Regulatory Report

Subscribe | Advertise | About Us | Contact Us | Home

November 2001

By Stuart S. Kurlander, JD, MHA

Stuart S. Kurlander, JD, MHA

Moving Forward on Inpatient Rehab

CMS issues instructions for implementation of the inpatient rehabilitation facility PPS.

In our last update we reported that the Centers for Medicare and Medicaid Services (CMS) had published a number of recent rules establishing, modifying, or updating various Medicare payment systems. These include an update to the prospective payment system (PPS) for skilled nursing facilities (SNFs), and a final rule setting forth a PPS for inpatient rehabilitation facilities (IRFs). The agency is now moving forward to implement these rules.

Of particular interest is CMS' Program Memorandum (PM) A-01-110, dated September 14, 2001, which provides instructions for implementing the IRF PPS.

Payment Provisions
In regard to payment, PM A-01-110 reiterates the principle, set forth in the Balanced Budget Act of 1997, that IRF PPS will incorporate per discharge federal rates based on average IRF costs in a base year. These initial rates were set forth in the final rule issued on August 7, 2001. CMS will update the rates annually for inflation, and intends to publish the updated rates for future years on or before August 1 of the year preceding the affected fiscal year.

The per discharge rates for IRF PPS are based on Case-Mix Groups (CMGs) based on the clinical characteristics of the Medicare beneficiary receiving treatment. The CMGs were developed using Rehabilitation Impairment Categories (RICs), which in turn were formed using ICD-9 diagnosis codes. Age and functional measures of motor and cognitive scores have also been used to partition the CMGs further. PM A-01-110 notes that comorbidities were found to substantially increase the average cost of certain CMGs. Comorbidities have been divided into three tiers (high-cost, medium-cost, and low-cost); the payment rate for a case presenting more than one comorbidity will be based on the comorbidity that results in the highest payment. According to PM A-01-110, CMS intends to issue an item-by-item guide to the patient assessment instruments that facilities must complete upon admission and discharge in order to determine the correct CMG.

Adjustments to the base CMG payment rate are possible depending on specific characteristics of the individual case or of the facility. Because more than one case-level adjustment may apply to the same case, PM A-01-110 sets forth the order that will be used to determine whether the adjustments will apply. These are:

Interrupted stays-defined as those cases in which a Medicare beneficiary is discharged from the IRF but returns to the same facility within 3 consecutive calendar days. In interrupted stay cases, a single CMG payment will be made for the entire pre- and post-interruption period, based on the initial patient assessment. Note that if a case is determined to be an interrupted stay, other adjustments may still apply.

Transfer cases-defined as those in which (1) a Medicare beneficiary is transferred to another rehabilitation facility, a long-term care hospital, an inpatient hospital, or a nursing home, and (2) the average length of stay of the entire case is less than the average length of stay for a given CMG. Such cases will be paid on a per diem basis. The per diem amount is calculated by dividing the base CMG rate by the number of days in the average length of stay for that CMG. In addition to the per diem amount, reimbursement in transfer cases will include an additional half-day payment for the first day. Short-stay cases-meaning those with a length of stay of 3 days or less that do not meet the definition of a transfer case. Such cases will be assigned to their own CMG (CMG 5001), without regard to the clinical characteristics of the patient. Further cases that expire with a length of stay of 3 days or less will also be classified to CMG 5001.

Special CMGs for expired cases-certain cases that expire with a length of stay greater than 3 days will also be paid in accordance with a special series of CMGs. CMG 5101 will be used for limited-stay, orthopedic, expired cases-specifically, those that would otherwise have been grouped to RICs 07, 08, or 09 and for which the length of stay is greater than 3 days but less than or equal to 13 days. CMG 5102 will be used for expired orthopedic cases for which the length of stay is greater than or equal to 14 days. CMG 5103 will be used for those expired, nonorthopedic cases for which the length of stay is greater than 3 days but less than or equal to 15 days. Finally, CMG 5104 will be used for those expired, nonorthopedic cases for which the length of stay is greater than or equal to 16 days.

Outlier payments-outlier payments are considered to be a case-level adjustment, but eligibility for such payments cannot be determined until all facility-level adjustments are computed. A case will be considered for outlier payments if the estimated cost of the case, as determined in accordance with the facility's overall cost-to-charge ratio, sufficiently exceeds an adjusted threshold amount. The outlier payment will be 80% of the difference between the estimated cost of the case and the outlier threshold, over and above the adjusted CMG payment.

Unlike case-level adjustments, which are based on individual patient characteristics, facility-level adjustments are based on individual IRF characteristics, and apply to all cases. Facility-level adjustments include an area wage adjustment, an adjustment for facilities located in rural areas, and an adjustment for treating low-income patients, and are assessed in that order. PM A-01-110 sets forth wage indices based on inpatient acute care hospital wage data, excluding wages paid to teaching physicians, interns and residents, and nonphysician anesthetists. As with other CMS payment systems, labor market areas for the wage indices are defined by Metropolitan Statistical Area (MSA) or New England County Metropolitan Area. Rural-area adjustments will apply to those facilities located outside of an MSA. Finally, the low-income patient adjustment will be computed in accordance with the "disproportionate share variable," which is the ratio of SSI days to total Medicare days added to the ratio of Medicaid, non-Medicare days to total days.

Facilities will continue to be paid on a reasonable cost basis under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) system for their entire cost reporting periods prior to January 1, 2002. On that date, IRFs will be phased into a transition period during which payment will be based on two-thirds of the PPS payment and one-third of the TEFRA payment, unless they elect to accept 100% PPS payment. Facilities wishing to be paid on a 100% PPS basis during the transition period must notify their fiscal intermediary in writing no later than 30 days prior to the first cost-reporting period for which IRF PPS applies. If a facility's request is not submitted to and received by the fiscal intermediary by the 30th day before commencement of the relevant cost-reporting period, payment will be based on the transition method.

Claims Processing and Billing
PM A-01-110 includes detailed instructions regarding billing requirements under the new system, effective for cost-reporting periods beginning on or after January 1, 2002. All Part A inpatient claims will require a new revenue code, 0024, and a Health Insurance PPS Rate Code reflecting comorbidities, the CMG classification, and the relevant RIC category. Certain Patient Status codes are also applicable under the IRF PPS transfer policy. Note that because final PPS payment is based on the discharge bill for each patient, all patients discharged following the effective date of IRF PPS will be paid in accordance with IRF PPS, even if such patients were admitted prior to that date. A facility that has submitted an interim bill for such a patient must obtain a debit/credit adjustment prior to PPS payment.

Stuart S. Kurlander, JD, MHA, is a health care partner at Latham & Watkins, Washington, DC, and can be reached at stuart.kurlander@lw.com or (202) 637-2200.

LOOKING FOR EXPERT ADVICE?

Experts here are available to answer all your questions!

Please contact us for more information about this feature, or to become an expert.

MEDIA CENTER

Interactive Media

Resources

	Calendar
	Consumer Resources
	Media Kit
	Advertiser Index EAB Reprints Submit an Article

ADDITIONAL ONLINE RESOURCES

Allied Media
24X7mag Clinical Lab Products (CLP) Orthodontic Products The Hearing Review Hearing Review Products Rehab Management		Physical Therapy Products Plastic Surgery Practice Imaging Economics RT Magazine Sleep Review

Subscribe | Advertise | About Us | Contact Us | Home

November 2001