Medicare: More Specific Criteria Needed to Classify Inpatient Rehabilitation Facilities
Published: 2005-06-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Medicare classifies inpatient rehabilitation facilities (IRF) using the "75 percent rule." If a facility can show that during a 12-month period at least 75 percent of its patients required intensive rehabilitation for 1 of 13 listed conditions, it may be classified as an IRF and paid at a higher rate than for less intensive rehabilitation in other settings. Because this difference can be substantial, it is important to classify IRFs correctly. GAO was asked to discuss issues relating to the classification of IRFs, and in April 2005 it issued a report, Medicare: More Specific Criteria Needed to Classify Inpatient Rehabilitation Facilities (GAO-05-366). For that report, GAO analyzed data on all Medicare patients (the majority of patients in IRFs) admitted to IRFs in fiscal year 2003, spoke to IRF medical directors, and had the Institute of Medicine (IOM) convene a meeting of experts to evaluate the use of a list of conditions in the 75 percent rule. This testimony is based on the April 2005 report.
section_title: What GAO Found
paragraphs: As noted in the April 2005 report, GAO found that in fiscal year 2003 fewer than half of all IRF Medicare patients were admitted for having a primary condition on the list in the 75 percent rule. Almost half of all patients with conditions not on the list were admitted for orthopedic conditions, and among those the largest group was joint replacement patients. The experts IOM convened said that uncomplicated unilateral joint replacement patients rarely need to be admitted to an IRF, and GAO analysis suggested that relatively few of the Medicare unilateral joint replacement patients had comorbid conditions that suggested a possible need for the IRF level of services. Additionally, GAO found that only 6 percent of IRFs in fiscal year 2003 were able to meet a 75 percent threshold. GAO also found that IRFs varied in the criteria used to assess patients for admission, using patient characteristics such as functional status, as well as condition. The Centers for Medicare & Medicaid Services (CMS), working through its fiscal intermediaries, had not routinely reviewed IRF admission decisions to determine whether they were medically justified, although it reported that such reviews could be used to target problem areas. The experts IOM convened and other clinical and nonclinical experts GAO interviewed differed on whether conditions should be added to the list in the 75 percent rule. The experts IOM convened questioned the strength of the evidence for adding conditions to the list--finding the evidence for certain orthopedic conditions particularly weak--and some of them reported that little information was available on the need for inpatient rehabilitation for cardiac, transplant, pulmonary, or oncology patients. They called for further research to identify the types of patients that need inpatient rehabilitation and to understand the effectiveness of IRFs. There was general agreement among all the groups of experts interviewed that condition alone is insufficient for identifying appropriate types of patients for inpatient rehabilitation, since within any condition only a subgroup of patients require the level of services of an IRF, and that functional status should also be considered in addition to condition. GAO concluded that if condition alone is not sufficient for determining which types of patients are most appropriate for IRFs, more conditions should not be added to the list at the present time and the rule should be refined to clarify which types of patients should be in IRFs as opposed to another setting.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our report entitled Medicare:  More Specific Crieria Needed to Classfy Inpatien Rehabil ation ittit Facil ies,it which was issued in April 2005. Over the past decade, both the  number of inpatient rehabilitation facilities (IRF) and Medicare payments  to these facilities have grown steadily. In 2003, there were about 1,200  such facilities. Medicare payments to IRFs grew from $2.8 billion in 1992  to an estimated $5.7 billion 2003 and are projected to grow to almost   $9 billion per year by 2015.
Because patients treated at IRFs require more intensive rehabilitation than  is provided in other settings, such as an acute care hospital or a skilled  nursing facility (SNF), Medicare pays for treatment at an IRF at a higher  rate than it pays for treatment in other settings. The difference in payment  to IRFs and other settings can be substantial, and so IRFs need to be  correctly classified to be distinguished from other settings in which less  intensive rehabilitation is provided. remaining 25 percent of patients to have other conditions not listed in the  rule. IRFs are required to assess patients prior to admission to ensure they  require the level of services provided in an IRF, and CMS is responsible for  evaluating the appropriateness of individual admissions after the patient  has been discharged through reviews for medical necessity conducted  under contract by its fiscal intermediaries. An IRF that does not comply  with the requirements of the 75 percent rule may lose its classification as  an IRF and therefore no longer be eligible for payment by Medicare at a  higher rate.
IRF compliance with the rule has been problematic, and some IRFs have  questioned the requirements of the rule. CMS data indicate that in 2002  only 13 percent of IRFs had at least 75 percent of patients in 1 of the 10  conditions on the list at that time. IRF officials have contended that the list  of conditions in the rule should be updated because of changes in  medicine that have occurred and the concomitant expansion of the  population that could benefit from inpatient rehabilitation services.
The Conference Report that accompanied the Medicare Prescription Drug,  Improvement, and Modernization Act of 2003 directed us to issue a report,  in consultation with experts in the field of physical medicine and  rehabilitation, to assess whether the current list of conditions represents a  clinically appropriate standard for defining IRF services and, if not, to  determine which additional conditions should be added to the list. In this  testimony, I will discuss our April 2005 report, in which we (1) identified  the conditions—on and off the list—that IRF Medicare patients have and  the number of IRFs that meet the requirements of the 75 percent rule;   (2) described how IRFs assess patients for admission and whether CMS  reviews admission decisions; and (3) evaluated the approach of using a list  of conditions in the 75 percent rule to classify IRFs.
In carrying out our work, we analyzed data from the Inpatient  Rehabilitation Facility—Patient Assessment Instrument (IRF-PAI) records  on all Medicare patients (the majority of patients in IRFs) admitted to IRFs  in fiscal year 2003 (the most recent data available at the time). The IRF- PAI records contain, for each Medicare patient, the impairment group  code identifying the patient’s primary condition and the diagnostic code  from the International Classification of Diseases, Ninth Revision, Clinical  Modification (ICD-9-CM) identifying the patient’s comorbid condition (if  any). We used these codes to determine whether we considered the  patient’s primary or comorbid condition to be linked to a condition on the  list in the rule. We also spoke to 12 IRF medical directors, 10 fiscal  intermediary officials, and contracted with the Institute of Medicine (IOM)  of the National Academies to convene a 1-day meeting of 14 clinical  experts in physical medicine and rehabilitation to evaluate the approach of  using a list of conditions in the 75 percent rule. We conducted our work  from May 2004 through April 2005 in accordance with generally accepted  government auditing standards.
In brief, as noted in the report, in fiscal year 2003 fewer than half of all IRF  Medicare patients were admitted for having a primary condition on the list  in the 75 percent rule. Almost half of all patients with conditions not on  the list were admitted for orthopedic conditions, and among those the  largest group was joint replacement patients. The experts IOM convened  told us that uncomplicated unilateral joint replacement patients rarely  need to be admitted to an IRF, and our analysis suggested that relatively  few of the Medicare unilateral joint replacement patients had comorbid  conditions that suggested a possible need for the IRF level of services.  Additionally, we found that only 6 percent of IRFs in fiscal year 2003 were  able to meet a 75 percent threshold. We also found that IRFs varied in the  criteria used to assess patients for admission, using patient characteristics  such as functional status, as well as condition. We noted that CMS,  working through its fiscal intermediaries, had not routinely reviewed IRF  admission decisions to determine whether they were medically justified,  although it reported that such reviews could be used to target problem  areas. The experts IOM convened and other clinical and nonclinical  experts we interviewed differed on whether conditions should be added to  the list in the 75 percent rule. The experts IOM convened questioned the  strength of the evidence for adding conditions to the list—finding the  evidence for certain orthopedic conditions particularly weak—and some  of them reported that little information was available on the need for  inpatient rehabilitation for cardiac, transplant, pulmonary, or oncology  patients. They called for further research to identify the types of patients  that need inpatient rehabilitation and to understand the effectiveness of  IRFs. There was general agreement among all the groups of experts we  interviewed that condition alone is insufficient for identifying appropriate  types of patients for inpatient rehabilitation, since within any condition  only a subgroup of patients require the level of services of an IRF, and that  functional status should also be considered in addition to condition.
We concluded that if condition alone is not sufficient for determining  which types of patients are most appropriate for IRFs, more conditions  should not be added to the list at the present time and the rule should be  refined to clarify which types of patients should be in IRFs as opposed to  another setting. As noted in the report, we recommended that CMS ensure  that targeted reviews for medical necessity are conducted for IRF  admissions; conduct additional activities to encourage research on IRFs;  and refine the 75 percent rule to more clearly describe the subgroups of  patients within a condition that are appropriate for IRFs, possibly using  functional status or other factors in addition to condition. CMS generally  agreed with our recommendations.
subsections: section_title: Background
paragraphs: The 75 percent rule was established in 1983 to distinguish IRFs from other  facilities for payment purposes. According to CMS, the conditions on the  list in the rule at that time accounted for 75 percent of the admissions to  IRFs. In June 2002 CMS suspended the enforcement of the 75 percent rule  after its study of the fiscal intermediaries revealed that they were using  inconsistent methods to determine whether an IRF was in compliance and  that in some cases IRFs were not being reviewed for compliance at all.  CMS standardized the verification process that the fiscal intermediaries  were to use, and issued a rule—effective July 1, 2004—that increased the  number of conditions from 10 to 13 and provided a 3-year transition  period, ending in July 2007, to phase in the 75 percent threshold.
The current payment and review procedures for IRFs were established in  recent years. The inpatient rehabilitation facility prospective payment  system (IRF PPS) was implemented in January 2002. Payment is  contingent on an IRF’s completing the IRF-PAI after admission and  transmitting the resulting data to CMS. Two basic requirements must be  met if inpatient hospital stays for rehabilitation services are to be covered:  (1) the services must be reasonable and necessary, and (2) it must be  reasonable and necessary to furnish the care on an inpatient hospital  basis, rather than in a less intensive facility, such as a SNF, or on an  outpatient basis. Determinations of whether hospital stays for  rehabilitation services are reasonable and necessary must be based on an  assessment of each beneficiary’s individual care needs. Beginning in April  2002, the fiscal intermediaries, the entities that conduct compliance  reviews, were specifically authorized to conduct reviews for medical  necessity to determine whether an individual admission to an IRF was  covered under Medicare.
section_title: Fewer Than Half of All IRF Medicare Patients in 2003 Were Admitted for Conditions on List in Rule, and Few IRFs Were Able to Meet a 75 Percent Threshold
paragraphs: As we reported in April 2005, among the 506,662 Medicare patients  admitted to an IRF in fiscal year 2003, less than 44 percent were admitted  with a primary condition on the list in the 75 percent rule. About another  18 percent of IRF Medicare patients were admitted with a comorbid  condition that was on the list in the rule. Among the 194,922 IRF Medicare  patients that did not have a primary or comorbid condition on the list in  the rule, almost half were admitted for orthopedic conditions, and among  those the largest group was joint replacement patients whose condition  did not meet the list’s specific criteria. (See figure 1.)
Although some joint replacement patients may need admission to an IRF,  such as those with comorbidities that affect the patient’s function, our  analysis showed that few of these patients had comorbidities that  suggested a possible need for the level of services offered by an IRF. Our  analysis found that 87 percent of joint replacement patients admitted to  IRFs in fiscal year 2003 did not meet the criteria of the rule, and among  those, over 84 percent did not have any comorbidities that would have  affected the costs of their care based on our analysis of the payment data.
Because the data we analyzed were from 2003, when enforcement of the  rule was suspended, we also looked at newly released data from July  through December 2004, after enforcement had resumed, to determine  whether admission patterns had changed. We focused on the largest  category of patients admitted to IRFs, joint replacement patients, and  found no material change in the admission of joint replacement patients  for the same time periods in 2003 and 2004. Across all IRFs, the percentage  of Medicare patients admitted for a joint replacement declined by   0.1 percentage point.
In conjunction with our finding on the number of patients admitted to  IRFs for conditions not on the list in the rule, we determined that only   6 percent of IRFs in fiscal year 2003 were able to meet a 75 percent  threshold. Many IRFs were able to meet the lower thresholds that would  be in place early in the transition period, but progressively fewer IRFs  were able to meet the higher threshold levels.
section_title: IRFs Vary in the Criteria Used to Assess Patients for Admission, and CMS Does Not Routinely Review IRFs’ Admission Decisions
paragraphs: As we stated in our report, the criteria IRFs used to assess patients for  admission varied by facility and included patient characteristics in  addition to condition. All the IRF officials we interviewed evaluated a  patient’s function when assessing whether a patient needed the level of  services of an IRF. Whereas some IRF officials reported that they used  function to characterize patients who were appropriate for admission  (e.g., patients with a potential for functional improvement), others said  they used function to characterize patients not appropriate for admission  (e.g., patients whose functional level was too high, indicating that they  could go home, or too low, indicating that they needed to be in a SNF).  Almost half of the IRF officials interviewed stated that function was the  main factor that should be considered in assessing the need for IRF  services.
IRF officials reported to us that they did not admit all the patients they  assessed. Typically, the IRF received a request from a physician in the  acute care hospital requesting a medical consultation from an IRF  physician, or from a hospital discharge planner or social worker indicating  that they had a potential patient. An IRF staff member—usually a  physician and/or a nurse—conducted an assessment prior to admission to  determine whether to admit a patient.
CMS, working through its fiscal intermediaries, has not routinely reviewed  IRF admission decisions, although it reported that such reviews could be  used to target problem areas. Among the 10 fiscal intermediary officials we  interviewed, over half were not conducting reviews of patients admitted to  IRFs. We concluded that the presence of patients in IRFs who may not  need the intense level of services provided by IRFs called for increased  scrutiny of IRF admissions, which could target problem areas and  vulnerabilities and thereby reduce the number of inappropriate admissions  in the future. We recommended that CMS ensure that its fiscal  intermediaries routinely conduct targeted reviews for medical necessity  for IRF admissions. CMS agreed that targeted reviews are necessary and  said that it expected its contractors to direct their resources toward areas  of risk. It also reported that it has expanded its efforts to provide greater  oversight of IRF admissions through local policies that have been  implemented or are being developed by the fiscal intermediaries.
section_title: Experts Differed on Adding Conditions to List in Rule but Agreed That Condition Alone Does Not Provide Sufficient Criteria
paragraphs: As we reported, the experts IOM convened and other experts we  interviewed differed on whether conditions should be added to the list in  the 75 percent rule but agreed that condition alone does not provide  sufficient criteria to identify types of patients appropriate for IRFs.
The experts IOM convened generally questioned the strength of the  evidence for adding conditions to the list in the rule. They reported that  the evidence on the benefits of IRF services is variable, particularly for  certain orthopedic conditions, and some of them reported that little  information was available on the need for inpatient rehabilitation for  cardiac, transplant, pulmonary, or oncology conditions. In general, they  reported that, except for a few subpopulations, uncomplicated, unilateral  joint replacement patients rarely need to be admitted to an IRF. Most of  them called for further research to identify the types of patients that need  inpatient rehabilitation and to understand the effectiveness of IRFs in  comparison with other settings of care. IRF officials we interviewed did  not agree on whether conditions, including a broader category of joint  replacements, should be added to the list in the rule. Half of them  suggested that joint replacement be more broadly defined to include more  patients saying, for example, that the current requirements were too  restrictive and arbitrary. Others said that unilateral joint replacement  patients were not generally appropriate for IRFs. We recommended that  CMS conduct additional activities to encourage research on the  effectiveness of intensive inpatient rehabilitation and factors that predict  patient need for these services. CMS agreed and said that it has expanded  its activities to guide future research efforts by encouraging government  research organizations, academic institutions, and the rehabilitation  industry to conduct both general and targeted research, and plans to  collaborate with the National Institutes of Health to determine how to best  promote research.
There was general agreement among all the groups of experts we  interviewed, including the experts IOM convened, that condition alone is  insufficient for identifying appropriate types of patients for inpatient  rehabilitation, because not all patients with a condition on the list need to  be in an IRF. For example, stroke is on the list, but not all stroke patients  need to go to an IRF after their hospitalization. Similarly, cardiac condition  is not on the list, but some cardiac patients may need to be admitted to an  IRF. Among the experts convened by IOM, functional status was identified  most frequently as the information required in addition to condition. Half  of them commented on the need to add information about functional  status, such as functional need, functional decline, motor and cognitive  function, and functional disability. However, some of the experts  convened by IOM recognized the challenge of operationalizing a measure  of function, and some experts questioned the ability of the current  assessment tools to predict which types of patients will improve if treated  in an IRF.
We concluded that if condition alone is not sufficient for determining  which types of patients are most appropriate for IRFs, more conditions  should not be added to the list at the present time, and that future efforts  should refine the rule to increase its clarity about which types of patients  are most appropriate for IRFs. We recommended that CMS use the  information obtained from reviews for medical necessity, research  activities, and other sources to refine the rule to describe more thoroughly  the subgroups of patients within a condition that require IRF services,  possibly using functional status or other factors, in addition to condition.  CMS stated that while it expected to follow our recommendation, it would  need to give this action careful consideration because it could result in a  more restrictive policy than the present regulations, and noted that future  research could guide the agency’s description of subgroups.
section_title: Concluding Observations
paragraphs: As we stated in our report, we believe that action to conduct reviews for  medical necessity and to produce more information about the  effectiveness of inpatient rehabilitation could support future efforts to  refine the rule over time to increase its clarity about which types of  patients are most appropriate for IRFs. These actions could help to ensure  that Medicare does not pay IRFs for patients who could be treated in a less  intensive setting and does not misclassify facilities for payment.
Madam Chairman, this concludes my prepared statement. I would be  happy to respond to any questions you or other Members of the  Subcommittee may have at this time.
section_title: Contact and Staff Acknowledgments
paragraphs: For further information about this testimony, please contact Marjorie  Kanof at (202) 512-7114. Linda Kohn and Roseanne Price also made key  contributions to this statement.
section_title: Appendix I: List of Conditions in CMS’s 75 Percent Rule
paragraphs: A facility may be classified as an IRF if it can show that, during a 12-month  period at least 75 percent of all its patients, including its Medicare  patients, required intensive rehabilitation services for the treatment of one  or more of the following conditions:1.  Stroke.  2.  Spinal cord injury.  3.  Congenital deformity.  4.  Amputation.  5.  Major multiple trauma.  6.  Fracture of femur (hip fracture).  7.  Brain injury.  8.  Neurological disorders (including multiple sclerosis, motor neuron  diseases, polyneuropathy, muscular dystrophy, and Parkinson’s  disease).
9.  Burns.  10. Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and  seronegative arthropathies resulting in significant functional  impairment of ambulation and other activities of daily living that have  not improved after an appropriate, aggressive, and sustained course of  outpatient therapy services or services in other less intensive  rehabilitation settings immediately preceding the inpatient  rehabilitation admission or that result from a systemic disease  activation immediately before admission, but have the potential to  improve with more intensive rehabilitation.  11. Systemic vasculidities with joint inflammation, resulting in significant  functional impairment of ambulation and other activities of daily living  that have not improved after an appropriate, aggressive, and sustained  course of outpatient therapy services or services in other less intensive  rehabilitation settings immediately preceding the inpatient  rehabilitation admission or that result from a systemic disease  activation immediately before admission, but have the potential to  improve with more intensive rehabilitation.  12. Severe or advanced osteoarthritis (osteoarthritis or degenerative joint  disease) involving two or more major weight bearing joints (elbow,  shoulders, hips, or knees, but not counting a joint with a prosthesis)  with joint deformity and substantial loss of range of motion, atrophy of  muscles surrounding the joint, significant functional impairment of  ambulation and other activities of daily living that have not improved  after the patient has participated in an appropriate, aggressive, and  sustained course of outpatient therapy services or services in other  less intensive rehabilitation settings immediately preceding the  inpatient rehabilitation admission but have the potential to improve  with more intensive rehabilitation. (A joint replaced by a prosthesis no  longer is considered to have osteoarthritis, or other arthritis, even  though this condition was the reason for the joint replacement.)  13. Knee or hip joint replacement, or both, during an acute hospitalization  immediately preceding the inpatient rehabilitation stay and also meet  one or more of the following specific criteria:  a. The patient underwent bilateral knee or bilateral hip joint  replacement surgery during the acute hospital admission  immediately preceding the IRF admission.  b. The patient is extremely obese, with a body mass index of at least 50  at the time of admission to the IRF.  c. The patient is age 85 or older at the time of admission to the IRF.
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