............................................       18,109.94       17,185.90       16,029.33       14,901.64
1203............................................       22,999.13       21,824.33       20,354.68       18,924.55
1301............................................       18,571.96       15,026.26       13,187.30       12,433.48
1302............................................       24,184.58       19,565.91       17,172.22       16,190.43
1303............................................       30,854.98       24,962.72       21,909.44       20,655.60
1401............................................       13,726.83       11,131.02       10,138.59        9,196.31
1402............................................       18,157.05       14,725.34       13,412.24       12,164.48
1403............................................       22,339.54       18,116.02       16,500.47       14,965.47
1404............................................       28,105.66       22,793.96       20,760.47       18,830.32
1501............................................       15,194.96       12,386.37       11,454.73       11,068.70
1502............................................       19,736.12       16,088.60       14,880.36       14,378.83
1503............................................       24,192.18       19,720.92       18,239.12       17,625.12
1504............................................       29,921.82       24,391.27       22,558.39       21,798.49
1601............................................       14,354.51       13,318.01       12,287.58       11,580.88
1602............................................       19,011.18       17,638.80       16,274.02       15,337.82
1603............................................       24,081.23       22,345.62       20,616.09       19,429.12
1701............................................       15,854.55       14,118.94       13,018.61       11,977.54
1702............................................       19,923.06       17,742.15       16,359.13       15,050.58
1703............................................       23,371.48       20,812.14       19,190.51       17,655.52
1704............................................       30,177.15       26,873.10       24,777.30       22,797.00
1801............................................       16,204.11       14,342.35       12,283.02       10,989.67
1802............................................       25,660.30       22,713.41       19,450.40       17,403.23
1803............................................       42,701.82       37,795.91       32,367.18       28,959.79
1901............................................       15,837.84       14,196.45       14,077.91       13,430.47
1902............................................       28,506.89       25,553.92       25,338.11       24,172.42
1903............................................       51,296.29       45,981.55       45,594.00       43,496.68
2001............................................       13,415.27       11,018.55       10,153.78        9,267.74
2002............................................       18,043.07       14,819.57       13,656.92       12,463.88
2003............................................       22,889.71       18,799.93       17,325.72       15,813.52
2004............................................       29,646.74       24,348.72       22,439.85       20,479.31
2101............................................       27,971.92       25,480.97       23,629.85       20,568.97
5001............................................  ..............  ..............  ..............        2,354.17
5101............................................  ..............  ..............  ..............       10,320.96
5102............................................  ..............  ..............  ..............       23,616.17
5103............................................  ..............  ..............  ..............       11,055.03
5104............................................  ..............  ..............  ..............       29,601.14
----------------------------------------------------------------------------------------------------------------

G. Example of the Methodology for Adjusting the Federal Prospective 
Payment Rates

    Table 6 illustrates the methodology for adjusting the federal 
prospective payments (as described in sections VI.A. through VI.F. of 
this final rule). The following examples are based on two hypothetical 
Medicare beneficiaries, both classified into CMG 0110 (without 
comorbidities). The unadjusted federal prospective payment rate for CMG 
0110 (without comorbidities) appears in Table 6.
    Example: One beneficiary is in Facility A, an IRF located in rural 
Spencer County, Indiana, and another beneficiary is in Facility B, an 
IRF located in urban Harrison County, Indiana. Facility A, a rural non-
teaching hospital has a Disproportionate Share Hospital (DSH) 
percentage of 5 percent (which would result in a LIP adjustment of 
1.0156), a wage index of 0.8513, and a rural adjustment of 14.9 
percent. Facility B, an urban teaching hospital, has a DSH percentage 
of 15 percent (which would result in a LIP adjustment of 1.0454 
percent), a wage index of 0.8852, and a teaching status adjustment of 
0.0784.
    To calculate each IRF's labor and non-labor portion of the Federal 
prospective payment, we begin by taking the unadjusted Federal 
prospective payment rate for CMG 0110 (without comorbidities) from 
Table 5. Then, we multiply the labor-related share for FY 2015 (69.294 
percent) described in section VI.D. of this final rule by the 
unadjusted federal prospective payment rate. To determine the non-labor 
portion of the federal prospective payment rate, we subtract the labor 
portion of the federal payment from the unadjusted federal prospective 
payment.
    To compute the wage-adjusted federal prospective payment, we 
multiply the labor portion of the federal payment by the appropriate 
wage index found in tables A and B. These tables are available through 
the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. The resulting 
figure is the wage-adjusted labor amount. Next, we compute the wage-
adjusted federal payment by adding the wage-adjusted labor amount to 
the non-labor portion.
    Adjusting the wage-adjusted federal payment by the facility-level 
adjustments involves several steps. First, we take the wage-adjusted 
Federal prospective payment and multiply it by the appropriate rural 
and LIP adjustments (if applicable). Second, to determine the 
appropriate amount of additional payment for the teaching status 
adjustment (if applicable), we multiply the teaching status adjustment 
(0.0784, in this example) by the wage-adjusted and rural-adjusted 
amount (if applicable). Finally, we add the additional teaching status 
payments (if applicable) to the wage, rural, and LIP-adjusted federal 
prospective payment rates. Table 6 illustrates the components of the 
adjusted payment calculation.

[[Page 45890]]

                    Table 6--Example of Computing the IRF FY 2015 Federal Prospective Payment
----------------------------------------------------------------------------------------------------------------
                                                                                                Urban Facility B
              Steps                                                     Rural Facility A         (Harrison Co.,
                                                                       (Spencer Co., IN)              IN)
----------------------------------------------------------------------------------------------------------------
 1..............................  Unadjusted Federal Prospective  ...         $32,561.72  ...         $32,561.72
                                   Payment.
 2..............................  Labor Share...................   x             0.69294   x             0.69294
 3..............................  Labor Portion of Federal         =          $22,563.32   =          $22,563.32
                                   Payment.
 4..............................  CBSA-Based Wage Index (shown     x              0.8513   x              0.8852
                                   in the Addendum, Tables 1 and
                                   2).
 5..............................  Wage-Adjusted Amount..........   =          $19,208.15   =          $19,973.05
 6..............................  Non-Labor Amount..............   +           $9,998.40   +           $9,998.40
 7..............................  Wage-Adjusted Federal Payment.   =          $29,206.55   =          $29,971.45
 8..............................  Rural Adjustment..............   x               1.149   x               1.000
 9..............................  Wage- and Rural-Adjusted         =          $33,558.33   =          $29,971.45
                                   Federal Payment.
10..............................  LIP Adjustment................   x              1.0156   x              1.0454
11..............................  FY 2015 Wage-, Rural- and LIP-   =          $34,081.84   =          $31,332.15
                                   Adjusted Federal Prospective
                                   Payment Rate.
12..............................  FY 2015 Wage- and Rural-        ...         $33,558.33  ...         $29,971.45
                                   Adjusted Federal Prospective
                                   Payment.
13..............................  Teaching Status Adjustment....   x                   0   x              0.0784
14..............................  Teaching Status Adjustment       =               $0.00   =           $2,349.76
                                   Amount.
15..............................  FY 2015 Wage-, Rural-, and LIP-  +          $34,081.84   +          $31,332.15
                                   Adjusted Federal Prospective
                                   Payment Rate.
16..............................  Total FY 2015 Adjusted Federal   =          $34,081.84   =          $33,691.92
                                   Prospective Payment.
----------------------------------------------------------------------------------------------------------------

    Thus, the adjusted payment for Facility A would be $34,081.84, and 
the adjusted payment for Facility B would be $33,681.92.

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

A. Update to the Outlier Threshold Amount for FY 2015

    Section 1886(j)(4) of the Act provides the Secretary with the 
authority to make payments in addition to the basic IRF prospective 
payments for cases incurring extraordinarily high costs. A case 
qualifies for an outlier payment if the estimated cost of the case 
exceeds the adjusted outlier threshold. We calculate the adjusted 
outlier threshold by adding the IRF PPS payment for the case (that is, 
the CMG payment adjusted by all of the relevant facility-level 
adjustments) and the adjusted threshold amount (also adjusted by all of 
the relevant facility-level adjustments). Then, we calculate the 
estimated cost of a case by multiplying the IRF's overall CCR by the 
Medicare allowable covered charge. If the estimated cost of the case is 
higher than the adjusted outlier threshold, we make an outlier payment 
for the case equal to 80 percent of the difference between the 
estimated cost of the case and the outlier threshold.
    In the FY 2002 IRF PPS final rule (66 FR 41362 through 41363), we 
discussed our rationale for setting the outlier threshold amount for 
the IRF PPS so that estimated outlier payments would equal 3 percent of 
total estimated payments. For the 2002 IRF PPS final rule, we analyzed 
various outlier policies using 3, 4, and 5 percent of the total 
estimated payments, and we concluded that an outlier policy set at 3 
percent of total estimated payments would optimize the extent to which 
we could reduce the financial risk to IRFs of caring for high-cost 
patients, while still providing for adequate payments for all other 
(non-high cost outlier) cases.
    Subsequently, we updated the IRF outlier threshold amount in the 
FYs 2006 through 2014 IRF PPS final rules and the FY 2011 and FY 2013 
notices (70 FR 47880, 71 FR 48354, 72 FR 44284, 73 FR 46370, 74 FR 
39762, 75 FR 42836, 76 FR 47836, 76 FR 59256, and 77 FR 44618, 78 FR 
47860, respectively) to maintain estimated outlier payments at 3 
percent of total estimated payments. We also stated in the FY 2009 
final rule (73 FR 46370 at 46385) that we would continue to analyze the 
estimated outlier payments for subsequent years and adjust the outlier 
threshold amount as appropriate to maintain the 3 percent target.
    To update the IRF outlier threshold amount for FY 2015, we proposed 
to use FY 2013 claims data and the same methodology that we used to set 
the initial outlier threshold amount in the FY 2002 IRF PPS final rule 
(66 FR 41316 and 41362 through 41363), which is also the same 
methodology that we used to update the outlier threshold amounts for 
FYs 2006 through 2014. Based on an analysis of this updated data, we 
estimate that IRF outlier payments as a percentage of total estimated 
payments are approximately 2.8 percent in FY 2014. Therefore, we update 
the outlier threshold amount to $8,848 to maintain estimated outlier 
payments at approximately 3 percent of total estimated aggregate IRF 
payments for FY 2015.
    We received 3 comments on the proposed update to the FY 2015 
outlier threshold amount to maintain estimated outlier payments at 
approximately 3 percent of total estimated IRF payments, which are 
summarized below.
    Comment: Several commenters expressed support for the proposed 
update to the outlier threshold amount to maintain estimated IRF 
outlier payments for FY 2015 at 3 percent of total IRF PPS payments. 
However, some commenters expressed concerns that actual IRF outlier 
payments in recent years have tended to fall below 3 percent of total 
IRF PPS payments. These commenters requested that we revise the 
methodology used to set the outlier threshold amount to ensure that we 
pay out the full 3 percent in outlier payments or incorporate any 
unused outlier payments from years in which aggregate outlier payments 
are below the 3 percent target back into the IRF PPS base payments for 
subsequent years.
    Response: We will continue to monitor our IRF outlier policies to 
ensure that they continue to compensate IRFs for treating unusually 
high-cost patients and, thereby, promote access to care for patients 
who are likely to require unusually high-cost care. Although actual 
outlier payments in the most recent 4-year period have tended to be 
just slightly below the 3 percent target, actual outlier payments 
ranged at or above 3 percent for the 4-year period from FY 2007 through 
FY 2010. In fact, actual outlier payments in FY 2008 were 4.2 percent 
of total IRF PPS payments.
    As we have indicated in previous IRF PPS final rules, we do not 
make adjustments to IRF PPS payment rates for the sole purpose of 
accounting for differences between projected and actual outlier 
payments. We use the best available data at the time to establish an 
outlier threshold for IRF PPS payments prior to the beginning of each 
fiscal year so that estimated outlier payments for that fiscal year 
will equal 3 percent of total estimated IRF PPS payments. We

[[Page 45891]]

evaluate the status of our outlier expenditures annually, and if there 
is a difference from our projection, that information is used to make a 
prospective adjustment to lower or raise the outlier threshold for the 
upcoming fiscal year. We believe a retrospective adjustment would not 
be appropriate. This includes instances where we have overestimated, as 
well as underestimated, outlier payments. If outlier payments for a 
given year turn out to be greater than projected, we do not recoup 
money from hospitals; if outlier payments for a given year are lower 
than projected, we do not make an adjustment to account for the 
difference. Payments for a given discharge in a given fiscal year are 
generally intended to reflect or address the average costs of that 
discharge in that year; that goal would be undermined if we adjusted 
IRF PPS payments to account for ``underpayments'' or ``overpayments'' 
in IRF outliers in previous years.
    Final Decision: Having carefully considered the public comments 
received and also taking into account the most recent available data, 
we are finalizing the outlier threshold amount of $8,848 to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2015. This update is effective 
October 1, 2014. We will continue to monitor trends in IRF outlier 
payments to ensure that they are working as intended to compensate IRFs 
for treating exceptionally high-cost IRF patients.

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

    In accordance with the methodology stated in the FY 2004 IRF PPS 
final rule (68 FR 45674, 45692 through 45694), we apply a ceiling to 
IRFs' CCRs. Using the methodology described in that final rule, we 
update the national urban and rural CCRs for IRFs, as well as the 
national CCR ceiling for FY 2015, based on analysis of the most recent 
data that is available. We apply the national urban and rural CCRs in 
the following situations:
     New IRFs that have not yet submitted their first Medicare 
cost report.
     IRFs whose overall CCR is in excess of the national CCR 
ceiling for FY 2015, as discussed below.
     Other IRFs for which accurate data to calculate an overall 
CCR are not available.
    Specifically, for FY 2015, we estimate a national average CCR of 
0.569 for rural IRFs, which we calculated by taking an average of the 
CCRs for all rural IRFs using their most recently submitted cost report 
data. Similarly, we estimate a national average CCR of 0.443 for urban 
IRFs, which we calculated by taking an average of the CCRs for all 
urban IRFs using their most recently submitted cost report data. We 
apply weights to both of these averages using the IRFs' estimated 
costs, meaning that the CCRs of IRFs with higher costs factor more 
heavily into the averages than the CCRs of IRFs with lower costs. For 
this final rule, we have used the most recent available cost report 
data (FY 2012). This includes all IRFs whose cost reporting periods 
begin on or after October 1, 2011, and before October 1, 2012. If, for 
any IRF, the FY 2012 cost report was missing or had an ``as submitted'' 
status, we used data from a previous fiscal year's (that is, FY 2004 
through FY 2011) settled cost report for that IRF. We do not use cost 
report data from before FY 2004 for any IRF because changes in IRF 
utilization since FY 2004 resulting from the 60 percent rule and IRF 
medical review activities suggest that these older data do not 
adequately reflect the current cost of care.
    In accordance with past practice, we will set the national CCR 
ceiling at 3 standard deviations above the mean CCR. Using this method, 
the national CCR ceiling would be 1.37 for FY 2015. This means that, if 
an individual IRF's CCR exceeds this proposed ceiling of 1.37 for FY 
2015, we would replace the IRF's CCR with the appropriate national 
average CCR (either rural or urban, depending on the geographic 
location of the IRF). We calculated the national CCR ceiling by:
    Step 1. Taking the national average CCR (weighted by each IRF's 
total costs, as discussed above) of all IRFs for which we have 
sufficient cost report data (both rural and urban IRFs combined).
    Step 2. Estimating the standard deviation of the national average 
CCR computed in step 1.
    Step 3. Multiplying the standard deviation of the national average 
CCR computed in step 2 by a factor of 3 to compute a statistically 
significant reliable ceiling.
    Step 4. Adding the result from step 3 to the national average CCR 
of all IRFs for which we have sufficient cost report data, from step 1.
    We did not receive any comments on the proposed updates to the IRF 
CCR ceilings and urban/rural averages.
    Final Decision: As we did not receive any comments on the proposed 
updates to the IRF CCR ceiling and the urban/rural averages for FY 
2015, we are finalizing the national average urban CCR at 0.443, the 
national average rural CCR at 0.569, and the national CCR ceiling at 
1.37 percent for FY 2015. These updates are effective October 1, 2014.

VIII. Refinements to the Presumptive Compliance Methodology

A. Background on the Compliance Percentage

    The compliance percentage has been part of the criteria for 
defining IRFs since implementation of the Inpatient Prospective Payment 
System (IPPS) in 1983. In the September 1, 1983, interim final rule 
with comment period (48 FR 39752), which allowed IRFs to be paid 
separately from the IPPS, the initial compliance percentage was set at 
75 percent. The 1983 interim rule stipulated that in accordance with 
sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act, a 
rehabilitation hospital and a rehabilitation unit were excluded from 
the IPPS. Sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act also 
give the Secretary the discretion to define a rehabilitation hospital 
and unit.
    A hospital or unit deemed excluded from the IPPS and paid under the 
IRF PPS must meet the general requirements in subpart B and subpart P 
of part 412. Subject to the special payment provisions of Sec.  
412.22(c), a hospital or unit must meet the general criteria set forth 
in Sec.  412.22 and in the regulations at Sec.  412.23(b), Sec.  
412.25, and Sec.  412.29 that specify the criteria for a provider to be 
classified as a rehabilitation hospital or unit. Hospitals and units 
meeting these criteria are eligible to be paid on a prospective payment 
basis as an IRF under the IRF PPS.
    The 1983 interim final rule stipulated that one of the criteria for 
being classified as an IRF was that, during the facility's most 
recently completed 12-month cost reporting period, the hospital must be 
primarily engaged in furnishing intensive rehabilitation services, as 
demonstrated by patient medical records, indicating that at least 75 
percent of the IRF's patient population were treated for one or more of 
the 10 medical conditions specified in the regulation that typically 
required the intensive inpatient rehabilitation treatment provided in 
an IRF. These criteria, along with other related criteria, 
distinguished an inpatient rehabilitation hospital or unit from a 
hospital that furnished general medical or surgical services, as well 
as rehabilitation services. We believed then, as we do now, that by 
examining the types of conditions for which a hospital's inpatients are 
treated, and the proportion of patients treated for conditions that 
typically require intensive inpatient rehabilitation, we

[[Page 45892]]

would be able to distinguish those hospitals in which the provision of 
rehabilitation services was primary rather than secondary. Thus, 
Medicare pays for rehabilitation services at IRFs at a higher rate than 
other hospitals because IRFs are designed to offer specialized 
inpatient rehabilitation care to patients with intensive needs.
    The original medical conditions specified under the compliance 
percentage, or ``75 percent rule,'' were stroke, spinal cord injury, 
congenital deformity, amputation, major multiple trauma, fracture of 
femur (hip fracture), brain injury, and polyarthritis (including 
rheumatoid arthritis). In the January 3, 1984, final rule (49 FR 234), 
we expanded the list of eligible medical conditions to include 
neurological disorders (including multiple sclerosis, motor neuron 
diseases, polyneuropathy, muscular dystrophy, and Parkinson's disease) 
and burns. In the May 7, 2004 final rule (69 FR 25752), we modified and 
expanded the list of eligible medical conditions by removing 
polyarthritis and substituting three more clearly defined arthritis-
related conditions. The three conditions that replaced polyarthritis 
included the following:
     Active, polyarticular rheumatoid arthritis, psoriatic 
arthritis, and seronegative arthropathies resulting in significant 
functional impairment of ambulation and other activities of daily 
living, which has not improved after an appropriate, aggressive, and 
sustained course of outpatient therapy services or services in other 
less intensive rehabilitation settings immediately preceding the 
inpatient rehabilitation admission, or which results from a systemic 
disease activation immediately before admission, but has the potential 
to improve with more intensive rehabilitation.
     Systemic vasculidities with joint inflammation, resulting 
in significant functional impairment of ambulation and other activities 
of daily living, which has not improved after an appropriate, 
aggressive, and sustained course of outpatient therapy services or 
services in other less intensive rehabilitation settings immediately 
preceding the inpatient rehabilitation admission, or which results from 
a systemic disease activation immediately before admission, but has the 
potential to improve with more intensive rehabilitation.
     Severe or advanced osteoarthritis (osteoarthrosis or 
degenerative joint disease) involving three or more major joints 
(elbow, shoulders, hips, or knees) with joint deformity and substantial 
loss of range of motion, atrophy, significant functional impairment of 
ambulation and other activities of daily living, which has not improved 
after an appropriate, aggressive, and sustained course of outpatient 
therapy services or services in other less intensive rehabilitation 
settings immediately preceding the inpatient rehabilitation admission, 
but has the potential to improve with more intensive rehabilitation. (A 
joint replaced by a prosthesis is no longer considered to have 
osteoarthritis, or other arthritis, even though this condition was the 
reason for the joint replacement.)
    In the May 7, 2004 final rule (69 FR 25752), a 13th condition was 
also added to include patients who undergo knee and/or hip joint 
replacement during an acute hospitalization immediately preceding the 
inpatient rehabilitation stay and also meet at least one of the 
following specific criteria:
     Underwent bilateral knee or hip joint replacement surgery 
during the acute hospitalization immediately preceding the IRF 
admission.
     Are extremely obese patients as measured by the patient's 
Body Mass Index (BMI) of at least 50, at the time of admission to the 
IRF.
     Are patients considered to be ''frail elderly,'' as 
determined by a patient's age of 85 or older, at the time of admission 
to the IRF (the provision currently states only that the patients be 
age 85 or older at the time of admission to the IRF).
    In 2002, we surveyed Medicare fiscal intermediaries to determine 
how they were enforcing the 75 percent rule. Although the 75 percent 
rule was one of the criteria that were used to distinguish an IRF from 
an acute care hospital from 1983 to 2004, we found evidence that 
different fiscal intermediaries were enforcing the rule differently. We 
found fiscal intermediaries were using inconsistent methods to 
determine whether IRFs were in compliance with the regulation, and that 
some IRFs were not being reviewed for compliance at all. This led to 
concerns that some IRFs might have been out of compliance with the 
regulation and inappropriately classified as IRFs, while other IRFs may 
have been held to overly high standards. Because of these concerns we 
sought to establish a more uniform enforcement of the 75 percent rule.
    In the May 16, 2003, IRF PPS proposed rule (68 FR 26786), we 
solicited comments on the regulatory requirements of the 75 percent 
rule. Though we did not, at that time, propose amending the regulatory 
requirements for the 75 percent rule located in then Sec.  
412.23(b)(2), we did propose to amend these requirements in the 
September 9, 2003, proposed rule titled, ``Medicare Program; Changes to 
the Criteria for Being Classified as an Inpatient Rehabilitation 
Facility'' (68 FR 53266). In that rule, we proposed some revisions to 
the 75 percent rule, including lowering the compliance percentage to 65 
percent during a 3-year transition period for cost reporting periods 
between January 1, 2004, and January 1, 2007. Also, in response to 
comments on the September 9, 2003, proposed rule and as stated above, 
the May 7, 2004, final rule (69 FR 25752) expanded the number of 
medical conditions that would meet the compliance percentage from 10 to 
13 and provided that patient comorbidities may also be included in 
determining an IRF's compliance with the requirements during the 
transition period.
    In the September 9, 2003, proposed rule, we defined ``comorbidity'' 
as a specific patient condition that is secondary to the patient's 
principal diagnosis or impairment that is the primary reason for the 
inpatient rehabilitation stay. In the May 7, 2004, rule, we adopted the 
provision to use a patient with a comorbidity counting towards the 
compliance threshold during the transition period. In the determination 
of the compliance percentage, a patient comorbidity counts toward the 
percentage if the comorbidity falls in one of the conditions specified 
at Sec.  412.29(b)(2) and has caused significant decline in functional 
ability in the individual that even in the absence of the admitting 
condition, the individual would require the intensive rehabilitation 
treatment that is unique to IRFs.
    Anticipating that IRFs needed some time to adjust and adapt their 
processes to the changes in the enforcement of the 75 percent rule, in 
the May 7, 2004 final rule, we provided IRFs with a 3-year phase-in 
period (cost reporting periods beginning on or after July 1, 2004, 
through July 1, 2007) to establish the compliance threshold of 75 
percent of the IRF's total patient population. The 3-year phase-in 
period was intended to begin with cost reporting periods on or after 
July 1, 2004, with the threshold at 50 percent of the IRF's population 
and gradually increase to 60 percent, then to 65 percent, and then to 
expire with cost reporting periods beginning on or after July 1, 2007, 
when the compliance percentage would once again be at 75 percent.
    Section 5005 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) and section 1886(d)(1)(B) of the Act 
modified the provisions of the 75 percent rule originally specified in 
the May 7, 2004,

[[Page 45893]]

final rule. To reflect these statutory changes, in the August 7, 2007, 
final rule (72 FR 44284), we revised the regulations to prolong the 
overall duration of the phased transition to the full 75 percent 
threshold by stipulating that an IRF must meet the full 75 percent 
compliance threshold as of its first cost reporting period that starts 
on or after July 1, 2008. We also extended the policy of using a 
patient's comorbidities to the extent they met the conditions as 
outlined in the regulations to determine compliance with the 
classification criteria at then Sec.  412.23(b)(2)(1) to the first cost 
reporting period that starts on or after July 1, 2008.
    Subsequently, section 115 of the MMSEA amended section 5005 of the 
DRA to revise elements of the 75 percent rule that are used to classify 
IRFs. In accordance with the statute, in the August 8, 2008, final rule 
(73 FR 46370), we revised the compliance rate that IRFs must meet to be 
excluded from the IPPS and be paid under the IRF PPS to 60 percent for 
cost reporting periods beginning in or after July 1, 2006. Also, in 
accordance with the statute, we required that patient comorbidities 
that satisfy the criteria as specified at then Sec.  412.23(b)(2)(i) 
[now located at Sec.  412.29(b)(1) and Sec.  412.29(b)(2)] be included 
in calculations used to determine whether an IRF meets the 60 percent 
compliance percentage for cost reporting periods beginning on or after 
July 1, 2007. As a result of these changes, the requirements started 
being referred to as the ``60 percent rule,'' instead of the ``75 
percent rule.'' The regulations finalized in the FY 2009 IRF PPS final 
rule (73 FR 46370) continue to be in effect.
    Though an IRF must serve an inpatient population of whom at least 
60 percent meet the compliance percentage criteria specified at Sec.  
412.29(b), the existing regulation allows for 40 percent of reasonable 
and necessary admissions to an IRF to fall outside of the 13 qualifying 
medical conditions. Still, the 60 percent rule is one of the primary 
ways we distinguish an IRF from an acute care hospital. As Medicare 
payments for IRF services are generally significantly higher than 
Medicare payments for similar services provided in acute care hospital 
settings, we believe that it is important to maintain and enforce the 
criteria for medical conditions that may be counted toward an IRF's 
compliance calculation for the 60 percent rule to ensure that the 
higher Medicare payments are appropriately allocated to those providers 
that are providing IRF-level services.

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

    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we revised the list of ICD-9-CM diagnosis codes that are used 
to determine presumptive compliance, effective for compliance review 
periods beginning on or after October 1, 2014. These revisions were 
based on an analysis of the ICD-9-CM code list that determined the 
clinical appropriateness of each individual ICD-9-CM code's inclusion 
on the list. As a result of this analysis, we also intended to remove 
all of the status post-amputation diagnoses codes, but these codes were 
inadvertently omitted from the FY 2014 IRF PPS proposed and final 
rules. These codes, listed in Table 7, are used to indicate that a 
patient has the sequela or residual effect of a condition.
    As we stated in the FY 2014 IRF PPS final rule (78 FR 47860, 
47881), the ICD-9-CM diagnosis codes included on the ``ICD-9-CM Codes 
That Meet Presumptive Compliance Criteria'' list are ones that 
demonstrate that the patient meets criteria for the medical conditions 
that may be counted toward an IRF's compliance percentage under the 
presumptive compliance methodology. Further, we stated that the 
underlying premise of the presumptive compliance methodology list is 
that it represents particular diagnosis codes that, if applicable to a 
given patient, would more than likely mean that the patient required 
intensive rehabilitation services in an IRF for treatment of one or 
more of the conditions specified at Sec.  412.29(b)(2) or that they had 
a comorbidity that caused significant decline in functional ability 
such that, even in the absence of the admitting condition, the patient 
would require the intensive rehabilitation treatment that is unique to 
IRFs and cannot be appropriately treated in another care setting. For 
the reasons described below, we do not believe that the ICD-9-CM 
diagnosis codes listed in Table 7 meet either of these criteria. We 
believe it is impossible to determine, from the presence of such 
diagnosis codes alone, whether a patient with an amputation status or 
prosthetic fitting and adjustment needs has a condition for which he or 
she would qualify for treatment in an IRF. Some patients with an 
amputation status or prosthetic fitting and adjustment needs will not 
require close medical supervision by a physician or weekly 
interdisciplinary team conferences to achieve their goals, while others 
may require these services. We believe that rehabilitation associated 
with an amputation status or prosthetic fitting and adjustment needs 
does not necessarily need to be accompanied by the close medical 
management provided in IRFs, as long as the patient does not have any 
additional comorbidities that have caused significant decline in his or 
her functional ability that, in the absence of an amputation status or 
prosthetic fitting and adjustment needs, would necessitate treatment in 
an IRF. That is to say, a patient's need for intensive rehabilitation 
services provided in an IRF may depend on other conditions which cannot 
be solely identified through the presence of an amputation status or 
prosthetic fitting and adjustment diagnosis code. If a patient with one 
of the diagnosis codes listed in Table 7 has additional comorbidities 
that would necessitate treatment in an IRF, then those additional 
comorbidities would qualify the patient for inclusion in the 
calculation of the IRF's compliance percentage under the presumptive 
compliance methodology. Thus, we are removing the status post-
amputation diagnosis codes listed in Table 7 from the list of ``ICD-9-
CM Codes That Meet Presumptive Compliance Criteria.'' The removal of 
these codes will be effective for compliance review periods beginning 
on or after October 1, 2015, and the changes will be incorporated into 
the ICD-10 lists (discussed below) when ICD-10-CM becomes the required 
medical data code set for use on Medicare claims and IRF-PAI 
submissions.

     Table 7--ICD-9-CM Codes Removed From ``ICD-9-CM Codes That Meet
                    Presumptive Compliance Criteria''
------------------------------------------------------------------------
            ICD-9-CM Code                          Diagnosis
------------------------------------------------------------------------
V49.65..............................  Below elbow amputation status.
V49.66..............................  Above elbow amputation status.
V49.67..............................  Shoulder amputation status.
V49.73..............................  Foot amputation status.
V49.74..............................  Ankle amputation status.
V49.75..............................  Below knee amputation status.
V49.76..............................  Above knee amputation status.
V49.77..............................  Hip amputation status.
V52.0...............................  Fitting and adjustment of
                                       artificial arm (complete)
                                       (partial).
V52.1...............................  Fitting and adjustment of
                                       artificial leg (complete)
                                       (partial).
------------------------------------------------------------------------

    We received 44 comments on the proposed changes to the diagnosis 
codes that are used to determine presumptive

[[Page 45894]]

compliance, which are summarized below.
    Comment: Citing studies, several commenters emphasized that 
research indicates that amputees receive substantial benefits from care 
in the IRF setting compared to other post-acute care settings. Another 
commenter stated that proper fitting and training for the use of a 
prosthesis is a complex clinical exercise that requires the intensive 
multidisciplinary services provided in IRFs.
    Response: We agree that some patients that present with an 
amputation status or prosthetic fitting or adjustment may require the 
close medical supervision by a rehabilitation physician and weekly 
interdisciplinary team conferences uniquely provided in IRFs to achieve 
their therapeutic goals. However, we believe that it cannot be 
determined from the amputation status or prosthetic fitting or 
adjustment diagnosis codes alone whether a patient presents with the 
clinical complexity that would require an IRF level of care. Indeed, we 
believe that many patients who are appropriately coded with these 
diagnosis codes can be effectively cared for in other care settings. As 
we stated in the FY 2015 IRF PPS proposed rule (79 FR 26308, 26327) and 
the FY 2014 IRF PPS final rule (78 FR 47860, 47881), the underlying 
premise of the presumptive compliance methodology list is that it 
represents particular diagnosis codes that, if applicable to a given 
patient, would more than likely mean that the patient required 
intensive rehabilitation services in an IRF for treatment of one or 
more of the conditions specified at Sec.  412.29(b)(2) or that they had 
a comorbidity that caused significant decline in functional ability 
such that, even in the absence of the admitting condition, the patient 
would require the intensive rehabilitation treatment that is unique to 
IRFs and cannot be appropriately treated in another care setting. 
Therefore, we believe that the mere presence of an amputation status or 
prosthetic fitting or adjustment code alone does not provide us with 
enough information to determine whether the patient meets all of the 
requirements necessary to count for the 60 percent rule in Sec.  
412.29(b)(2).
    Comment: One commenter suggested that the rationale provided by CMS 
for the removal of the amputation status codes confuses the concepts of 
medical necessity with IRF classification. The commenter stated that an 
amputee would only be admitted to a rehabilitation hospital by a 
rehabilitation physician if he or she needed intensive rehabilitation 
services. The commenter further stated that even though many amputees 
may not need intensive inpatient rehabilitation services, the mere 
referral and subsequent admission to an IRF would mean that the patient 
needs the intensive services provided by the IRF.
    Response: We disagree with this comment. The regulatory 
requirements at Sec.  412.29(b) specify that at least 60 percent of an 
IRF's patient population must require intensive rehabilitation services 
in an IRF for treatment of one or more of the conditions specified at 
Sec.  412.29(b)(2) or that they have a comorbidity that caused 
significant decline in functional ability such that, even in the 
absence of the admitting condition, the patient would require the 
intensive rehabilitation treatment that is unique to IRFs and cannot be 
appropriately treated in another care setting. For a patient to require 
intensive rehabilitation services in an IRF for treatment of a 
particular condition, that patient must require the close medical 
supervision and interdisciplinary approach to care that are unique to 
care in an IRF. This is not based on the IRF coverage requirements, but 
rather it is based directly on the regulatory language in Sec.  
412.29(b) that details the requirements that IRFs must meet to adhere 
to the 60 percent rule and thereby be classified for payment under the 
IRF PPS.
    Comment: Several commenters stated that the proposed removal of the 
status post amputation diagnoses codes from ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria'' list would limit access to patients 
that would meet admission criteria as specified in Sec.  412.29(b)(2). 
One commenter stated that the effect of the proposed removal of the 
amputation status post diagnosis codes would be to cause more IRFs to 
have to undergo medical review, and the IRFs would respond by 
restricting admission for certain types of patients in order to avoid 
having to go through medical review.
    Response: We do not believe that the proposed removal of these 
diagnosis codes will have a significant effect on access to care for 
these patients, as we estimate that only about 2 percent of all IRF 
patients are currently coded with these diagnoses, and these diagnosis 
codes are only used to meet the 60 percent rule requirements 0.3 
percent of the time. In addition, the proposed removal of these codes 
from the presumptive compliance method does not necessarily mean that a 
patient with one of these diagnosis codes cannot be included in the 
IRF's population that meets the 60 percent rule. As we described in the 
FY 2014 IRF PPS final rule, we use a bifurcated sub-regulatory approach 
to determining compliance with the rule, in which an IRF's data is 
first evaluated to determine whether or not the IRF is presumptively 
compliant with the 60 percent rule requirements. If so, then the IRF is 
presumed to meet the regulatory requirements. If not, then the IRF is 
evaluated using the more intensive medical review compliance method. If 
a patient with one of these diagnosis codes presents with the clinical 
complexity that would require an IRF level of care, then this 
information can be determined by the medical review, and the patient 
can then be included in the IRF's patient population that meets the 60 
percent rule requirements. We will closely monitor the data to ensure 
that there are no unintended consequences of these policies on access 
to care.
    Comment: One commenter stated that amputations in older adult 
populations are often the byproduct of multiple comorbid conditions 
(for example, diabetes or peripheral vascular disease) that make this 
population more at risk for post-surgical complications, such as risk 
of non-healing surgical incision.
    Response: We agree that a patient with multiple comorbid 
conditions, such as diabetes or peripheral vascular disease affecting 
the surgical stump incision, may present with a need for intensive 
rehabilitation services provided in an IRF that could not be solely 
identified through the presence of an amputation status or prosthetic 
fitting or adjustment diagnosis code. These patients may meet the 60 
percent rule requirements based on the presence of one of their other 
comorbid conditions, or the patients' clinical complexity may be 
determined on medical review, and the patient can then be included in 
the IRF's patient population that meets the 60 percent rule 
requirements.
    Comment: One commenter requested that we apply any changes to the 
presumptive compliance methodology to an IRF's full 12-month compliance 
review period, instead of applying them to only part of an IRF's 
compliance review period.
    Response: As the commenter suggested, all of the proposed changes 
to the presumptive compliance methodology are being applied effective 
for full 12-month compliance review periods, and will not be applied to 
only part of an IRF's compliance review period.
    Comment: Several commenters suggested that we delay implementation 
of the proposed removal of the amputation status diagnosis codes and 
the other changes to the presumptive

[[Page 45895]]

compliance methodology. For example, one commenter specifically 
recommended that we delay implementation of changes to the presumptive 
compliance methodology until changes to the IRF-PAI and the associated 
limited medical review process are implemented. Another commenter 
recommended that we delay implementation of any further changes to the 
presumptive compliance method until at least October 1, 2015, and one 
commenter recommended that we delay implementation of any changes to 
the ``non-specific ICD codes,'' which we finalized in the FY 2014 IRF 
PPS final rule (78 FR 47884 through 47887), for at least one year 
following the implementation of the ICD-10-CM medical code data set, to 
give providers more time to adapt to the added specificity of the 
coding provided for under ICD-10-CM. Another commenter suggested that 
we delay implementation of the changes to the presumptive compliance 
method to give us more time to thoroughly evaluate the policies, since 
the changes to the presumptive compliance method that we finalized in 
the FY 2014 IRF PPS final rule and the changes to the presumptive 
compliance method that we proposed in the FY 2015 IRF PPS proposed 
rule, taken together, would cause as many as 15 percent of IRF Medicare 
cases to fail the presumptive compliance method. Finally, several 
commenters recommended that we keep the ICD-9-CM codes used in the 
presumptive compliance method as they are now--as of the date of this 
final rule, neither the changes finalized in the FY 2014 IRF PPS nor 
the changes proposed in the FY 2015 IRF PPS proposed rule have taken 
effect--or delay implementation of additional IGC exclusions until we 
transition to ICD-10-CM.
    Response: We agree with these commenters that delaying the 
effective date of the changes to the presumptive compliance method 
would give CMS more time to put processes in place to mitigate some of 
the additional burden of increased medical reviews, and would allow 
providers more time to adapt to these changes. Though several of the 
commenters explicitly recommended that we delay the changes to the 
presumptive compliance method that were proposed in the FY 2015 IRF PPS 
proposed rule, none of the commenters explicitly stated that we should 
delay implementation of the changes to the presumptive compliance 
method that we finalized in the FY 2014 IRF PPS final rule. However, we 
interpret several of the comments to mean that we should delay both 
sets of changes, so as to effectuate all of the related policies at the 
same time. For example, several of the commenters suggested delaying 
implementation of the ``presumptive compliance'' changes, without 
distinguishing between the changes that we finalized in the FY 2014 IRF 
PPS final rule and the changes that we proposed in the FY 2015 IRF PPS 
proposed rule. In addition, one commenter referred specifically to the 
impetus for recommending a delay being the significant impact that the 
changes would have on ``15 percent'' of IRF cases that would no longer 
meet the presumptive compliance criteria. Other commenters referenced 
this ``15 percent'' figure as the percentage of IRF cases that would be 
affected if we were to change from using the current presumptive 
compliance method to using the revised presumptive compliance method 
that would result from both the changes that we finalized in the FY 
2014 IRF PPS final rule and the changes that were proposed in the FY 
2015 IRF PPS proposed rule. Thus, we believe that the commenter was 
recommending a delay of both sets of presumptive compliance method 
changes, so as to effectuate all of the related policies at the same 
time.
    Therefore, based on our review of these comments, and to allow for 
the revisions to the IRF-PAI and the associated limited medical review 
process discussed in section X. of this final rule to take effect prior 
to implementation of the changes to the presumptive compliance method, 
we are implementing all of the changes to the presumptive compliance 
method for compliance review periods beginning on or after October 1, 
2015. That is, we are delaying the effective date of the changes to the 
presumptive compliance method that we finalized in the FY 2014 IRF PPS 
final rule until compliance review periods beginning on or after 
October 1, 2015, and we are also delaying the changes to the 
presumptive compliance method that we are finalizing in this final rule 
so that they also take effect for compliance review periods beginning 
on or after October 1, 2015. This represents a one-year delayed 
effective date for all of these changes. We believe that it will be 
much less confusing for providers to have all of the changes to the 
presumptive compliance method take effect at the same time.
    We do not believe that it is necessary to delay implementation of 
these changes for an additional year after ICD-10-CM becomes the 
required medical code data set for use on IRF claims and on the IRF-
PAI. Given that the effective date of the use of ICD-10-CM has been 
delayed twice, and given that the ICD-10-CM code lists, which will be 
used when ICD-10-CM becomes the required medical code data set with 
respect to IRF claims and the IRF-PAI, are available for download on 
the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html in conjunction 
with the publication of this final rule, we believe that IRFs will have 
sufficient opportunity to become familiar with the added specificity of 
the coding offered in ICD-10-CM.
    Comment: Several commenters suggested that CMS continue to count 
amputation status codes toward an IRF's compliance percentage, but do 
so in conjunction with other related information provided in the IRF-
PAI. The commenters stated that the amputation status codes could be 
used in combination with the Etiologic Diagnosis, which would reflect 
recent injury. One commenter suggested that an indicator could be added 
that could be ``paired up'' with the codes in order to maintain 
automation and avoid the burden of increased medical review. Another 
commenter stated that comorbid conditions listed on the IRF-PAI could 
also provide an appropriate clinical picture that would 
``presumptively'' indicate that the patient meets conditions outlined 
at Sec.  412.29(b)(2). Moreover, one commenter suggested that the added 
specificity of coding provided for in the ICD-10-CM coding may supply 
additional information that may help support the amputation status 
diagnosis as a ``presumptively'' qualifying condition.
    Response: We thank the commenters for their suggestions. However, 
we continue to believe that it cannot be determined from the amputation 
status or prosthetic fitting or adjustment diagnosis codes alone 
whether a patient presents with the clinical complexity that would 
require an IRF level of care, and, for this reason, we do not believe 
that it is appropriate to continue to include these codes on the ``ICD-
9-CM Codes That Meet Presumptive Compliance'' list. However, as we 
indicated above, these patients can continue to be counted under the 
medical review methodology if their clinical complexity is shown in the 
medical record to require an IRF level of care. In fact, as the one 
commenter mentioned, the patient's comorbid conditions as listed on the 
IRF-PAI and described in the patient's medical record do contribute to 
an overall ``picture'' of the patient's condition, but at this time, 
this information cannot be

[[Page 45896]]

determined using a computer program and can only be determined through 
a medical review of the patient's clinical record.
    While we agree that ICD-10-CM coding will likely provide more 
specificity and more information, we continue to believe that these 
amputation status or prosthetic fitting or adjustment diagnosis codes, 
even under ICD-10-CM, do not provide enough information about the 
clinical complexity of the case to warrant continued inclusion on the 
list of diagnosis codes that meets the presumptive compliance criteria. 
We will consider the commenters suggestions for future refinements to 
the IRF-PAI and to the presumptive compliance methodology.
    Comment: One commenter recommended that CMS ensure that MACs 
understand the importance of IRF care to patients with amputations 
(especially those with other comorbidities) since there could be an 
increase in medical review for amputation cases.
    Response: We appreciate the commenter's suggestion, and we plan to 
carry out training and outreach with MACs to review policy changes to 
the presumptive compliance methodology.
    Final Decision: After carefully considering the comments that we 
received on the proposed removal of the status post-amputation 
diagnoses codes from the ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria'' list, we are finalizing these proposed changes to 
the list. The changes to the list of diagnosis codes that are used to 
determine presumptive compliance under the 60 percent rule are 
effective for compliance review periods beginning on or after October 
1, 2015.

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

    An ``impairment group code'' is not an ICD diagnosis code, but part 
of a separate unique set of codes specifically developed for the IRF 
PPS for assigning the primary reason for admission to an IRF. These 
codes are listed in the IRF-PAI Training Manual (see section II, item 
21, and Appendix A). The IRF-PAI Training Manual is available 
through the Internet on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    If an IRF is eligible to use the presumptive methodology to 
evaluate its compliance with the 60 percent rule, all of its IRF-PAI 
assessments from the most recently completed 12-month compliance review 
period are examined (with the use of a computer program) to determine 
whether they contain any of the codes listed on the presumptive 
methodology lists (that is, ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria'' and ``Impairment Groups That Meet Presumptive 
Compliance Criteria''). Each selected assessment is presumptively 
categorized as either meeting or not meeting the IRF 60 percent rule 
requirements based upon the primary reason for the patient to be 
treated in the IRF (the impairment group) and the ICD diagnosis codes 
listed as either the etiologic diagnosis (the etiologic problem that 
led to the condition for which the patient is receiving rehabilitation) 
or one of 25 comorbidities on the assessment.
    Not all impairment group codes (IGCs) meet the presumptive 
compliance criteria. The underlying premise of the list of eligible 
IGCs that are used to determine presumptive compliance (similar to the 
diagnosis codes listed in ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria'') includes particular IGCs that, if applicable to 
a given patient, would more than likely mean that the patient required 
intensive rehabilitation services for treatment of one or more of the 
conditions specified at Sec.  412.29(b)(2). The current list of 
eligible IGCs that meet presumptive compliance criteria, Appendix B: 
Impairment Group Codes That Meet Presumptive Compliance Criteria, can 
be downloaded from the October 1, 2007, IRF Compliance Rule 
Specification Files on the Medicare IRF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Criteria.html. Again, this list contains only 
those IGCs that meet the presumptive compliance criteria.
1. Removal of IGCs for Unilateral Upper Extremity Amputations and 
Arthritis From Appendix B: Impairment Group Codes That Meet Presumptive 
Compliance Criteria
    In the FY 2014 IRF PPS final rule (78 FR 47889 through 47895), we 
finalized (applicable for compliance review periods beginning on or 
after October 1, 2014) the removal of certain ICD-9-CM codes for 
unilateral upper extremity amputations from the list of ``ICD-9-CM 
Codes That Meet Presumptive Compliance Criteria'' because we believed 
that it is impossible to determine, from the presence of such ICD-9-CM 
codes alone, whether a patient with such a unilateral upper extremity 
amputation has a condition for which he or she would need intensive 
rehabilitation services for treatment of one or more of the conditions 
specified in Sec.  412.29(b)(2). Further, we stated that a patient's 
need for intensive inpatient rehabilitative services for the treatment 
of one or more of these conditions would depend on the presence of 
additional comorbidities that caused significant decline in his or her 
functional ability to an extent that would necessitate treatment in an 
IRF. If the patient has one or more of the comorbidities on the list of 
``ICD-9-CM Codes That Meet Presumptive Compliance Criteria,'' then the 
patient would already qualify as meeting the presumptive compliance 
criteria. We concluded that if the diagnosis codes for such a patient's 
comorbidities do not appear on the list of ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria,'' then the patient could still be 
considered for inclusion in the IRF's compliance percentage following 
medical review and confirmation that the case meets the criteria for 
one or more of the medical conditions in the regulations.
    In the FY 2014 IRF PPS final rule (78 FR 47887 through 47895), we 
also finalized (applicable for compliance review periods beginning on 
or after October 1, 2014) the removal of ICD-9-CM diagnosis codes for 
arthritis conditions from the list of ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria'' because the inclusion of patients 
with these medical conditions in the presumptive compliance calculation 
of the IRF's compliance percentage is conditioned on those patients 
meeting the described severity and prior treatment requirements. 
However, the ICD-9-CM diagnosis codes that reflect these arthritis and 
arthropathy conditions do not provide any information about the 
severity of the condition or whether the prior treatment requirements 
were met. Therefore, we stated in the FY 2014 IRF PPS final rule that 
we believe that additional information beyond the presence of the code 
is necessary to determine if the medical record would support inclusion 
of individuals with the arthritis and arthropathy conditions outlined 
in our regulations under Sec.  412.29(b)(2)(x) through Sec.  
412.29(b)(2)(xii) in the presumptive compliance calculation of the 
facility's compliance percentage. For this reason, we finalized the 
removal of the ICD-9-CM diagnosis codes associated with the medical 
conditions outlined in our regulations under Sec.  412.29(b)(2)(x) 
through Sec.  412.29(b)(2)(xii) from the list of ``ICD-9-CM Codes That 
Meet Presumptive Compliance Criteria.'' However, we also stated that we 
expect

[[Page 45897]]

that the MACs will be able, upon medical review, to include those 
patients in a facility's compliance percentage upon confirmation that 
the severity and prior treatment requirements were met.
    Consistent with our rationale in the FY 2014 IRF PPS final rule for 
removing the ICD-9-CM diagnoses codes for unilateral upper extremity 
amputations and the arthritis and arthropathy conditions, we are making 
conforming changes to the IGCs in this final rule by removing four IGCs 
from Appendix B: Impairment Group Codes That Meet Presumptive 
Compliance Criteria. Thus, we will remove the following codes from 
Appendix B: Impairment Group Codes That Meet Presumptive Compliance 
Criteria:
     IGC 0005.1--Unilateral Upper Limb Above the Elbow (AE),
     IGC 0005.2--Unilateral Upper Limb Below the Elbow (BE),
     IGC 0006.1--Rheumatoid Arthritis, and
     IGC 0006.9--Other Arthritis.
2. Other Changes to Appendix B: Impairment Group Codes That Meet 
Presumptive Compliance Criteria
    We will revise Appendix B: Impairment Group Codes That Meet 
Presumptive Compliance Criteria by revising the diagnosis codes listed 
as exclusions on the table and by revising the title of the table.
    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we finalized (applicable for compliance review periods 
beginning on or after October 1, 2014) the removal of certain ICD-9-CM 
codes from the list of ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria.'' Accordingly, we exclude these diagnosis codes 
from counting if they are the patient's Etiologic Diagnosis (that is, 
the etiologic problem that led to the condition for which the patient 
is receiving rehabilitation). That is, a given IGC that would otherwise 
meet the presumptive compliance criteria will not meet such criteria if 
the patient has one of the ``excluded'' Etiologic Diagnoses for that 
IGC.
    In addition, in the FY 2014 IRF PPS final rule (78 FR 47860, 
47883), we implemented a change in the titles of some tables used in 
the presumptive compliance methodology to no longer use alphabet 
characters or the ``Appendix'' labels to identify these tables. 
Consistent with the intent to reduce confusion among tables, and 
effective October 1, 2014, we will identify Appendix B: Impairment 
Group Codes That Meet Presumptive Compliance Criteria as ``Impairment 
Group Codes That Meet Presumptive Compliance Criteria.''
    In addition, we provided an additional new table, ``Impairment 
Group Codes That Meet Presumptive Compliance Criteria,'' that lists 
Etiologic Diagnosis codes that are excluded from counting under related 
IGCs in ICD-10-CM code format. For example, ICD-10-CM code G72.3, 
``Periodic Paralysis'' is an excluded Etiologic Diagnosis code under 
IGC 0003.8, ``Neuromuscular Disorders.'' Further, to accommodate the 
Etiologic Diagnosis code exclusions, we have reformatted this table. A 
revised table containing the ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria,'' with the ICD-10-CM Etiologic 
Diagnosis exclusions, can be viewed on the Medicare IRF PPS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. The changes to the table, 
``Impairment Group Codes That Meet Presumptive Compliance Criteria,'' 
will be effective for compliance review periods beginning on or after 
October 1, 2015.
    We received 49 comments on the proposed changes to the impairment 
group codes that meet presumptive compliance criteria, which are 
summarized below.
    Comment: Several commenters expressed concerns that a potential 
unintended consequence of excluding the proposed arthritis diagnosis 
codes under IGCs 0008.51, 0008.52, 0008.61, 0008.62, 0008.71, and 
0008.72 would be that most lower extremity joint replacement cases that 
currently satisfy the 60 percent rule, that is, bilateral joint 
replacement cases and unilateral joint replacement cases involving 
patients 85 years of age or older and/or who have a BMI of 50 or 
greater, would no longer be included in an IRF's presumptive compliance 
percentage.
    Response: We appreciate the commenters' careful review of the 
proposed Etiologic Diagnosis exclusions for IGCs 0008.51, 0008.52, 
0008.61, 0008.62, 0008.71, and 0008.72, and we agree with these 
commenters that there would have been unintended consequences of 
excluding the proposed arthritis diagnosis codes from these IGCs. As we 
intend to continue to count bilateral lower-extremity joint replacement 
cases and unilateral lower-extremity joint replacement cases involving 
patients 85 years of age or older and/or who have a BMI of 50 or 
greater as meeting the 60 percent rule criteria under the presumptive 
compliance method, we will remove the proposed Etiologic Diagnosis 
exclusions from IGCs 0008.51, 0008.52, 0008.61, 0008.62, 0008.71, and 
0008.72.
    Comment: Several commenters expressed concern that the impact of 
the proposed changes to the presumptive compliance criteria, the 
changes proposed in the FY 2015 proposed rule and the changes finalized 
in the FY 2014, will be to increase the number of IRFs that will fail 
to meet presumptive compliance.
    Response: We agree with commenters that one of the likely 
consequences of the changes to the presumptive compliance method will 
be an increase in the number of IRFs that will fail the presumptive 
compliance method and will have to be evaluated using the medical 
review method. However, we believe that the proposed changes to the 
IGCs That Meet Presumptive Compliance Criteria are necessary to 
continue appropriate enforcement of the regulations in Sec.  412.29(b). 
We believe that it is impossible to determine from the presence of one 
of the IGCs or Etiologic Diagnoses alone whether the patient's clinical 
complexity requires an IRF level of care, or, in the case of an 
arthritis code, whether the patient meets the severity and prior 
treatment requirements in regulation at Sec.  412.29(b)(2). This 
information can only be obtained through a review of the patient's 
medical record.
    However, to mitigate some of the added burden on providers of the 
additional medical reviews, we discuss a new policy in section X of 
this final rule that will allow some arthritis cases to count toward 
the presumptive compliance method based on a limited medical review of 
these cases. We believe that this new policy will alleviate some of the 
burden associated with additional medical reviews.
    Comment: One commenter expressed concern about the removal of IGC 
0005.1--Unilateral upper limb above the elbow (AE) and IGC 0005.2--
Unilateral upper limb below the elbow (BE), as the commenter said that 
these patients have impairments related to the ability to conduct 
activities of daily living that are most appropriately treated using 
the intensive rehabilitation therapy provided in an IRF.
    Response: As we indicated in the FY 2014 IRF PPS final rule (78 FR 
47860, at 47890), we believe that some patients with upper extremity 
amputations might require treatment in an IRF, depending on the 
clinical complexity of the particular case or the presence of any other 
complicating factors or comorbidities. However, we expect that many 
patients with these upper extremity amputations will not require close 
medical supervision by a

[[Page 45898]]

physician or weekly interdisciplinary team conferences to achieve their 
goals, and can be treated effectively in other care settings. If the 
patient has additional comorbidities causing significant decline in his 
or her functional ability which, in the absence of the unilateral upper 
extremity amputation, would require treatment in an IRF, then the 
patient will still be able to be counted towards meeting the 60 percent 
rule criteria. Additionally, the patient can still be counted towards 
meeting the 60 percent rule criteria on medical review, if appropriate. 
However, we continue to believe that a patient's need for the intensive 
rehabilitation services provided in an IRF depends on other factors 
which cannot be adequately determined through the mere presence of IGC 
0005.1--Unilateral upper limb above the elbow (AE) and IGC 0005.2--
Unilateral upper limb below the elbow (BE). Thus, we are removing these 
IGCs from the IGCs That Meet the Presumptive Compliance Criteria.
    Comment: One commenter expressed concern about the proposed 
addition of non-specific diagnosis codes to the Etiologic Diagnosis 
exclusions for some of the IGCs because this commenter said that it is 
often ``administratively unrealistic'' to obtain detailed medical 
information from a transferring facility, especially in cases where the 
IRF admission is not directly from an acute care hospital. The 
commenter said that non-specific codes should not be viewed as 
reflecting poor documentation or poor coding.
    Response: As we stated in the FY 2014 IRF PPS final rule (78 FR 
47860, 47884), we believe that highly descriptive coding provides the 
best and clearest way to document the appropriateness of a given 
patient's admission, and would improve our ability to use the 
presumptive compliance method of calculating a facility's 60 percent 
rule compliance percentage. Therefore, whenever possible, we believe 
that the most specific code that describes a medical disease, 
condition, or injury should be used to document diagnoses on the IRF-
PAI. We also stated in the FY 2014 IRF PPS final rule (78 FR 47860, 
47884) that we believe imprecise codes would inappropriately categorize 
an overly broad segment of the patient population as having the 
conditions required for inclusion in a facility's presumptive 
compliance calculation, which would result in an inflated compliance 
percentage. In the FY 2014 IRF PPS final rule (78 FR 47860, 47885), we 
also stated that if the IRF does not have enough information about the 
patient's condition to code the more specific codes on the IRF-PAI, we 
would expect the IRF to seek out additional information from the 
patient's acute care hospital medical record to determine the 
appropriate, more specific code to use. The ICD-9-CM diagnosis codes 
that are listed as exclusions on ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria'' are consistent with the list of 
diagnosis codes we removed from ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria.''
    Comment: Several commenters expressed concerns about possible 
inconsistencies in the specific IGC exclusions that we proposed in the 
FY 2015 IRF PPS proposed rule. For example, one commenter pointed out 
that we were proposing to exclude the Etiologic Diagnosis of ICD-9-CM 
code 850.5--Concussion with loss of consciousness of unspecified 
duration for IGC 0002.22--Brain dysfunction, Traumatic, Closed Injury. 
However, we were not proposing to exclude, ICD-9-CM code 850.0--
Concussion with no loss of consciousness from this same IGC.
    Response: We thank the commenter for their careful review and 
analysis of the IGCs That Meet Presumptive Compliance Criteria. We have 
reviewed the IGCs That Meet Presumptive Compliance Criteria in light of 
these comments, and we agree with the commenter's suggestion that this 
represents an inadvertent inconsistency. Thus, we are adding ICD-9-CM 
code 850.0--Concussion with no loss of consciousness as an Etiologic 
Diagnosis exclusion to the list of Etiologic Diagnosis exclusions under 
IGC 0002.22--Brain dysfunction, Traumatic, Closed Injury.
    Comment: One commenter stated that we excluded ICD-9-CM diagnosis 
code 438.20--Late effects of cerebrovascular disease, hemiplegia 
affecting unspecified side from IGC 0001.9--Other Stroke, but did not 
list this diagnosis code as an exclusion for other stroke IGCs.
    Response: ICD-9-CM diagnosis code 438.20 is not listed as an 
exclusion for the other stroke IGCs because the other stroke IGCs 
either specify side of body involvement or no paresis.
    Comment: One commenter suggested that as many as 10 percent of IRF 
cases will no longer qualify toward an IRF's presumptive compliance 
percentage should the proposed removal of IGC 0005.1, IGC 0005.2, IGC 
0006.1, and IGC 0006.9 and the exclusion of Rheumatoid and 
Osteoarthritis diagnosis codes from hip and knee joint replacement be 
finalized.
    Response: As discussed above, the commenters led us to discover 
that there would have been unintended consequences of excluding the 
proposed arthritis Etiologic Diagnosis codes from IGCs0008.51, 0008.52, 
0008.61, 0008.62, 0008.71, and 0008.72. As we intend to continue to 
count bilateral lower-extremity joint replacement cases and unilateral 
lower-extremity joint replacement cases involving patients 85 years of 
age or older and/or who have a BMI of 50 or greater as meeting the 60 
percent rule criteria under the presumptive compliance method, we are 
removing the proposed Etiologic Diagnosis exclusions from these IGCs. 
We believe that this change substantially reduces the estimated 
percentage of IRF cases that will no longer qualify toward an IRF's 
presumptive compliance percentage. However, with respect to the 
remaining IRF cases that will no longer qualify toward an IRF's 
presumptive compliance percentage, we continue to believe that this is 
appropriate because the case's compliance with the 60 percent rule 
criteria cannot be adequately determined through the mere presence of 
the IGC or ICD-9-CM diagnosis code alone.
    Comment: Several commenters indicated that the proposed changes to 
``Impairment Group Codes That Meet Presumptive Compliance Criteria'' 
(and the above discussed removal of the amputation status diagnosis 
codes) would likely lead to reduced access to IRF care. The commenters 
noted that for certain types of patients, IRFs would be in the position 
of choosing between admitting these patients and facing ``additional 
risk'' associated with medical reviews, or not admitting these types of 
patients. Many of these commenters said that such changes are 
unnecessary in light of past regulatory actions, such as the regulatory 
refinements of the 60 percent rule that were implemented in 2004 and 
the more stringent IRF coverage requirements that were implemented in 
2010, that have already reduced the number of IRF admissions and 
increased the average IRF case mix.
    Response: We acknowledge that some IRFs may seek to avoid the 
possibility of medical review by limiting admission of patients with 
certain conditions, such as arthritis or unilateral upper-extremity 
amputations. However, this is not our intent in implementing this 
policy. The intent of these changes to the presumptive compliance 
method is obtain enough information to ensure that patients who are 
counted as meeting the 60 percent rule in Sec.  412.29(b) are 
appropriately meeting

[[Page 45899]]

the regulatory requirements. Although previous regulatory refinements 
have improved the IRF payment system, we believe that the proposed 
updates to the presumptive compliance method serve to further enhance 
the accuracy and appropriateness of the payment system. As discussed in 
section X. of this final rule, we are concurrently implementing 
policies designed to minimize the burden created by the operational 
aspects of this policy.
    Comment: One commenter suggested that the removal of IGC 0006.1--
Rheumatoid Arthritis and IGC 0006.9--Other Arthritis should coincide 
with the implementation of the proposed new IRF-PAI item, so that these 
IGCs could still be used to presumptively determine an IRF's compliance 
with the 60 percent rule. The commenter also suggested that the new 
IRF-PAI item and associated limited medical review should replace the 
current policy of requiring a full medical review if an IRF fails the 
presumptive compliance method.
    Response: We agree with the commenter's suggestion that the 
effective date of the removal of IGC 0006.1--Rheumatoid Arthritis and 
IGC 0006.9--Other Arthritis should coincide with the implementation of 
the new proposed IRF-PAI item. Additionally, we believe that it makes 
the most sense to implement the changes to the presumptive methodology, 
both those that were finalized in the FY 2014 IRF PPS final rule and 
those that we are finalizing in this section of this final rule, for 
compliance review periods beginning on or after October 1, 2015, to aid 
in mitigating the potential burden for additional medical review as a 
result of the finalized policy changes. As discussed in more detail in 
section X. of this final rule, the new IRF-PAI item for arthritis 
conditions will allow IRFs to indicate whether there are any arthritis 
codes (either IGC or ICD-9-CM diagnosis codes) on a patient's IRF-PAI 
that meet all of the regulatory requirements specified in Sec.  
412.29(b)(2)(x), (xi), or (xii). If so, then we will perform a limited 
medical review on these cases to ensure that the requirements are met. 
If we find that all of the requirements are met, those arthritis cases 
will be allowed to count toward the IRF's presumptive compliance 
percentage. As the new IRF-PAI item is being added for IRF discharges 
occurring on or after October 1, 2015, we believe it makes sense to 
delay the effective dates of the changes to the presumptive methodology 
finalized in the FY 2014 IRF PPS final rule and those changes to the 
presumptive methodology being finalized in this section of this final 
rule. Therefore, we are delaying the effective date of the presumptive 
methodology changes finalized in the FY 2014 IRF PPS final rule and the 
additional presumptive methodology changes that we are finalizing in 
this section of this final rule, so that they will become effective for 
compliance review periods beginning on or after October 1, 2015.
    However, we do not agree with the suggestion that the limited 
medical review should replace the full medical review entirely. The 
medical review method has been the more detailed and comprehensive 
method for enforcing the 60 percent rule since the rule was first 
implemented in the mid-1980s, and continues to be an important way of 
accurately determining whether IRFs meet the criteria in Sec.  
412.29(b) to be excluded from the IPPS and be paid instead under the 
IRF PPS.
    Comment: One commenter expressed concern that the changes to the 
presumptive compliance methodology finalized in the FY 2014 IRF PPS 
final rule and the changes proposed in the FY 2015 IRF PPS proposed 
rule constitute an ``end run'' around the statutory limit on the 
compliance threshold of 60 percent established by Congress.
    Response: We disagree with the commenter's assertion that we are 
changing the 60 percent compliance threshold. We do not believe that 
the changes finalized in the FY 2014 IRF PPS final rule or the changes 
proposed in the FY 2015 IRF PPS proposed rule erode the underlying 
principle of the 60 percent rule that requires an IRF to demonstrate 
that it ``served an inpatient population of whom at least 60 percent 
required intensive rehabilitation services for treatment of one or more 
of the conditions specified at paragraph (b)(2).'' We are not revising 
the criteria that govern the 13 medical conditions that may be counted 
toward an IRF's 60 percent rule compliance percentage. As we have 
stated in the FY 2014 IRF PPS final rule and the FY 2015 IRF PPS 
proposed rule, we are refining the lists used for the presumptive 
compliance methodology because we believe that certain ICD diagnosis 
codes on the lists do not necessarily demonstrate a patient's meeting 
the medical condition (including severity and prior treatment) 
requirements for inclusion in a facility's 60 percent compliance 
calculation under the presumptive methodology method. Thus, we are 
removing these codes so that the presumptive methodology lists better 
reflect the regulations. Furthermore, the criteria under which a case 
may count under medical review have not changed.
    Comment: Several commenters stated that ICD-9-CM codes 820.8--
Closed fracture of unspecified part of neck of femur and 820.9--Open 
fracture of unspecified part of neck of femur should not be exclusions 
under IGC 0008.11--Status Post Unilateral Hip Fracture and IGC 
0008.12--Status Post Bilateral Hip Fractures. The commenters said that 
the ICD-9-CM codes 820.8 and 820.9 are often used as Etiologic 
Diagnoses in combination with IGCs 0008.11 and 0008.12. One commenter 
said that the diagnosis codes 820.8 and 820.9 still represent a hip 
fracture and that the more specific information regarding where on the 
neck of the femur the fracture occurred would not be readily available 
to the IRF and would in any case not meaningfully impact care.
    Response: The use of an ICD-9-CM code beginning with 820, by 
definition, indicates that the patient has experienced a fracture of 
the neck of the femur. However, this code requires that decimal points 
be used following the number to ensure specificity. Diagnosis codes 
820.00 through 820.32, by differentiating between an intracapsular and 
an extracapsular fracture of the proximal femur, provide a degree of 
specificity not offered by diagnosis codes 820.8 and 820.9. Therefore, 
as we proposed, we will exclude ICD-9-CM codes 820.8 and 820.9 as 
Etiologic Diagnosis codes under IGC 0008.11--Status Post Unilateral Hip 
Fracture and IGC 0008.12--Status Post Bilateral Hip Fractures. IGC 
0008.11 and IGC 0008.12 will continue to count toward 60 percent 
compliance under the presumptive compliance method if coded with 
Etiologic Diagnosis codes 820.00 through 820.32.
    Final Decision: After carefully considering the comments that we 
received on the proposed changes to the IGCs That Meet Presumptive 
Compliance Criteria, we are revising the list of excluded ICD-9-CM 
diagnosis codes for some IGCs from ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria'' as follows: We are removing the ICD-
9-CM diagnosis code exclusions under IGC 0008.51 through IGC 0008.72. 
We are also excluding ICD-9-CM diagnosis code 850.0 under IGC 0002.22. 
The final ``Impairment Group Codes That Meet Presumptive Compliance 
Criteria'' list that reflects specific changes to the proposed policies 
listed above, is available for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. The presumptive methodology 
changes that we had finalized in the FY 2014 IRF

[[Page 45900]]

PPS final rule and the additional presumptive methodology changes that 
we are finalizing in this section of this final rule will become 
effective for compliance review periods beginning on or after October 
1, 2015.

IX. Data Collection of the Amount and Mode (Individual, Concurrent, 
Group, and Co-Treatment) of Therapy Provided in IRFs According to 
Occupational, Speech, and Physical Therapy Disciplines

    Prior to the implementation of the IRF PPS in January 2002, 
Medicare payment for IRF services under section 101(a) of the Tax 
Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-248, enacted 
September 3, 1982) was based on the reasonable costs incurred in 
furnishing services to Medicare beneficiaries, subject to a limit on 
allowable costs per discharge. Thus, for therapy services, Medicare 
reimbursed IRFs based on the reasonable costs incurred in furnishing 
appropriate levels of Individual Therapy or Group Therapy, which meant 
that IRFs had limited financial incentives to provide more of one mode 
of therapy than another. We presumed that decisions about the mode of 
therapy delivery were likely to be based on the needs of the patient 
and on the best way to assist patients in meeting their individualized 
rehabilitation goals. With the advent of the IRF PPS beginning in 
January 2002, Medicare began reimbursing IRFs using a set prospective 
payment amount that was intended to cover the costs of all treatment 
and services, including therapy services, provided to patients in the 
IRF. This increased the financial incentives for IRFs to give patients 
more Group Therapy and less Individual Therapy, because Individual 
Therapy is more costly to provide. Although we know that the financial 
incentives for the provision of Individual Therapy and Group Therapy 
changed, we do not know whether IRFs provided different modes of 
therapy in response to the new incentives or how much Individual 
Therapy and Group Therapy IRFs currently provide. Medicare does not 
currently collect data from IRFs on the amount of Individual, 
Concurrent, Group, and Co-Treatment Therapies provided by therapy 
discipline. We believe that it is important to begin collecting these 
data to determine what services Medicare is paying for under the IRF 
prospective payment system, which would allow us to analyze whether we 
are paying appropriately for services currently rendered by IRFs. 
Medicare administrative data (such as the IRF claims data) do not 
currently provide the level of detailed information about the mode and 
type of therapy provided to IRF patients that we need to perform these 
analyses. Thus, this proposed new data collection will assist us in the 
development of appropriate coverage and payment criteria for the 
provision of Group Therapy in the IRF setting. We believe that these 
coverage and payment criteria are important to balance the beneficial 
aspects of Group Therapy for certain patients in certain instances with 
the IRF requirements for an intensive rehabilitation therapy program.
    In the FY 2010 IRF PPS proposed rule (74 FR 21070, 21071), in which 
we proposed a revised set of Medicare coverage requirements for IRF 
services, we discussed the relative value of Individual Therapy versus 
Group Therapy in the IRF setting. To improve our understanding of when 
Group Therapy is most appropriate in IRFs, we solicited comments in 
that proposed rule on the types of patients for whom Group Therapy is 
appropriate, and the specific amount of Group Therapy that may be 
beneficial for these types of patients. Subsequently, we discussed the 
comments in the FY 2010 IRF PPS final rule (74 FR 39796, 39797). 
Although the comments on the FY 2010 IRF PPS proposed rule did not 
offer any clinical study results or any data that would be helpful to 
us in developing coverage and payment criteria for the provision of 
Group Therapy in IRFs, the comments did suggest an important role for 
Group Therapy in the provision of therapies in IRFs. However, the 
majority of commenters remarked that Group Therapy should be limited in 
some way. Many commenters agreed that Group Therapy is a good adjunct 
to Individual Therapy, but should not be the primary source of therapy 
services provided in IRFs. Several commenters recommended that we limit 
the amount of Group Therapies provided in IRFs, and that we also limit 
the number of patients who can participate in a Group Therapy session. 
Commenters also suggested that Group Therapy sessions should be 
comprised of patients with similar diagnoses. We agreed with the 
commenters that Group Therapy should not be the primary source of 
therapy given to patients in IRFs. Group Therapy should be used in IRFs 
primarily as an adjunct to Individual Therapy services, which is the 
standard of care in IRFs, as Group Therapy may not uniformly represent 
the level of intensive rehabilitation therapy required and paid for in 
the IRF setting. In the final rule, we also stated that we would 
consider adopting specific coverage and payment criteria for Group 
Therapy practice in IRFs through future rulemaking.
    When an authorized clinician deems it to be necessary, we continue 
to believe that Group Therapy can serve as an appropriate mode of 
therapy delivery that can be beneficial to the particular needs of IRF 
patients as an adjunct to Individual Therapy. Anecdotally, we 
understand that Group Therapy remains a widely used mode of therapy in 
the IRF setting. But as we stated in the FY 2010 IRF PPS final rule, we 
believe that it would be inappropriate for IRFs to provide essentially 
all therapy in the form of Group Therapy because we do not believe that 
this is in the best interest of the patients, or that it reflects the 
services for which the IRF prospective payment system was established 
to pay. Therefore, to better understand the ways in which therapy 
services are currently being provided in IRFs, we are adding a new 
Therapy Information Section to the IRF-PAI to record the amount and 
mode of therapy (that is, Individual, Concurrent, Group, and Co-
Treatment) patients receive in each therapy discipline (that is, 
physical therapy, occupational therapy, and speech-language pathology).
    For purposes of recording therapy services in IRFs, we proposed to 
define Individual Therapy as the provision of therapy services by one 
licensed or certified therapist (or licensed therapy assistant, under 
the appropriate direction of a licensed or certified therapist) to one 
patient at a time (this is sometimes referred to as ``one-on-one'' 
therapy). In the proposed rule, we defined Group Therapy as the 
provision of therapy services by one licensed or certified therapist 
(or licensed therapy assistant, under the appropriate direction of a 
licensed or certified therapist) to between 2 and 6 IRF patients at one 
time, regardless of whether those 2 to 6 IRF patients are performing 
the same activity or different activities. As discussed in our 
responses to comments below, we will instead define Group Therapy as 
one licensed or certified therapist (or licensed therapy assistant, 
under the appropriate direction of a licensed therapist) treating 2 to 
6 patients at the same time who are performing the same or similar 
activities. We proposed to define Co-Treatment as the provision of 
therapy services by more than one licensed or certified therapist (or 
licensed therapy assistant, under the appropriate direction of a 
licensed therapist) from different therapy disciplines to one patient 
at the same time. For example, Co-Treatment could involve one physical 
therapist and one occupational therapist working with one patient at

[[Page 45901]]

the same time to achieve the patient's goals. Because Co-Treatment is 
appropriate for specific clinical circumstances and is not suitable for 
all patients, its use should be limited. As discussed in our responses 
to comments below, we will define Concurrent Therapy as one licensed or 
certified therapist treating 2 patients at the same time who are 
performing different activities.
    We will collect this information in a new Therapy Information 
Section on the IRF-PAI, which will be effective for IRF discharges 
beginning on or after October 1, 2015. The new Therapy Information 
section will be completed as part of the patient's discharge 
assessment. In this new section, the IRF will record how many minutes 
of Individual, Concurrent, Group, and Co-Treatment Therapies the 
patient received, according to each therapy discipline (that is, 
physical therapy, occupational therapy, and speech-language pathology), 
during the first week (7 calendar day period) of the IRF stay; how many 
minutes of Individual, Concurrent, Group, and Co-Treatment Therapies 
the patient received, according to each therapy discipline, during the 
second week (7 calendar day period) of the IRF stay. In the proposed 
rule, we proposed that IRFs would also collect the average number of 
minutes of Individual, Group, and Co-Treatment therapies the patient 
received, according to each therapy discipline, during all subsequent 
weeks (7 calendar day periods) of the IRF stay, beginning with the 
third week. For Co-Treatment, each therapist will record the amount of 
time spent with the patient. That is, if a physical therapist and an 
occupational therapist both worked with the patient from 9:00 a.m. to 
9:30 a.m., then each therapist would record 30 minutes with the patient 
in the Co-Treatment section of the IRF-PAI. The draft of the IRF-PAI 
for FY 2016 that includes this new Therapy Information section is 
available for download from the IRF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the publication of this final rule. We 
will use these data for the following purposes:
     To analyze the types of therapy services Medicare is 
currently paying for under the IRF prospective payment system; and
     To monitor the amount of therapy given and the use of 
different therapy modes in IRFs to support future rulemaking in this 
area.
    For example, we are considering using these data to propose limits 
on the amount of Group Therapy that may be provided in IRFs through 
future rulemaking. One such limit that we are currently considering is 
that an IRF patient may receive no more than 25 percent of his or her 
total therapy treatment time in Group Therapy, similar to the limit 
that currently exists in the skilled nursing facility (SNF) setting, as 
discussed in the FY 2000 SNF PPS and Consolidated Billing final rule 
(64 FR 41644, 41662). We specifically solicited public comment on all 
of these proposals, including whether 25 percent is the most 
appropriate limit to establish for the IRF setting.
    We received 43 comments on the data collection regarding the amount 
and mode (Individual, Concurrent, Group, and Co-Treatment) of therapy 
provided in IRFs according to Occupational, Speech, and Physical 
Therapy Disciplines, which are summarized below.
    Comment: Overall, several commenters supported CMS's proposed 
therapy collection item on the IRF-PAI, with one commenter indicating 
that collection of these data could lead to significant improvements in 
quality of care and accuracy of payments in the IRF PPS.
    Response: We appreciate the support from the commenters regarding 
the new therapy item on the IRF-PAI. To date, we have been unable to 
track changes in the provision of therapy to patients because Medicare 
does not collect data on therapy modalities (Individual, Concurrent, 
Group, and Co-Treatment) by each therapy discipline (that is, physical 
therapy, occupational therapy, and speech-language pathology). We 
believe that by adding this item to the IRF-PAI, we will be able to 
determine the current services for which Medicare is paying and whether 
limits on the amount of group therapy that may be provided to IRF 
patients are needed.
    Comment: Several commenters expressed concern that the proposed 
collection method changes the collection criteria for the weeks 
subsequent to the second week. Commenters suggested that this change 
introduces the potential for confusion and error because facilities 
will have to monitor every patient on the unit to determine when the 
third week of the stay will begin. Additionally, these commenters 
suggested that we should collect data on the total number of minutes of 
therapy provided to patients, by mode and type of therapy, only once at 
discharge based on the total number of minutes provided to the patient 
throughout the IRF stay, as it would lessen the burden of the data 
collection.
    Response: After careful consideration of these comments, we agree 
that collecting average number of minutes of therapy, by mode and type 
of therapy, for weeks 3 and beyond may have the potential to create 
confusion for providers. For this reason and in order to minimize 
provider burden, we are choosing not to finalize this proposal, and 
will instead only collect total number of minutes of therapy by mode 
and discipline for weeks 1 and 2. We believe that it would greatly 
improve our understanding of the provision of therapy in IRFs to 
collect data on the amount of therapy provided, by mode and type of 
therapy, for week 1 of the IRF stay (that is, the first 7 consecutive 
calendar days starting with the day of admission) and for week 2 of the 
IRF stay (that is, the second 7 consecutive calendar days of the IRF 
stay). Since the average length of stay in an IRF is 13 days, and to 
minimize the burden of this data collection effort, we will not require 
data to be reported beyond week 2 of the IRF stay. We believe that 
collecting total number of minutes of therapy, by mode and type of 
therapy, only for weeks 1 and 2 of the IRF stay is sufficient to help 
us to be able to develop future policy and improve the quality of care 
and accuracy of payments in the IRF PPS. Additionally, since our intent 
is to collect the most specific information regarding therapy data that 
we can, we recognize that collecting the average amount of therapy for 
weeks 3 and on, will perhaps not provide us with the specificity that 
we are seeking at this time. However, we may propose to require data 
collection on weeks 3 and beyond of the IRF stay through future notice 
and comment rulemaking if we later determine that such data is needed 
to better inform future policymaking.
    While we recognize that the commenters believe that collecting the 
number of minutes of therapy, by mode and type of therapy, for the 
whole IRF stay only at the time of the patient's discharge from the IRF 
would lessen the burden of this data collection, we do not believe that 
this would provide us with level of detail that we believe we would 
need to develop future policy in this area or to understand what 
services we are paying for with the IRF benefit.
    Comment: Several commenters suggested that CMS should seek to 
achieve its objective of better understanding therapy usage and 
outcomes within IRFs, by funding a study on the utilization of various 
therapy modes in IRFs.
    Response: Unfortunately, we are not able to fund a study of therapy 
usage and outcomes, but we would welcome learning from such studies 
conducted by others. Clinical evidence linking

[[Page 45902]]

therapy usage with patient outcomes would greatly improve our 
understanding of these issues, and would not only enhance future 
policymaking in this area, but we believe would also inform and enhance 
the quality of care provided in IRFs and other post-acute care 
settings.
    Comment: Several commenters expressed concern regarding CMS's 
definition of each therapy mode, most specifically, Group Therapy. One 
commenter suggested that we should be more consistent in our 
definitions of the different modes of therapy across Medicare payment 
settings. Many of the commenters indicated that studies regarding the 
benefits of one mode of therapy over another are very limited, and 
wanted to know what clinical basis we used when deciding that a group 
should be comprised of 2-6 patients. Other commenters urged CMS to 
recognize Concurrent Therapy as a distinct mode of therapy and not 
include it in the Group Therapy definition.
    Response: After carefully reviewing the comments regarding the 
definitions of the different modes of therapy, we agree with commenters 
that Concurrent Therapy should be removed from the definition of Group 
Therapy and recognized as a distinct mode of therapy. We initially 
included Concurrent Therapy with Group Therapy because we wanted to 
lessen the burden on providers. However, we understand from the 
comments that separating out Concurrent Therapy from Group Therapy may 
actually make it easier for providers to report the data, as they 
already record data separately according to Concurrent Therapy and 
Group Therapy in the medical record. We also understand from the 
comments that it would make it easier for providers if we were to use 
the same definitions for the different modes of therapy, to the extent 
feasible, across Medicare's post-acute care settings. We believe that 
such consistency across settings will serve to improve the accuracy and 
reliability of the data we receive. As we also believe that it would be 
useful for us to better understand the provision of Concurrent Therapy 
in IRFs, separate from the provision of Group Therapy, we are revising 
our proposal, and will collect data instead on Individual, Concurrent, 
Group, and Co-Treatment Therapies.
    Furthermore, in response to comments, we will generally define 
these terms using the same definitions for Individual, Concurrent, and 
Co-Treatment, that we currently use in the SNF PPS (see Chapter 3 Sec. 
O of the Minimum Data Set (MDS) Manual, version 3.0 located at, http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html). We generally 
concur that, when appropriate, it is important to apply definitions 
consistently across Medicare's post-acute care settings. Thus, we are 
defining Individual Therapy as the provision of therapy services by one 
licensed or certified therapist (or licensed therapy assistant, under 
the appropriate direction of a licensed or certified therapist) to one 
patient at a time (this is sometimes referred to as ``one-on-one'' 
therapy), Co-Treatment as the provision of therapy services by more 
than one licensed or certified therapist (or licensed therapy 
assistant, under the appropriate direction of a licensed therapist) 
from different therapy disciplines to 1 patient at the same time, and 
Concurrent Therapy as one licensed or certified therapist treating 2 
patients at the same time who are performing different activities. 
However, we have decided not to use the exact SNF definition for Group 
Therapy in IRFs. Based on our review of the public comments, we believe 
it is appropriate to broaden the SNF definition for the purposes of 
this IRF data collection effort. We may still consider changes to the 
definition of Group Therapy for the IRF setting in the future, based on 
our review of the data we receive and based on any additional feedback 
from providers. In the SNF setting, the data collection regarding Group 
Therapy is used to allocate a therapist's time for the purpose of 
classifying a particular patient into the appropriate case-mix group 
for payment. Since the purpose of the data collection in the IRF 
setting differs, we believe that the same interpretation is not needed. 
Additionally, since we have decided to separate Concurrent Therapy from 
the definition of Group Therapy, we have changed the definition of 
Group Therapy to ensure patients are performing the same or similar 
activities. Two patients performing different activities would now be 
defined as Concurrent Therapy. We will define Group Therapy as the 
provision of therapy services by one licensed or certified therapist 
(or licensed therapy assistant, under the appropriate direction of a 
licensed or certified therapist) treating 2 to 6 patients at the same 
time who are performing the same or similar activities.
    We plan to update the IRF-PAI Training Manual to inform providers, 
in more detail, regarding completion of the Therapy Data Collection 
Section.
    We agree with many of the commenters that evidence regarding the 
clinical efficacy of the various modes of therapy for different patient 
populations is lacking. In the FY 2010 IRF PPS proposed rule (74 FR 
21052, 21070), we specifically asked for this type of information, and 
the commenters told us that such information is largely unavailable. We 
would welcome any information that might be available to better 
understand this issue. However, we believe that the absence of such 
clinical evidence makes it all the more imperative that we start by 
collecting data on the amounts, types, and modes of therapy provided in 
IRFs to inform future policymaking.
    We do not specifically know of the existence of any clinical 
evidence on the optimal number of patients for Group Therapy. We would 
be interested in any studies that developed such clinical evidence. In 
the absence of such evidence and solely for the purposes of collecting 
the data, we proposed to define Group Therapy as one therapist working 
with 2 to 6 patients at the same time. We proposed 6 patients as the 
upper limit for group therapy in IRFs because we believe that more than 
6 patients in a group would likely make the group more difficult for a 
therapist to supervise and manage, and might decrease the benefits to 
patients of the group interaction. We did not receive any comments 
suggesting that a Group Therapy session in an IRF should include more 
than 6 patients, and in fact received several comments in support of 
using 6 as an upper limit on the number of patients. Thus, we will use 
the definition of Group Therapy as one therapist working with 2 to 6 
patients who are all performing the same or similar activities solely 
for the purposes of this data collection effort. We may consider 
revising this definition for the IRF setting through future rulemaking 
based on the availability of new evidence or further feedback on this 
issue.
    Comment: While a few commenters were supportive of our 
consideration of 25 percent as the most appropriate limit to establish 
for the provision of Group Therapy in the IRF setting, the majority of 
commenters urged CMS not to by impose a 25 percent threshold limiting 
the amount of Group Therapy an IRF patient can receive. Many commenters 
said that a potential cap on the provision of Group Therapy in IRFs was 
premature in the absence of data and studies to support an appropriate 
limit. These commenters also indicated that such a limit would not 
sufficiently recognize the professional judgment of the treating 
clinicians who, they believe,

[[Page 45903]]

are best equipped to determine the modality and duration of therapy a 
patient needs. Additionally, several commenters suggested that IRF 
patients should not be held to the same therapy standards and 
assignment of minutes as SNF patients since the two populations are 
very different.
    Response: While we appreciate the positive feedback from the 
commenters who supported the idea of a potential threshold, after 
careful review of the comments, the majority of commenters suggested 
placing a cap on the amount of Group Therapy that IRF patients should 
receive would be premature at this time. We appreciate the concerns 
raised by these commenters and believe that it would be prudent to give 
more consideration to setting a cap, and the appropriate threshold for 
such a cap, regarding the provision of Group Therapy. We believe that 
collecting and analyzing the current delivery of therapy services will 
help inform any future policymaking. At such time that we believe a 
threshold is needed on the amount of Group Therapy provided, we will 
consider policy development through notice and comment rulemaking.
    If, through future rulemaking, we do decide to impose a Group 
Therapy threshold, we do not believe that this would limit the 
professional judgment of the treating clinicians. We know that 
clinicians are best equipped to determine the modality and duration of 
therapy that any particular patient needs. With that being said, we 
believe that the preponderance of therapy given in an IRF should be 
Individual, since that is the only way that we believe that an IRF 
patient is truly receiving the intensive rehabilitation therapy program 
typically provided in an IRF, and we want to be sure that continues to 
be the standard. A potential threshold for the provision of group 
therapy in IRFs would serve to further clarify what we mean by 
``preponderance.''
    Comment: One commenter expressed concern that we might believe that 
all IRF patients should receive 100 percent individual therapy. Another 
commenter suggested that we explicitly recognize the clinical value 
that Group Therapy provides over other therapy modes for certain 
patients.
    Response: We do not believe that all IRF patients should only 
receive individualized therapy. We understand that different types of 
patients need different motivation and various forms of therapy in 
order to achieve their therapy goals. As we indicated in the proposed 
rule (79 FR 26329), when an authorized clinician deems it to be 
necessary, we continue to believe that Group Therapy can serve as an 
appropriate mode of therapy delivery that can be beneficial to the 
particular needs of IRF patients as an adjunct to Individual Therapy. 
An important goal of rehabilitation is community reintegration and 
groups are important to that process. The interaction with other 
patients provides tremendous psychosocial benefits, providing 
encouragement and confidence in skills learned. However, we believe 
that the preponderance of therapy provided to patients in IRFs should 
be individual therapy in order to reflect the intensity of therapy 
provided in IRFs.
    Comment: Several commenters suggested that we provide additional 
information about how IRFs should allocate or attribute minutes among 
patients participating in a Concurrent Therapy or Group Therapy session 
on the IRF-PAI.
    Response: We will include more detailed information regarding 
completion of the Therapy Data Collection Section of the IRF-PAI in an 
update to the IRF-PAI Training Manual that we will post on the IRF PPS 
Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS prior to October 1, 2015.
    Final Decision: After careful consideration of the comments we 
received on the proposed therapy data collection on the IRF-PAI, we are 
finalizing our collection of data on the amount and mode (that is, 
Individual, Concurrent, Group, and Co-Treatment) of therapy provided in 
the IRF setting according to therapy discipline (that is, physical 
therapy, occupational therapy, and speech-language pathology). These 
data will be collected on a revised IRF-PAI form which is available for 
download from the CMS Web site [http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/index.html] in conjunction 
with this final rule. This requirement will become effective for IRF 
discharges occurring on or after October 1, 2015.

X. Revision to the IRF-PAI for Arthritis Conditions

    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we revised the list of ICD-9-CM diagnosis codes used to 
determine presumptive compliance, effective for compliance review 
periods beginning on or after October 1, 2014. As part of these 
revisions, we removed all of the ICD-9-CM codes for arthritis 
conditions because we found that such codes did not provide any 
information as to whether the patients met the severity and prior 
treatment requirement portions of the criteria for the medical 
conditions that may be counted toward an IRF's compliance percentage 
under the presumptive compliance method. As we said in the FY 2014 IRF 
PPS final rule, we did not adopt any and all arthritis conditions in 
the May 7, 2004, final rule (69 FR 25752). Rather, we only included 
certain kinds of arthritic conditions which met defined severity and 
prior treatment requirements. We anticipated that less severe arthritic 
conditions could be satisfactorily managed outside of IRFs, as these 
cases would not require the intensive therapy provided in the inpatient 
rehabilitation setting.
    We received a number of comments on the FY 2014 IRF PPS proposed 
rule (78 FR 26880) regarding the proposed removal of the ICD-9-CM codes 
for arthritis. The majority of commenters suggested that removing ICD-
9-CM codes for arthritis would increase the use of the medical review 
method, which is more burdensome for both CMS and for IRFs. Several 
commenters suggested that IRFs should not be required to undergo a 
``full medical review'' if they fail to meet the required compliance 
percentage using the presumptive compliance method. Instead, commenters 
suggested use of a ``limited medical review'' in which only arthritis 
and systemic vasculidities cases would be reviewed. We said in the FY 
2014 IRF PPS final rule (78 FR 47860 at 47888 through 47889) that we 
would use the time afforded by the 1-year delayed implementation to 
consider the feasibility of minimizing any burdens created by the 
operational aspects of this policy.
    In keeping with what we stated in the FY 2014 IRF PPS final rule, 
in the FY 2015 IRF PPS proposed rule (79 FR 26308 at 26330 through 
26331), we proposed to add an item to the IRF-PAI form for an IRF to 
record the specific arthritis diagnosis code(s) for each patient that 
meets the severity and prior treatment requirements outlined in the 
regulation. By coding arthritis diagnosis codes in this section, the 
IRF would indicate that the patient's arthritis conditions met all of 
the severity and prior treatment requirements (as outlined in 
regulation at Sec.  412.29(b)(2)(x) through Sec.  412.29(b)(2)(xii)) to 
be counted toward an IRF's compliance percentage under the presumptive 
compliance method.
    The purpose of the proposed new item is to provide us with the 
additional severity and prior treatment information necessary for us to 
identify the arthritis diagnoses that are appropriate to count toward 
an IRF's compliance percentage under the presumptive compliance

[[Page 45904]]

method, thus reducing the medical review burden. If an IRF's 
presumptive compliance percentage is below the compliance threshold 
(currently, 60 percent), but inclusion of the arthritis codes reported 
in the new proposed data item would result in the IRF's presumptive 
compliance percentage meeting or exceeding the compliance threshold, 
then we proposed to perform a ``limited'' medical review on a 
statistically valid random sample of the cases documented under this 
new proposed item to ensure that the severity and prior treatment 
requirements were actually met. The number of cases from the 
statistically valid random sample found to meet the severity and prior 
treatment requirements would be extrapolated to the total number of 
cases documented under the new proposed item (that is, if 70 percent of 
the cases in the statistically valid random sample meet the severity 
and prior treatment requirements, we would presume that 70 percent of 
all of the cases documented in the new proposed item met the severity 
and prior treatment requirements). If the IRF's presumptive compliance 
percentage meets or exceeds the compliance threshold (currently, 60 
percent) with the addition of the compliant cases documented under the 
new proposed item, then the IRF will be presumed to meet the 60 percent 
rule requirements using the presumptive compliance method. However, if 
the number of compliant cases documented under the new proposed item 
does not result in the IRF's presumptive compliance percentage meeting 
or exceeding the compliance threshold (currently 60 percent), then the 
normal medical review procedures for IRFs not meeting the compliance 
threshold (currently 60 percent) under the presumptive compliance 
method would apply. A draft of the proposed new IRF-PAI for FY 2016, 
with the new proposed item, was made available for download on the IRF 
PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the 
release of the proposed rule.
    The purpose of the proposal is to reduce the medical review burden 
associated with the removal of the ICD-9-CM codes for arthritis 
conditions from the presumptive methodology, while still allowing us to 
ensure that the arthritis diagnosis codes included in the calculation 
of an IRF's compliance percentage under the presumptive compliance 
method meet the severity and prior treatment regulatory requirements.
    We received 21 comments on our proposed revision to the IRF-PAI to 
add a data item for arthritis conditions, which are summarized below.
    Comment: Several commenters supported the proposed revision to the 
IRF-PAI to allow providers to indicate whether the case coded with the 
arthritis condition met the prior treatment and severity requirements. 
Commenters especially supported the associated limited medical review 
process as described in the proposed rule. However, many commenters 
said that asking IRFs to code the arthritis diagnosis codes twice would 
create confusion, increase provider burden, and possibly lead to 
duplicative coding. Several commenters suggested that we instead 
provide for a simplified yes/no field on the IRF-PAI to indicate 
whether the case meets the prior treatment and severity regulatory 
requirements.
    Response: We appreciate the commenters' suggestions. Based on our 
review of the suggestions offered by the commenters, we believe that a 
much simpler approach than what we had proposed would be to provide an 
item on the IRF-PAI allowing the IRF to indicate whether or not the 
IRF-PAI contains any arthritis codes which meet the severity and prior 
treatment regulatory requirements at Sec.  412.29(b)(2)(x) through 
Sec.  412.29(b)(2)(xii). This approach would also be easier to 
administer. Thus, we are adopting this change to item 24A of 
the IRF-PAI form, instead of the additional IRF-PAI item that had been 
proposed for that item. The new item 24A would instead ask the 
IRF to mark the box if there are any arthritis codes listed in items 
21, 22, or 24 that meet the severity and prior treatment 
regulatory requirements at Sec.  412.29(b)(2)(x) through Sec.  
412.29(b)(2)(xii).
    Comment: Several commenters indicated that IRFs are sometimes 
unable to obtain the necessary information about a patient's course of 
treatment prior to the IRF admission. These commenters suggested that 
the prior treatment requirements should be removed from the regulation.
    Response: The requirement that patients with arthritis conditions 
admitted to IRFs must not have shown adequate improvement following an 
appropriate, aggressive, and sustained course of outpatient therapy 
services or services in other less intensive rehabilitation settings 
has been in regulation since this requirement was finalized in the May 
7, 2004 final rule (69 FR 25752). As stated in that final rule, the 
rehabilitation prescriptions for many types of arthritis conditions, 
especially osteoarthritis, typically involve outpatient therapy several 
times a week for 4 weeks or more. Although we recognized in that final 
rule that some very unusual cases may require intensive therapies and 
the interdisciplinary approach to care typically provided in IRFs, we 
believe that patients should have participated in a required course of 
appropriate, sustained, and aggressive outpatient treatment (or 
treatment in a less-intensive setting) which failed to improve the 
patient's condition in order to demonstrate that the IRF admission is 
reasonable and necessary. This requirement allows us to be able to 
count toward the 60 percent rule those ``exceptional'' cases that the 
IRF is able to demonstrate truly require the intensive and 
interdisciplinary level of care provided in an IRF, without counting 
the majority of cases we believe do not represent the type of patient 
requiring intensive rehabilitation in an IRF.
    These requirements have been in regulation for almost a decade. 
Until now, IRFs have not expressed any concerns to us regarding their 
inability to obtain the required prior treatment information, and many 
IRFs treat a significant number of these patients. We do not believe 
difficulties obtaining prior treatment information are a widespread 
problem among IRFs. Further, we believe that a patient's prior course 
of treatment is useful and important clinical information for the 
treating physicians and therapists in the IRF to design the most 
effective treatment plan for the patient. Thus, we believe that the 
prior treatment information is necessary and important information for 
the IRF to obtain, both to meet the regulatory requirements and to 
provide the most effective care to the patient, and we disagree with 
the commenter's suggestion that this requirement should be removed from 
the regulation.
    Final Decision: After carefully considering the comments we 
received on the proposed new item on the IRF-PAI to indicate the 
arthritis codes that meet the prior treatment and severity regulatory 
requirements, we are modifying our proposal, based on the commenters' 
suggestions, to simplify it. Instead of the new item we had proposed 
for item 24A on the IRF-PAI, we will instead ask IRFs to mark 
the box in item 24A if there are any arthritis codes listed in 
items 21, 22, or 24 that meet the severity and prior treatment 
regulatory requirements at Sec.  412.29(b)(2)(x) through

[[Page 45905]]

Sec.  412.29(b)(2)(xii). If an IRF's presumptive compliance percentage 
is below the compliance threshold (currently, 60 percent), but 
inclusion of the cases that have been marked in the affirmative in the 
new item 24A in the IRF's presumptive compliance percentage 
would cause the IRF's presumptive compliance percentage to exceed 60 
percent, then we will perform a ``limited'' medical review on a 
statistically valid random sample of such cases. The number of cases 
from the statistically valid random sample that are found to meet the 
severity and prior treatment requirements would be extrapolated to the 
total number of cases that have been marked in the affirmative by the 
IRF in the new item 24A. For example, if 70 percent of the 
IRF's cases in the statistically valid random sample are found to meet 
the severity and prior treatment requirements, we would presume that 70 
percent of all of the IRF's cases marked in the affirmative by the IRF 
in the new item 24A met the severity and prior treatment 
requirements. If the IRF's presumptive compliance percentage meets or 
exceeds the compliance threshold (currently, 60 percent) with the 
addition of the compliant cases that are found to meet the severity and 
prior treatment requirements by this method, then the IRF will be 
presumed to meet the 60 percent rule requirements using the presumptive 
compliance method. However, if the number of compliant cases that are 
found to meet the severity and prior treatment requirements by this 
method do not result in the IRF's presumptive compliance percentage 
meeting or exceeding the compliance threshold (currently 60 percent), 
medical review procedures for IRFs not meeting the compliance threshold 
(currently 60 percent) under the presumptive compliance method would 
apply. A draft of the proposed new IRF-PAI for FY 2016, with the 
simpler item 24A, is available for download on the IRF PPS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with this final rule.
    Because item 24A is specifically intended to mitigate some 
of the burden of additional medical reviews that would be required as a 
result of the refinements to the presumptive compliance method that are 
finalized in section VIII of this final rule, we believe that this 
change to the IRF-PAI should have an effective date that is as close as 
possible to the effective date of the refinements to the presumptive 
compliance method. However, as noted in section VIII of this final 
rule, the refinements to the presumptive compliance method are 
effective for compliance review periods beginning on or after October 
1, 2015, but changes to the IRF-PAI must instead be implemented for all 
IRF discharges occurring on or after a specific date and cannot be done 
on a compliance review period basis. Thus, an effective date for new 
IRF-PAI item 24A of October 1, 2015, will enable this change 
to take effect on or before any IRFs are subject to the new presumptive 
compliance method. This change to the IRF-PAI is effective for IRF 
discharges on or after October 1, 2015.

XI. International Classification of Diseases, 10th Revision, Clinical 
Modification (ICD-10-CM), Conversion

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

    As described in section I.C. of this final rule, IRFs are required 
to complete the appropriate sections of a PAI, designated as the IRF-
PAI, upon the admission and discharge of a Medicare Part A Fee-for-
Service patient. In addition, beginning with IRF discharges occurring 
on or after October 1, 2009, the IRF is also required to complete the 
appropriate sections of the IRF-PAI upon the admission and discharge of 
each Medicare Part C (Medicare Advantage) patient, as described in the 
FY 2010 IRF PPS final rule (74 FR 39762, 39798 through 39800). Several 
sections of the IRF-PAI (currently, items 22, 24, 46, and 47) 
require IRFs to report diagnosis information for patients. Until ICD-
10-CM becomes the required medical data code set for use on Medicare 
claims and IRF-PAI submissions, we will continue to use the ICD-9-CM 
medical data code set. Medicare uses the diagnosis information recorded 
on the IRF-PAI for the following purposes:
    (1) To case-mix adjust the IRF PPS payment for a patient by 
assigning the patient to an appropriate payment tier based on the 
patient's comorbidities.
    (2) To determine, using the presumptive compliance method, whether 
an IRF presumptively meets the 60 percent rule requirements in Sec.  
412.29(b).
    As described in more detail in the FY 2002 IRF PPS final rule (66 
FR 41316), we developed a list of diagnosis codes (previously, ICD-9-CM 
codes) that, if coded as a comorbidity in item 22 on a 
patient's IRF-PAI, would result in that patient being assigned to one 
of three higher-paying payment tiers under the IRF PPS. In the FY 2006 
IRF PPS final rule (70 FR 57166), we updated and revised the list of 
diagnosis codes (at that time, ICD-9-CM codes). We refer to the current 
list of diagnosis codes that, if present on a patient's IRF-PAI, result 
in the patient being assigned to a higher-paying tier as the ``List of 
Comorbidities'' in this final rule.
    In addition to determining the appropriate tier assignment for 
case-mix adjusting IRF PPS payments, the diagnosis coding on the IRF-
PAI is also used within the presumptive compliance method that 
typically serves as the first step in determining an IRF's compliance 
with the 60 percent rule. As discussed in more detail in section VII. 
of this final rule, the presumptive compliance method is one of two 
ways that MACs may evaluate an IRF's compliance with the 60 percent 
rule (the other method being the medical review method). The diagnosis 
coding on the IRF-PAI assessments from an IRF's most recently completed 
12-month compliance review period are examined (with the use of a 
computer program) to determine whether they contain any of the 
diagnosis codes that are listed in the ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria'' (which is also known as the 
presumptive methodology list).
    Additionally, the computer program examines the impairment group 
codes, which are not ICD-9-CM or ICD-10-CM codes, but are instead part 
of a separate unique set of codes specifically developed for the IRF 
PPS for assigning the primary reason for admission to an IRF. The 
computer program compares the impairment group codes listed in item 
21 to the list of ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria'' to determine whether the patient's 
impairment group code presumptively meets the 60 percent rule 
requirements. In certain cases, the list of ``Impairment Group Codes 
That Meet Presumptive Compliance Criteria'' contains Etiologic 
Diagnosis exclusions. For example, impairment group code 0005.4, which 
represents a unilateral lower limb amputation below the knee is 
included on the list of ``Impairment Group Codes that Meet Presumptive 
Compliance Criteria,'' unless the associated Etiologic Diagnosis 
recorded on the patient's IRF-PAI in item 22 is 895.0 (under 
ICD-9-CM), which indicates a traumatic amputation of the toe or toes. 
Therefore, the list of ``Impairment Group Codes That Meet Presumptive 
Compliance Criteria'' contains diagnosis code information (currently 
ICD-9-CM codes) in addition to impairment group codes.
    These lists contain diagnosis code information (currently in the 
form of

[[Page 45906]]

ICD-9-CM diagnosis codes) which is used to case-mix adjust payments, 
determine an IRF's presumptive compliance with the 60 percent rule, and 
to assist IRFs in accurately completing the impairment group code 
information on the IRF-PAI. As such, these lists must all be converted 
to ICD-10-CM for the IRF PPS to assign payments and classify IRF 
facilities appropriately when ICD-10-CM becomes the required medical 
data code set for use on Medicare claims and IRF-PAI submissions.

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

    In the September 5, 2012, final rule, ``Administrative 
Simplification: Adoption of a Standard for a Unique Health Plan 
Identifier; Addition to the National Provider Identifier Requirements; 
and a Change to the Compliance Date for the International 
Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) 
Medical Data Code Sets'' (77 FR 54664), the Department of Health and 
Human Services announced a delay in the implementation of the ICD-10-CM 
and ICD-10-PCS code sets from October 1, 2013, to October 1, 2014. The 
transition to the ICD-10 code sets is required for entities covered by 
the Health Insurance Portability and Accountability Act of 1996 
(HIPAA). On April 1, 2014, the Protecting Access to Medicare Act of 
2014 (Pub. L. No. 113-93) (PAMA) was enacted. Section 212 of PAMA, 
titled ``Delay in Transition from ICD-9 to ICD-10 Code Sets,'' provides 
that ``[t]he Secretary of Health and Human Services may not, prior to 
October 1, 2015, adopt ICD-10 code sets as the standard for code sets 
under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) 
and section 162.1002 of title 45, Code of Federal Regulations.'' As of 
now, the Secretary has not implemented this provision under HIPAA.
    We are addressing the conversion of ICD-9-CM to ICD-10-CM codes for 
the IRF PPS in this final rule, but in light of PAMA, the effective 
date of those changes would be the date when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions. Until that time, we will continue to require use of the 
ICD-9-CM codes for the IRF PPS.
    CMS, along with our support contractor 3M, has spent several years 
implementing a process for the transition from the use of ICD-9-CM 
diagnosis codes to ICD-10-CM codes within both the IRF PPS Grouper and 
the software for evaluating IRFs' compliance with the 60 percent rule. 
As this will be the first time that ICD-10-CM codes have been used for 
the IRF PPS, we invited public comment in the proposed rule on our 
translation of the diagnosis code lists into ICD-10-CM.
    To ensure a smooth transition from the use of ICD-9-CM diagnosis 
codes to ICD-10-CM codes for the IRF PPS and to allow for public 
comment on these lists, we proposed ICD-10-CM lists that were available 
for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. 
The proposed ICD-10-CM code lists were intended to be used when ICD-10-
CM becomes the required medical data code set for use on Medicare 
claims and IRF-PAI submissions. To convert these lists from ICD-9-CM to 
ICD-10-CM, we used the General Equivalence Mappings (GEMs) that were 
developed as a tool to assist in converting ICD-9-CM-based applications 
to ICD-10-CM. The GEMs tool is a comprehensive translation dictionary 
that was developed over a 3-year period by CMS and the Centers for 
Disease Control and Prevention (CDC), with input from both the American 
Hospital Association and the American Health Information Management 
Association (AHIMA). They can be used to translate any ICD-9-CM-based 
data into ICD-10-CM. For more information on GEMs, please refer to the 
General Equivalence Mappings Frequently Asked Questions Booklet, which 
is available for download from the CMS Web site at http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. Like a 
translation dictionary, the GEMs tool is based on the complete meaning 
of a given code, where ``meaning'' refers to the correspondence between 
the official documents (tabular and index) that define each code set. 
The GEMs tool contains a complete and comprehensive bidirectional set 
of mappings between ICD-9-CM and ICD-10-CM.
    Our intention in converting the ICD-9-CM diagnosis codes to ICD-10-
CM diagnosis codes within the IRF PPS was for the converted codes to 
reflect the same ``meaning'' as the original codes. That is, except for 
the specific changes to the ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria'' list and to the ``ICD-9-CM Codes That 
Meet Presumptive Compliance Criteria'' list described in section VIII 
of this final rule, we did not intend to add conditions to, or delete 
conditions from, the ICD-9-CM codes used in the IRF PPS. Thus, for all 
IRF lists containing an ICD-9-CM code, we used the 2014 GEMs, which can 
be downloaded from the CMS Web site at http://www.cms.gov/Medicare/Coding/ICD10/2014-ICD-10-CM-and-GEMs.html to create a translation list, 
and then we reviewed and revised that translation list to ensure that 
all of the codes on the new ICD-10-CM list reflect as closely as 
possible the same ``meaning'' as the codes that were present on the old 
ICD-9-CM list.
    The majority of ICD-9-CM codes have straightforward translation 
alternative(s) in ICD-10-CM, where the diagnoses classified to a given 
ICD-9-CM code are replaced by one or more ICD-10-CM codes. Wherever 
possible, we erred on the side of including a given ICD-10-CM code if 
we believed that a patient coded with that ICD-10-CM code would have 
been correctly coded with the associated ICD-9-CM prior to the 
transition from ICD-9-CM to ICD-10-CM. Our intent is that the meaning 
of the diagnosis codes is thereby unchanged because all of the patient 
records that would have been correctly coded using the ICD-9-CM codes 
are correctly coded using one or more of the specific ICD-10-CM codes. 
For example, the ICD-9-CM code 582.1, ``Human herpesvirus 6 
encephalitis,'' translates directly to the ICD-10-CM code B1001, 
``Human herpesvirus 6 encephalitis.''
    Below, we note two issues within ICD-10-CM coding that differ from 
ICD-9-CM coding, and therefore, require special attention to ensure 
correct coding of patient diagnoses under ICD-10-CM.
     Combination Diagnosis Codes in ICD-9-CM and ICD-10-CM--
Both ICD-9-CM and ICD-10-CM contain diagnosis codes called combination 
codes, meaning that one code contains two or more diagnoses. Typically, 
one diagnosis in the combination code is a chronic disease, such as 
diabetes, and the other diagnosis is an associated manifestation or 
complication of the disease, such as diabetic nephropathy.
    ICD-10-CM contains many new combination codes that are not 
contained in ICD-9-CM. In terms of a coded record, this means that the 
same diagnoses coded with one ICD-10-CM combination code may require 
two or more ICD-9-CM codes to capture a comparable level of detail. In 
addition, ICD-9-CM contains combination codes with diagnosis 
terminology that was revised or deleted from ICD-10-CM, with the result 
that the same diagnoses coded with one ICD-9-CM code may require two or 
more ICD-10-CM codes to capture a comparable level of detail. For 
example, ICD-9-CM code 115.11, ``Infection by Histoplasma duboisii, 
meningitis'' translates to a pair of ICD-10-CM codes, ``B39.5--
Histoplasmosis

[[Page 45907]]

duboisii'' and code ``G02--Meningitis in other infectious and parasitic 
diseases classified elsewhere.'' In such instances, the intent of our 
policy is unchanged because the patient records that would have been 
correctly coded using the single ICD-9-CM code will now be correctly 
coded using a combination of ICD-10-CM codes. Furthermore, to maintain 
the same meaning and reflect the same diagnoses as the ICD-9-CM code in 
such instances, we require the patient's IRF-PAI record to have all of 
the relevant combination of ICD-10-CM codes present to reflect the 
condition on the list. If only one of the ICD-10-CM codes required to 
reflect the condition on the list is included on the IRF-PAI, the 
record will not accurately reflect the same diagnoses as the ICD-9-CM 
code. We note that, in some cases, IRFs may need to use a combination 
of ICD-10-CM codes to represent an Etiologic Diagnosis on the IRF-PAI 
form. For this reason, we will add additional spaces to the Etiologic 
Diagnosis field (Item 22) on the IRF-PAI, effective October 1, 
2015. The new draft IRF-PAI form for IRF discharges occurring on or 
after October 1, 2015, is available for download from the CMS Web site 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
     Seventh Character Extensions in ICD-10-CM--Certain codes 
in ICD-10-CM require the use of a seventh character in the code, where 
each seventh character of the code has one of the following meanings:
    ++ The seventh character ``A'' in the code indicates that the 
diagnosis is an initial encounter.
    ++ The seventh character ``D'' in the code indicates that the 
patient is receiving aftercare for the injury or illness.
    ++ The seventh character ``S'' in the code indicates that the 
patient no longer requires care for any aspect of the initial injury or 
illness itself, but that the patient is receiving care for a late 
effect of the injury or illness.
    In the IRF PPS context, these seventh character extensions only 
apply to ICD-10-CM diagnosis codes related to certain types of 
injuries. The corresponding ICD-9-CM diagnosis codes currently listed 
on the ``List of Comorbidities,'' ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria,'' and ``Impairment Group Codes That 
Meet Presumptive Compliance Criteria'' only map to the seventh 
character extensions of ``A'' and ``S,'' but not to the seventh 
character extension of ``D,'' using the GEMs tool. Thus, including 
codes under ICD-10-CM with the seventh character extension of ``D'' 
would mean adding conditions to the lists that were not included on the 
lists under ICD-9-CM. As we indicated previously, we did not intend to 
add, delete, or alter the conditions included on these lists in 
transitioning from ICD-9-CM to ICD-10-CM. Thus, we are not including 
ICD-10-CM codes with the seventh character extension of ``D'' on the 
ICD-10-CM versions of the ``List of Comorbidities,'' ``ICD-9-CM Codes 
That Meet Presumptive Compliance Criteria,'' or ``Impairment Group 
Codes That Meet Presumptive Compliance Criteria.'' In the IRF context, 
we define the patient as having a current diagnosis requiring the use 
of the seventh character extension of ``A'' if the patient requires 
current treatment for the injury and if the diagnosis has a direct 
effect on the patient's rehabilitation therapy program in the IRF.
    In addition, ICD-10-CM injury codes specify that traumatic 
fractures are coded using the appropriate seventh character extension 
for an initial encounter, where each seventh character of the code has 
one of the following meanings:
     The seventh character ``A'' in the code indicates that the 
diagnosis is an initial encounter for closed fracture.
     The seventh character ``B'' in the code indicates that the 
diagnosis is an initial encounter for open fracture.
     The seventh character ``C'' in the code indicates that the 
diagnosis is an initial encounter for open fracture type IIIA, IIIB, or 
IIIC.
    We used the GEMs tool and the guiding rationales described above to 
translate the following lists of ICD-9-CM diagnosis codes for the IRF 
PPS into lists of ICD-10-CM diagnosis codes:
     List of Comorbidities--This file contains the list of 
comorbidities (ICD-9-CM codes) that are used to determine placement in 
tiers within the IRF Grouper software. Placement in one of the higher-
paying tiers, which is triggered by the presence of one of the 
comorbidities on this list, results in a higher prospective payment 
amount for the IRF.
     ICD-9-CM Codes That Meet Presumptive Compliance Criteria--
This file contains the list of diagnoses (ICD-9-CM codes) that are used 
for determining presumptive compliance with the IRF 60 percent rule.
     Impairment Group Codes That Meet Presumptive Compliance 
Criteria--This file contains the list of IGCs that meet presumptive 
compliance criteria for the 60 percent rule. While the IGC codes 
themselves are not ICD-9-CM diagnosis codes, the file contains a list 
of Etiologic Diagnosis codes (ICD-9-CM codes) that are excluded from 
particular IGCs. That is, a given IGC that would otherwise meet the 
presumptive compliance criteria will not meet such criteria if the 
patient has one of the ``excluded'' Etiologic Diagnoses for that IGC.
    The converted ICD-10-CM code tables associated with each of these 
lists are available for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html in conjunction with this final 
rule.
    We received 3 comments on our proposed translation of the lists 
into ICD-10-CM, effective when ICD-10-CM becomes the required medical 
data code set for use on Medicare claims and IRF-PAI submissions, which 
are summarized below.
    Comment: One commenter expressed concern about using the GEMs tool 
as the only means of converting the diagnosis codes from ICD-9-CM to 
ICD-10-CM, as this commenter said that the GEMs tool is limited in its 
ability to capture all of the clinical nuances of the coding 
conversion. This commenter suggested some enhanced conversions related 
to specific codes.
    Response: As we described in the proposed rule, we used the GEMs 
tool as our starting point in converting the ICD-9-CM codes to ICD-10-
CM, but we also reviewed and revised the resulting translation list 
from GEMs to ensure that all of the codes on the new ICD-10-CM list 
reflect as closely as possible the same ``meaning'' as the codes that 
were present on the old ICD-9-CM list. Thus, we did not use the GEMs 
tool as the sole method of converting the codes, but instead started 
with the GEMs tool translation and then reviewed and revised the 
translated lists from a clinical perspective to ensure that we were 
appropriately capturing the clinical nuances of the ICD-9-CM to ICD-10-
CM conversions. We appreciate the commenter's specific suggestions 
regarding particular code translations, and we will carefully consider 
the suggestions in finalizing the ICD-10-CM lists for implementation 
when ICD-10-CM becomes the required medical data code set for use on 
Medicare claims and IRF-PAI submissions.
    Comment: One commenter requested that we provide a crosswalk from 
ICD-9-CM to ICD-10-CM to assist IRFs in better understanding the 
specific diagnosis codes that will be used for the IRF PPS when ICD-10-
CM becomes the required medical data code set for use on Medicare 
claims and IRF-PAI submissions.
    Response: The GEMs tool already provides a crosswalk from ICD-9-CM 
to ICD-10-CM, and it is readily available

[[Page 45908]]

for download from the CMS Web site at http://www.cms.gov/Medicare/Coding/ICD10/2014-ICD-10-CM-and-GEMs.html for use by all providers. We 
believe that providing a crosswalk ourselves apart from the GEMs tool 
that already exists would potentially create added confusion.
    Comment: One commenter expressed support for our proposal to use 
the GEMs tool to convert diagnosis codes from ICD-9-CM to ICD-10-CM, 
but indicated some specific ICD-10-CM codes that the commenter believed 
should be added to the various ICD-10-CM lists. The specific ICD-10-CM 
codes that this commenter suggested for inclusion on the lists are 
divided into 3 categories. The first category includes those ICD-10-CM 
codes that the commenter said they believe may represent 
inconsistencies between the GEMs tool conversion of ICD-9-CM codes and 
our proposed translation of those codes in the proposed ICD-10-CM code 
lists. The second and third categories contain ICD-10-CM diagnosis 
codes that represent clinical conditions that the commenter said they 
believe should be added to the ICD-10-CM Codes That Meet Presumptive 
Compliance Criteria and the List of Comorbidities, respectively, and 
that are not currently reflected on these same lists in ICD-9-CM.
    Response: We appreciate the commenter's detailed analysis of the 
converted ICD-10-CM lists that were published on the CMS Web site in 
conjunction with the proposed rule, and the specific suggestions this 
commenter provided regarding codes that we may have inadvertently 
omitted from the lists. We will carefully consider all of the specific 
ICD-10-CM codes that the commenter noted to ensure that we do not 
inadvertently omit any ICD-10-CM codes that should be included based on 
the use of the GEMs tool and our subsequent review and revision of 
these ICD-10-CM codes to ensure that they reflect the same clinical 
meaning as the ICD-9-CM codes that are currently on the respective 
lists. However, as we indicated in the proposed rule, we do not intend 
to add conditions to, or delete conditions from, the ICD-10-CM Codes 
That Meet Presumptive Compliance Criteria or the List of Comorbidities 
in translating the codes from ICD-9-CM to ICD-10-CM. Thus, at this 
time, we will not add the ICD-10-CM codes that would add additional 
clinical conditions to the lists. However, we will take the commenter's 
suggestions into consideration for future rulemaking.
    Final Decision: After carefully considering the comments that we 
received on our proposed translation of the ICD-9-CM code lists into 
ICD-10-CM using the GEMs tool, we are finalizing the ICD-10-CM lists 
that are available for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html for use when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions.

XII. Revisions and Updates to the Quality Reporting Program for IRFs

A. Background and Statutory Authority

    Section 3004(b) of the Affordable Care Act added section 1886(j)(7) 
to the Act, which requires the Secretary to implement a quality 
reporting program (QRP) for IRFs. This program applies to freestanding 
IRFs, as well as IRF units that are affiliated with acute care 
facilities, which includes critical access hospitals (CAHs).
    Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires 
the reduction of the applicable IRF PPS annual increase factor, as 
previously modified under section 1886(j)(3)(D) of the Act, by 2 
percentage points for any IRF that fails to submit data to the 
Secretary in accordance with requirements established by the Secretary 
for that fiscal year. Section 1886(j)(7)(A)(ii) of the Act notes that 
this reduction may result in the increase factor being less than 0.0 
for a fiscal year, and in payment rates under subsection (j) for a 
fiscal year being less than such payment rates for the preceding fiscal 
year. Any reduction based on failure to comply with the reporting 
requirements is, in accordance with section 1886(j)(7)(B) of the Act, 
limited to the particular fiscal year involved. The reductions are not 
to be cumulative and will not be taken into account in computing the 
payment amount under subsection (j) for a subsequent fiscal year.
    Section 1886(j)(7)(C) of the Act requires that each IRF submit data 
to the Secretary for quality measures specified by the Secretary. The 
required quality measure data must be submitted to the Secretary in a 
form, manner, and time specified by the Secretary.
    The Secretary is generally required to specify measures that have 
been endorsed by the entity with a contract under section 1890(a) of 
the Act. This contract is currently held by the National Quality Forum 
(NQF), which is a voluntary consensus standard-setting organization. 
The NQF was established to standardize health care quality measurement 
and reporting through its consensus development process. Additional 
information regarding NQF and its consensus development process is 
available at http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.
    We have adopted NQF-endorsed measures in our reporting programs. 
However, section 1886(j)(7)(D)(ii) of the Act provides that ``[i]n the 
case of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) [of the 
Act], the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary.''
    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making data submitted under the IRF QRP 
available to the public. The Secretary must ensure that each IRF is 
given the opportunity to review the data that is to be made public 
prior to the publication or posting of this data.
    We seek to promote higher quality and more efficient health care 
for all patients who receive care in acute and post-acute care 
settings. Our efforts are, in part, effectuated by quality reporting 
programs coupled with the public reporting of data collected under 
those programs. The initial framework of the IRF QRP was established in 
the FY 2012 IRF PPS final rule (76 FR 47873).

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

1. Measures Finalized in the FY 2012 IRF PPS Final Rule
    In the FY 2012 IRF PPS final rule (76 FR 47874 through 47878), we 
adopted applications of 2 quality measures for use in the first data 
reporting cycle of the IRF QRP: (1) An application of Catheter-
Associated Urinary Tract Infection (CAUTI) for Intensive Care Unit 
Patients (NQF0138); and (2) an application of Percent of 
Residents with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF 0678). We adopted applications of these 2 measures 
because neither of them, at the time, was endorsed by the NQF for the 
IRF setting. We also discussed our plans to propose a 30-Day All-Cause 
Risk-Standardized Post-IRF Discharge Hospital Readmission Measure.

[[Page 45909]]

2. Measures Finalized in the CY 2013 OPPS/ASC Final Rule
    In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we 
adopted:
     Updates to the CAUTI measure to reflect the NQF's 
expansion of this quality measure to the IRF setting, replacing our 
previous adoption of an application of the quality measure for the IRF 
QRP;
     A policy that would allow any quality measure adopted for 
use in the IRF QRP to remain in effect until the measure was actively 
removed, suspended, or replaced (and specifically applied this policy 
to the CAUTI and Pressure Ulcer measures that had already been adopted 
for use in the IRF QRP); and
     A subregulatory process to incorporate NQF updates to IRF 
quality measure specifications that do not substantively change the 
nature of the measure.
    At the time of the CY 2013 OPPS/ASC final rule, the NQF had 
endorsed the Pressure Ulcer measure for the IRF setting, and retitled 
it to cover both residents and patients within Long-Term Care Hospitals 
(LTCH) and IRF settings, in addition to the Nursing Home/Skilled 
Nursing Facility setting. Although the quality measure had been 
expanded to the IRF setting, we concluded that it was not possible to 
adopt the NQF-endorsed measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF 
0678) because it is a risk-adjusted measure, and the ``Quality 
Indicator'' section of the IRF-PAI did not contain the data elements 
that would be needed to calculate a risk-adjusted quality measure. As a 
result, we decided to: (1) Adopt an application of the Pressure Ulcer 
measure that was a non-risk-adjusted Pressure Ulcer measure (numerator 
and denominator data only); (2) collect the data required for the 
numerator and the denominator using the then-current version of the 
IRF-PAI; (3) delay public reporting of Pressure Ulcer measure results 
until we could amend the IRF-PAI to add the data elements necessary for 
risk-adjusting the Pressure Ulcer measure, and then (4) adopt the NQF-
endorsed version of the measure covering the IRF setting through 
rulemaking (77 FR 68507).
a. National Healthcare Safety Network (NHSN) Catheter-Associated 
Urinary Tract Infection (CAUTI) Outcome Measure (NQF 0138)
    In the CY 2013 OPPS/ASC final rule, we adopted the current version 
of NHSN CAUTI Outcome Measure (NQF 0138) (replacing an 
application of this measure that we initially adopted in the FY 2012 
IRF PPS (76 FR 47874 through 47886)). The NQF-endorsed measure applies 
to the FY 2015 adjustments to the IRF PPS annual increase factor and 
all subsequent annual increase factors (77 FR 68504 through 68505).
    Since the publication of the CY 2013 OPPS/ASC final rule, the NHSN 
CAUTI quality measure has not changed, and it remains an active part of 
the IRF QRP. Additional information about this measure can be found at 
http://www.qualityforum.org/QPS/0138. Our procedures for data 
submission for this measure have also remained the same. IRFs should 
continue to submit their CAUTI measure data to the Centers for Disease 
Control and Prevention (CDC) NHSN. Details regarding submission of IRF 
CAUTI data to the NHSN can be found at the NHSN 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 using the 2012 
version of the IRF-PAI.
3. Measures Finalized in the FY 2014 IRF/PPS Final Rule
    For the FY 2016 adjustments to the IRF PPS annual increase factor, 
in addition to retaining the previously discussed CAUTI and Pressure 
Ulcer measures, we finalized the adoption of one new measure: Influenza 
Vaccination Coverage among Healthcare Personnel (NQF 0431) (78 
FR 47902 through 47921). In addition, for the FY 2017 adjustments to 
the IRF PPS annual increase factor, we adopted 3 quality measures: (1) 
All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 
Inpatient Rehabilitation Facilities; (2) Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short-Stay) (NQF 0680); and (3) the NQF-
endorsed version of Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short-Stay) (NQF 0678).
a. Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
0431)
    In the FY 2014 IRF PPS final rule (78 FR 47905 through 47906), we 
adopted the CDC developed Influenza Vaccination Coverage among 
Healthcare Personnel (NQF 0431) quality measure that is 
currently collected by the CDC via the NHSN. This measure reports on 
the percentage of IRF health care personnel (HCP) who receive the 
influenza vaccination.
    In the FY 2014 IRF PPS final rule, we finalized that the Influenza 
Vaccination Coverage among Healthcare Personnel (NQF 0431) 
measure have its own reporting period to align with the influenza 
vaccination season, which is defined by the CDC as October 1 (or when 
the vaccine becomes available) through March 31. We further finalized 
that IRFs will submit their data for this measure to the NHSN (http://www.cdc.gov/nhsn/). The NHSN is a secure Internet-based healthcare-
associated infection tracking system maintained by the CDC and can be 
utilized by all types of health care facilities in the United States, 
including IRFs. The NHSN collects data via a web-based tool hosted by 
the CDC. Information on the NHSN system, including protocols, report 
forms, and guidance documents, can be found at http://www.cdc.gov/nhsn/. NHSN will submit the HCP influenza vaccination adherence 
percentage data to CMS on behalf of the facility. We also finalized 
that for the FY 2016 adjustments to the IRF PPS annual increase factor, 
data collection will cover the period from October 1, 2014 (or when the 
vaccine becomes available), through March 31, 2015.
    Details related to the use of the NHSN for data submission and 
information on definitions, numerator data, denominator data, data 
analyses, and measure specifications for the Influenza Vaccination 
Coverage among Healthcare Personnel (NQF 0431) measure can be 
found at http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html. 
Because IRFs are already using the NHSN for the submission of CAUTI 
measure data, the additional administrative burden related to data 
collection and submission for this measure under the IRF QRP should be 
minimal.
    While IRFs can enter information in NHSN at any point during the 
influenza vaccination season for the Influenza Vaccination Coverage 
among Healthcare Personnel (NQF 0431) measure, data submission 
is only required once per influenza vaccination season, unlike the 
CAUTI measure, which is the other quality measure finalized for the IRF 
QRP that utilizes the CDC NHSN. We finalized that the final deadline 
for data submission associated with this quality measure will be May 
15th of each year.

[[Page 45910]]

    Also, the data collection period for this quality measure is not 12 
months, as with other measures, but is approximately 6 months (that is, 
October 1, or when the vaccine becomes available, through March 31 of 
the following year). This data collection period is applicable only to 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431), and is not applicable to any other IRF QRP measures, 
proposed or adopted, unless explicitly stated. The measure 
specifications for this measure can be found at http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html and at http://www.qualityforum.org/QPS/0431.
b. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
From Inpatient Rehabilitation Facilities (NQF 2502, Under 
Review at NQF; see http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx)
    In the FY 2014 IRF PPS final rule (78 FR 47906 through 47910), we 
adopted an All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Inpatient Rehabilitation Facilities. This quality 
measure estimates the risk-standardized rate of unplanned, all-cause 
hospital readmissions for cases discharged from an IRF who were 
readmitted to a short-stay acute care hospital or LTCH, within 30 days 
of an IRF discharge. We noted that this is a claims-based measure that 
will not require reporting of new data by IRFs and thus will not be 
used to determine IRF reporting compliance for the IRF QRP. Please note 
that this measure is not NQF-endorsed, but it was submitted by CMS to 
the NQF for review on February 5, 2014 (http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx).
c. Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
    In the FY 2014 IRF PPS final rule (78 FR 47906 through 47911), we 
adopted the Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 
0680) measure for the IRF QRP, and we will collect the data 
for this measure through the addition of data items to the ``Quality 
Indicator'' section of the IRF-PAI.
    We also added the data elements needed for this measure, as an 
influenza data item set, to the ``Quality Indicator'' section of the 
IRF-PAI, and data for this measure will be collected using this revised 
version of the IRF-PAI. The revised IRF-PAI will become effective on 
October 1, 2014. These data elements are harmonized with data elements 
(O0250: Influenza Vaccination Status) from the Minimum Data Set (MDS) 
3.0 and the LTCH CARE Data Set Version 2.01, and the specifications and 
data elements for this measure are available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    For purposes of this quality measure, the influenza vaccination 
season takes place from October 1 (or when the vaccine becomes 
available) through March 31 each year. The measure calculation and 
public reporting of this measure (once public reporting is implemented) 
will also be based on the influenza vaccination season, starting on 
October 1 (or when the vaccine becomes available) and ending on March 
31 of the subsequent year.
    The IRF-PAI Training Manual indicates how providers should complete 
these items during the time period outside of the vaccination season 
(that is, prior to October 1, or when the vaccine becomes available, 
and after March 31 of the following year). The measure specifications 
for this measure, Percent of Residents or Patients Who Were Assessed 
and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) 
(NQF 0680), can be found on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIQualityMeasures.html. 
Additional information on this measure can also be found 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)--Adoption of the NQF-
Endorsed Version of This Measure
    In the FY 2014 IRF PPS final rule (78 FR 47911 through 47912), we 
adopted the 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 revised version of the IRF-PAI, for quality reporting 
affecting the FY 2017 adjustments to the IRF PPS annual increase factor 
and subsequent year annual increase factors. We noted in the rule that, 
until September 30, 2014, IRFs should continue to submit pressure ulcer 
data using the version of the IRF-PAI released on October 1, 2012, for 
the purposes of data submission requirements for the FY 2015 and FY 
2016 adjustments to the annual IRF PPS increase factor.
    In the FY 2014 IRF PPS final rule (78 FR 47912 through 47916), we 
also adopted a revised version of the IRF-PAI starting October 1, 2014, 
for the FY 2017 adjustments to the IRF PPS annual increase factor and 
subsequent year annual increase factors.
    We received several comments and questions related to previously 
finalized measures and our current policies. While we greatly 
appreciate the commenters' views on such previously finalized measures 
and policies, we did not make any proposals relating to them in the FY 
2015 IRF PPS proposed rule. As such, we will not address these comments 
in this final rule. However, we will consider all of these comments in 
future rulemaking and program development.

  Table 8--Quality Measures Finalized in the FY 2014 IRF PPS Final Rule
  Affecting the FY 2016 and 2017 Adjustments to the IRF Annual Increase
              Factors and Subsequent Year Increase Factors
------------------------------------------------------------------------
        NQF measure ID                        Measure title
------------------------------------------------------------------------
NQF 0431+............  Influenza Vaccination Coverage among
                                 Healthcare Personnel.
NQF 0680 *...........  Percent of Residents or Patients Who
                                 Were Assessed and Appropriately Given
                                 the Seasonal Influenza Vaccine (Short-
                                 Stay).
NQF 0678 *...........  Percent of Residents or Patients with
                                 Pressure Ulcers That Are New or
                                 Worsened (Short-Stay)--Adoption of the
                                 NQF-Endorsed Version of this Measure.
NQF 2502 **..........  All-Cause Unplanned Readmission Measure
                                 for 30 Days Post-Discharge from
                                 Inpatient Rehabilitation Facilities.
------------------------------------------------------------------------
\+\ Using the CDC NHSN.
* Using the IRF-PAI Version 1.2 that is effective on October 1, 2014;
  available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Downloads/IRF-PAI-FINAL-for-Use-Oct2014-updated-v4.pdf.
** Not NQF-endorsed, currently under review by NQF. (See http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx).

[[Page 45911]]

C. New IRF QRP Quality Measures Affecting the FY 2017 Adjustments to 
the IRF PPS Annual Increase Factor and Beyond

1. General Considerations Used for Selection of Quality Measures for 
the IRF QRP
    In the FY 2014 IRF PPS final rule (78 FR 47094), we noted that the 
successful development of an IRF quality reporting program that 
promotes the delivery of high-quality health care services in IRFs is 
our paramount concern. We discussed several of the factors we had taken 
into account in selecting measures to propose and finalize. We do wish 
to note here that, in our measure selection activities for the IRF QRP, 
we must take into consideration input we receive from a multi-
stakeholder group, the Measure Applications Partnership (MAP), which is 
convened by the NQF as part of a pre-rulemaking process that we have 
established and are required to follow under section 1890A of the Act. 
The MAP is a public-private partnership comprised of multi-stakeholder 
groups convened by the NQF for the primary purpose of providing input 
to CMS on the selection of certain categories of quality and efficiency 
measures, as required by section 1890A(a)(3) of the Act. By February 1 
of each year, the NQF must provide MAP input to CMS. We have taken the 
MAP's input into consideration in selecting measures for this rule. 
Input from the MAP is located at https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. We also take into account national priorities, such as 
those established by the National Priorities Partnership (NPP) at 
http://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx, the HHS Strategic Plan at http://www.hhs.gov/secretary/about/priorities/priorities.html, the National 
Strategy for Quality Improvement in Health Care at http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf, and the CMS Quality Strategy 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    To the extent practicable, we have sought to adopt measures that 
have been endorsed by a national consensus organization, recommended by 
multi-stakeholder organizations, and developed with the input of 
providers, purchasers/payers, and other stakeholders.
    For the FY 2017 adjustments to the IRF PPS annual increase factor, 
in addition to retaining the previously discussed CAUTI (NQF 
0138), Pressure Ulcer, Patient Influenza Vaccination (NQF 
0680), Healthcare Personnel Influenza Vaccination (NQF 
0431), and Hospital Readmission (NQF 2502) quality 
measures, we proposed in the FY 2015 IRF PPS proposed rule (79 FR 26336 
through 26338) to adopt two new quality measures: (1) National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF 1716), and (2) National Healthcare Safety Network 
(NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile 
Infection (CDI) Outcome Measure (NQF 1717). These quality 
measures are discussed in more detail below.
a. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF 1716).
    In the FY 2015 IRF PPS proposed rule (79 FR 26336 through 26337), 
we proposed to adopt the CDC-developed National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
1716). The MRSA measure is a measure of hospital-onset unique 
blood source MRSA laboratory-identified events among all inpatients in 
the facility. This measure was adopted by the Hospital Inpatient 
Quality Reporting (IQR) Program in the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51630, 51645) for the FY 2015 payment determination, with data 
collection beginning on January 1, 2013. It was also adopted by the 
LTCH Quality Reporting (LTCHQR) Program in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50712 through 50717) for the FY 2017 payment 
determination, with data collection beginning on January 1, 2015. This 
measure is NQF-endorsed. We included the MRSA measure in the December 
1, 2013 Measures under Consideration (MUC) list. The MAP conditionally 
supported the direction of this quality measure, noting that the 
measure is not ready for implementation and suggesting that we 
harmonize this measure with other infection measures. We respectfully 
disagree with the position of the MAP, as the MRSA measure is fully 
endorsed by the NQF for various settings, including the IRF setting, 
which speaks to its suitability for use in that setting. Methicillin-
resistant Staphylococcus aureus (S. aureus) infections are caused by a 
strain of S. aureus bacteria that has become resistant to antibiotics 
commonly used to treat S. aureus infections. Between 2003 and 2004, an 
estimated 4.1 million persons in the United States had nasal 
colonization with MRSA.\1\ In addition, in 2005 there were an estimated 
94,000 invasive MRSA infections in the United States, which were 
associated with an estimated 18,000 deaths.\2\ Healthcare-associated 
MRSA infections occur frequently in patients whose treatment involves 
the use of invasive devices, such as catheters or ventilators.
---------------------------------------------------------------------------

    \1\ Gorwitz RJ, Kruszon-Moran D, McAllister SK, et al. Changes 
in the prevalence of nasal colonization with Staphylococcus aureus 
in the United States, 2001-2004. J Infect Dis 2008; 197: 1226-34.
    \2\ Department of Health and Human Services. National Action 
Plan to Prevent Healthcare-Associated Infections: Roadmap to 
Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html.
---------------------------------------------------------------------------

    Currently, there are 22 States that have implemented a MRSA 
Prevention Collaborative, and at least 15 states that have reporting 
mandates for MRSA bacteremia in NHSN.\3\ For Medicare populations, MRSA 
infection is associated with increased cost, hospital length of stay, 
morbidity, and mortality. MRSA infections can be a consequence of poor 
quality of care.4 5 Older adults and patients in health care 
settings are most vulnerable to MRSA infections, as these patients may 
have weakened immune systems. A recent study reported that 9.2 percent 
of patients without a history of MRSA tested positive for MRSA at the 
time of the IRF admission.\6\ We also recently analyzed IRF claims 
submitted to Medicare during CY 2009. According to our analysis, IRFs 
reported a total of 3,464 cases of MRSA in 2009, including cases either 
present on admission or acquired during the IRF stay (``present on 
admission'' indicators for ICD-9 codes are not available on the IRF 
claims).\7\

[[Page 45912]]

We believe it is important to collect data on MRSA infections acquired 
during the IRF stay, because MRSA infection is associated with 
increased cost, hospital length of stay, morbidity, and mortality.
---------------------------------------------------------------------------

    \3\ Centers for Disease Control and Prevention. State Has 
Implemented a MRSA Prevention Collaborative. Available at http://www.cdc.gov/hai/stateplans/states-w-MRSA-collaborative.html.
    \4\ Centers for Disease Control and Prevention. People at Risk 
of Acquiring MRSA Infections. Available at http://www.cdc.gov/mrsa/index.html.
    \5\ Centers for Disease Control and Prevention. Management of 
Multidrug-Resistant Organisms in Healthcare Settings, 2006. 
Available at http://www.cdc.gov/hicpac/pdf/guidelines/MDROGuideline2006.pdf.
    \6\ Rabinowitz RP, Kufera JA, Makely MJ. A Hidden Reservoir of 
Methicillin-resistant Staphylococcus aureus and Vancomyvin-resistant 
Enterococcus in Patients Newly Admitted to an Acute Rehabilitation 
Hospital. Physical Medicine & Rehabilitation 2012 (4):18-22.
    \7\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, 
Sorensen AV, Thaker S, West ND. Study to support a CMS Report to 
Congress: Assess feasibility of extending the hospital-acquired 
conditions--present on admission IPPS payment policy to non-IPPS 
payment environments. Prepared for the Centers for Medicare & 
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
---------------------------------------------------------------------------

    In the FY 2015 IRF PPS proposed rule (79 FR 26336 through 26337), 
we proposed to use the CDC/NHSN data collection and submission 
framework for reporting of the MRSA measure. This is the same framework 
currently used for reporting the CAUTI (NQF 0138) and 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431) quality measures. Details related to the procedures for 
using the NHSN for data submission and information on definitions, 
numerator data, denominator data, data analyses, and measure 
specifications for the MRSA measure can be found at http://www.qualityforum.org/QPS/1716 and http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html. For January 2012 through January 2013, an 
estimated 15 IRFs reported laboratory-identified MRSA event data into 
NHSN. We refer readers to section XI.B.3.a. of this final rule for more 
information on data collection and submission. We sought public 
comments on the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF 1716) for the FY 2017 
IRF PPS annual increase factor and subsequent years. Our responses to 
public comments on this measure are discussed in this section of the 
final rule.
    Comment: Several commenters expressed support of our proposal to 
adopt the MRSA measure, citing the importance of focusing on outcomes, 
such as healthcare-associated infections, because they are meaningful 
to patients and because of their impact on provider behavior. One 
commenter noted, as stated above, that the measure is NQF-endorsed for 
the IRF setting. A few commenters expressed support for CMS's effort to 
align IRF QRP quality measures with measures in other quality reporting 
initiatives.
    Response: We appreciate the commenters' support for this outcome 
measure and recognition of our efforts to adopt measures for the IRF 
QRP that emphasize high-priority patient safety concerns and harmonize 
measures across settings, when applicable.
    Comment: Several commenters objected to the proposed MRSA 
healthcare-associated infection measure due to the low prevalence of 
MRSA in IRFs, indicating that the measure would not be a meaningful 
quality measure in IRFs. Several comments noted the MRSA measure 
received only ``conditional support'' from the MAP, and several 
commenters noted that it would add additional data collection burden.
    Response: The MRSA measure is endorsed by the National Quality 
Forum for use in several settings, including IRFs. Because of the scope 
of the patient safety problem posed by MRSA to the IRF patient 
population, as discussed earlier in this section of the final rule, as 
well as its burden on the health care system, we continue to believe it 
is in the best interest of patients to adopt this measure for the IRF 
QRP in order to promote awareness and encourage implementation of MRSA 
control procedures in the IRF setting. The measure is on the list of 
NQF-endorsed measures and can be found on the NQF Web site at http://www.qualityforum.org/QPS/1716. We note that we have taken the MAP's 
input into consideration in selecting quality measures, as we are 
required to do under section 1890(a)(4) of the Act. However, we are not 
required to follow the MAP's recommendations, but to take them into 
account when selecting measures for proposal. In addition to MAP input, 
we take a variety of other factors into account in selecting measures. 
In this instance, for example, the MRSA measure is NQF-endorsed for the 
IRF setting, an indication that it is appropriate for IRF patients. In 
addition, this measure is appropriate in light of the fact that MRSA 
infection most commonly affects older adults in hospitals or in 
facilities with longer lengths of stay and is associated with increased 
costs, hospital length of stay, morbidity, and mortality. For the 
reasons listed above, we continue to believe that this measure is 
appropriate for IRF patients.
    Comment: One commenter was concerned that it may be difficult to 
distinguish infections present on admission from those that are 
healthcare-associated infections. Several commenters expressed concern 
that adoption of this quality measure would lead to additional and 
inappropriate screening for these conditions when patients are admitted 
to an IRF, and one commenter noted a concern about antibiotic 
resistance.
    Response: The definition of MRSA laboratory-identified (LabID) 
events--used in the measure we proposed, National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia 
Outcome Measure (NQF 1716)--is provided in the measure 
specifications, which are posted on the NQF Web site at http://www.qualityforum.org/QPS/1716, and it specifically addresses 
attribution through categorization of MRSA LabID events based on date 
admitted to the facility and date specimen collected, as well as by the 
current date and prior dates of specimen collection. As specified in 
the measure, Community-Onset (CO) is a LabID event collected as an 
outpatient or an inpatient less than or equal to 3 days after admission 
to the facility (that is, days 1, 2, or 3 of admission), while 
Healthcare Facility-Onset (HO) is defined as a LabID event collected 
from a patient greater than 3 days after admission to the facility 
(that is, days 4 or later of admission). Data from emergency department 
and outpatient observation locations (that is, outpatient encounters) 
are also included in this reporting of CO and HO events, in order to 
ensure that events are accurately categorized and identified. The CO 
definition accounts for infections acquired outside the IRF setting, 
either in the community or in other health care settings.
    Regarding the commenter's concern that adoption of this quality 
measure would lead to additional and inappropriate screening, per NHSN 
protocol, LabID events are to be reported only from specimens collected 
for clinical decision-making and never from screening or surveillance 
cultures. Because these required LabID events are to be reported only 
from MRSA blood specimens, they represent actual and serious infections 
that should be treated appropriately and according to physician 
decision, as MRSA bacteria should never be found in blood. Therefore, 
this reporting should not be a driver of inappropriate antibiotic use. 
Additionally, we believe it is imperative that we close the gap with 
respect to monitoring for this serious infection within the continuum 
of care. Because this measure has been finalized for several other 
health care settings (see the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51630, 51645) for IQR Program; FY 2014 IPPS/LTCH PPS final rule (78 FR 
50712 through 50717) for the LTCHQR Program), we believe that requiring 
IRFs to monitor for MRSA infections is necessary and will help further 
improve the quality of care provided to patients receiving services 
across the continuum of care.
    Comment: One commenter suggested collecting MRSA data for one year 
in

[[Page 45913]]

order to determine if the measure is valuable.
    Response: We believe that this is unnecessary because quality 
measures already undergo maintenance review at regular intervals in 
order to evaluate the value of ongoing use of these measures. As noted 
above, it is important to collect data on MRSA infections acquired 
during the IRF stay because MRSA infections are associated with 
increased cost, hospital length of stay, morbidity, and mortality.
    Final Decision: Having carefully considered the comments we 
received on the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF 
1716), we are finalizing the adoption of this measure as 
proposed for use in the IRF QRP.
b. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure 
(NQF 1717)
    In the FY 2015 IRF PPS proposed rule (79 FR 26337 through 26338), 
we proposed to adopt the CDC-developed National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF 1717) that is 
currently collected by the CDC via the NHSN. The CDI measure is a 
measure of hospital-onset CDI laboratory-identified events among all 
inpatients in the facility. This measure was adopted by the Hospital 
IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 
through 51631) for the FY 2015 payment determination, with data 
collection having begun on January 1, 2013. It was also adopted by the 
LTCHQR program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50712 
through 50717) for the FY 2017 payment determination, with data 
collection beginning on January 1, 2015. This measure is NQF-endorsed. 
We included the CDI measure in the December 1, 2013 MUC list. The MAP 
supported this measure.\8\ CDI can cause a range of serious symptoms, 
including diarrhea, serious intestinal conditions, sepsis, and 
death.\9\ In the United States, CDI is responsible for an estimated 
337,000 infections and 14,000 deaths annually.\10\ According to the HHS 
National Action Plan to Prevent Health Care-Associated Infections, CDI 
rates have increased in recent years.\11\ The CDC estimates that CDIs 
cost more than $1 billion in additional health care costs each 
year.\12\ In recent years, CDIs have become more frequent, more severe, 
and more difficult to treat. Mortality rates for CDIs are highest in 
elderly patients.\13\ Rates of CDI among hospitalized patients aged 65 
years and older increased 200 percent between 1996 and 2009, while 
deaths related to CDIs increased 400 percent between 2000 and 2007, 
partly attributed to a stronger germ strain.14 15 Further, 
the emergence and continued rise of CDI as a leading cause of 
gastroenteritis hospitalizations and deaths, particularly in the 
elderly, has been documented.\16\ CDI is associated with increased 
patient care costs, hospital lengths of stay, morbidity, and mortality. 
CDI can be a consequence of poor quality of care for Medicare 
patients.\17\
---------------------------------------------------------------------------

    \8\ National Quality Forum. Measure Applications Partnership 
Pre-Rulemaking Report: 2014 Recommendations of Measures Under 
Consideration by HHS: February 2014. Available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
    \9\ McDonald LC, Coignard B, Dubberke E, et al. Recommendations 
for surveillance of Clostridium difficile-associated disease. Infect 
Control Hosp Epidemiol 2007;28:140-145. Available at: http://www.jstor.org/stable/pdfplus/10.1086/511798.pdf?acceptTC=true.
    \10\ Centers for Disease Control and Prevention. Investigating 
Clostridium difficile Infections Across the U.S. Available at http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
    \11\ Department of Health and Human Services. National Action 
Plan to Prevent Health Care-Associated Infections: Roadmap to 
Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html.
    \12\ Centers for Disease Control and Prevention. Making Health 
Care Safer: Stopping C. difficile Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html.
    \13\ Centers for Disease Control and Prevention. Investigating 
Clostridium difficile Infections Across the U.S. Available at: 
http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
    \14\ Centers for Disease Control and Prevention. QuickStats: 
Rates of Clostridium difficile Infection Among Hospitalized Patients 
Aged >=65 Years,* by Age Group--National Hospital Discharge Survey, 
United States, 1996-2009. MMWR, 60(34); 1171. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6034a7.htm.
    \15\ Centers for Disease Control and Prevention. Making Health 
Care Safer: Stopping C. difficile Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html.
    \16\ Aron J. Hall, Aaron T. Curns, L. Clifford McDonald, Umesh 
D. Parashar, and Ben A. Lopman. The Roles of Clostridium difficile 
and Norovirus Among Gastroenteritis-Associated Deaths in the United 
States, 1999-2007. Clinical Infectious Diseases 2012;55(2):216-23. 
Published by Oxford University Press on behalf of the Infectious 
Diseases Society of America 2012. DOI: 10.1093/cid/cis386.
    \17\ Dubberke ER, Reske KA, Olsen MA, McDonald LC, Fraser VJ. 
Short- and long-term attributable costs of Clostridium difficile-
associated disease in nonsurgical inpatients. Clin Infect Dis 2008; 
46:497-504. Available at: http://cid.oxfordjournals.org/content/46/4/497.long.
---------------------------------------------------------------------------

    Illness from CDI most commonly affects older adults in hospitals or 
in facilities with longer lengths of stay, where germs spread more 
easily, antibiotic use is more common, and people are especially 
vulnerable to infection.\18\ Considering CDIs are increasing in all 
health care facilities, and the IRF population is highly vulnerable to 
CDI, it is important to measure these rates in IRFs.\19\ According to 
an analysis of ICD-9 codes reported on Medicare claims, IRFs reported 
7,720 cases of CDI-associated disease in 2009.\20\ Currently, the 
``present on admission'' indicators for ICD-9 codes are not available 
on IRF claims. Therefore, we are unable to determine whether the 7,720 
reported cases of CDI were present on admission or acquired during the 
IRF stay. There is evidence that CDIs are preventable, and therefore, 
surveillance and measuring infection rates is important to reducing 
infections and improving patient safety. Thirty-seven states have 
implemented a C. difficile Prevention Collaborative, and at least 15 
states have reporting mandates for CDI LabID events in NHSN.\21\ The 
goal for the CDI measure is to collect and publicly report IRF data on 
CDIs so that IRFs will be better informed about the incidence of this 
condition and better equipped to prevent it.
---------------------------------------------------------------------------

    \18\ Centers for Disease Control and Prevention. Frequently 
Asked Questions about Clostridium difficile for Healthcare 
Providers. Available at: http://www.cdc.gov/HAI/organisms/cdiff/Cdiff_faqs_HCP.html.
    \19\ Marciniak C, Chen D, Stein A, et al. Prevalence of 
Clostridium Difficile Colonization at Admission to Rehabilitation. 
Archives of Physical Medicine and Rehabilitation 2006; 87(8):1086-
1090.
    \20\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, 
Sorensen AV, Thaker S, West ND. Study to support a CMS Report to 
Congress: Assess feasibility of extending the hospital-acquired 
conditions--present on admission IPPS payment policy to non-IPPS 
payment environments. Prepared for the Centers for Medicare & 
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
    \21\ Centers for Disease Control and Prevention. State Has 
Implemented a C. diff Prevention Collaborative. Available at: http://www.cdc.gov/hai/stateplans/states-w-CDI-collaborative.html.
---------------------------------------------------------------------------

    In the FY 2015 IRF PPS proposed rule (79 FR 26337 through 26338), 
we proposed to use the CDC/NHSN data collection and submission 
framework for reporting of the NHSN Facility-Wide Inpatient Hospital-
Onset CDI Outcome Measure (NQF 1717). This framework is 
currently used for reporting the CAUTI (NQF 0138) and 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431) measures. Details related to the procedures for using 
the NHSN for data submission and information on definitions, numerator 
data, denominator data, data analyses, and measure specifications for 
the NHSN Facility-Wide Inpatient Hospital-Onset CDI Outcome Measure 
(NQF 1717) can be found at http://www.qualityforum.org/QPS/1717 and

[[Page 45914]]

http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html.
    We sought public comments on the National Healthcare Safety Network 
(NHSN) Facility-Wide Inpatient Hospital-Onset CDI Outcome Measure (NQF 
1717) for the FY 2017 IRF PPS annual increase factor and 
subsequent years. The responses to public comments on this measure are 
discussed below in this section of the final rule.
    Comment: Several commenters supported the CMS proposal to adopt the 
CDI measure, citing the importance of focusing on outcomes, such as 
healthcare-associated infections, because they are meaningful to 
patients and because it can impact provider behavior. One commenter 
supported the measure because it encourages hospitals to focus on 
prevention and appropriate treatment and has important implications for 
patient outcomes, society, and reduced health care expenditures. One 
commenter noted the measure is NQF-endorsed for the IRF setting, and 
two commenters expressed support for CMS's effort to align IRF QRP 
quality measures with measures in other quality reporting initiatives. 
A commenter who supports the measure suggested the significance of 
reporting CDIs is increased due to a higher than expected number of 
cases.
    Response: We appreciate the commenters' support and recognition of 
the importance of the expansion of the IRF QRP to include this measure. 
C. difficile is a pathogen of serious concern, causing morbidity and 
mortality throughout the continuum of care. Transmission can only be 
controlled and infection prevented if monitoring occurs across the 
health care settings.
    Comment: Several commenters objected to the proposed CDI measure 
due to the low prevalence of CDIs in IRFs, indicating that the measure 
would not be a meaningful quality measure in IRFs. One commenter noted 
that it adds additional data collection burden.
    Response: The CDI measure is endorsed by the NQF for use in several 
settings, including the IRF setting. As with MRSA, because of the scope 
of the patient safety problem posed by CDI to the very vulnerable IRF 
population, as well as its burden on the health care system, we believe 
it is in the best interest of patients to adopt this measure to promote 
awareness and encourage immediate implementation of CDI control 
procedures within the IRF setting. The measure is on the list of NQF-
endorsed measures and can be found on the NQF Web site at http://www.qualityforum.org/QPS/1717. In addition, the MAP supported this 
quality measure for the IRF setting. This measure is appropriate in 
light of the fact that illness from CDI most commonly affects older 
adults in hospitals or in facilities with longer lengths of stay and is 
associated with increased costs, hospital length of stay, and those who 
have been treated with antibiotics. C. difficile is a pathogen of 
serious concern that causes patient morbidity and mortality throughout 
all health care settings. Furthermore, lack of monitoring for this 
serious infection in the IRF setting creates a monitoring gap within 
the continuum of care. Because this measure has been proposed and 
finalized for several other hospital settings, we believe that 
requiring IRFs to monitor for CDI is necessary and will help further 
improve the quality of care provided to Medicare beneficiaries. For all 
of the reasons we have discussed, we continue to believe this measure 
is appropriate for IRF patients.
    Comment: One commenter was concerned that it may be difficult to 
distinguish infections present on admission from those that are 
hospital-acquired infections. The commenter expressed concern about 
inappropriate screening for these conditions if the quality measure was 
adopted.
    Response: The definition of CDI LabID events, as provided in the 
measure specifications, which are posted on the NQF Web site at http://www.qualityforum.org/QPS/1717, specifically addresses attribution 
through categorization of CDI LabID events based on date admitted to 
the facility and date specimen collected, as well as by the current 
date and prior dates of specimen collection. As specified in the 
measure, Community-Onset (CO) is a LabID event collected as an 
outpatient or an inpatient less than or equal to 3 days after admission 
to the facility (that is, days 1, 2, or 3 of admission), while 
Community-Onset Healthcare Facility-Associated (CO-HCFA) is defined as 
a CO LabID event collected from a patient who was discharged from the 
facility within 4 weeks prior to current date of stool specimen 
collection. Data from emergency department and outpatient observation 
locations (that is, outpatient encounters) are also included in this 
reporting of CO and HO events, in order to ensure that events are 
accurately categorized and identified. A Healthcare Facility-Onset (HO) 
is a LabID event collected more than 3 days after admission to the 
facility (that is, on or after day 4). The CDI measure is already in 
use in the hospital inpatient setting, where similar concerns have been 
raised and successfully addressed (see the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51630 through 51631) for the IQR program). We also note 
that the definition of CDI LabID events (as required by this measure) 
is based on laboratory testing and admission date data, and not 
clinical evaluation of the patient, allowing for a much less labor-
intensive method to track CDIs. This provides an infection measure of 
CDI health care acquisition, exposure burden, and infection burden 
based almost exclusively on laboratory data and limited admission date 
data, including patient care location. LabID events use NHSN forms to 
collect all required data, using the definitions of each data field. 
Per NHSN protocol, LabID events are to be reported only from specimens 
collected for clinical decision-making (that is, collected from 
patients with greater than or equal to 3 unformed stools within 24 
hours) and never from screening or surveillance cultures.
    Final Decision: Having carefully considered the comments we 
received on the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF 1717), we are finalizing the adoption of this 
measure as proposed for use in the IRF QRP.

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

    We are considering whether to propose one or more of the quality 
measures and quality measure topics listed in Table 9 for future years 
in the IRF QRP. We invited public comment on these quality measures and 
quality measure topics, specifically the clinical importance of 
reported measure data, the feasibility of measure data collection and 
implementation, current use of reported measure data, and usefulness of 
the reported measure data to inform quality of care delivered to IRF 
patients.

[[Page 45915]]

   Table 9--Future Measures and Measure Topics Under Consideration for
             Proposal for the IRF Quality Reporting Program
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
National Quality Strategy Priority: Patient Safety:
    Application of Percent of Residents Experiencing One or More Falls
     with Major Injury (Long-Stay) (NQF 0674).
National Quality Strategy Priority: Patient and Caregiver-Centered Care:
    Application of Percent of Residents Who Self-Report Moderate to
     Severe Pain (Short-Stay) (NQF 0676).
    Not Endorsed/Under Development--IRF Functional Outcome Measure:
     Change in Mobility Score for Medical Rehabilitation Patients.
    Not Endorsed/Under Development--IRF Functional Outcome Measure:
     Change in Self-Care Score for Medical Rehabilitation Patients.
    Not Endorsed/Under Development--IRF Functional Outcome Measure:
     Discharge Mobility Score for Medical Rehabilitation Patients.
    Not Endorsed/Under Development--IRF Functional Outcome Measure:
     Discharge Self-Care Score for Medical Rehabilitation Patients.
------------------------------------------------------------------------

    In particular, we are considering whether to propose one or more of 
the following measures for future year IRP PPS increase factors: (1) 
IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients; (2) IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients; (3) IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients; (4) IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients; (5) Application of the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long-Stay) 
(NQF 0674); and (6) Application of Percent of Residents Who 
Self-Report Moderate to Severe Pain (Short-Stay) (NQF 0676).
    IRFs are designed to provide intensive rehabilitation services to 
patients. Patients seeking care in IRFs are those whose illness, 
injury, or condition has resulted in a loss of function, and for whom 
rehabilitative care is expected to help regain that function. Examples 
of conditions treated in IRFs include stroke, spinal cord injury, hip 
fracture, brain injury, neurological disorders, and other diagnoses 
characterized by loss of function.
    Given that the primary goal of rehabilitation is improvement in 
functional status, IRF clinicians have traditionally assessed and 
documented patients' functional statuses at admission and discharge to 
evaluate the effectiveness of the rehabilitation care provided to 
individual patients, as well as the effectiveness of the rehabilitation 
unit or hospital overall. In addition, research results have found 
differences in IRF patients' functional outcomes, thus we believe there 
is an opportunity for improvement in this area. Differences in IRF 
patients' functional outcomes have been found by geographic region, 
insurance type, and race/ethnicity after adjusting for key patient 
demographic characteristics and admission clinical status. This 
supports the need to monitor IRF patients' functional outcomes. For 
example, Reistetter \22\ examined discharge motor function and 
functional gain among IRF patients with stroke and found statistically 
significant differences in functional outcomes by U.S. geographic 
region, insurance type, and race/ethnicity group after risk adjustment. 
O'Brien and colleagues \23\ 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 \24\ 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.
---------------------------------------------------------------------------

    \22\ Reistetter TA, Karmarkar AM, Graham JE, et al. Regional 
variation in stroke rehabilitation outcomes. Arch Phys Med 
Rehabil.95(1):29-38, Jan. 2014.
    \23\ O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of 
stay is associated with worse functional outcomes for medicare 
beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 
2013.
    \24\ O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of 
stay is associated with worse functional outcomes for medicare 
beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 
2013.
---------------------------------------------------------------------------

    We are currently developing 4 functional status quality measures 
for the IRF setting:
    (1) Quality Measure: IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients;
    (2) Quality Measure: IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients;
    (3) Quality Measure: IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients; and
    (4) Quality Measure: IRF Functional Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients.
    We invited public comment on our intent to propose these measures 
for the FY 2019 adjustments to the IRF PPS annual increase factor and 
subsequent year increase factors. The draft measure specifications for 
these measures are posted at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Details.html. The development of these 
measures is expected to be completed in 2014, at which time they will 
be submitted to the NQF, the entity with a contract under section 
1890(a) of the Act, for review. Our responses to public comments on 
these quality measures are discussed in this section of the final rule.
    Comment: Several comments were received about the quality measure 
Application of the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long-Stay) (NQF 0674). One commenter 
supported this measure. Several commenters opposed the measure, citing 
that the measure is not appropriate for the IRF setting and that it is 
unclear how a major fall is defined and what tool will be used to 
collect this data.
    Response: We thank the commenters for their input and will take 
these comments into consideration to inform our ongoing measure 
development efforts for this measure and our ongoing consideration of 
the potential to adopt this measure in the IRF QRP through future 
rulemaking. For the purpose of this measure, ``major injury'' is 
defined as including bone fractures, joint dislocations, closed head 
injuries with altered consciousness, or subdural hematoma. If selected 
for proposal, and finalized through the future rulemaking process, for 
data collection purposes, we would revise the IRF PAI to include the 
items used for this quality measure, which are found in the Minimum 
Data Set version 3.0. We believe that this measure is appropriate for 
the IRF setting. Fall-related injuries are the most common cause of 
accidental death in people aged 65 years and older, resulting in 
approximately 41 fall-related deaths per 100,000 people per

[[Page 45916]]

year.25 26 In 2010, the total direct medical costs of fall 
injuries for people aged 65 years and older was $30 billion. The annual 
direct and indirect cost of fall injuries is expected to reach $54.9 
billion by 2020.\27\ Falls thus represent a significant cost burden to 
the entire health care system, with injurious falls accounting for 6 
percent of medical expenses among those aged 65 years and older.\28\ 
This measure was developed by CMS and is currently NQF-endorsed for the 
Nursing Home/Skilled Nursing Facility setting. Further, we adopted this 
measure for the LTCH Quality Reporting Program in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50874 through 50877). We included the Falls with 
Major Injury quality measure in the December 1, 2013 Measures Under 
Consideration (MUC) list, and the MAP conditionally supported this 
quality measure for the IRF setting. Additional information regarding 
NQF 0674, on which our application of the measure will be 
based, if proposed and adopted through future rulemaking process, is 
available at http://www.qualityforum.org/QPS/0674.
---------------------------------------------------------------------------

    \25\ L. Currie, Chapter 10: Fall and Injury Prevention. In: 
Patient Safety and Quality: An Evidence-Based Handbook for Nurses 
(Rockville: Agency for Healthcare Research and Quality, 2008).
    \26\ U.S. Department of Health & Human Services, 
``Implementation Guide to Prevention of Falls with Injury,'' http://www.dcha.org/wp-content/uploads/falls_change-package_508.pdf.
    \27\ Centers for Disease Control and Prevention, ``Costs of 
Falls Among Older Adults,'' http://www.cdc.gov/homeandrecreationalsafety/falls/fallcost.html.
    \28\ L. Z. Rubenstein, C. M. Powers, and C. H. MacLean, 
``Quality indicators for the management and prevention of falls and 
mobility problems in vulnerable elders,'' Ann Intern Med 135, no. 8 
Pt 2 (2001).
---------------------------------------------------------------------------

    Comment: Several comments were received about the quality measure 
Application of Percent of Residents Who Self-Report Moderate to Severe 
Pain (Short-Stay) (NQF 0676). One commenter supported this 
measure. Several commenters opposed the measure, indicating that it is 
not appropriate for the IRF setting and does not take into account pain 
that may be a healthy part of a treatment protocol. One commenter 
opposed the measure because it was unclear when the assessment would be 
completed, noting that patients whose pain was inadequately assessed at 
a previous facility would be admitted to the IRF experiencing pain, and 
the commenter did not want pain present at the time of admission to be 
attributed to the IRF. This commenter also noted that it is not 
addressed how the self-report of pain would be conducted for 
cognitively impaired patients.
    Response: We thank the commenters for their input and will take 
these comments into consideration to inform our ongoing measure 
development efforts and our ongoing consideration of including this 
measure in the future.
    Comment: Several commenters expressed strong support for functional 
status quality measures because functional improvement is a key focus 
of IRF care. The commenters noted several issues that CMS should 
consider in the development of these functional status quality 
measures, including NQF endorsement as well as the importance of 
adequate risk adjustment and specified exclusion criteria. Several 
commenters requested that CMS consider using the FIM[supreg] instrument 
as part of the quality measure. One commenter suggested expediting the 
development of the functional status quality measures.
    Response: We appreciate the strong support for functional status 
measures in the IRF setting. The functional status quality measures are 
in development and will be submitted to NQF for consideration of 
endorsement in the fall. The draft quality measure specifications 
(version 2), including the inclusion and exclusion criteria, the risk 
adjustment variables and risk adjustment approach can be found on the 
CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Downloads/Draft-Specifications-for-the-Functional-Status-Quality-Measures-for-Inpatient-Rehabilitation-Facilities-Version-2.pdf. We appreciate the 
commenters for their input on the quality measures and will take this 
feedback under consideration as we finalize the development of the IRF 
functional status quality measures.
    Comment: Several commenters questioned CMS's future proposal of the 
self-care and mobility functional status quality measures due to their 
concern that the measures are not yet fully developed nor adequately 
risk adjusted.
    Response: The functional status quality measures have been under 
development for more than 3 years. The steps in measure development 
have included analysis, technical expert panel review, and public 
posting of specifications with public input. Nearing their completion, 
we anticipate submission of the quality measures to the NQF for its 
review this fall. The current specifications for the self-care quality 
measure lists 41 risk adjustors, and the mobility quality measure list 
43 risk adjustors. The risk adjustors were selected based on our review 
of the literature, input from the function expert panel and feedback 
from public comments.
    Comment: One commenter conveyed their concern regarding the use of 
the Continuity Assessment Record and Evaluation Tool (CARE Tool) as 
currently proposed, because the CARE Tool is not appropriate for data 
collection for the IRF setting.
    Response: We interpret the commenter's comment to mean that they 
were concerned that we would use the CARE Tool as the data source for 
the functional status quality measures. We further interpret the 
commenter to mean that we would use the CARE Tool in its entirety for 
the collection of these measures because they believe that the use of 
the CARE Tool in its entirety would be inappropriate in an IRF. We 
would like to clarify that the functional status quality measures do 
not require data collection of the entire CARE Tool. The functional 
status measures were developed using a subset of the CARE Tool items 
(and their response codes), not the CARE Tool in its entirety. These 
particular assessment items (and response codes) used for the 
functional status measures, were derived from a subset of items within 
the CARE Tool which had been tested for reliability and validity in the 
IRF setting as part of the Post-Acute Payment Reform Demonstration (PAC 
PRD). A summary of the reliability and validity results are provided in 
the draft measure specifications posted at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Details.html.
    Comment: Several commenters conveyed concern related to undue 
burden associated with ``double documentation'' for the functional 
status quality measures.
    Response: We interpret the comment to refer to the collection of 
both existing data elements and additional similar or redundant data 
elements. We appreciate the concerns related to any undue burden, 
including collection of both existing data elements and additional 
similar data elements, and take such concerns under consideration.
    Comment: One commenter was concerned about relying on data from a 
demonstration that had flaws in data collection and testing, and 
wondered whether these quality measures will perform as intended.
    Response: We interpreted the commenter's concern to be a concern 
about the validity of the CARE items tested as part of the PAC PRD. We 
further interpret their concern being related to the measures 
performing ``as

[[Page 45917]]

intended'' to imply that they wonder if the measures would be able to 
depict quality. We have described the development and the assessment of 
the CARE items and examined the validity and reliability of these CARE 
items in reports that summarize this work and these reports are posted 
on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/The-Development-and-Testing-of-the-Continuity-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report-on-the-Development-of-the-CARE-Item-Set-and-Current-Assessment-Comparisons-Volume-3-of-3.pdf 
and http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/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.pdf. We anticipate that the quality measures 
will perform as intended and that they will provide information 
pertaining to quality due to the rigor applied in the development of 
the measures, including the risk adjustment variables used in measure 
calculation. In addition, we intend to perform ongoing analysis of the 
performance of the measures as part of our obligation as a quality 
measure steward.
    Comment: We received several comments pertaining to concerns 
surrounding the ability of the quality measures to capture small, but 
important levels of functional change, specifically concerns related to 
``floor and ceiling effects.''
    Response: We interpret the commenter to mean that ``floor and 
ceiling effects'' pertain to the assessment items used in the measure 
not being able to capture change for patients who would fall at the 
lower or upper ends of the measurement scale. We appreciate concerns 
related to any instrument that would have limitations such as these 
floor and ceiling effects. In the development of these quality measures 
this major concern was taken under consideration, and there was a focus 
on including items that would cover a wide range of functioning, thus 
minimizing limitations in measuring change for patients who are low 
functioning and patients who are high functioning. Details about the 
development of the CARE items can be found on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Downloads/Draft-Specifications-for-the-Functional-Status-Quality-Measures-for-Inpatient-Rehabilitation-Facilities-Version-2.pdf.
    Comment: Several commenters indicated concerns about the need for 
standardized training to ensure inter-rater reliability for the CARE 
function items and noted that this training would add additional burden 
to facilities.
    Response: We appreciate the commenters' concerns related to data 
collection and the requirements that accompany the implementation of 
new quality measures and have addressed this in the past with public 
outreach including training sessions, webinars, open door forums, and 
help desk support.

E. Timeline for Data Submission for New IRF QRP Quality Measures 
Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase Factor

    In the FY 2015 IRF PPS proposed rule (79 FR 26339), we proposed the 
following data submission timeline for the quality measures for the FY 
2017 adjustments to the IRF PPS annual increase factor. We proposed 
that IRFs would be required to submit data on admissions and discharges 
occurring between January 1, 2015, and December 31, 2015 (CY 2015), for 
the FY 2017 adjustments to the IRF PPS annual increase factor. We 
proposed this time frame because we believe this will provide 
sufficient time for IRFs and CMS to put processes and procedures in 
place to meet the additional quality reporting requirements. Given 
these measures are collected through the CDC's NHSN, and IRFs are 
already familiar with the NHSN reporting system, as they currently 
report the CAUTI measure, we believe this time frame will allow IRFs 
ample opportunity to begin reporting the MRSA and CDI measures. We also 
proposed the quarterly data submission deadlines for the FY 2017 
adjustments to the IRF PPS annual increase factor to occur 
approximately 135 days after the end of each quarter, as outlined in 
the Table 10. Each quarterly deadline would be the date by which all 
data collected during the preceding quarter would be required to be 
submitted to us for measures using the IRF-PAI and to the CDC for 
measures using the NHSN. We invited public comment on these proposed 
timelines for data submission for the proposed IRF QRP quality measures 
for the FY 2017 adjustments to the IRF PPS annual increase factor.
    Comment: Several commenters recommended that CMS delay the adoption 
of the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF 1716), because it is 
not ready for implementation. They recommended additional education and 
training as well as additional testing should be conducted before 
implementation.
    Response: As the MRSA quality measure is already NQF-endorsed for 
the IRF setting, we do not believe that additional testing is required 
before implementation. By utilizing CDC's NHSN for MRSA reporting, we 
are building upon IRFs' ongoing experience with data reporting via the 
NHSN. Quality measures undergo maintenance review at regular intervals 
in order to evaluate the value of ongoing use of these measures.
    Comment: Several commenters recommended that CMS delay the adoption 
of the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF 1717), because it is not ready for 
implementation. They recommended additional testing should be conducted 
before implementation.
    Response: As the CDI quality measure is NQF-endorsed for the IRF 
setting, we do not believe that additional testing is required before 
implementation. By utilizing CDC's NHSN for CDI reporting, we are 
building upon IRFs' ongoing experience with data reporting via the 
NHSN, but recognize that additional education and training would be 
helpful.
    Final Decision: After careful consideration of the comments we 
received, we are finalizing our proposal to begin to submit data for 
the MRSA and CDI measures on admissions and discharges starting January 
1, 2015, including the quarterly submission deadlines. While we have 
taken into consideration comments suggesting that we delay 
implementation of these measures, we do not believe we can delay 
closing the monitoring gap that would continue to exist if we delayed 
implementation of these important measures. Adjustments to the IRF PPS 
annual increase factor for the MRSA and CDI measures will begin with FY 
2017.

[[Page 45918]]

Table 10--Timelines for Submission of IRF QRP Quality Data Using CDC/NSHN for FY 2017 Adjustments to the IRF PPS
Annual Increase Factor: National Health Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
  Resistant Staphylococcus Aureus (MRSA) Bacteremia Outcome Measure (NQF 1716) and National Healthcare
   Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium Difficile Infection (CDI) Outcome
                                          Measure (NQF 1717) *
----------------------------------------------------------------------------------------------------------------
                                             CDC/NHSN data collection
                 Quarter                              period                CDC/NHSN data  submission deadline
----------------------------------------------------------------------------------------------------------------
                                             FY 2017 Increase Factor
----------------------------------------------------------------------------------------------------------------
Quarter 1................................  January 1, 2015-March 31,     August 15, 2015.
                                            2015.
Quarter 2................................  April 1, 2015-June 30, 2015.  November 15, 2015.
Quarter 3................................  July 1, 2015-September 30,    February 15, 2016.
                                            2015.
Quarter 4................................  October 1, 2015-December 31,  May 15, 2016.
                                            2015.
----------------------------------------------------------------------------------------------------------------
* The quarterly deadlines provided in this table apply to the CDC/NHSN data only. Timelines for submission of
  IRF-PAI data for the IRF PPS and Quality Indicator items are provided separately.

 Table 11--Summary of IRF QRP Measures Affecting the FY 2017 Adjustments
   to the IRF PPS Annual Increase Factor and Subsequent Year Increase
                                 Factors
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Continued IRF QRP Measure Affecting the FY 2015 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 0138: National Health Safety Network (NHSN)
     Catheter-Associated Urinary Tract Infection (CAUTI) Outcome
     Measure.\+\
Continued IRF QRP Measure Affecting the FY 2016 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 0431: Influenza Vaccination Coverage among
     Healthcare Personnel.\+\
Continued IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 2502: All-Cause Unplanned Readmission Measure
     for 30 Days Post-Discharge from Inpatient Rehabilitation
     Facilities.[supcaret]**
     NQF 0680: Percent of Residents or Patients Who
     Were Assessed and Appropriately Given the Seasonal Influenza
     Vaccine (Short-Stay).*
     NQF 0678: Percent of Residents or Patients with
     Pressure Ulcers That Are New or Worsened (Short-Stay).*
New IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF PPS
 Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 1716: National Healthcare Safety Network
     (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
     Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.
     NQF 1717: National Healthcare Safety Network
     (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile
     Infection (CDI) Outcome Measure.
------------------------------------------------------------------------
+ Using CDC/NHSN.
* Using the IRF-PAI effective October 1, 2014.
[supcaret] Medicare Fee-for-Service claims data.
** This measure is under review at NQF (http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx).

F. Timing for New IRFs To Begin Reporting Quality Data Under the IRF 
QRP Affecting the FY 2017 Adjustments to the IRF PPS Annual Increase 
Factor and Beyond

    In the FY 2015 IRF PPS proposed rule (79 FR 26340 through 26341), 
we proposed that for the FY 2017 adjustments to the IRF PPS annual 
increase factor and subsequent year increase factors, that new IRFs be 
required to begin reporting quality data under the IRF QRP by no later 
than the first day of the calendar quarter subsequent to the quarter in 
which they have been designated as operating in the CASPER system. We 
invited public comment on this proposed timing for new IRFs to begin 
reporting quality data under the IRF QRP.
    Comment: We did not receive any comments on the above proposal.
    Final Decision: We are finalizing our policy regarding the timing 
for new IRFs to begin reporting quality data under the IRF QRP 
affecting the FY 2017 adjustments to the IRF PPS annual increase factor 
and beyond, as proposed.

G. IRF QRP Reconsideration and Appeals Procedures for the FY 2016 
Adjustments to the IRF PPS Annual Increase Factor and Beyond

1. IRF QRP Reconsideration and Appeals for the FY 2014 and FY 2015 
Adjustments to the IRF PPS Annual Increase Factor
    In the FY 2014 IRF PPS final rule (78 FR 47919), we finalized a 
voluntary process that allowed IRF providers the opportunity to seek 
reconsideration of our initial noncompliance decision for the FY 2014 
and FY 2015 adjustments to the IRF PPS annual increase factor. We 
stated that we would notify IRFs found to be noncompliant with the IRF 
QRP reporting requirements that they may be subject to the 2-percentage 
point reduction to their IRF PPS annual increase factor. The purpose of 
this notification is to put the IRF on notice of the following: (1) 
That the IRF has been identified as being noncompliant with the IRF QRP 
reporting requirements for a given reporting period; (2) that the IRF 
will be scheduled to receive a 2-percentage point reduction to its IRF 
PPS annual increase factor for the applicable fiscal year; (3) that the 
IRF may file a request for reconsideration if it believes that the 
finding of noncompliance is erroneous, or that if it was noncompliant, 
it had a valid and justifiable excuse for this noncompliance; and (4) 
that, to receive reconsideration, the IRF must follow a defined process 
on how to file a request for reconsideration, which will be described 
in the notification. This defined process for filing a request for 
reconsideration was described on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    We further stated that upon the conclusion of our review of each 
request

[[Page 45919]]

for reconsideration, we would render a decision. We may reverse our 
initial finding of noncompliance if: (1) The IRF provides adequate 
proof of full compliance with all IRF QRP reporting requirements during 
the reporting period; or (2) the IRF provides adequate proof of a valid 
or justifiable excuse for noncompliance if the IRF was not able to 
comply with the requirements during the reporting period. We will 
uphold our initial finding of noncompliance if the IRF cannot show any 
justification for noncompliance.
    If an IRF is dissatisfied with either our initial finding of 
noncompliance or a CMS decision rendered at the reconsideration level, 
it can appeal the decision with the Provider Reimbursement Review Board 
(PRRB) under 42 CFR part 405, subpart R. We recommended, however, that 
IRF providers submit requests for reconsideration to us before 
submitting appeals to the PRRB. We noted that this order of appeals has 
had good success under other established quality reporting programs 
and, from an IRF perspective, it allows for the opportunity to resolve 
issues earlier in the process, when we have dedicated resources to 
consider all reconsideration requests before payment changes are 
applied to the IRF's annual payment.
2. IRF QRP Program Reconsideration and Appeals Procedures for the FY 
2016 Adjustments to the IRF PPS Annual Increase Factor and Beyond
    In the FY 2015 IRF PPS proposed rule (79 FR 26340 through 26341), 
we proposed, for the FY 2016 adjustments to the IRF PPS annual increase 
factor and subsequent year increase factors, to adopt an updated 
process, as described below, that will enable an IRF to request a 
reconsideration of our initial noncompliance decision in the event that 
an IRF believes that it was incorrectly identified as being subject to 
the 2-percentage point reduction to its IRF PPS annual increase factor 
due to noncompliance with the IRF QRP reporting requirements for a 
given reporting period.
    For the FY 2016 adjustments to the IRF PPS annual increase factor 
and subsequent year increase factors, we proposed that an IRF would 
receive a notification of noncompliance if we determine that the IRF 
did not submit data in accordance with section 1886(j)(7)(C) of the Act 
for the applicable fiscal year, and therefore, that the IRF is subject 
to a 2-percentage point reduction in the applicable IRF PPS annual 
increase factor as required by section 1886(j)(7)(A)(i) of the Act. We 
will only consider requests for reconsideration once a provider has 
been found to be noncompliant and not before. IRFs will have 30 days 
from the date of the initial notification of noncompliance to review 
the CMS determination and submit to us a request for reconsideration. 
This proposed time frame allows us to balance our desire to ensure that 
IRFs have the opportunity to request reconsideration with our need to 
complete the reconsideration process and provide IRFs with our decision 
in a timely manner. Notifications of noncompliance and any subsequent 
notifications from CMS will be sent via a traceable delivery method 
such as certified U.S. mail or registered U.S. mail. We will not accept 
any requests for reconsideration that are submitted after the 30-day 
deadline.
    We further proposed that as part of the IRF's request for 
reconsideration, the IRF will be required to submit all supporting 
documentation and evidence demonstrating (1) full compliance with all 
IRF QRP reporting requirements during the reporting period or (2) a 
valid or justifiable excuse for noncompliance if the IRF was not able 
to comply with the requirements during the reporting period. We will be 
unable to review any reconsideration request that fails to provide the 
necessary documentation and evidence along with the request. The 
documentation and evidence may include copies of any communications 
that demonstrate its compliance with all IRF QRP reporting 
requirements, as well as any other records that support the IRF's 
rationale for seeking reconsideration. A sample list of the proposed 
acceptable supporting documentation and evidence, as well as 
instructions for IRF providers to retrieve copies of the data submitted 
to CMS for the appropriate program year, can be found on the CMS Web 
site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    We proposed that providers may withdraw reconsideration requests at 
any time and may file new requests within the proposed 30-day deadline. 
We also proposed that, in very limited circumstances, we may extend the 
proposed deadline for submitting reconsideration requests. It will be 
the responsibility of a provider to request an extension and 
demonstrate that extenuating circumstances existed that prevented the 
filing of the reconsideration request by the proposed deadline. We will 
not respond to any other types of requests, such as requests for 
administrative review of the methodology and standards that determine 
the quality reporting requirements.
    We proposed that an IRF provider wishing to request a 
reconsideration of our initial noncompliance determination will be 
required to do so by submitting an email to the following email 
address: IRFQRPReconsiderations@cms.hhs.gov. Any request for 
reconsideration submitted to us by an IRF will be required to follow 
the guidelines outlined on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. 
Following receipt of a request for reconsideration, we will provide--
     An email acknowledgment, using the contact information 
provided in the reconsideration request, to the CEO or CEO-designated 
representative that the request has been received; and
     Once we have reached a decision regarding the 
reconsideration request, an email to the IRF CEO or CEO-designated 
representative, using the contact information provided in the 
reconsideration request, regarding our decision.
    We proposed to require any IRF that believes it was incorrectly 
identified as being subject to the 2-percentage point reduction to its 
IRF PPS annual increase factor to submit a request for reconsideration 
and receive a decision on that request before the IRF can file an 
appeal with the PRRB, as authorized by the Administrative Procedure 
Act. If the IRF is dissatisfied with the decision rendered at the 
reconsideration level, the IRF can appeal the decision with the PRRB 
under Sec.  405.1835. We believe this proposed process is more 
efficient and less costly for us and for IRFs because it decreases the 
number of PRRB appeals by resolving issues earlier in the process. 
Additional information about the reconsideration process including 
requirements for submitting reconsideration request is posted on the 
CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. We invited public comment on the 
proposed procedures for reconsideration and appeals. The responses to 
the public comments we received on this proposal are discussed below.
    Comment: Several commenters supported the proposal to continue the 
reconsideration process for FY 2016.

[[Page 45920]]

    Response: We thank the commenters for taking the time to express 
their support.
    Comment: One commenter supported the reconsideration process, but 
believed that it should be expanded to include reconsideration of the 
results of the data validation process described in section XII.K. of 
this final rule. Specifically, if two clinicians do not document the 
patient's condition in the same way, but the rationale for the 
difference can be explained through the reconsideration and appeals 
process, then the provider should be allowed to use this process.
    Response: We thank the commenter for their support of the proposed 
reconsideration process. We believe the current reconsideration process 
could be utilized for reconsideration of the results of the validation 
process, as long as all of the supporting documentation necessary for 
the request for reconsideration was previously submitted at the time of 
validation (that is, as long as the reconsideration request was based 
on the same documentation that was submitted for validation).
    Final Decision: Having carefully considered the comments we 
received on the IRF QRP Reconsideration and Appeals procedures for the 
FY 2016 adjustments to the IRF PPS annual increase factor and beyond, 
we are finalizing this policy as proposed.

H. IRF QRP Data Submission Exception or Extension Requirements for the 
FY 2017 Adjustments to the IRF PPS Annual Increase Factor and Beyond

    In the FY 2015 IRF PPS proposed rule (79 FR 26341 through 26342), 
for the IRF QRP's data submission exception or extension requirements 
for the FY 2017 adjustments to the IRF PPS annual increase factor and 
subsequent year increase factors, we proposed to continue using the IRF 
QRP's disaster waiver requirements that were adopted in the FY 2014 IRF 
PPS final rule (78 FR 47920) for the FY 2015 adjustments to the IRF PPS 
annual increase factor and subsequent year increase factors, which are 
outlined in this section, with the exception that the phrase 
``exception or extension'' will be substituted for the word ``waiver.'' 
We also proposed, for the FY 2017 adjustments to the IRF PPS annual 
increase factor and subsequent year increase factors, that we may grant 
an exception or extension to IRFs if we determine that a systemic 
problem with one of our data collection systems directly affected the 
ability of the IRF to submit data. Because we do not anticipate that 
these types of systemic errors will happen often, we do not anticipate 
granting an exception or extension on this proposed basis frequently. 
We proposed that if we make the determination to grant an exception or 
extension, we will communicate this decision through routine 
communication channels to IRFs and vendors, including, but not limited 
to, issuing memos, emails, and notices on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    In the FY 2014 IRF PPS final rule (78 FR 47920), we finalized a 
process for IRF providers to request and for us to grant exceptions or 
extensions for the quality data reporting requirements of the IRF QRP 
for one or more quarters, beginning with the FY 2015 adjustments to the 
IRF PPS annual increase factor and subsequent year increase factors, 
when there are extraordinary circumstances beyond the control of the 
provider.
    In the event that an IRF seeks to request an exception or extension 
for quality reporting purposes, the IRF must request an exception or 
extension within 30 days of the occurrence of an extraordinary event by 
submitting a written request to CMS via email to the IRF QRP mailbox at 
IRFQRPReconsiderations@cms.hhs.gov. Exception or extension requests 
sent to us through any other channel will not be considered as a valid 
request for an exception or extension from the IRF QRP reporting 
requirements for any adjustment to the IRF PPS annual increase factor. 
The written request must contain all of the finalized requirements in 
the FY 2014 IRF PPS final rule (78 FR 47920) and on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. When an exceptions or extension is granted, an IRF will 
not incur payment reduction penalties for failure to comply with the 
requirements of the IRF QRP, for the time frame specified by CMS. If an 
IRF is granted an exception, we will not require that the IRF submit 
any quality data for a given period of time. If we grant an extension 
to an IRF, the IRF will still remain responsible for submitting quality 
data collected during the time frame in question, although we will 
specify a revised deadline by which the IRF must submit this quality 
data. It is important to note that requesting an exception or extension 
from the requirements of the IRF QRP is separate and distinct from the 
purpose and requirements of Sec.  412.614, which outline the 
requirements to follow if an IRF is requesting a waiver regarding 
consequences of failure to submit complete and timely IRF-PAI payment 
data specified in that regulation. IRFs that have filed and were 
granted an IRF-PAI waiver in accordance with Sec.  412.614 may so 
indicate when requesting an exception or extension from the IRF QRP 
requirements, but the submission of an IRF-PAI waiver request pursuant 
to Sec.  412.614 will not be considered a valid request for an 
exception or extension from the IRF QRP requirements. To request an 
exception or extension from the IRF QRP requirements, the previously 
discussed process must be followed.
    Additionally, in the FY 2014 IRF PPS final rule (78 FR 47920), we 
finalized a policy that allowed us to grant waivers (which we are now 
calling exceptions or extensions) to IRFs that have not requested them 
if we determine that an extraordinary circumstance, such as an act of 
nature, affects an entire region or locale. We stated that if this 
determination was made, we will communicate this decision through 
routine communication channels to IRFs and vendors, including, but not 
limited to, issuing memos, emails, and notices on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We invited public comment on these proposals regarding the IRF 
QRP's data submission exception or extension requirements for the FY 
2017 adjustments to the IRF PPS annual increase factor and subsequent 
year increase factors. The responses to the public comments we received 
on this proposal are discussed below.
    Comment: Several commenters supported the proposed Exception/
Exemption waiver proposal.
    Response: We thank the commenters for taking time to express their 
support.
    Final Decision: Having carefully considered the comments we 
received on the proposed IRF QRP data submission exception or extension 
requirements for the FY 2017 adjustments to the IRF PPS annual increase 
factor and beyond, we are finalizing these requirements, as proposed.

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

    Under section 1886(j)(7)(E) of the Act, the Secretary is required 
to establish procedures for making data submitted under the IRF QRP 
available to the public. Section 1886(j)(7)(E) of the Act also requires 
these procedures to ensure that each IRF provider has the

[[Page 45921]]

opportunity to review the data that is to be made public for its 
facility, prior to such data being made public. Section 1886(j)(7)(E) 
of the Act requires the Secretary to report quality measures that 
relate to services furnished in IRFs on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.
    Currently, the Agency is developing plans regarding the 
implementation of these provisions. We appreciate the need for 
transparency into the processes and procedures that will be implemented 
to allow for the public reporting of the IRF QRP data and to afford 
providers the opportunity to preview that data before it is made 
public. At this time, we have not established procedures or timelines 
for public reporting of data, but we intend to make the public aware of 
our strategy in the future. We invited public comments on what we 
should consider when developing future proposals related to public 
reporting. Our responses to the public comments we received on this 
topic are discussed below.
    Comment: Several commenters encouraged CMS to report IRF quality 
data on Hospital Compare in the same manner that it reports data for 
acute care hospitals. One commenter encouraged CMS to report on IRF 
quality data as soon as possible.
    Response: We thank the commenters for taking the time to express 
these views and suggestions regarding public reporting and will take 
them into consideration for future public reporting development.

J. IRF QRP Data Completion Thresholds for the FY 2016 Adjustments to 
the IRF PPS Annual Increase Factor and Beyond

    Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires 
the reduction of the applicable IRF PPS annual increase factor, as 
previously modified under section 1886(j)(3)(D) of the Act, by 2 
percentage points for any IRF that fails to submit data on quality 
measures specified by the Secretary in accordance with the form and 
manner specified by the Secretary for that fiscal year. To date, we 
have not established a standard for compliance other than for IRF 
providers to submit all applicable required data for all finalized IRF 
QRP quality measures, by the previously finalized quarterly deadlines. 
We have also specifically required monthly submission of such quality 
data for the healthcare-associated infection or vaccination data, which 
is reported to the CDC. In the FY 2015 IRF PPS proposed rule (79 FR 
26342 through 26343), in reaction to the input received from our 
stakeholders seeking additional specificity related to required IRF QRP 
compliance affecting FY annual increase factor determinations and, due 
to the importance of ensuring the integrity of quality data submitted 
to CMS, we proposed to set specific IRF QRP thresholds for completeness 
of provider quality data beginning with data affecting the FY 2016 
annual increase factor determination and beyond.
    The IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 OPPS/
ASC final rule, and FY 2014 IRF PPS final rule, requires providers to 
submit quality data using 2 separate data collection/submission 
mechanisms: Measures collected using the quality indicator section of 
the IRF-PAI are submitted through the CMS Quality Improvement 
Evaluation System (QIES); and measures stewarded by the Centers for 
Disease Control and Prevention (CDC) (Healthcare-associated Infection 
(HAI) measures and vaccination measures) are submitted using the CDC's 
National Healthcare Safety Network (NHSN). While we have previously 
finalized a claims-based measure (All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from Inpatient Rehabilitation 
Facilities), such measures do not require IRFs to actually submit 
quality data to us, as they are calculated using claims data submitted 
to us for payment purposes. Thus, with claims-based measures, there is 
no quality data to which we could apply the proposed data completion 
thresholds. To ensure that IRF providers are meeting an acceptable 
standard for completeness of submitted data, we proposed that for the 
FY 2016 annual increase factor and beyond, IRF providers must meet or 
exceed two separate program thresholds: One threshold for quality 
measures data collected using the quality indicator section of the IRF-
PAI and submitted through QIES; and a second threshold for quality 
measures data collected and submitted using the CDC's NHSN. We proposed 
that IRFs must meet or exceed both thresholds discussed below to avoid 
receiving a 2 percentage point reduction to their IRF PPS annual 
increase factor for a given FY, beginning with FY 2016, which considers 
quality data submitted during CY 2014. We proposed to hold IRF 
providers accountable for two different data completion thresholds for 
each of the 2 data submission mechanisms: A 95 percent data completion 
threshold for data collected using the quality indicator items on the 
IRF-PAI and submitted through QIES; and a 100 percent threshold for 
data collected and submitted through the CDC's NHSN. We have chosen to 
hold providers to the lower threshold of 95 percent for the quality 
indicator items on the IRF-PAI, as there has to be some margin for 
error related to IRF patients that have been discharged emergently or 
against medical advice, as these situations make it more difficult to 
collect and submit the mandatory IRF-PAI quality indicator items at 
discharge. We do not believe the same impediments exist for the 
infection, vaccination, or other quality measures data that IRFs submit 
to the CDC's NHSN.
1. IRF QRP Completion Threshold for the Required Quality Indicator Data 
Items on the IRF-PAI
    The quality indicator section of the IRF-PAI is composed of data 
collection items designed to inform quality measure calculations, 
including risk-adjustment calculations as well as internal consistency 
checks for logical inaccuracies. In the FY 2015 IRF PPS proposed rule 
(79 FR 26342 through 26343), we proposed that beginning with quality 
data affecting the FY 2016 IRF PPS annual increase factor (CY 2014 
data) and beyond, IRF providers must meet or exceed a proposed IRF-PAI 
quality indicator data completion threshold of 95 percent. We proposed 
to assess the completeness of submitted data by verifying that, for all 
IRF-PAI Assessments submitted by any given IRF, at least 95 percent of 
those IRF-PAI Assessments must have 100 percent of the mandatory 
quality indicator data items completed where, for the purposes of this 
proposed rule, ``completed'' is defined as having provided actual 
patient data as opposed to a non-informative response, such as a dash 
(-), that indicates the IRF was unable to provide patient data. The 
proposed threshold of 95 percent is based on the need for complete 
records, which allows appropriate analysis of quality measure data for 
the purposes of updating quality measure specifications as they undergo 
yearly and triennial measure maintenance reviews with the NQF. 
Additionally, complete data is needed to understand the validity and 
reliability of quality data items, including risk-adjustment models. 
Finally, we want to ensure complete quality data from IRF providers, 
which will ultimately be reported to the public, allowing our 
beneficiaries to gain an understanding of provider performance related 
to these quality metrics, and helping them to make informed health care 
choices. Our data suggests that the majority of current IRF

[[Page 45922]]

providers are in compliance with, or exceeding this proposed threshold 
already. However, we take comment on circumstances that might prevent 
IRFs from meeting this level of compliance. All items that we propose 
to require under the IRF QRP are identified in Chapter 4 of the IRF PAI 
Training Manual, which is available for download on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-
Reporting/. We additionally proposed that any IRF that does not meet 
the proposed requirement that 95 percent of all IRF-PAI assessments 
submitted contain 100 percent of all required quality indicator data 
items, will be subject to a reduction of 2 percentage points to the 
applicable FY IRF PPS annual increase factor beginning with FY 2016. To 
establish this program threshold, we analyzed IRF-PAI quality indicator 
data item submissions from January 2013 through September 2013, and we 
believe that the majority of IRF providers will be able to meet the 
proposed 95 percent data completion threshold. It is our intent to 
raise this threshold over the next 2 years, through the notice and 
comment rulemaking process. We proposed that this threshold will have 
to be met by IRFs, in addition to the CDC NHSN threshold discussed 
below, to avoid receiving a 2 percentage point reduction to the 
applicable FY IRF PPS annual increase factor.
2. IRF QRP Data Completion Threshold for Measures Submitted Using the 
Centers for Disease Control and Prevention (CDC) National Healthcare 
Safety Network (NHSN)
    The IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 OPPS/
ASC final rule, and FY 2014 IRF PPS final rule, requires that IRFs 
submit CDC-stewarded quality measure data using the CDC's NHSH, 
including data for the previously finalized CAUTI and Influenza 
Vaccination Coverage Among Healthcare Personnel (HCP) quality measures. 
More specifically, we require that IRFs follow CDC quality measure 
protocols, which require them to complete all data fields required for 
both numerator and denominator data within NHSN, including the ``no 
events'' field for any month during which no infection events were 
identified. IRFs are required to submit this data on a monthly basis 
(except for the HCP measure, which is only required to be reported once 
per year). However, IRFs have until the associated quarterly deadline 
(135 calendar days beyond the end of each CY quarter) by which to 
report infection data to the CDC for each of the 3 months within any 
give quarter. For more information on the IRF QRP quarterly deadlines, 
we refer you to Table 10 in section XI.E of this final rule. In the FY 
2015 IRF PPS proposed rule (79 FR 26343), we proposed that, beginning 
with FY 2016 IRF PPS annual increase factor and beyond, this previously 
finalized requirement for monthly reporting must be met, in addition to 
the proposed IRF-PAI quality indicator data item completion threshold 
discussed above, to avoid a 2 percentage point reduction to the 
applicable FY IRF PPS annual increase factor. That is, we proposed that 
IRFs must meet a threshold of 100 percent for measures submitted via 
the NHSN, achieved by submitting relevant infection or vaccination data 
for each month of any given CY, in addition to meeting the above 
proposed data item completion threshold for required quality indicator 
items on the IRF-PAI. As the IRF QRP expands and IRFs begin reporting 
measures that were previously finalized, but not yet implemented, or 
newly proposed and finalized measures, we proposed to apply this same 
threshold.
a. Application of the 2 Percentage Point Reduction for IRF Providers 
That Fail To Meet the Above-Proposed Data Completion Thresholds
    In the FY 2015 IRF PPS proposed rule (79 FR 26343), we proposed 
that IRFs must meet two separate data completion thresholds to avoid a 
2 percentage point reduction to their applicable FY annual increase 
factor: A data completion threshold of 95 percent for those mandatory 
data elements collected using the quality indicator items on the IRF-
PAI and submitted through QIES; and a second data completion threshold 
of 100 percent for quality measure data submitted through the CDC's 
NHSN. We also proposed that these data completion thresholds must be 
met in addition to the below proposed data accuracy validation 
threshold of 75 percent, to avoid a 2 percentage point reduction to 
their applicable FY annual increase factor. While we proposed that IRFs 
must meet both the data completion and data accuracy thresholds, IRFs 
cannot have their applicable annual increase factor reduced twice. That 
is, should an IRF provider fail to meet either one or both of the 
proposed thresholds, they will only receive one reduction of 2 
percentage points to their applicable FY annual increase factor.
    We invited comment on these proposals. Our responses to the public 
comments we received on this proposal are discussed below.
    Comment: A few commenters supported our proposal of data 
completeness standards, stating that these standards will facilitate 
more accurate public reporting in the future.
    Response: We thank the commenters for taking the time to express 
their support of our proposal.
    Comment: Several commenters believed we should delay the 
implementation of our data completion threshold. One commenter stated 
we should not implement this threshold until FY 2016, at the earliest. 
Other commenters stated that we should apply the standards no earlier 
than FY 2017.
    Response: We would submit that we proposed to begin applying this 
data completion threshold, beginning with the FY 2016 annual increase 
factor for IRFs (based on CY 2014 data), and interpret that the 
commenter stating that we should not implement this proposal until FY 
2016, at the earliest, meant that we should apply this threshold to 
data collected during CY 2016, at the earliest. We believe that it is 
important that we begin evaluating the completeness of the quality data 
submitted to CMS as early as possible, in order to ensure the integrity 
of the IRF QRP data. This data may not only be used for public 
reporting, but is also used to inform important updates to quality 
measures undergoing maintenance at the NQF, that occurs on an annual or 
triennial basis. Additionally, quality data being submitted via the 
CDC's NHSN during CY 2014, will be used to calculate a baseline 
``expected'' ratio, as well as a Standard Infection Ratio (SIR). 
Incomplete quality data, including missing monthly submissions of NHSN 
data, will result in an incomplete, and therefore potentially 
misleading, SIR. We believe delaying implementation of the application 
of these data completion thresholds would be a disservice to Medicare 
beneficiaries, who will eventually use publically reported data to make 
better informed health care choices for themselves and their families.
    Comment: Several commenters stated that CMS should delay 
implementation and apply these standards no earlier than FY 2017, and 
additionally commented that it would be inappropriate and unfair to 
apply the data completeness standards to data submitted before the 
standards were proposed, and therefore, known to IRFs. One commenter 
stated that in the hospital IQR program, changes to data submission 
standards are proposed in advance of--not during or after--the data 
collection period. One commenter

[[Page 45923]]

stated that it would be impermissibly retroactive to apply data 
completeness thresholds to IRF data submitted prior to October 1, 2014.
    Response: We respectfully disagree with the commenters, and believe 
that we are within our authority to apply these data completion 
standards to quality data submitted to CMS prior to the effective date 
of this final rule. Currently, the compliance standard applicable to 
each IRF is to timely submit all required quality data to CMS, and IRFs 
should already be ensuring that the data they submit is complete and 
accurate. Thus, applying a data completion threshold to data submitted 
during CY 2014 ensures that IRFs are complying with applicable 
standards, and that payments made to IRFs are based on complete and 
accurate data.
    Comment: One commenter stated that it would be unfair for CMS to 
apply the proposed data completion threshold to data collected for the 
first 6 months using the newly revised IRF-PAI that will go into effect 
on October 1, 2014, and that CMS should only consider the second 6 
months of data submitted using the new IRF-PAI when making compliance 
determinations. The commenter further stated that CMS has, in the past, 
used a partial year's data to make compliance determinations, and 
should do so for the FY 2017 compliance determinations, as IRFs will 
have a greater chance of submitting inaccurate or incomplete data until 
they are familiar with the updated IRF-PAI.
    Response: We thank the commenter for expressing their concern. 
However, we respectfully disagree with the commenter. While IRFs will 
be using a new version of the IRF-PAI beginning October 1, 2014, we do 
not believe that the expanded quality indicator section used for 
reporting quality data is so substantially different that IRFs will 
have difficulty submitting complete and accurate data. The newly 
expanded quality indicator section of the IRF-PAI includes only 1 
additional mandatory item compared to the version that is in use 
currently. Additionally, the data completion threshold, initially, will 
only look at the mandatory pressure ulcer items, which remain the same; 
the new mandatory item is related to the Patient Influenza measure, and 
will not be considered when applying the data completion threshold for 
FY 2017 compliance determinations. Any expansion of the application of 
this data completion threshold to IRF quality data will be addressed 
through notice-and-comment rulemaking.
    Final Decision: Having carefully considered the comments we 
received on the proposed IRF QRP data completion threshold, and for the 
reasons discussed above, we are finalizing the IRF data completion 
threshold for the FY 2016 adjustments to the IRF PPS annual increase 
factor and beyond, as proposed.

K. Data Validation Process for the FY 2017 Adjustments to the IRF PPS 
Annual Increase Factor and Beyond

    Historically, we have built consistency and internal validation 
checks into our data submission specifications to ensure that the basic 
elements of the IRF-PAI assessment conform to requirements such as 
proper format and facility information. These internal validation 
checks are automated and occur during the provider submission process, 
and help ensure the integrity of the data submitted by providers by 
rejecting submissions or issuing warnings when provider data contain 
logical inconsistencies. These edit checks are further outlined in the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument Data 
Submission Specifications, which are available for download at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html.
    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public as required by section 
1886(j)(7)(E) of the Act. In the FY 2015 IRF PPS proposed rule (79 FR 
26343 through 26344), we proposed, for the FY 2016 adjustments to the 
IRF PPS annual increase factor and subsequent years, to validate the 
data submitted for quality purposes. Initially, for FY 2016 this data 
accuracy validation will apply only to the quality indicator items on 
the IRF-PAI that inform the measure Percent of Patients or Residents 
with Pressure Ulcers That Are New or Worsened (NQF 0678), 
including those mandatory data elements that inform the measure 
calculation, as well as those that inform internal consistency checks 
for logical inaccuracies. We proposed that as the IRF QRP expands, and 
as IRFs begin to submit additional data using the quality indicator 
section of the IRF-PAI, to include those additional data elements in 
this validation process. We will inform any such expansion of this 
validation process prior to its occurrence through our routine channels 
of communication including, but not limited to the IRF QRP Web site, 
CMS open door forums, national IRF provider trainings, and the Medicare 
Learning Network Newsletter.
    We proposed to validate the data elements submitted to CMS for 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Have Worsened (Short-Stay) (NQF 0678) under the IRF QRP by 
requesting the minimum chart data necessary to confirm a statistically 
valid random sample of 260 providers. From each of those 260 providers, 
5 IRF-PAI assessments submitted through National Assessment Collection 
Database will be randomly selected. In accordance with Sec.  
164.512(d)(1)(iii) of the HIPAA Privacy Rule, we will request from 
these providers the specified portions of the 5 Medicare patient charts 
that correspond to the randomly selected assessments, which will need 
to be copied and submitted via traceable mail to a CMS contractor for 
validation. We proposed that the specific portions of the 5 beneficiary 
charts will be identified in the written request, but may include: 
Admission and discharge assessments, relevant nursing notes following 
the admission, relevant nursing notes preceding the discharge, 
physician admission summary and discharge summary, and any Assessment 
of Pressure Ulcer Form the facility may utilize. We proposed that the 
CMS contractor would utilize the portions of the patient charts to 
compare that information with the quality data submitted to CMS. 
Differences that would affect measure outcomes or measure rates would 
be identified and reported to CMS. These differences could include, but 
are not limited to, unreported worsened pressure ulcers.
    We proposed that all data that has been submitted to the National 
Assessment Collection Database under the IRF QRP would be subject to 
the data validation process. Specifically, we proposed that the 
contractor will request copies of the randomly selected medical charts 
from each facility via certified mail (or other traceable methods that 
require a facility representative to sign for CMS correspondence), and 
the facility will have 45 days from the date of the request (as 
documented on the request letter) to submit the requested records to 
the contractor. If the facility does not comply within 30 days, the 
contractor will send a second certified letter to the facility, 
reminding the facility that it must return copies of the requested 
medical records within 45 calendar days following the date of the 
initial contractor medical record request. If the facility still does 
not comply, then the contractor will assign a ``zero'' score to each 
measure in each missing record. If, however, the facility does comply, 
the contractor will review the data submitted by the facility using the 
IRF-

[[Page 45924]]

PAI for the mandatory data elements associated with the Pressure Ulcer 
measure, until such time that IRFs begin to submit additional quality 
measures that are collected using the quality indicator section of the 
IRF-PAI. Initially, this review will consist solely of those mandatory 
data elements that inform the pressure ulcer measure calculations, as 
well as those that inform checks for logical inconsistencies. We 
proposed that as IRFs begin to report additional finalized measures, we 
intend to propose expanding this validation process to other such 
measures at that time. The contractor will then calculate the 
percentage of matching data elements which will constitute a validation 
score. Because we would not be validating all records, we would need to 
calculate a confidence interval that incorporates a potential sampling 
error.
    To receive the full FY 2016 IRF annual increase factor, we proposed 
that IRFs in the random sample must attain at least a 75 percent 
validation score, based upon our validation process, which will use 
charts requested from patient assessments submitted for FY 2014. We 
will calculate a 95 percent confidence interval associated with the 
observed validation score. If the upper bound of this confidence 
interval is below the 75 percent cutoff point, we will not consider a 
hospital's data to be ``validated'' for payment purposes. For example, 
for a provider who submits all 5 of their charts, each with 9 elements, 
the provider's score will be based on 45 possible opportunities to 
report correctly or incorrectly. If the provider correctly scored on 40 
of the 45 elements, then their reliability would be 89 percent (40/45). 
The upper bound of the confidence interval takes into account sampling 
error and would be higher than this estimated reliability, in this case 
96 percent. This number is greater than or equal to 75 percent. 
Therefore the provider passes validation. We proposed that providers 
failing the validation requirements would be subject to a 2 percentage 
point reduction to their applicable annual increase factor. In 
addition, all providers validated would receive educational feedback, 
including specific case details.
1. Application of the 2 Percentage Point Reduction for IRF Providers 
That Fail To Meet the Above-Proposed Data Accuracy Threshold
    In the FY 2015 IRF PPS proposed rule (79 FR 26344), we proposed 
that IRFs must meet a data accuracy threshold of 75 percent to avoid 
receiving a 2 percentage point reduction to their applicable FY annual 
increase factor. We additionally proposed that this data accuracy 
threshold of 75 percent must be met in addition to the above data 
completion thresholds (95 percent for data collected using the quality 
indicator items on the IRF-PAI and submitted using QIES, and 100 
percent for data submitted using the CDC's NHSN), to avoid receiving a 
2 percentage point reduction to their applicable FY annual increase 
factor. While we proposed that IRFs must meet both the proposed data 
accuracy and data completion thresholds, IRFs cannot have their 
applicable annual payment update reduced twice. That is, should an IRF 
provider fail to meet either one or both of the proposed thresholds 
(data completion and/or data accuracy), they will only receive one 
reduction of 2 percentage points to their applicable FY annual increase 
factor.
    We invited public comment on these proposals and suggestions to 
improve the utility of the approach and/or reduce the burden on 
facilities. Our responses to comments we received on this proposal are 
discussed below.
    Comment: One commenter recommended inclusion of NHSN measures in 
its proposed validation for FY 2017, beginning with the CAUTI measure. 
Additionally, they suggested CMS explore a secure method of electronic 
submission of records for the validation process.
    Response: We thank the commenter for taking the time to express 
these views and suggestions regarding validation and will take them 
into consideration for future validation proposals. The HIPAA Security 
Rule and HHS policy require CMS to use secure methods of data 
transmission. We will consider adoption of electronic transmission of 
records in future rulemaking as a secure file transfer product becomes 
available to the IRF QRP.
    Comment: Several commenters believed that the proposed data 
validation process is a fundamental step to ensure the accuracy of the 
IRF quality reporting data.
    Response: We thank the commenters for their support of this 
process.
    Comment: One commenter recommended that CMS not move forward with 
its proposal to complete data validation for the Pressure Ulcer measure 
or that CMS should delay implementation until at least FY 2016 and 
should consider the use of a different measure for validation purposes. 
Additionally the commenter expressed concern that inconsistencies in 
the medical record would not be the sole factor used to demonstrate a 
failure to comply.
    Response: We believe that data validation is necessary to ensure 
the integrity of the data we use in the IRF QRP. We are finalizing that 
the data validation process for FY 2016 is for the Pressure Ulcer 
measure. This process would validate those data elements submitted to 
the QRP that are found in the medical record. We will not be validating 
individual inconsistencies in each record. However, if we find that 
record to be non-compliant, yet a facility believed the documentation 
submitted for validation matches the data elements submitted for the 
Pressure Ulcer measure, the facility may seek reconsideration of our 
initial determination.
    Comment: One commenter expressed concern that the threshold 
compliance of 75 percent agreement was too high for this first attempt 
to validate the Pressure Ulcer data. They stated that there would be a 
great deal of variability in the reporting of the pressure ulcer 
measure and that this should be an opportunity for CMS to educate 
providers on appropriate documentation and reporting to improve the 
process. Instead, they offered a 60 percent compliance threshold as 
more appropriate for this initial round of validation.
    Response: We thank the commenter for taking time to express concern 
about possible variability in the pressure ulcer measure. We note that 
the 75 percent agreement is the single point estimate of the proportion 
in agreement; we are proposing that the upper bound of a 95 percent 
confidence interval be the value that must exceed the 75 percent 
compliance threshold. We believe this takes into account the inherent 
variability to be found in the Pressure Ulcer measure data. In 
addition, the 75 percent proportion agreement is consistent with the 
other data quality programs currently underway, for example, the 
Hospital Inpatient Quality Reporting Program, 42 CFR 412.140(d)(2), and 
the Hospital Outpatient Quality Reporting Program, 42 CFR 419.46(e)(2). 
We believe it is important, where feasible, to promulgate consistent 
standards when we deal with the various quality data we are collecting.
    Final Decision: Having carefully considered the comments we 
received on the proposed IRF QRP data validation process and data 
accuracy threshold, and for the reasons discussed above, we are 
finalizing the IRF data validation process and data accuracy threshold 
for the FY 2017 adjustments

[[Page 45925]]

to the IRF PPS annual increase factor and beyond, as proposed.

L. Electronic Health Record and Health Information Exchange

    We believe that all patients, their families, and their health care 
providers should have consistent and timely access to their health 
information in a standardized format that can be securely exchanged 
between the patient, providers, and others involved in the patient's 
care.\29\ We are committed to accelerating health information exchange 
(HIE) through the use of electronic health records (EHRs) and other 
types of health information technology (HIT) across the broader care 
continuum through a number of initiatives, including: (1) Alignment of 
incentives and payment adjustments to encourage provider adoption and 
optimization of HIT and HIE services through Medicare and Medicaid 
payment policies; (2) adoption of common standards and certification 
requirements for interoperable HIT; (3) support for privacy and 
security of patient information across all HIE-focused initiatives; and 
(4) governance of health information networks. These initiatives are 
designed to improve care delivery and coordination across the entire 
care continuum and encourage HIE among all health care providers, 
including professionals and hospitals eligible for the Medicare and 
Medicaid EHR Incentive Programs and those who are not eligible for the 
EHR Incentive Programs. The Office of the National Coordinator for 
Health Information Technology (ONC) is currently exploring regulatory 
ways to expand the ONC HIT Certificate Program to more easily 
accommodate HIT certification for technology used in other types of 
health care settings where individual or institutional health care 
providers are not typically eligible for incentive payments under the 
EHR Incentive Programs, such as long-term and post-acute care and 
behavioral health settings. ONC has previously provided guidance for 
EHR technology developers serving providers ineligible for incentives 
under the EHR Incentive Programs titled ``Certification Guidance for 
EHR Technology Developers Serving Health Care Providers Ineligible for 
Medicare and Medicaid EHR Incentive Payments.'' \30\
---------------------------------------------------------------------------

    \29\ The Department of Health & Human Services August 2013 
Statement, ``Principles and Strategies for Accelerating Health 
Information Exchange.
    \30\ http://www.healthit.gov/sites/default/files/generalcertexchangeguidance_final_9-9-13.pdf.
---------------------------------------------------------------------------

    We believe that HIE and the use of certified EHR technology by IRFs 
(and other providers ineligible for the Medicare and Medicaid EHR 
Incentive Programs) can effectively and efficiently help providers 
improve internal care delivery practices, support management of patient 
care across the continuum, and enable the reporting of electronically 
specified clinical quality measures (eCQMs). More information on the 
identification of EHR certification criteria and development of 
standards applicable to IRFs can be found at:

http://healthit.gov/policy-researchers-implementers/standards-and-certification-regulationshttp://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoptionhttp://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWGhttp://wiki.siframework.org/Longitudinal+Coordination+of+Care

    In the FY 2015 IRF PPS proposed rule (79 FR 26344 through 26345), 
we solicited feedback on the feasibility and desirability of electronic 
health record adoption and use of HIE in IRFs. We also solicited public 
comment on the need to develop electronic clinical quality measures, 
and the benefits and limitations of implementing these measures for IRF 
providers. Our responses to the comments we received on this topic are 
discussed below.
    Comment: We received several comments in response to its 
solicitation for input related to EHR adoption and usage and HIE among 
IRFs. A commenter suggested that we consider a structural measure 
similar to the Inpatient Psychiatric Facility Quality Reporting Program 
to gain insight on the feasibility of EHR adoption and use of HIE in 
IRFs. Some commenters conveyed concerns related to current EHR/HIE 
adoption in IRFs, including burden associated with EHR use and time and 
burden associated with the implementation of the technical 
infrastructure needed to accommodate EHRs. Many commenters noted the 
lack of EHR incentive funding and integration of IRFs in activities 
such as those related to the design of the HIE exchanges, electronic 
health record interoperability standards, electronic health record 
incentive payment programs, electronic quality measurement development, 
as well as the Medicare EHR Incentive Programs, and therefore conveyed 
concerns about the feasibility and appropriateness of requiring 
electronic clinical quality measure use at this time in the absence of 
incentive funding for IRFs. Some commenters suggested collaboration 
with CMS and the IRF community to expand the reach of HIEs and the 
interoperability standards to include IRFs. Some commenters also 
requested that CMS extend incentive payments to IRFs, allowing HIEs to 
include IRFs in the development of clinically appropriate electronic 
quality measures for IRFs. A commenter recommended that CMS not apply 
the requirement of electronic clinical quality measures reporting at 
this time, and another commenter requested that CMS allow time for the 
process of data collection using electronic measures to mature before 
requiring them.
    Response: We thank the commenters for their recommendations and 
concerns. We believe that these recommendations, including 
interoperability standards which we interpret to mean those that would 
align with what has been adopted by the Secretary, and concerns are 
important considerations related to EHR adoption and HIE usage in the 
IRF setting. We thank the commenter for their suggestion for us to 
consider the implementation of a structural measure similar to the 
Inpatient Psychiatric Facility Report Program in the IRF QRP to gain 
insight on the feasibility of EHR adoption and use of HIE in IRFs, and 
we will take this suggestion under consideration.

M. Method for Applying the Reduction to the FY 2015 IRF Increase Factor 
for IRFs That Fail To Meet the Quality Reporting Requirements

    As previously noted, section 1886(j)(7)(A)(i) of the Act requires 
the application of a 2-percentage point reduction of the applicable 
market basket increase factor for IRFs that fail to comply with the 
quality data submission requirements. In compliance with 
1886(j)(7)(A)(i) of the Act, we will apply a 2-percentage point 
reduction to the applicable FY 2015 market basket increase factor (2.2 
percent) in calculating an adjusted FY 2015 standard payment conversion 
factor to apply to payments for only those IRFs that failed to comply 
with the data submission requirements. As previously noted, application 
of the 2-percentage point reduction may result in an update that is 
less than 0.0 for a fiscal year and in payment rates for a fiscal year 
being less than such payment rates for the preceding fiscal year. Also, 
reporting-based reductions to the market basket increase factor will 
not be cumulative; they will only apply for the FY involved. Table 12 
shows the calculation of the adjusted FY 2015 standard payment 
conversion factor that will be used to compute IRF PPS payment rates 
for any IRF that failed to meet the quality reporting requirements

[[Page 45926]]

for the period from January 1, 2013, through December 31, 2013.

    Table 12--Calculations To Determine the Adjusted FY 2015 Standard
   Payment Conversion Factor for IRFs That Failed To Meet the Quality
                          Reporting Requirement
------------------------------------------------------------------------
               Explanation for adjustment                  Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2014..........         $14,846
Market Basket Increase Factor for FY 2015 (2.9 percent),        x 1.0020
 reduced by 0.5 percentage point reduction for the
 productivity adjustment as required by section
 1886(j)(3)(C)(ii)(I) of the Act, reduced by 0.2
 percentage point in accordance with sections
 1886(j)(3)(C) and (D) of the Act and further reduced by
 2 percentage points for IRFs that failed to meet the
 quality reporting requirement..........................
Budget Neutrality Factor for the Wage Index and Labor-          x 1.0017
 Related Share..........................................
Budget Neutrality Factor for the Revisions to the CMG           x 1.0000
 Relative Weights.......................................
                                                         ---------------
    Final Adjusted FY 2015 Standard Payment Conversion         = $14,901
     Factor.............................................
------------------------------------------------------------------------

    We did not receive any comments on the proposed method for applying 
the reduction to the FY 2015 IRF increase factor for IRFs that fail to 
meet the quality reporting requirements.
    Final Decision: As we did not receive any comments on the proposed 
method for applying the reduction to the FY 2015 IRF increase factor 
for IRFs that fail to meet the quality reporting requirements, we are 
finalizing the proposed methodology.

XIII. Miscellaneous Comments

    Comment: Several commenters suggested that we consider imposing a 
cap on the amount of outlier payments an individual IRF can receive 
under the IRF PPS.
    Response: As we did not propose any limits on the amount of outlier 
payments an individual IRF can receive, this comment is outside the 
scope of the proposed rule. However, any future consideration given to 
imposing a limit on outlier payments would have to carefully analyze 
and take into consideration the effect on access to IRF care for 
certain high-cost patient populations.
    Comment: Several commenters requested that we allow IRFs access to 
the presumptive compliance reports that the MACs use to determine 
whether or not an IRF has met the 60 percent rule requirements under 
the presumptive methodology. These same commenters also requested that 
we provide IRFs with patient-level detail regarding which patients were 
counted as presumptively meeting the 60 percent rule requirements and 
which patients were not counted as meeting the requirements. Other 
commenters requested that we ensure that all MACs allow for a review 
process prior to an IRF declassification for the IRF to dispute a 60 
percent rule determination.
    Response: As we did not propose any changes to these operational 
aspects of the 60 percent rule enforcement, these comments are outside 
the scope of the proposed rule. However, we will take these suggestions 
into consideration for future operational enhancements.
    Comment: Several commenters requested that we release the exact 
software specifications and algorithms for enforcement of the 60 
percent rule policies. Other commenters expressed concerns that we are 
fundamentally altering the technical code specifications that are used 
in determining an IRF's presumptive compliance with the 60 percent 
rule. Additionally, some commenters indicated that there is an 
inconsistency with the software specifications because they mark a 
record as failing the presumptive methodology test if the case has an 
IGC and one of the excluded Etiologic Diagnoses, even if the case has a 
comorbidity that would qualify the case as counting for the presumptive 
methodology.
    Response: As we did not propose changes to the technical 
specifications, these comments are outside the scope of the proposed 
rule. The technical specifications for the presumptive methodology 
determination are available for download from the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Criteria.html. As we are continually looking to 
improve the technical specifications and the accuracy with which we 
evaluate providers' compliance with the 60 percent rule requirements, 
we will take these commenters' suggestions and concerns into 
consideration for future updates to the technical specifications.
    Comment: Several commenters suggested that we re-examine the 
conditions that are included on the list of tier comorbidities 
(otherwise known in this final rule as the ``List of Comorbidities'') 
using the most recent 3 years of data, and revise this list for FY 
2016. In addition, one commenter suggested that we allow for multiple 
tier payments if a patient has multiple comorbidities that qualify for 
tier payments, instead of only recognizing the one comorbidity that 
qualifies for the highest payment.
    Response: As we did not propose any changes to the methodology or 
policy regarding the determination of the tier comorbidities, these 
comments are outside the scope of the proposed rule. We appreciate the 
commenters' suggestions, and will consider these suggestions for future 
analyses.
    Comment: One commenter suggested that we continue to explore ways 
to ensure comparability of payments across Medicare's post-acute care 
settings.
    Response: We appreciate the commenter's suggestion. Although the 
comment is beyond the scope of this rule and reaches beyond the IRF 
PPS, we appreciate the forward thinking nature of this comment and will 
try to consider ways in which this suggestion may be considered for 
future analysis.
    Comment: Several commenters expressed concern about the proposal 
that was included in the most recent President's Budget Proposal to 
increase the compliance threshold for the 60 percent rule to 75 
percent.
    Response: Since the Secretary does not have the authority to make 
this change, this comment is outside the scope of the proposed rule.

XIV. Provisions of the Final Regulations

    In this final rule, we are adopting the provisions set forth in the 
FY 2015 IRF proposed rule (79 FR 26308), except as noted elsewhere in 
the preamble. Specifically:
     We will update the FY 2015 IRF PPS relative weights and 
average length of stay values using the most current and complete 
Medicare claims and cost report data in a budget-neutral manner,

[[Page 45927]]

as discussed in section IV of this final rule.
     We will freeze the IRF facility-level adjustment factors 
at FY 2014 levels, as discussed in section V of this final rule.
     We will update the FY 2015 IRF PPS payment rates by the 
market basket increase factor, based upon the most current data 
available, with a 0.2 percentage point reduction as required by 
sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act and a 
productivity adjustment required by section 1886(j)(3)(C)(ii)(I) of the 
Act, as described in section VI of this final rule.
     We will indicate the Secretary's Final Recommendation for 
updating IRF PPS payments for FY 2015, in accordance with the statutory 
requirements, as described in section VI of this final rule.
     We will update the FY 2015 IRF PPS payment rates by the FY 
2015 wage index and the labor-related share in a budget-neutral manner, 
as discussed in section VI of this final rule.
     We will calculate the final IRF Standard Payment 
Conversion Factor for FY 2015, as discussed in section VI of this final 
rule.
     We will update the outlier threshold amount for FY 2015, 
as discussed in section VII of this final rule.
     We will update the cost-to-charge ratio (CCR) ceiling and 
urban/rural average CCRs for FY 2015, as discussed in section VII of 
this final rule.
     We will adopt revisions to the list of eligible diagnosis 
codes that are used to determine presumptive compliance under the 60 
percent rule in section VIII of this final rule.
     We will adopt revisions to the list of eligible impairment 
group codes that presumptively meet the 60 percent rule compliance 
criteria in section VIII of this final rule.
     We will collect data on the amount and mode (that is, of 
Individual, Concurrent, Group, and Co-Treatment) of therapies provided 
in IRFs according to occupational, speech, and physical therapy 
disciplines via the IRF-PAI in section IX of this final rule.
     We will adopt a revision to the IRF-PAI to indicate 
whether the case meets the regulatory requirements for arthritis cases 
in section X of this final rule.
     We will adopt the conversion of the IRF PPS to ICD-10-CM, 
effective when ICD-10-CM becomes the required medical data code set for 
use on Medicare claims and IRF-PAI submissions, in section XI of this 
final rule.
     We will adopt revisions and updates to quality measures 
and reporting requirements under the quality reporting program for IRFs 
in accordance with section 1886(j)(7) of the Act, as discussed in 
section XII of this final rule.

XV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30 days' notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    This final rule does not impose any new information collection 
requirements as outlined in the regulation text. However, this final 
rule does make reference to associated information collections that are 
not discussed in the regulation text contained in this document. The 
following is a discussion of these information collections, some of 
which have already received OMB approval.

A. ICRs Regarding the IRF QRP

Updates to IRF QRP
    As stated in section XI of this final rule, we have finalized 2 new 
measures for use in the IRF QRP that will affect the increase factor 
for FY 2017. These quality measures are: National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
1716) and National Healthcare Safety Network (NHSN) Facility-
Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) 
Outcome Measure (NQF 1717). We proposed that these measures 
would be collected via the CDC's NHSN data submission system (http://www.cdc.gov/nhsn/). The NHSN is a secure, Internet-based healthcare-
associated infection tracking system that is maintained and managed by 
the CDC.
    There are currently approximately 1,140 IRFs in the United States 
paid under the IRF PPS that are already required to submit CAUTI data 
to the CDC's NHSN. We believe that any burden increase related to 
complying with the IRF QRP requirements for submission of the MRSA and 
CDI measures will be minimal for those IRFs that are already familiar 
with the NHSN submission process, for several reasons. First, these 
IRFs have already completed the initial setup and have become familiar 
with reporting data in the NHSN system due to the requirement to report 
the CAUTI measure. Second, due to their participation in a wide range 
of mandatory reporting and quality improvement programs, there are at 
least 15 states that require IRFs to report MRSA bacteremia data and 
CDI data to the NHSN. The most significant burden associated with these 
quality measures is the time and effort associated with collecting and 
submitting the data on the MRSA and CDI measures for IRFs that are not 
currently reporting any measures beyond the current CAUTI data 
requirement into the CDC's NHSN system.
    Based on submissions to the NHSN, we now estimate that each IRF 
will execute approximately 5 NHSN submissions per month: 1 MRSA 
bacteremia event, 1 C. difficile event and 3 CAUTI events (60 events 
per IRF annually). This equates to a total of approximately 68,400 
submissions of events to the NHSN from all IRFs per year. The CDC 
estimated the public reporting burden of the collection of information 
for each measure to include the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. 
MRSA and C. difficile are estimated to be an average of 15 minutes per 
response (10 minutes of clinical (registered nurse) time, and 5 minutes 
of clerical (Medical Records or Health Information Technician); CAUTI 
is estimated to be an average of 29 minutes per response. Each IRF must 
also complete a Patient Safety Monthly Reporting Plan estimated at 35 
minutes and a Denominator for Specialty Care Area, which is estimated 
at 5 hours per month. Based on this estimate, we expect each IRF would 
expend 7.53 hours per month reporting to the NHSN. Additionally, each 
IRF must submit the Healthcare Personnel Vaccination measure, which the 
CDC estimates will take 10 minutes of clerical time. Based on this 
estimate, we expect each IRF would expend 78.97 clinical hours per year 
reporting to the NHSN, or 90,026 hours for all IRFs. According to the 
U.S.

[[Page 45928]]

Bureau of Labor and Statistics, the mean hourly wage for a registered 
nurse (RN) is $33.13; the mean hourly wage for a medical records and 
health information technician is $16.81. However, to account for 
overhead and fringe benefits, we have doubled the mean hourly wage, 
making it $66.26 for an RN and $33.62 for a Medical Record or Health 
Information Technician. We estimate that the annual cost per each IRF 
would be $5,162.09 and that the total yearly cost to all IRFs for the 
submission of data to NHSN would be $5,882,782.60. While the quality 
measures previously discussed are subject to the PRA, we believe that 
the associated burden is approved under OMB control number 0920-0666, 
with an expiration date of November, 31, 2016.
    In the FY 2014 IRF PPS rule (78 FR 47923 through 47925), we 
provided burden estimates for measures adopted in that rule. Updated 
Collection of Information Requirements for each of those measures is 
described below:
a. All-Cause Unplanned Readmission Measure for 30 Days Post Discharge 
From Inpatient Rehabilitation Facilities
    As stated in the FY 2014 IRF PPS rule (78 FR 47923 through 47925), 
data for this measure will be derived from Medicare claims, and 
therefore, will not add any additional reporting burden for IRFs.
b. Percent of Residents or Patients With Pressure Ulcers That Are New 
or Have Worsened (Short-Stay) (NQF 0678)
    In the FY 2015 IRF PPS proposed rule (79 FR 26346), we stated that 
we expect that the admission and discharge pressure ulcer data will be 
collected by a clinician such as an RN because the assessment and 
staging of pressure ulcers requires a high degree of clinical judgment 
and experience. We estimated that it will take approximately 10 minutes 
of time by the RN to perform the admission pressure ulcer assessment. 
We further estimated that it will take an additional 15 minutes of time 
to complete the discharge pressure ulcer assessment.
    We estimated that there are 359,000 IRF-PAI submissions per year 
\3\ and that there are 1,140 IRFs in the U.S. reporting quality data to 
CMS. Based on these figures, we estimated that each IRF will submit 
approximately 315 IRF-PAIs per year. Assuming that each IRF-PAI 
submission requires 25 minutes of time by an RN at an average hourly 
wage of $66.26 (including fringe benefits and overhead), to complete 
the ``Quality Indicator'' section, the yearly cost to each IRF would be 
$8,696.63 and the annualized cost across all IRFs would be 
$9,914,158.20.
    In the FY 2015 IRF PPS proposed rule (79 FR 26346), we also stated 
we expected that most IRFs will use administrative personnel, such as a 
medical secretary or medical data entry clerk, to perform the task of 
entering the IRF-PAI pressure ulcer Assessment data. We estimated that 
this data entry task will take no more than 3 minutes for the ``Quality 
Indicator'' section of each IRF-PAI record or 15.75 hours for each IRF 
annually. The average hourly wage for a Medical Records & Health 
Information Technician is $33.62 (including fringe benefits and 
overhead). Again, as we noted above, there are approximately 359,000 
IRF-PAI submissions per year and 1,140 IRFs reporting quality data to 
CMS. Given this wage information, the estimated total annual cost 
across all reporting IRFs for the time required for entry of pressure 
ulcer data into the IRF-PAI by a medical record or health information 
technician (including fringe benefits and overhead) is $603,652.80. We 
further estimated the average yearly cost to each individual IRF to be 
$529.52.
    We estimated that the combined annualized time burden related to 
the pressure ulcer data item set for work performed, by the both 
clinical and administrative staff, will be 147 hours for each 
individual IRF and 167,580 hours across all IRFs. The total estimated 
annualized cost for collection and submission of pressure ulcer data is 
$9,226.15 for each IRF and $10,517,811 across all IRFs. We estimated 
the cost for each pressure ulcer submission to be $29.29.
c. Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
    IRFs are already required to complete and transmit certain IRF-PAI 
data on all Medicare Part A Fee-for-Service and Medicare Part C 
(Medicare Advantage) patients to receive payment from Medicare. In the 
FY 2015 IRF PPS proposed rule (79 FR 26347), we estimated that 
completion of the Patient Influenza measure data items will take 
approximately 5 minutes to complete. The Patient Influenza item set 
consists of three data items (for example, questions). Each item is 
straightforward and does not require physical assessment of the patient 
for completion. We estimated that it will take approximately 0.7 
minutes to complete each item, or 2.1 minutes to complete all items 
related to the Patient Influenza measure. However, in some cases, the 
person completing this item set may need to consult the patient's 
medical record to obtain data about the patient's influenza 
vaccination. Therefore, we have allotted an additional 1.66 minutes per 
item, for a total of 7.1 minutes to complete the Patient Influenza 
measure data items.
    In the FY 2015 IRF PPS proposed rule (79 FR 26347), we noted that 
there are approximately 359,000 IRF-PAIs completed annually across all 
1,140 IRFs that report IRF quality data to CMS. This breaks down to 
approximately 315 IRF-PAIs completed by each IRF yearly. We 
additionally estimated that the annual time burden for reporting the 
Patient Influenza measure data is 42,481 hours across all IRFs in the 
U.S. and 37.26 hours for each individual IRF. Again, we have estimated 
the mean hourly wage for an RN (including fringe benefits and overhead) 
to be $66.26. Taking all of the above information into consideration, 
we estimate the annual cost across all IRFs for the submission of the 
Patient Influenza measure data to be $2,814,791.06. We further 
estimated the cost for each individual IRF to be $2,469.11.
    Lastly, in the FY 2015 IRF PPS proposed rule (79 FR 26347), we 
proposed to validate data submitted to CMS by requesting portions of 
patient's charts be copied and mailed to a CMS validation contractor. 
We estimated the size of each section we proposed to request as 
follows: We stated that we anticipate that the first 3 days of nurses 
notes will be approximately 15 pages; the last 3 days of nurses notes 
will be approximately 10 pages; the physician or physician's 
assistant's admission history and physical will be approximately 30 
pages; the physician or physician's assistant's discharge summary will 
be approximately 15 pages; nurses admission database is approximately 
40 pages; pressure ulcer assessment assessments will be approximately 
30 pages; physicians progress notes will be approximately 30 pages; 
physicians orders will be approximately 30 pages and lab reports to be 
approximately 70 pages. We estimated the total submission to be 
approximately 270 pages in length. The FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53745) estimates the appropriate cost for chart submission to be 
12 cents per page and $4.00 shipping. Two hundred seventy pages at a 
rate of $0.12 per page with a $4.00 shipping cost would be $36.40 per 
chart. We proposed that 260 providers will be randomly selected for 
validation, and we proposed to request 5 charts from each selected 
provider for a total cost of $47,320 for all IRF

[[Page 45929]]

providers, or $182.00 for any randomly selected IRF provider.
    We did not receive any public comments on the above IRF QRP 
Information Collection Request section of the FY 2015 IRF PPS proposed 
rule. Additionally, in section XI of this final rule, we have finalized 
the adoption of the following two measures: NHSN Facility-wide 
Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF 1716); and NHSN 
Facility-wide Inpatient Hospital-onset Clostridium difficile Infection 
(CDI) Outcome Measure (NQF 1717). We further confirmed that 
the previously finalized measures discussed in section XII.B. will 
continue to be required for the IRF QRP.

B. ICRs Regarding Individual, Concurrent, Group, and Co-Treatment 
Therapy Data on the IRF-PAI

    As stated in section IX. of this final rule, we are including a new 
Therapy Information Section in the IRF-PAI that will require IRF 
providers to submit data regarding the amount and mode (that is, 
Individual, Concurrent, Group, and Co-Treatment) of therapy that 
patients are receiving and in which therapy discipline (PT, OT, speech/
language) beginning on October 1, 2015.
    Under Medicare's conditions of participation for hospitals that 
provide rehabilitation, physical therapy, occupational therapy, 
audiology, or speech pathology services at Sec.  482.56, the provision 
of care and the personnel qualifications must be in accordance with 
national acceptable standards of practice and must also meet the 
requirements at Sec.  409.17, according to which IRFs are required to 
furnish physical therapy, occupational therapy or speech-language 
pathology services under a plan that, among other things, 
``[p]rescribes the type, amount, frequency, and duration of the 
physical therapy, occupational therapy, or speech-language pathology 
services to be furnished to the individual.'' (Such services may also 
be furnished under plan requirements specific to the payment policy 
under which the services are rendered, if applicable.) In addition, the 
IRF coverage requirements at Sec.  412.622(a)(3)(ii), (4), require the 
IRF to document that the patient ``[g]enerally requires and can 
reasonably be expected to actively participate in, and benefit from, an 
intensive rehabilitation therapy program.'' As Medicare already 
requires extensive documentation of the type, amount, frequency, and 
duration of physical therapy, occupational therapy, or speech-language 
pathology services furnished to individuals in the IRF setting, we do 
not believe that IRFs will incur any additional burden related to the 
collection of the data for the proposed new Therapy Information 
Section. In accordance with 5 CFR 1320.3(b)(2), we believe the burden 
associated with this requirement is exempt from the PRA as it is a 
usual and customary business practice. The time, effort, and financial 
resources necessary to comply with this requirement would be incurred 
in the course of each IRF conducting its normal business activities.
    We anticipate that it will take approximately 4 minutes to retrieve 
the therapy data from the patient's medical record and transfer the 
required data to the IRF-PAI for submission. We believe this task can 
be completed by any clinician in the IRF. To calculate the burden, we 
obtained hourly wage rates for social worker assistants, licensed 
practical nurses (LPN), recreational therapists, social workers, 
dietitians and nutritionists, RN, speech language pathologists, 
audiologists, occupational therapists, and physical therapists, all of 
whom may complete the IRF-PAI, from the Bureau of Labor Statistics 
(http://www.bls.gov/ooh/healthcare/home.htm). The $26.52 rate is a 
blend of all of these categories, and reflects the fact that IRF 
providers have historically used all of these clinicians for 
preparation and coding of the IRF-PAI. However, to account for overhead 
and fringe benefits, we double the average rate, making it $53.04. On 
average, an IRF submits approximately 300 IRF-PAIs annually and when 
multiplied by 4 minutes to complete the proposed new Therapy 
Information Section, the total estimated annual hour burden per each 
IRF is 20 hours. We estimate the total cost burden to each IRF for 
reporting the proposed therapy data will be $1,060 annually. Since 
there are a total of 1,140 IRFs, we estimate the total burden cost 
across all IRFs for submitting therapy data is $1.2 million.
    We received 40 comments on the information collection requirements 
regarding the Individual, Concurrent, Group, and Co-Treatment Therapy 
data on the IRF-PAI, which are summarized below.
    Comment: Many commenters suggested that the therapy collection item 
would be excessively burdensome and should be removed. The commenters 
suggested that CMS has underestimated the cost and time it would take 
providers to implement this proposed policy, implying that additional 
IRF staff would need to be employed to fulfill the data collection 
requirement. A few commenters even suggested that the therapy data CMS 
is proposing to collect is redundant since the data could be found on 
IRF patient claims. Additionally, commenters suggested that the 
proposed therapy data collection requirement does not seem to provide 
any value to the patient and would ultimately divert clinical resources 
from patient care to administrative functions compromising patients' 
health outcomes instead of increasing quality of care. Ultimately, the 
commenters urged CMS to focus on the outcomes of rehabilitative care 
rather than regulatory mandates.
    Response: We recognize and have taken into account that the 
addition of the therapy collection item will increase the time it takes 
for providers to complete the IRF-PAI. However, IRF clinicians are 
currently required to thoroughly document all treatment information in 
the patients' medical record. We believe that in order to fulfill this 
requirement, IRFs are already required to document in detail the amount 
and mode of therapy that a patient receives. We do not believe that it 
would take an excessive amount of additional time and/or training to 
transfer that information from the medical record to the IRF-PAI. We 
certainly do not believe that IRFs would need to employ additional 
staff to meet this data collection requirement. The additional cost 
that a facility would incur in making updates to its electronic systems 
is considered the cost of doing business, and that is not something 
that we believe should be taken into account when preparing our burden 
estimates.
    In response to the commenters' suggestions to minimize the burden 
associated with the therapy data collection, we are choosing not to 
adopt the proposed requirement to record the average number of minutes 
by mode and type of therapy for weeks 3 and beyond of a patient's IRF 
stay. Instead, we will require IRFs to report only the total number of 
minutes of therapy provided to a patient, by mode and type of therapy, 
for week 1 and week 2 of the IRF stay. Additionally, we are adding 
Concurrent Therapy and revising the Group Therapy definition so that 
both types of therapy are clearly differentiated. Providers indicated 
that this change would be helpful to reduce burden, as this is more 
consistent with the way they currently keep their records. We believe 
that these changes will substantially lower the amount of burden 
associated with this data collection.
    We respectfully disagree with the commenters' assertion that this 
information is included on the IRF claim. The therapy data on the IRF

[[Page 45930]]

claim is not reported in a consistent manner, and we do not believe 
that it would be as beneficial as the proposed data collection when 
developing future policy regarding IRF therapy. We believe it is 
important to collect the most accurate and reliable information in 
order to develop future policy to increase the quality of care for IRF 
patients. Ultimately, we believe that by requiring providers to report 
each patient's therapy information, in an effort to develop future 
policies and procedures regarding the amount and mode of therapy given, 
we are in fact focusing on improving the outcomes of the intensive 
rehabilitation that patients receive.
    We will be submitting a revision of the IRF-PAI information 
collection request currently approved under OMB control number 0938-
0842.
    If you comment on these information collection and recordkeeping 
requirements, please submit your comments to the Office of Information 
and Regulatory Affairs, Office of Management and Budget, Attention: CMS 
Desk Officer, [CMS-1608-F], Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

XVI. Regulatory Impact Analysis

A. Statement of Need

    This final rule updates the IRF prospective payment rates for FY 
2015 as required under section 1886(j)(3)(C) of the Act. It responds to 
section 1886(j)(5) of the Act, which requires the Secretary to publish 
in the Federal Register on or before the August 1 that precedes the 
start of each fiscal year, the classification and weighting factors for 
the IRF PPS's case-mix groups and a description of the methodology and 
data used in computing the prospective payment rates for that fiscal 
year.
    This rule implements sections 1886(j)(3)(C) and (D) of the Act. 
Section 1886(j)(3)(C)(ii)(I) of the Act requires the Secretary to apply 
a multi-factor productivity adjustment to the market basket increase 
factor, and to apply other adjustments as defined by the Act. The 
productivity adjustment applies to FYs from 2012 forward. The other 
adjustments apply to FYs 2010 through 2019.
    This rule also adopts some policy changes within the statutory 
discretion afforded to the Secretary under section 1886(j) of the Act. 
We will collect data on the amount and mode (that is, Individual, 
Concurrent, Group, and Co-Treatment) of therapy provided in the IRF 
setting according to therapy discipline, revise the list of impairment 
group codes that presumptively meet the 60 percent rule compliance 
criteria, provide a way for IRFs to indicate on the IRF-PAI form 
whether the prior treatment and severity requirements have been met for 
arthritis cases to presumptively meet the 60 percent rule compliance 
criteria, and revise and update quality measures and reporting 
requirements under the IRF quality reporting program. In this final 
rule, we also address the implementation of the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for the IRF prospective payment system (PPS), effective when 
ICD-10-CM becomes the required medical data code set for use on 
Medicare claims and IRF-PAI submissions.

B. Overall Impacts

    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980, Pub. L. 96-354) (RFA), section 1102(b) of the Act, section 
202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for a 
major final rule with economically significant effects ($100 million or 
more in any 1 year). We estimate the total impact of the policy updates 
described in this final rule by comparing the estimated payments in FY 
2015 with those in FY 2014. This analysis results in an estimated $180 
million increase for FY 2015 IRF PPS payments. As a result, this final 
rule is designated as economically ``significant'' under section 
3(f)(1) of Executive Order 12866, and hence a major rule under the 
Congressional Review Act. Also, the rule has been reviewed by OMB.
    The Regulatory Flexibility Act (RFA) requires agencies to analyze 
options for regulatory relief of small entities, if a rule has a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and small governmental jurisdictions. Most IRFs and most 
other providers and suppliers are small entities, either by having 
revenues of $7 million to $35.5 million or less in any 1 year depending 
on industry classification, or by being nonprofit organizations that 
are not dominant in their markets. (For details, see the Small Business 
Administration's final rule that set forth size standards for health 
care industries, at 65 FR 69432 at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf, effective March 26, 2012.) 
Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary IRFs or the proportion of 
IRFs' revenue that is derived from Medicare payments. Therefore, we 
assume that all IRFs (an approximate total of 1,100 IRFs, of which 
approximately 60 percent are nonprofit facilities) are considered small 
entities and that Medicare payment constitutes the majority of their 
revenues. The Department of Health and Human Services generally uses a 
revenue impact of 3 to 5 percent as a significance threshold under the 
RFA. As shown in Table 13, we estimate that the net revenue impact of 
this final rule on all IRFs is to increase estimated payments by 
approximately 2.4 percent. However, we find that certain categories of 
IRF providers would be expected to experience revenue impacts in the 3 
percent range. We estimate a 3.1 percent overall impact for 141 urban 
IRFs and 15 rural IRFs in the Middle Atlantic region, a 3.2 increase 
for 101 urban IRFs in the Pacific region, a 3.3 increase for 27 rural 
IRFs in the West North Central region, and a 4.4 increase for four 
rural IRFs in the Pacific region. As a result, we anticipate this final 
rule will have a net positive impact on a substantial number of small 
entities. Medicare Administrative Contractors are not considered to be 
small entities. Individuals and states are not included in the 
definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has

[[Page 45931]]

fewer than 100 beds. As discussed in detail below, the rates and 
policies set forth in this final rule will not have a significant 
impact (not greater than 3 percent) on rural hospitals based on the 
data of the 165 rural units and 17 rural hospitals in our database of 
1,142 IRFs for which data were available.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-04, enacted on March 22, 1995) also requires that agencies assess 
anticipated costs and benefits before issuing any rule whose mandates 
require spending in any 1 year of $100 million in 1995 dollars, updated 
annually for inflation. In 2014, that threshold level is approximately 
$141 million. This final rule will not impose spending costs on state, 
local, or tribal governments, in the aggregate, or by the private 
sector, of greater than $141 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications. As stated 
above, this final rule will not have a substantial effect on state and 
local governments, preempt state law, or otherwise have a federalism 
implication.

C. Detailed Economic Analysis

1. Basis and Methodology of Estimates
    This final rule sets forth policy changes and updates to the IRF 
PPS rates contained in the FY 2014 IRF PPS final rule (78 FR 47860). 
Specifically, this final rule updates the CMG relative weights and 
average length of stay values, the wage index, and the outlier 
threshold for high-cost cases. This final rule also applies a MFP 
adjustment to the FY 2015 RPL market basket increase factor in 
accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 
percentage point reduction to the FY 2015 RPL market basket increase 
factor in accordance with sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) 
of the Act. Further, this final rule contains additional changes to the 
presumptive methodology and additional therapy and quality data 
collection that are expected to result in some additional financial 
effects on IRFs. In addition, section XII of this rule discusses the 
implementation of the required 2 percentage point reduction of the 
market basket increase factor for any IRF that fails to meet the IRF 
quality reporting requirements, in accordance with section 1886(j)(7) 
of the Act.
    We estimate that the impact of the changes and updates described in 
this final rule will be a net estimated increase of $180 million in 
payments to IRF providers. This estimate does not include the estimated 
impacts of the additional changes to the presumptive compliance method 
and the additional therapy and quality data collection, as discussed in 
section 8 of this Economic Analysis. In addition, it does not include 
the implementation of the required 2 percentage point reduction of the 
market basket increase factor for any IRF that fails to meet the IRF 
quality reporting requirements (as discussed in section 9 of this 
Economic Analysis). The impact analysis in Table 13 of this final rule 
represents the projected effects of the updates to IRF PPS payments for 
FY 2015 compared with the estimated IRF PPS payments in FY 2014. We 
determine the effects by estimating payments while holding all other 
payment variables constant. We use the best data available, but we do 
not attempt to predict behavioral responses to these changes, and we do 
not make adjustments for future changes in such variables as number of 
discharges or case-mix.
    We note that certain events may combine to limit the scope or 
accuracy of our impact analysis, because such an analysis is future-
oriented and, thus, susceptible to forecasting errors because of other 
changes in the forecasted impact time period. Some examples could be 
legislative changes made by the Congress to the Medicare program that 
would impact program funding, or changes specifically related to IRFs. 
Although some of these changes may not necessarily be specific to the 
IRF PPS, the nature of the Medicare program is such that the changes 
may interact, and the complexity of the interaction of these changes 
could make it difficult to predict accurately the full scope of the 
impact upon IRFs.
    In updating the rates for FY 2015, we are adopting standard annual 
revisions described in this final rule (for example, the update to the 
wage and market basket indexes used to adjust the federal rates). We 
are also implementing a productivity adjustment to the FY 2015 RPL 
market basket increase factor in accordance with section 
1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 percentage point reduction 
to the FY 2015 RPL market basket increase factor in accordance with 
sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act. We estimate the 
total increase in payments to IRFs in FY 2015, relative to FY 2014, 
will be approximately $180 million.
    This estimate is derived from the application of the FY 2015 RPL 
market basket increase factor, as reduced by a productivity adjustment 
in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 
percentage point reduction in accordance with sections 
1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act, which yields an 
estimated increase in aggregate payments to IRFs of $165 million. 
Furthermore, there is an additional estimated $15 million increase in 
aggregate payments to IRFs due to the update to the outlier threshold 
amount. Outlier payments are estimated to increase from approximately 
2.8 percent in FY 2014 to 3.0 percent in FY 2015. Therefore, summed 
together, we estimate that these updates will result in a net increase 
in estimated payments of $180 million from FY 2014 to FY 2015.
    The effects of the updates that impact IRF PPS payment rates are 
shown in Table 13. The following updates that affect the IRF PPS 
payment rates are discussed separately below:
     The effects of the update to the outlier threshold amount, 
from approximately 2.8 percent to 3.0 percent of total estimated 
payments for FY 2015, consistent with section 1886(j)(4) of the Act.
     The effects of the annual market basket update (using the 
RPL market basket) to IRF PPS payment rates, as required by section 
1886(j)(3)(A)(i) and sections 1886(j)(3)(C) and -(D) of the Act, 
including a productivity adjustment in accordance with section 
1886(j)(3)(C)(i)(I) of the Act, and a 0.2 percentage point reduction in 
accordance with sections 1886(j)(3)(C) and -(D) of the Act.
     The effects of applying the budget-neutral labor-related 
share and wage index adjustment, as required under section 1886(j)(6) 
of the Act.
     The effects of the budget-neutral changes to the CMG 
relative weights and average length of stay values, under the authority 
of section 1886(j)(2)(C)(i) of the Act.
     The total change in estimated payments based on the FY 
2015 payment changes relative to the estimated FY 2014 payments.
2. Description of Table 13
    Table 13 categorizes IRFs by geographic location, including urban 
or rural location, and location for CMS's 9 census divisions (as 
defined on the cost report) of the country. In addition, the table 
divides IRFs into those that are separate rehabilitation hospitals 
(otherwise called freestanding hospitals in this section), those that 
are rehabilitation units of a hospital

[[Page 45932]]

(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 13 shows the overall impact 
on the 1,142 IRFs included in the analysis.
    The next 12 rows of Table 13 contain IRFs categorized according to 
their geographic location, designation as either a freestanding 
hospital or a unit of a hospital, and by type of ownership; all urban, 
which is further divided into urban units of a hospital, urban 
freestanding hospitals, and by type of ownership; and all rural, which 
is further divided into rural units of a hospital, rural freestanding 
hospitals, and by type of ownership. There are 960 IRFs located in 
urban areas included in our analysis. Among these, there are 732 IRF 
units of hospitals located in urban areas and 228 freestanding IRF 
hospitals located in urban areas. There are 182 IRFs located in rural 
areas included in our analysis. Among these, there are 165 IRF units of 
hospitals located in rural areas and 17 freestanding IRF hospitals 
located in rural areas. There are 339 for-profit IRFs. Among these, 
there are 335 IRFs in urban areas and 64 IRFs in rural areas. There are 
673 non-profit IRFs. Among these, there are 567 urban IRFs and 106 
rural IRFs. There are 70 government-owned IRFs. Among these, there are 
58 urban IRFs and 12 rural IRFs.
    The remaining four parts of Table 13 show IRFs grouped by their 
geographic location within a region, by teaching status, and by DSH PP. 
First, IRFs located in urban areas are categorized for their location 
within a particular one of the nine Census geographic regions. Second, 
IRFs located in rural areas are categorized for their location within a 
particular one of the nine Census geographic regions. In some cases, 
especially for rural IRFs located in the New England, Mountain, and 
Pacific regions, the number of IRFs represented is small. IRFs are then 
grouped by teaching status, including non-teaching IRFs, IRFs with an 
intern and resident to average daily census (ADC) ratio less than 10 
percent, IRFs with an intern and resident to ADC ratio greater than or 
equal to 10 percent and less than or equal to 19 percent, and IRFs with 
an intern and resident to ADC ratio greater than 19 percent. Finally, 
IRFs are grouped by DSH PP, including IRFs with zero DSH PP, IRFs with 
a DSH PP less than 5 percent, IRFs with a DSH PP between 5 and less 
than 10 percent, IRFs with a DSH PP between 10 and 20 percent, and IRFs 
with a DSH PP greater than 20 percent.
    The estimated impacts of each policy described in this final rule 
to the facility categories listed above are shown in the columns of 
Table 13. The description of each column is as follows:
     Column (1) shows the facility classification categories 
described above.
     Column (2) shows the number of IRFs in each category in 
our FY 2013 analysis file.
     Column (3) shows the number of cases in each category in 
our FY 2013 analysis file.
     Column (4) shows the estimated effect of the adjustment to 
the outlier threshold amount.
     Column (5) shows the estimated effect of the update to the 
IRF PPS payment rates, which includes a productivity adjustment in 
accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 
percentage point reduction in accordance with sections 
1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act.
     Column (6) shows the estimated effect of the update to the 
IRF labor-related share and wage index, in a budget-neutral manner.
     Column (7) shows the estimated effect of the update to the 
CMG relative weights and average length of stay values, in a budget-
neutral manner.
     Column (8) compares our estimates of the payments per 
discharge, incorporating all of the proposed policies reflected in this 
final rule for FY 2015 to our estimates of payments per discharge in FY 
2014.
    The average estimated increase for all IRFs is approximately 2.4 
percent. This estimated net increase includes the effects of the RPL 
market basket increase factor for FY 2015 of 2.9 percent, reduced by a 
productivity adjustment of 0.5 percentage point in accordance with 
section 1886(j)(3)(C)(ii)(I) of the Act, and further reduced by 0.2 
percentage point in accordance with sections 1886(j)(3)(C)(ii)(II) and 
-(D)(iv) of the Act. It also includes the approximate 0.2 percent 
overall increase in estimated IRF outlier payments from the update to 
the outlier threshold amount. Since we are making the updates to the 
IRF wage index and the CMG relative weights in a budget-neutral manner, 
they will not be expected to affect total estimated IRF payments in the 
aggregate. However, as described in more detail in each section, they 
will be expected to affect the estimated distribution of payments among 
providers.

                                                         Table 13--IRF Impact Table for FY 2015
                                                                   [Columns 4-9 in %]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Adjusted
                                                                                                         market      FY 2015
                                                                Number of    Number of                   basket     CBSA wage                   Total
                   Facility classification                         IRFs        cases       Outlier      increase    index and       CMG        percent
                                                                                                       factor for  labor-share                  change
                                                                                                      FY 2015 \1\
(1)                                                                    (2)          (3)          (4)          (5)          (6)          (7)          (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total........................................................        1,142      389,157          0.2          2.2          0.0          0.0          2.4
Urban unit...................................................          732      179,336          0.3          2.2          0.0          0.0          2.6
Rural unit...................................................          165       26,444          0.3          2.2          0.0          0.1          2.6
Urban hospital...............................................          228      177,726          0.1          2.2          0.0          0.0          2.2
Rural hospital...............................................           17        5,651          0.1          2.2         -0.1          0.0          2.2
Urban For-Profit.............................................          335      165,971          0.1          2.2         -0.2          0.0          2.1
Rural For-Profit.............................................           64       12,484          0.2          2.2         -0.2          0.1          2.4
Urban Non-Profit.............................................          567      175,276          0.3          2.2          0.2          0.0          2.6
Rural Non-Profit.............................................          106       17,698          0.3          2.2          0.1          0.1          2.7
Urban Government.............................................           58       15,815          0.3          2.2         -0.1          0.0          2.4
Rural Government.............................................           12        1,913          0.4          2.2         -0.5          0.1          2.2
Urban........................................................          960      357,062          0.2          2.2          0.0          0.0          2.4

[[Page 45933]]

 
Rural........................................................          182       32,095          0.3          2.2         -0.1          0.1          2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Urban by Region
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban New England............................................           30       16,946          0.1          2.2          0.4         -0.1          2.6
Urban Middle Atlantic........................................          141       58,438          0.2          2.2          0.8          0.0          3.1
Urban South Atlantic.........................................          138       64,756          0.2          2.2         -0.1         -0.1          2.2
Urban East North Central.....................................          180       53,400          0.2          2.2         -0.2          0.0          2.2
Urban East South Central.....................................           50       24,482          0.1          2.2         -0.5         -0.1          1.7
Urban West North Central.....................................           73       18,700          0.2          2.2         -0.4          0.0          2.0
Urban West South Central.....................................          173       71,028          0.2          2.2         -0.3          0.1          2.1
Urban Mountain...............................................           74       23,158          0.2          2.2         -0.7          0.0          1.7
Urban Pacific................................................          101       26,154          0.4          2.2          0.6          0.0          3.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Rural by Region
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rural New England............................................            5        1,270          0.2          2.2          0.0         -0.1          2.3
Rural Middle Atlantic........................................           15        2,557          0.2          2.2          0.5          0.2          3.1
Rural South Atlantic.........................................           24        6,028          0.1          2.2         -0.1          0.1          2.4
Rural East North Central.....................................           31        5,244          0.3          2.2         -0.2          0.1          2.4
Rural East South Central.....................................           21        3,497          0.3          2.2         -0.1          0.1          2.5
Rural West North Central.....................................           27        3,460          0.5          2.2          0.5          0.1          3.3
Rural West South Central.....................................           48        8,974          0.2          2.2         -0.4          0.2          2.2
Rural Mountain...............................................            7          683          0.7          2.2         -0.1          0.0          2.8
Rural Pacific................................................            4          382          0.9          2.2          1.2          0.0          4.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Teaching Status
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-teaching.................................................        1,033      343,078          0.2          2.2          0.0          0.0          2.4
Resident to ADC less than 10%................................           60       31,090          0.2          2.2          0.3         -0.1          2.6
Resident to ADC 10%-19%......................................           39       13,981          0.3          2.2         -0.1         -0.1          2.4
Resident to ADC greater than 19%.............................           10        1,008          0.2          2.2          0.2          0.0          2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Disproportionate Share Patient Percentage (DSH PP)
--------------------------------------------------------------------------------------------------------------------------------------------------------
DSH PP = 0%..................................................           37        6,323          0.5          2.2          0.0          0.0          2.8
DSH PP less than 5%..........................................          185       65,137          0.2          2.2          0.1          0.1          2.6
DSH PP 5%-10%................................................          333      130,367          0.2          2.2         -0.1          0.0          2.3
DSH PP 10%-20%...............................................          362      126,848          0.2          2.2          0.1          0.0          2.5
DSH PP greater than 20%......................................          225       60,482          0.3          2.2         -0.1         -0.1          2.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This column reflects the impact of the RPL market basket increase factor for FY 2015 (2.9 percent), reduced by a 0.5 percentage point reduction for
  the productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2 percentage points in accordance with paragraphs
  1886(j)(3)(C) and (D) of the Act.

3. Impact of the Update to the Outlier Threshold Amount
    The estimated effects of the update to the outlier threshold 
adjustment are presented in column 4 of Table 13. In the FY 2014 IRF 
PPS final rule (78 FR 47860), we used FY 2012 IRF claims data (the 
best, most complete data available at that time) to set the outlier 
threshold amount for FY 2014 so that estimated outlier payments would 
equal 3 percent of total estimated payments for FY 2014.
    For this final rule, we are updating our analysis using FY 2013 IRF 
claims data and, based on this updated analysis, we estimate that IRF 
outlier payments as a percentage of total estimated IRF payments are 
2.8 percent in FY 2014. Thus, we are adjusting the outlier threshold 
amount in this final rule to set total estimated outlier payments equal 
to 3 percent of total estimated payments in FY 2015. The estimated 
change in total IRF payments for FY 2015, therefore, includes an 
approximate 0.2 percent increase in payments because the estimated 
outlier portion of total payments is estimated to increase from 
approximately 2.8 percent to 3 percent.
    The impact of this outlier adjustment update (as shown in column 4 
of Table 13) is to increase estimated overall payments to IRFs by about 
0.2 percent. We estimate the largest increase in payments from the 
update to the outlier threshold amount to be 0.9 percent for rural IRFs 
in the Pacific region. We do not estimate that any group of IRFs would 
experience a decrease in payments from this proposed update.
4. Impact of the Market Basket Update to the IRF PPS Payment Rates
    The estimated effects of the market basket update to the IRF PPS 
payment rates are presented in column 5 of Table 13. In the aggregate 
the update would result in a net 2.2 percent increase in

[[Page 45934]]

overall estimated payments to IRFs. This net increase reflects the 
estimated RPL market basket increase factor for FY 2014 of 2.9 percent, 
reduced by the 0.2 percentage point in accordance with sections 
1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act, and further 
reduced by a 0.5 percentage point productivity adjustment as required 
by section 1886(j)(3)(C)(ii)(I) of the Act.
5. Impact of the CBSA Wage Index and Labor-Related Share
    In column 6 of Table 13, we present the effects of the budget-
neutral update of the wage index and labor-related share. The changes 
to the wage index and the labor-related share are discussed together 
because the wage index is applied to the labor-related share portion of 
payments, so the proposed changes in the two have a combined effect on 
payments to providers. As discussed in section VI.D. of this final 
rule, we will decrease the labor-related share from 69.494 percent in 
FY 2014 to 69.294 percent in FY 2015.
    In the aggregate, since these updates to the wage index and the 
labor-related share are applied in a budget-neutral manner as required 
under section 1886(j)(6) of the Act, we do not estimate that these 
updates will affect overall estimated payments to IRFs. However, we 
estimate that these updates will have small distributional effects. For 
example, we estimate the largest increase in payments from the update 
to the CBSA wage index and labor-related share of 1.2 percent for rural 
IRFs in the Pacific region. We estimate the largest decrease in 
payments from the update to the CBSA wage index and labor-related share 
to be a 0.7 percent decrease for urban IRFs in the Mountain region.
6. Impact of the Update to the CMG Relative Weights and Average Length 
of Stay Values
    In column 7 of Table 13, we present the effects of the budget-
neutral update of the CMG relative weights and average length of stay 
values. In the aggregate, we do not estimate that these updates will 
affect overall estimated payments of IRFs. However, we do expect these 
updates to have small distributional effects. The largest estimated 
increase in payments is a 0.2 percent increase in rural Middle Atlantic 
and rural West South Central IRFs. Urban areas in New England, South 
Atlantic, and East South Central and rural New England are estimated to 
experiences a 0.1 percent decrease in payments due to the CMG relative 
weights change.
7. Effects of the Changes to the Presumptive Compliance Method for 
Compliance Review Periods Beginning on or After October 1, 2014
    As discussed in section VIII. of this final rule, we are making 
some additional changes to the presumptive compliance method for 
compliance review periods beginning on or after October 1, 2015. We do 
not estimate that the removal of the ``amputation status'' codes will 
have any significant financial effects on IRFs, as our data analysis 
indicates that IRFs are only using these codes for about 2 percent of 
cases and these codes are only being used to count patients towards the 
60 percent rule in 0.3 percent of cases. Similarly, we do not estimate 
that the proposed exclusion of the non-specific Etiologic Diagnosis 
codes from the IGCs will have any significant financial effects on 
IRFs, as we estimate that IRFs will be able to switch to using the more 
specific codes that are available for the Etiologic Diagnoses instead.
    We do, however, believe that there could be a financial effect on 
IRFs from the removal of the Unilateral Upper Extremity Amputations and 
Arthritis IGCs from the presumptive compliance method, as the removal 
of these IGCs from presumptively counting toward meeting the 60 percent 
rule compliance threshold could result in more IRFs failing to meet the 
requirements solely on the basis of the presumptive compliance method 
and being required to be evaluated using the medical review method. We 
estimate that these effects would be concentrated in approximately 10 
percent of IRFs that admit a high number of patients with Unilateral 
Upper Extremity Amputation and Arthritis conditions, and that the 
effects would vary substantially among IRFs. As discussed in section X. 
of this final rule, we are providing IRFs with the ability to indicate 
on the IRF-PAI that a particular arthritis case meets the severity and 
prior treatment regulatory requirements, the purpose of which is to 
mitigate some of the financial effects for these IRFs while still 
allowing Medicare to ensure that the regulatory requirements are being 
met.
    Comment: One commenter disagreed with our statement that the 
removal of non-specific codes from the presumptive methodology 
determination will not have a financial effect on IRFs because they 
will be able to change their coding practices to use more specific 
diagnosis codes instead. This commenter said that the information 
needed to report more specific diagnosis codes is not always available 
to IRFs.
    Response: As we indicated in the FY 2014 IRF PPS final rule (78 FR 
47860, 47887), we previously decided to allow some non-specific codes 
to count toward the presumptive methodology because we recognized that 
it would be extremely difficult for IRFs to gather the necessary 
information to code a more specific code in those particular cases. 
However, after careful analysis, we believe that the remaining non-
specific codes that will not count toward an IRF's presumptive 
compliance with the 60 percent rule are ones that the IRF can and 
should make every effort to code more specifically. Even if the 
necessary information to code more specifically is not available in the 
acute care medical record, we believe that the IRF should make every 
effort to obtain the necessary information to code more specifically. 
This is consistent with reduction in the use of non-specific codes for 
other Medicare settings.
8. Effects of New Therapy Information Section
    Because the type, amount, frequency, and duration of therapy 
provided in IRFs is documented in detail in the IRF medical records as 
part of the requirements for meeting Medicare's conditions of 
participation and IRF coverage requirements, we estimate that the 
additional costs incurred by IRFs for FY 2016 for the new proposed 
Therapy Information Section of the IRF-PAI would be based on the 4 
additional minutes per IRF-PAI form to transfer the information from 
the IRF medical record to the IRF-PAI form. We estimate that this would 
result in an additional cost of $1.2 million to all IRFs for FY 2016.
    Comment: Many commenters said that our estimates of the overall 
costs to IRFs of the therapy data collection on the IRF-PAI are too 
low. They said that the costs of making the necessary modifications to 
their medical record systems and the training that will be required for 
therapists, nurses, and other clinical staff to ensure that they can 
record the data in a form and manner that will be compatible with the 
new data collection requirements will be substantial. In addition, 
there were comments regarding the added burden due to our original 
proposal to include the average number of minutes by mode and type of 
therapy for weeks 3 and beyond of a patient's IRF stay.
    Response: We appreciate the detailed comments that we received on 
this issue, and we understand, based on these comments, that the 
proposed collection of average number of minutes by mode and type of 
therapy for weeks 3 and beyond of a patient's IRF stay

[[Page 45935]]

would require additional resources from the IRFs to operationalize. For 
this reason, we have withdrawn the proposal to collect the average 
number of minutes for weeks 3 and beyond. Instead, we will require IRFs 
to report on the IRF-PAI the total number of minutes of therapy 
provided to a patient, by mode and therapy discipline, for only week 1 
and week 2 of the IRF stay. As described in section IX of this final 
rule, we believe that this will give us the minimum information that we 
need to develop future policy and to understand the nature of the 
services that Medicare is paying for under the IRF PPS, while also 
minimizing the costs to providers. We carefully considered commenters' 
suggestions that we add the collection of Concurrent Therapy as a mode 
and revise the definition of Group Therapy so that new data collection 
items would be consistent with the way in which facilities were already 
recording the information in the patient's medical record. We believe 
this will reduce the need for training and help to minimize burden. 
Finally, although we understand that updating specific software that 
IRFs use to collect this information can include additional costs, we 
view this as a provider business decision. Providers may always opt to 
use the IRVEN software supplied by CMS for collecting and submitting 
the IRF-PAI information. Given the revisions to the data collection 
described in section IX of this final rule, we believe that the cost 
estimate indicated for this data collection in the proposed rule is 
accurate.
9. Effects of Updates to the IRF QRP
    As discussed in section XI.A. of this final rule and in accordance 
with section 1886(j)(7) of the Act, we will implement a 2 percentage 
point reduction in the FY 2015 increase factor for IRFs that have 
failed to report the required quality reporting data to us during the 
most recent IRF quality reporting period. In section XI.A of this final 
rule, we discuss how the 2 percentage point reduction will be applied. 
Only a few IRFs received the 2 percentage point reduction in the FY 
2014 increase factor for failure to report the required quality 
reporting data last year, and we would anticipate that even fewer IRFs 
will receive the reduction for FY 2015 as they are now more familiar 
with the IRF QRP reporting requirements.
    In sections XI.K and XI.L of this final rule, we have finalized our 
proposal to adopt a new data completion threshold as well as a new data 
accuracy validation policy. While we cannot estimate the increase in 
the number of IRFs that will not meet our proposed requirements at this 
time, we believe that these finalized policies may increase the number 
of IRFs that receive a 2 percent point reduction to their FY annual 
increase factor for FY 2016 and beyond. Thus, we estimate that this 
policy will increase impact on overall IRF payments, by increasing the 
rate of non-compliance by an estimated 5 percent, for FY 2016 and 
beyond, decreasing the number of IRF providers that will receive their 
full annual increase factor for FY 2016 and beyond.
    In this FY 2015 IRF PPS final rule, we finalized our proposal to 
adopt two new quality measures (MRSA and CDI), as well as to adopt a 
new data accuracy validation policy. Together, we estimate that these 
proposals will increase the cost to all IRF providers by $852,238 
annually, for an average cost to IRF providers of $747.57 annually. 
This is an average increase of approximately 4.43 percent to all IRF 
providers over the FY 2014 burden. While we also proposed to adopt a 
data completion threshold policy, this policy, if finalized, will have 
no associated cost burden beyond that discussed in the first paragraph 
of this section (XI.C.9) of this final rule.
    We intend to closely monitor the effects of this new quality 
reporting program on IRF providers and help perpetuate successful 
reporting outcomes through ongoing stakeholder education, national 
trainings, CMS Open Door Forums, and general and technical help desks. 
We did not receive any public comments with regard to this section of 
the proposed rule.

D. Alternatives Considered

    The following is a discussion of the alternatives considered for 
the IRF PPS updates contained in this final rule.
    Section 1886(j)(3)(C) of the Act requires the Secretary to update 
the IRF PPS payment rates by an increase factor that reflects changes 
over time in the prices of an appropriate mix of goods and services 
included in the covered IRF services. Thus, we did not consider 
alternatives to updating payments using the estimated RPL market basket 
increase factor for FY 2015. However, as noted previously in this final 
rule, section 1886(j)(3)(C)(ii)(I) of the Act requires the Secretary to 
apply a productivity adjustment to the market basket increase factor 
for FY 2015, and sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) 
of the Act require the Secretary to apply a 0.2 percentage point 
reduction to the market basket increase factor for FY 2015. Thus, in 
accordance with section 1886(j)(3)(C) of the Act, we are updating the 
IRF federal prospective payments in this final rule by 2.2 percent 
(which equals the 2.9 percent estimated RPL market basket increase 
factor for FY 2015 reduced by 0.2 percentage points, and further 
reduced by a 0.5 percentage point productivity adjustment as required 
by section 1886(j)(3)(C)(ii)(I) of the Act).
    We considered maintaining the existing CMG relative weights and 
average length of stay values for FY 2015. However, in light of 
recently available data and our desire to ensure that the CMG relative 
weights and average length of stay values are as reflective as possible 
of recent changes in IRF utilization and case mix, we believe that it 
is appropriate to update the CMG relative weights and average length of 
stay values at this time to ensure that IRF PPS payments continue to 
reflect as accurately as possible the current costs of care in IRFs.
    We considered updating facility-level adjustment factors for FY 
2015. However, as discussed in more detail in section V.B. of this 
final rule, we believe that freezing the 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 
last year's changes.
    We considered maintaining the existing outlier threshold amount for 
FY 2015. However, analysis of updated FY 2013 data indicates that 
estimated outlier payments would be lower than 3 percent of total 
estimated payments for FY 2015, by approximately 0.2 percent, unless we 
updated the outlier threshold amount. Consequently, we are adjusting 
the outlier threshold amount in this final rule to reflect a 0.2 
percent increase thereby setting the total outlier payments equal to 3 
percent, instead of 2.8 percent, of aggregate estimated payments in FY 
2015.
    We considered making no further changes to the presumptive 
compliance method in this final rule. However, to be consistent with 
the changes to the presumptive compliance method that we implemented in 
the FY 2014 IRF PPS final rule, and to correct some inadvertent 
omissions in last year's final rule, we believe it is important to make 
further changes in this final rule.
    However, to ensure that the IRF-PAI item designed to mitigate some 
of the burden of additional medical reviews that could result from the 
changes to the presumptive compliance method is available on the IRF-
PAI on the same

[[Page 45936]]

date or prior to the effective date of those changes, we are delaying 
the effective date of the changes to the presumptive compliance method. 
Both the changes to the presumptive compliance method that we finalized 
in the FY 2014 IRF PPS final rule and the additional changes to the 
presumptive compliance method that are finalized in this rule will 
become effective for compliance review periods beginning on or after 
October 1, 2015.
    We considered not including the new Therapy Information Section on 
the IRF-PAI. However, we believe that it is vitally important for 
Medicare to better understand the ways in which therapy services are 
currently being provided in IRFs and, most importantly, what services 
Medicare is paying for under the IRF benefit.

E. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in Table 14, we have prepared an accounting statement showing 
the classification of the expenditures associated with the provisions 
of this final rule. Table 14 provides our best estimate of the increase 
in Medicare payments under the IRF PPS as a result of the updates 
presented in this final rule based on the data for 1,142 IRFs in our 
database. In addition, Table 14 presents the costs associated with the 
new IRF quality reporting program and therapy reporting requirements 
for FY 2015.

Table 14--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
  Change in Estimated Transfers from FY 2014 IRF PPS to FY 2015 IRF PPS
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $180 million.
From Whom to Whom?.....................  Federal Government to IRF
                                          Medicare Providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
         FY 2015 Cost to Updating the Quality Reporting Program
------------------------------------------------------------------------
Cost for IRFs to Submit Data for the     $852,238.
 Quality Reporting Program.
------------------------------------------------------------------------
                FY 2016 Cost for Therapy Data Collection
------------------------------------------------------------------------
Cost for IRFs to Submit Therapy Data...  $1.2 million.
------------------------------------------------------------------------

F. Conclusion

    Overall, the estimated payments per discharge for IRFs in FY 2015 
are projected to increase by 2.4 percent, compared with the estimated 
payments in FY 2014, as reflected in column 9 of Table 13. IRF payments 
per discharge are estimated to increase by 2.4 percent in urban areas 
and by 2.5 percent in rural areas, compared with estimated FY 2014 
payments. Payments per discharge to rehabilitation units are estimated 
to increase 2.6 percent in urban and rural areas. Payments per 
discharge to freestanding rehabilitation hospitals are estimated to 
increase 2.2 percent in urban and rural areas.
    Overall, IRFs are estimated to experience a net increase in 
payments as a result of the policies in final rule. The largest payment 
increase is estimated to be a 4.4 percent increase for rural IRFs 
located in the Pacific region.

    Dated: July 24, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: July 30, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-18447 Filed 7-31-14; 4:15 pm]
BILLING CODE 4120-01-P
```