Centers for Medicare & Medicaid Services Seeks Comments on Updated Payment Rates for Inpatient Rehabilitation Facilities

Targeted News Service

Targeted News Service

WASHINGTON, May 7 -- The Centers for Medicare & Medicaid Services published the following proposed rule in the Federal Register:

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

A Proposed Rule by the Centers for Medicare & Medicaid Services on 05/07/2014

Publication Date: Wednesday, May 07, 2014

Agencies: Department of Health and Human Services

Centers for Medicare & Medicaid Services

Dates: To be assured consideration, comments must be received at one of

Entry Type: Proposed Rule

Action: Proposed rule.

Document Citation: 79 FR 26307

Page: 26307 -26354 (48 pages)

CFR: 42 CFR 412

Agency/Docket Number: CMS-1608-P

RIN: 0938-AS09

Document Number: 2014-10321

Shorter URL: https://federalregister.gov/a/2014-10321

Action

Proposed Rule.

Summary

This proposed rule would update the prospective payment rates for inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 2015 (for discharges occurring on or after October 1, 2014 and on or before September 30, 2015) as required by the statute. We are also proposing to collect data on the amount and mode (that is, Individual, 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 for a new item on 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, and revise and update quality measures and reporting requirements under the IRF quality reporting program (QRP). In this proposed 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.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on June 30, 2014.

ADDRESSES:

In commenting, please refer to file code CMS-1608-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the "Submit a comment" instructions.

2. By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1608-P, P.O. Box 8016, Baltimore, MD 21244-8016.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1608-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period:

a. For delivery in Washington, DC--Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

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

SUPPLEMENTARY INFORMATION:

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

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Executive Summary

A. Purpose

This proposed rule updates the payment rates for inpatient rehabilitation facilities (IRFs) for federal fiscal year (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 prospective payment system's (PPS) case-mix groups and a description of the methodology and data used in computing the prospective payment rates for that fiscal year.

B. Summary of Major Provisions

In this proposed 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 proposing to collect data on the amount and mode (that is, Individual, 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 for a new item on 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, and revise and update quality measures and reporting requirements under the IRF QRP. In this proposed rule, we also address the implementation of the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF prospective payment system (PPS), effective when ICD-10-CM becomes the required medical data code set for use on Medicare claims and IRF-PAI submissions.

C. Summary of Impacts

Provision description .....Transfers

FY 2015 IRF PPS payment rate update .....The overall economic impact of this proposed rule is an estimated $160 million in increased payments from the Federal government to IRFs during FY 2015.

Provision description .....Costs

New quality reporting program requirements .....The total costs in FY 2015 for IRFs as a result of the proposed new quality reporting requirements are estimated to be $852,238.

New Individual, Group, and Co-Treatment therapy reporting requirements .....The total costs in FY 2016 for IRFs as a result of the proposed new Individual, Group, and Co-Treatment reporting requirements are estimated to be $1.2 million.

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-ServicePayment/ 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 proposed rule also includes the provisions effective in the correcting amendments. For a detailed discussion of the final key policy changes for FY 2006, please refer to the FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166).

In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined the IRF PPS case-mix classification system (the CMG relative weights) and the case-level adjustments, to ensure that IRF PPS payments would continue to reflect as accurately as possible the costs of care. For a detailed discussion of the FY 2007 policy revisions, please refer to the FY 2007 IRF PPS final rule (71 FR 48354).

In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the federal prospective payment rates and the outlier threshold, revised the IRF wage index policy, and clarified how we determine high-cost outlier payments for transfer cases. For more information on the policy changes implemented for FY 2008, please refer to the FY 2008 IRF PPS final rule (72 FR 44284), in which we published the final FY 2008 IRF federal prospective payment rates.

After publication of the FY 2008 IRF PPS final rule (72 FR 44284), section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173, enacted on December 29, 2007) (MMSEA), amended section 1886(j)(3)(C) of the Act to apply a zero percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after April 1, 2008. Section 1886(j)(3)(C) of the Act required the Secretary to develop an increase factor to update the IRF federal prospective payment rates for each FY. Based on the legislative change to the increase factor, we revised the FY 2008 federal prospective payment rates for IRF discharges occurring on or after April 1, 2008. Thus, the final FY 2008 IRF federal prospective payment rates that were published in the FY 2008 IRF PPS final rule (72 FR 44284) were effective for discharges occurring on or after October 1, 2007, and on or before March 31, 2008; and the revised FY 2008 IRF federal prospective payment rates were effective for discharges occurring on or after April 1, 2008, and on or before September 30, 2008. The revised FY 2008 federal prospective payment rates are available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.

In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG relative weights, the average length of stay values, and the outlier threshold; clarified IRF wage index policies regarding the treatment of "New England deemed" counties and multi-campus hospitals; and revised the regulation text in response to section 115 of the MMSEA to set the IRF compliance percentage at 60 percent (the "60 percent rule") and continue the practice of including comorbidities in the calculation of compliance percentages. We also applied a zero percent market basket increase factor for FY 2009 in accordance with section 115 of the MMSEA. For more information on the policy changes implemented for FY 2009, please refer to the FY 2009 IRF PPS final rule (73 FR 46370), in which we published the final FY 2009 IRF federal prospective payment rates.

In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting amendments to the FY 2010 IRF PPS final rule (74 FR 50712) that we published on October 1, 2009, we updated the federal prospective payment rates, the CMG relative weights, the average length of stay values, the rural, LIP, teaching status adjustment factors, and the outlier threshold; implemented new IRF coverage requirements for determining whether an IRF claim is reasonable and necessary; and revised the regulation text to require IRFs to submit patient assessments on Medicare Advantage (MA) (Medicare Part C) patients for use in the 60 percent rule calculations. Any reference to the FY 2010 IRF PPS final rule in this proposed 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) 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 proposed 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 proposed productivity adjustment for FY 2015 is discussed in section V.A. of this proposed rule. Section 3401(d) of the Affordable Care Act requires an additional 0.2 percentage point adjustment to the IRF increase factor for FY 2015, as discussed in section V.A. of this proposed rule. Section 1886(j)(3)(C)(ii)(II) of the Act notes that the application of these adjustments to the market basket update may result in an update that is less than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year.

Section 3004(b) of the Affordable Care Act also addressed the IRF PPS program. It reassigned the previously designated section 1886(j)(7) of the Act to section 1886(j)(8) and inserted a new section 1886(j)(7), which contains requirements for the Secretary to establish a quality reporting program for IRFs. Under that program, data must be submitted in a form and manner and at a time specified by the Secretary. Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the application of a 2 percentage point reduction of the applicable market basket increase factor for IRFs that fail to comply with the quality data submission requirements. Application of the 2 percentage point reduction may result in an update that is less than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year. Reporting-based reductions to the market basket increase factor will not be cumulative; they will only apply for the FY involved.

Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary is generally required to select quality measures for the IRF quality reporting program from those that have been endorsed by the consensus-based entity which holds a performance measurement contract under section 1890(a) of the Act. This contract is currently held by the National Quality Forum (NQF). So long as due consideration is given to measures that have been endorsed or adopted by a consensus-based organization, section 1886(j)(7)(D)(ii) of the Act authorizes the Secretary to select non-endorsed measures for specified areas or medical topics when there are no feasible or practical endorsed measure(s).

Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for making the IRF PPS quality reporting data available to the public. In so doing, the Secretary must ensure that IRFs have the opportunity to review any such data prior to its release to the public. Future rulemaking will address these public reporting obligations.

C. Operational Overview of the Current IRF PPS

As described in the FY 2002 IRF PPS final rule, upon the admission and discharge of a Medicare Part A Fee-for-Service patient, the IRF is required to complete the appropriate sections of a patient assessment instrument (PAI), designated as the Inpatient Rehabilitation Facility-Patient Assessment Instrument (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 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 Medicare contractor. This will ensure that the Medicare Advantage days are included in the hospital's Supplemental Security Income (SSI) ratio (used in calculating the IRF low-income percentage adjustment) for Fiscal Year 2007 and beyond. Claims submitted to Medicare must comply with both ASCA and HIPAA.

Section 3 of the ASCA amends section 1862(a) of the Act by adding paragraph (22) which requires the Medicare program, subject to section 1862(h) of the Act, to deny payment under Part A or Part B for any expenses for items or services "for which a claim is submitted other than in an electronic form specified by the Secretary." Section 1862(h) of the Act, in turn, provides that the Secretary shall waive such denial in situations in which there is no method available for the submission of claims in an electronic form or the entity submitting the claim is a small provider. In addition, the Secretary also has the authority to waive such denial "in such unusual cases as the Secretary finds appropriate." For more information, see the "Medicare Program; Electronic Submission of Medicare Claims" final rule (70 FR 71008). Our instructions for the limited number of Medicare claims submitted on paper are available at http://www.cms.gov/manuals/downloads/clm104c25.pdf.

Section 3 of the ASCA operates in the context of the administrative simplification provisions of HIPAA, which include, among others, the requirements for transaction standards and code sets codified in 45 CFR, parts 160 and 162, subparts A and I through R (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct covered electronic transactions according to the applicable transaction standards. (See the CMS program claim memoranda at http://www.cms.gov/ElectronicBillingEDITrans/ and listed in the addenda to the Medicare Intermediary Manual, Part 3, section 3600).

The MAC processes the claim through its software system. This software system includes pricing programming called the "Pricer" software. The Pricer software uses the CMG number, along with other specific claim data elements and provider-specific data, to adjust the IRF's prospective payment for interrupted stays, transfers, short stays, and deaths, and then applies the applicable adjustments to account for the IRF's wage index, percentage of low-income patients, rural location, and outlier payments. For discharges occurring on or after October 1, 2005, the IRF PPS payment also reflects the teaching status adjustment that became effective as of FY 2006, as discussed in the FY 2006 IRF PPS final rule (70 FR 47880).

II. Summary of Provisions of the Proposed Rule

In this proposed rule, we propose to update the IRF Federal prospective payment rates, 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, revise the list of 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 revise and update quality measures and reporting requirements under the IRF QRP. In this proposed 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.

The proposed updates to the IRF federal prospective payment rates for FY 2015 are 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 this proposed rule.

Discuss our rationale for freezing the IRF facility-level adjustment factors at FY 2014 levels, as discussed in section IV of this proposed rule.

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 this proposed rule.

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 this proposed rule.

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 this proposed rule.

Describe the calculation of the IRF Standard Payment Conversion Factor for FY 2015, as discussed in section V of this proposed rule.

Update the outlier threshold amount for FY 2015, as discussed in section VI of this proposed rule.

Update the cost-to-charge ratio (CCR) ceiling and urban/rural average CCRs for FY 2015, as discussed in section VI of this proposed rule.

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 this proposed rule.

Describe proposed revisions to the list of eligible impairment group codes that presumptively meet the "60 percent rule" compliance criteria in section VII of this proposed rule.

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 this proposed rule.

Describe a proposed revision to the IRF-PAI to add a new data item for arthritis conditions in section IX of this proposed rule.

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 this proposed rule.

Describe proposed revisions and updates to quality measures and reporting requirements under the quality reporting program for IRFs in accordance with section 1886(j)(7) of the Act, as discussed in section XI of this proposed rule.

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

As specified in section 412.620(b)(1), we calculate a relative weight for each CMG that is proportional to the resources needed by an average inpatient rehabilitation case in that CMG. For example, cases in a CMG with a relative weight of 2, on average, will cost twice as much as cases in a CMG with a relative weight of 1. Relative weights account for the variance in cost per discharge due to the variance in resource utilization among the payment groups, and their use helps to ensure that IRF PPS payments support beneficiary access to care, as well as provider efficiency.

In this proposed rule, we propose to update the CMG relative weights and average length of stay values for FY 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 propose 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 this proposed rule, we propose to apply these data using the same methodologies that we have used to update the CMG relative weights and average length of stay values each fiscal year since we implemented an update to the methodology to use the more detailed 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 propose 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 V.F. of this proposed rule, we discuss the proposed 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--Proposed Relative Weights and Average Length of Stay Values for Case-Mix Groups

CMG .....CMG description (M=motor, C=cognitive, A=age) .....Relative weight .....Average length of stay

Tier1 .....Tier2 .....Tier3 .....None .....Tier1 .....Tier2 .....Tier3 .....None

0101 .....Stroke M>51.05 .....0.7860 .....0.7173 .....0.6524 .....0.6255 .....9 .....10 .....8 .....8

0102 .....Stroke M>44.45 and M<51.05 and C>18.5 .....0.9836 .....0.8977 .....0.8165 .....0.7829 .....11 .....11 .....10 .....10

0103 .....Stroke M>44.45 and M<51.05 and C<18.5 .....1.1645 .....1.0627 .....0.9666 .....0.9268 .....12 .....14 .....12 .....12

0104 .....Stroke M>38.85 and M<44.45 .....1.2109 .....1.1051 .....1.0052 .....0.9638 .....13 .....13 .....12 .....12

0105 .....Stroke M>34.25 and M<38.85 .....1.4154 .....1.2917 .....1.1750 .....1.1266 .....14 .....14 .....14 .....14

0106 .....Stroke M>30.05 and M<34.25 .....1.6119 .....1.4710 .....1.3381 .....1.2829 .....16 .....16 .....15 .....15

0107 .....Stroke M>26.15 and M<30.05 .....1.8023 .....1.6448 .....1.4961 .....1.4345 .....17 .....19 .....17 .....17

0108 .....Stroke M<26.15 and A>84.5 .....2.2450 .....2.0488 .....1.8636 .....1.7868 .....22 .....23 .....21 .....21

0109 .....Stroke M>22.35 and M<26.15 and A<84.5 .....2.0545 .....1.8749 .....1.7055 .....1.6352 .....19 .....20 .....19 .....19

0110 .....Stroke M<22.35 and A<84.5 .....2.6893 .....2.4542 .....2.2324 .....2.1404 .....28 .....27 .....24 .....24

0201 .....Traumatic brain injury M>53.35 and C>23.5 .....0.8151 .....0.6688 .....0.6000 .....0.5714 .....10 .....9 .....8 .....8

0202 .....Traumatic brain injury M>44.25 and M<53.35 and C>23.5 .....1.0534 .....0.8644 .....0.7755 .....0.7385 .....12 .....10 .....9 .....10

0203 .....Traumatic brain injury M>44.25 and C<23.5 .....1.2101 .....0.9930 .....0.8909 .....0.8484 .....13 .....12 .....12 .....11

0204 .....Traumatic brain injury M>40.65 and M<44.25 .....1.3295 .....1.0909 .....0.9788 .....0.9321 .....12 .....13 .....12 .....12

0205 .....Traumatic brain injury M>28.75 and M<40.65 .....1.5842 .....1.2999 .....1.1663 .....1.1106 .....14 .....15 .....14 .....14

0206 .....Traumatic brain injury M>22.05 and M<28.75 .....1.9178 .....1.5737 .....1.4119 .....1.3445 .....19 .....18 .....16 .....16

0207 .....Traumatic brain injury M<22.05 .....2.5453 .....2.0885 .....1.8738 .....1.7844 .....32 .....24 .....21 .....20

0301 .....Non-traumatic brain injury M>41.05 .....1.1082 .....0.9337 .....0.8460 .....0.7804 .....10 .....11 .....10 .....10

0302 .....Non-traumatic brain injury M>35.05 and M<41.05 .....1.3856 .....1.1674 .....1.0578 .....0.9757 .....13 .....13 .....12 .....12

0303 .....Non-traumatic brain injury M>26.15 and M<35.05 .....1.6437 .....1.3849 .....1.2548 .....1.1575 .....16 .....15 .....14 .....14

0304 .....Non-traumatic brain injury M<26.15 .....2.1604 .....1.8202 .....1.6492 .....1.5213 .....23 .....21 .....18 .....17

0401 .....Traumatic spinal cord injury M>48.45 .....1.0303 .....0.8804 .....0.8112 .....0.7252 .....12 .....12 .....10 .....9

0402 .....Traumatic spinal cord injury M>30.35 and M<48.45 .....1.4049 .....1.2005 .....1.1061 .....0.9889 .....15 .....14 .....14 .....12

0403 .....Traumatic spinal cord injury M>16.05 and M<30.35 .....2.3117 .....1.9754 .....1.8200 .....1.6271 .....26 .....21 .....20 .....20

0404 .....Traumatic spinal cord injury M<16.05 and A>63.5 .....4.0674 .....3.4756 .....3.2022 .....2.8628 .....55 .....39 .....33 .....33

0405 .....Traumatic spinal cord injury M<16.05 and A<63.5 .....3.2778 .....2.8009 .....2.5807 .....2.3071 .....26 .....34 .....29 .....25

0501 .....Non-traumatic spinal cord injury M>51.35 .....0.8442 .....0.6777 .....0.6206 .....0.5621 .....9 .....10 .....9 .....8

0502 .....Non-traumatic spinal cord injury M>40.15 and M<51.35 .....1.1667 .....0.9367 .....0.8578 .....0.7769 .....11 .....12 .....10 .....10

0503 .....Non-traumatic spinal cord injury M>31.25 and M<40.15 .....1.4465 .....1.1613 .....1.0635 .....0.9632 .....15 .....13 .....13 .....12

0504 .....Non-traumatic spinal cord injury M>29.25 and M<31.25 .....1.7058 .....1.3695 .....1.2541 .....1.1359 .....17 .....15 .....15 .....14

0505 .....Non-traumatic spinal cord injury M>23.75 and M<29.25 .....1.9486 .....1.5644 .....1.4326 .....1.2976 .....20 .....17 .....17 .....16

0506 .....Non-traumatic spinal cord injury M<23.75 .....2.7276 .....2.1898 .....2.0054 .....1.8164 .....26 .....25 .....23 .....21

0601 .....Neurological M>47.75 .....1.0352 .....0.8161 .....0.7540 .....0.6868 .....9 .....10 .....9 .....9

0602 .....Neurological M>37.35 and M<47.75 .....1.3349 .....1.0522 .....0.9722 .....0.8856 .....12 .....12 .....11 .....11

0603 .....Neurological M>25.85 and M<37.35 .....1.6799 .....1.3242 .....1.2235 .....1.1146 .....15 .....15 .....13 .....13

0604 .....Neurological M<25.85 .....2.2001 .....1.7343 .....1.6023 .....1.4597 .....21 .....19 .....17 .....17

0701 .....Fracture of lower extremity M>42.15 .....0.9713 .....0.8055 .....0.7715 .....0.7028 .....10 .....9 .....10 .....9

0702 .....Fracture of lower extremity M>34.15 and M<42.15 .....1.2457 .....1.0330 .....0.9894 .....0.9013 .....13 .....12 .....12 .....11

0703 .....Fracture of lower extremity M>28.15 and M<34.15 .....1.5091 .....1.2514 .....1.1986 .....1.0918 .....15 .....15 .....14 .....13

&lt;p>0704 .....Fracture of lower extremity M<28.15 .....1.9413 .....1.6099 .....1.5419 .....1.4045 .....18 .....18 .....17 .....17

0801 .....Replacement of lower extremity joint M>49.55 .....0.7445 .....0.6092 .....0.5625 .....0.5185 .....8 .....8 .....7 .....7

0802 .....Replacement of lower extremity joint M>37.05 and M<49.55 .....0.9928 .....0.8124 .....0.7502 .....0.6915 .....10 .....10 .....9 .....9

0803 .....Replacement of lower extremity joint M>28.65 and M<37.05 and A>83.5 .....1.3412 .....1.0975 .....1.0134 .....0.9341 .....13 .....13 .....12 .....12

0804 .....Replacement of lower extremity joint M>28.65 and M<37.05 and A<83.5 .....1.1854 .....0.9700 .....0.8957 .....0.8256 .....12 .....12 .....11 .....10

0805 .....Replacement of lower extremity joint M>22.05 and M<28.65 .....1.4747 .....1.2067 .....1.1142 .....1.0271 .....14 .....14 .....13 .....12

0806 .....Replacement of lower extremity joint M<22.05 .....1.7716 .....1.4496 .....1.3386 .....1.2339 .....16 .....17 .....15 .....14

0901 .....Other orthopedic M>44.75 .....0.9402 .....0.7560 .....0.7057 .....0.6382 .....10 .....9 .....9 .....8

0902 .....Other orthopedic M>34.35 and M<44.75 .....1.2419 .....0.9985 .....0.9321 .....0.8430 .....12 .....12 .....11 .....10

0903 .....Other orthopedic M>24.15 and M<34.35 .....1.5603 .....1.2546 .....1.1711 .....1.0591 .....15 .....14 .....14 .....13

0904 .....Other orthopedic M<24.15 .....1.9832 .....1.5946 .....1.4885 .....1.3462 .....19 .....18 .....17 .....16

1001 .....Amputation, lower extremity M>47.65 .....1.0277 .....0.9349 .....0.8076 .....0.7385 .....11 .....12 .....10 .....10

1002 .....Amputation, lower extremity M>36.25 and M<47.65 .....1.3191 .....1.1999 .....1.0365 .....0.9478 .....14 .....14 .....12 .....12

1003 .....Amputation, lower extremity M<36.25 .....1.8856 .....1.7152 .....1.4816 .....1.3549 .....18 .....19 .....17 .....16

1101 .....Amputation, non-lower extremity M>36.35 .....1.2651 .....1.0161 .....1.0058 .....0.8582 .....12 .....13 .....12 .....10

1102 .....Amputation, non-lower extremity M<36.35 .....1.8940 .....1.5211 .....1.5058 .....1.2848 .....17 .....19 .....16 .....15

1201 .....Osteoarthritis M>37.65 .....1.0766 .....0.9493 .....0.8872 .....0.8243 .....10 .....11 .....11 .....10

1202 .....Osteoarthritis M>30.75 and M<37.65 .....1.2812 .....1.1296 .....1.0557 .....0.9809 .....11 .....12 .....12 .....12

1203 .....Osteoarthritis M<30.75 .....1.6274 .....1.4349 .....1.3410 .....1.2459 .....13 .....16 .....15 .....15

1301 .....Rheumatoid, other arthritis M>36.35 .....1.2259 .....0.9876 .....0.8693 .....0.8186 .....12 .....12 .....10 .....10

1302 .....Rheumatoid, other arthritis M>26.15 and M<36.35 .....1.5967 .....1.2864 .....1.1323 .....1.0662 .....17 .....14 .....13 .....13

1303 .....Rheumatoid, other arthritis M<26.15 .....2.0339 .....1.6386 .....1.4424 .....1.3582 .....18 .....19 .....16 .....15

1401 .....Cardiac M>48.85 .....0.9056 .....0.7331 .....0.6668 .....0.6050 .....9 .....10 .....8 .....8

1402 .....Cardiac M>38.55 and M<48.85 .....1.1970 .....0.9689 .....0.8814 .....0.7997 .....12 .....11 .....11 .....10

1403 .....Cardiac M>31.15 and M<38.55 .....1.4753 .....1.1943 .....1.0863 .....0.9857 .....14 .....13 .....12 .....12

1404 .....Cardiac M<31.15 .....1.8546 .....1.5013 .....1.3656 .....1.2391 .....18 .....17 .....15 .....14

1501 .....Pulmonary M>49.25 .....0.9973 .....0.8152 .....0.7533 .....0.7276 .....10 .....10 .....9 .....8

1502 .....Pulmonary M>39.05 and M<49.25 .....1.2978 .....1.0608 .....0.9802 .....0.9468 .....13 .....11 .....11 .....10

1503 .....Pulmonary M>29.15 and M<39.05 .....1.5925 .....1.3017 .....1.2028 .....1.1618 .....15 .....14 .....13 .....13

1504 .....Pulmonary M<29.15 .....1.9673 .....1.6081 .....1.4859 .....1.4352 .....21 .....17 .....15 .....15

1601 .....Pain syndrome M>37.15 .....0.9503 .....0.8819 .....0.8110 .....0.7629 .....10 .....10 .....9 .....10

1602 .....Pain syndrome M>26.75 and M<37.15 .....1.2558 .....1.1654 .....1.0717 .....1.0081 .....13 .....13 .....13 .....12

1603 .....Pain syndrome M<26.75 .....1.5878 .....1.4735 .....1.3549 .....1.2746 .....14 .....17 .....16 .....15

1701 .....Major multiple trauma without brain or spinal cord injury M>39.25 .....1.0417 .....0.9291 .....0.8579 .....0.7871 .....11 .....11 .....10 .....10

1702 .....Major multiple trauma without brain or spinal cord injury M>31.05 and M<39.25 .....1.3092 .....1.1676 .....1.0782 .....0.9892 .....13 .....14 .....13 .....12

1703 .....Major multiple trauma without brain or spinal cord injury M>25.55 and M<31.05 .....1.5348 .....1.3689 .....1.2640 .....1.1597 .....16 .....16 .....15 .....14

1704 .....Major multiple trauma without brain or spinal cord injury M<25.55 .....1.9831 .....1.7687 .....1.6333 .....1.4984 .....20 .....20 .....18 .....17

1801 .....Major multiple trauma with brain or spinal cord injury M>40.85 .....1.0808 .....0.9559 .....0.8116 .....0.7275 .....11 .....12 .....10 .....9

1802 .....Major multiple trauma with brain or spinal cord injury M>23.05 and M<40.85 .....1.7023 .....1.5056 .....1.2782 .....1.1459 .....17 .....16 .....15 .....14

1803 .....Major multiple trauma with brain or spinal cord injury M<23.05 .....2.8280 .....2.5012 .....2.1235 .....1.9036 .....32 .....28 .....22 .....22

1901 .....Guillain Barre M>35.95 .....1.0531 .....0.9468 .....0.9297 .....0.8892 .....15 .....10 .....13 .....11

1902 .....Guillain Barre M>18.05 and M<35.95 .....1.8830 .....1.6929 .....1.6623 .....1.5899 .....24 .....19 .....18 .....19

1903 .....Guillain Barre M<18.05 .....3.3756 .....3.0347 .....2.9799 .....2.8501 .....43 .....31 .....36 .....31

2001 .....Miscellaneous M>49.15 .....0.8847 .....0.7262 .....0.6693 .....0.6110 .....9 .....8 .....8 .....8

2002 .....Miscellaneous M>38.75 and M<49.15 .....1.1882 .....0.9753 .....0.8990 .....0.8206 .....12 .....11 .....11 .....10

2003 .....Miscellaneous M>27.85 and M<38.75 .....1.5077 .....1.2376 .....1.1407 .....1.0412 .....15 .....14 .....13 .....12

2004 .....Miscellaneous M<27.85 .....1.9511 .....1.6015 .....1.4761 .....1.3474 .....20 .....18 .....16 .....15

2101 .....Burns M>0 .....1.8268 .....1.7144 .....1.5550 .....1.3502 .....27 .....18 .....17 .....16

5001 .....Short-stay cases, length of stay is 3 days or fewer ....................0.1545 ....................2

5101 .....Expired, orthopedic, length of stay is 13 days or fewer ....................0.6809 ....................7

5102 .....Expired, orthopedic, length of stay is 14 days or more ....................1.5543 ....................16

5103 .....Expired, not orthopedic, length of stay is 15 days or fewer ....................0.7274 ....................8

5104 .....Expired, not orthopedic, length of stay is 16 days or more ....................1.9267 ....................21

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

Table 2--Distributional Effects of the Proposed Changes to the CMG Relative Weights

Percentage change .....Number of cases affected .....Percentage of cases affected

Increased by 15% or more .....0 .....0.0

Increased by between 5% and 15% .....1,096 .....0.3

Changed by less than 5% .....379,524 .....99.3

Decreased by between 5% and 15% .....1,610 .....0.4

Decreased by 15% or more .....24 .....0.0

(FY 2014 Values Compared with FY 2015 Values)

As Table 2 shows, more than 99 percent of all IRF cases are in CMGs and tiers that we estimate would experience less than a 5 percent change (either increase or decrease) in the CMG relative weight value as a result of the proposed revisions for FY 2015. The largest estimated increase in the proposed CMG relative weight values that would affect 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, 19,867 IRF discharges (5.2 percent of all IRF discharges) were classified into this CMG and tier.

The largest estimated decrease in a CMG relative weight value that would affect the largest number of IRF cases is a 0.9 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 8,737 cases (2.3 percent of all IRF cases).

The proposed 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 invite public comment on our proposed update to the CMG relative weights and average length of stay values for FY 2015.

IV.. Proposal To Freeze 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 section 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. Proposal To Freeze 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 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 propose to freeze 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 invite public comment 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).

V. Proposed FY 2015 IRF PPS Federal Prospective Payment Rates

A. Proposed 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 this proposed rule, we propose 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 proposed rule, we propose to 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 first quarter 2014 forecast, the most recent estimate of the 2008-based RPL market basket increase factor for FY 2015 is 2.7 percent. IHS Global Insight (IGI) is an economic and financial forecasting firm that contracts with CMS to forecast the components of providers' market baskets.

[*Federal RegisterVJ 2014-05-07]

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